<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 7, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AHL SERVICES, INC.
(Exact Name of Registrant as Specified in Charter)
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<S> <C> <C>
GEORGIA 7389 58-2277249
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
3353 PEACHTREE ROAD, NE
SUITE 1120, NORTH TOWER
ATLANTA, GEORGIA 30326
(404)267-2222
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
FRANK A. ARGENBRIGHT, JR.
CHAIRMAN AND CO-CHIEF EXECUTIVE OFFICER
AHL SERVICES, INC.
3353 PEACHTREE ROAD, NE
SUITE 1120, NORTH TOWER
ATLANTA, GEORGIA 30326
(404)267-2222
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
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<C> <C>
JEFFREY M. STEIN, ESQ. RICHARD C. TILGHMAN, JR., ESQ.
KING & SPALDING PIPER & MARBURY L.L.P.
191 PEACHTREE STREET 36 SOUTH CHARLES STREET
ATLANTA, GEORGIA 30303 BALTIMORE, MARYLAND 21201
(404) 572-4600 (410) 539-2530
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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===============================================================================================================================
PROPOSED
PROPOSED MAXIMUM
MAXIMUM AGGREGATE AMOUNT OF
AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TITLE OF CLASS OF SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT PRICE(2) FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share................. 3,105,000 $18.125 $56,278,125 $17,054
==============================================================================================================================
</TABLE>
(1) Includes 405,000 shares which the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
OCTOBER 7, 1997
2,700,000 SHARES
AHL SERVICES, INC.
COMMON STOCK
[AHL SERVICES, INC. LOGO]
------------------
All of the 2,700,000 shares of Common Stock offered hereby are being sold
by AHL Services, Inc. ("AHL" or the "Company"). The Common Stock is traded on
The Nasdaq Stock Market under the symbol "AHLS." On October 6, 1997, the last
reported sale price of the Common Stock on the Nasdaq National Market was $18.25
per share. See "Price Range of Common Stock."
Upon completion of this offering, the Company's principal shareholder will
beneficially own approximately 61.7% of the outstanding Common Stock.
------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 HEREOF.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
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<S> <C> <C> <C>
Per Share......................... $ $ $
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Total(2).......................... $ $ $
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(1) Before deducting expenses of the offering estimated at $500,000.
(2) The Company and an affiliate of the Company's principal shareholder (the
"Selling Shareholder") have granted the Underwriters a 30-day option to
purchase up to an additional 51,570 shares and 353,430 shares of Common
Stock, respectively, solely to cover over-allotments, if any. To the extent
that the option is exercised, the Underwriters will offer the additional
shares at the Price to Public shown above. If the option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions,
Proceeds to Company and Proceeds to Selling Shareholder will be
$ , $ , $ and $ , respectively.
See "Principal and Selling Shareholders" and "Underwriting."
-----------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown Incorporated, Baltimore, Maryland, on or about ,
1997.
BT Alex. Brown
Credit Suisse First Boston
The Robinson-Humphrey
Company
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
[INSERT GRAPHICS]
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CERTAIN PERSONS PARTICIPATING IN THE COMMON STOCK OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK. SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH
THE COMMON STOCK OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON
STOCK IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN PERSONS PARTICIPATING IN THIS
OFFERING MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 103 OF REGULATION M UNDER THE
SECURITIES EXCHANGE ACT OF 1934 (THE "EXCHANGE ACT"). SEE "UNDERWRITING."
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus.
THE COMPANY
AHL provides contract staffing and management of its clients'
labor-intensive operational support functions on an outsourced basis throughout
the United States and Europe. The Company's core competencies include
recruiting, hiring, training, motivating and managing the large numbers of
personnel required to provide many of the support services needed by its clients
while incorporating quality systems and cost efficiency in its operations.
Founded in 1979, the Company is a leader in providing pre-departure screening,
passenger profiling and other passenger services to the aviation industry and,
increasingly, provides services to other large corporations, including Federal
Express, America Online, Georgia Power, BellSouth, Nike and Motorola. Through
its 62 offices in the United States and 27 offices in seven European countries,
AHL is able to service the multinational outsourcing needs of its largely
Fortune 1000 client base. The Company currently has approximately 500 contracts
to provide services and has established long-term relationships with its largest
clients, providing the Company with a significant source of predictable
recurring revenues. The Company intends to take advantage of market trends
toward contract staffing and become the preferred provider of outsourced labor
management solutions for its clients by leveraging its core competencies,
international scale, reputation for quality, performance-based quality
measurement systems, management depth and senior-level relationships with its
key clients. To capitalize on these market trends and to enter new complementary
business lines, the Company has completed three acquisitions since its initial
public offering in March 1997 and has an acquisition pending.
Large corporations and other institutions are seeking to outsource a
variety of non-core functions to enable them to better focus on their core
competencies. Many enterprises need to recruit, hire, train, motivate and manage
large numbers of personnel to handle non-core functions, in labor environments
often characterized by relatively low pay and high turnover rates. Increasingly,
enterprises are contracting with specialized third party providers to better
ensure long-term labor availability for support functions. Outsourcing these
functions shifts employment costs and risks, such as workers' compensation,
recruitment and turnover costs and changes in labor regulations, to outside
vendors and allows enterprises to reduce the administrative overhead and time
necessary to properly manage non-core functions. Large enterprises are
increasingly seeking partnering opportunities whereby the third party provider,
in addition to providing on-site management of staff, assumes responsibility for
a particular function, including designing and implementing a solution for its
client, and may share in the economic benefits derived from improved execution.
The Company provides a variety of services to its clients, all of which are
focused on labor-intensive operational support functions. The Company's services
to its airline clients include pre-departure screening, passenger profiling,
cargo handling and a number of passenger services, such as baggage claim and
check, aircraft clean and search, lost baggage delivery and replacement, sky
cap, wheelchair assistance, escorting of unaccompanied minors, inter-gate cart
services and frequent flyer lounge operation. Management believes, based on its
knowledge of the industry, that the Company is the largest provider of
pre-departure screening and passenger profiling services in the United States
and Europe combined. The Company also provides commercial security and shuttle
bus services and, as a result of a recent acquisition, staffing for warehouse
"pick and pack" and light industrial functions. The Company believes that it is
well-positioned to expand the operational support services it provides to its
clients and to deliver additional services to its clients, such as order
fulfillment and inbound call management functions.
The Company believes that its national and international scale provides it
with a significant advantage in competing for contracts from targeted clients,
given market trends toward outsourced
3
<PAGE> 5
solutions and vendor consolidation. To demonstrate its ability to deliver
quality services at lower cost, AHL is developing performance-based quality
measurement systems to further differentiate itself in the contract staffing
industry in which quality measurement has not been prevalent. The Company
typically enters into multi-year agreements with clients under which the client
pays an hourly rate for services performed.
The Company has grown rapidly during the past five years as it has entered
new markets on behalf of its clients and expanded its range of services.
Revenues have grown from $82.6 million in 1992 to $210.2 million in 1996, a
compound annual growth rate of 26.3%. The Company follows a disciplined model
for growth, entering a new market only after it has signed a contract with a
client to provide specific services in that market. Once an initial contract is
awarded, the Company establishes an office and begins building management depth
in that market. After establishing operations in a new market and demonstrating
its ability to provide high quality services, the Company has successfully
leveraged its local infrastructure by marketing additional services to its
initial client and by providing services to additional clients in that region.
The Company's field management and direct sales force market AHL's services to
clients in their assigned regions, while senior executives concentrate on
senior-level relationships and national account management.
The key elements of the Company's growth strategy are to (i) continue to
penetrate existing accounts, (ii) expand service offerings, (iii) obtain new
clients and (iv) continue to seek strategic acquisitions. The Company believes
that substantial opportunities exist in the United States as enterprises are
increasingly outsourcing support functions which have traditionally been
performed in-house, as well as in Europe, where the trends toward labor
management outsourcing are less developed than in the United States. In
addition, the Company believes that it is well-positioned to benefit if more
stringent aviation security measures are implemented by the Federal Aviation
Administration ("FAA").
RECENT DEVELOPMENTS
Completed Acquisitions. In September 1997, AHL acquired Lloyd Creative
Temporaries, Inc. ("Lloyd"), a Chicago-based company that provides staffing for
warehouse "pick and pack" and light industrial (such as product assembly)
functions, for approximately $5.0 million in cash plus contingent consideration
(the "Lloyd Acquisition"). Lloyd had revenues for the twelve months prior to the
acquisition of approximately $14.0 million. In May 1997, AHL acquired the
commercial security business of New Jersey-based USA Security Services, Inc.
("USA Security") for approximately $2.6 million in cash (the "USA Security
Acquisition"). USA Security had revenues for the twelve months prior to the
acquisition of approximately $8.6 million. In May 1997, AHL acquired British
Airways' executive aircraft services business at Heathrow Airport ("EAS") for
approximately $2.8 million in cash plus contingent consideration (the "EAS
Acquisition"). EAS provides ground handling and passenger services for executive
aircraft and had revenues for the twelve months prior to the acquisition of
approximately $2.4 million. All of these acquisitions have been accounted for
under the purchase method of accounting.
Potential Acquisition. In September 1997, the Company signed a letter of
intent to purchase RightSide Up, Inc. ("RightSide Up"), a California-based
company that provides order fulfillment and inbound call management services
principally for clients in the entertainment industry, for $6.0 million in cash
plus contingent consideration (the "RightSide Up Acquisition"). RightSide Up had
revenues for the twelve months prior to execution of the letter of intent of
approximately $6.4 million. The Company expects to execute a definitive purchase
agreement following consummation of this offering. However, there can be no
assurance that a definitive purchase agreement will be executed or that the
acquisition will be consummated.
4
<PAGE> 6
THE OFFERING
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<S> <C>
Common Stock offered by the Company.......... 2,700,000 shares
Common Stock to be outstanding after the
offering................................... 13,553,430 shares(1)
Use of proceeds.............................. To repay outstanding indebtedness and for
general corporate purposes, including working
capital and possible acquisitions.
Nasdaq National Market symbol................ AHLS
</TABLE>
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(1) Excludes 1,099,500 shares of Common Stock reserved for issuance upon
exercise of outstanding options with a weighted average exercise price of
$10.21 per share. See "Management -- Employee Benefit Plans -- Stock Option
Plan."
SUMMARY COMBINED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
<TABLE>
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SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31,(1) JUNE 30,
--------------------------------------------------- -------------------
1992 1993 1994 1995 1996 1996 1997
------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $82,576 $104,143 $123,234 $168,601 $210,153 $93,162 $124,194
Operating income........ 2,410 1,044 1,633 2,844 5,043 1,887 4,056
Income before income
taxes and
extraordinary items... 2,089 540 755 2,355 3,618 1,415 3,480
Income (loss) before
extraordinary items... 1,444 (160) 128 1,438 2,171 849 2,105(2)
Income per share before
extraordinary items... 0.25(3) 0.10(3) 0.21(2)
Weighted average common
and common equivalent
shares................ 8,557(3) 8,557(3) 9,895
OPERATING DATA (AT PERIOD
END):
Number of employees..... 3,972 5,714 7,334 9,954 12,980 10,085 13,590
Number of offices....... 11 26 33 69 83 80 89
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
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PRO FORMA
ACTUAL AS ADJUSTED(4)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $21,368 $ 56,137
Total assets.............................................. 62,908 103,188
Long-term debt, net of current portion.................... 7,808 1,935
Shareholders' equity...................................... 29,414 75,356
</TABLE>
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(1) The Company's fiscal year ends on the last Friday in December. Each of the
fiscal years presented consists of 52 weeks, except that fiscal 1993
consists of 53 weeks.
(2) Excludes extraordinary items, net of taxes, of $385,000, or $0.04 per share,
resulting from early extinguishment of debt. Including the extraordinary
items, net income was $1,720,000 and net income per share was $0.17.
(3) Pro forma to give effect to the Reorganization (as hereinafter defined).
(4) Pro forma to give effect to the Lloyd Acquisition and adjusted to give
effect to the sale of the 2,700,000 shares of Common Stock offered hereby
(at an assumed public offering price of $18.25 per share) and application of
the estimated net proceeds therefrom as described in "Use of Proceeds."
5
<PAGE> 7
As of February 1, 1997, all of the outstanding shares of common stock of
Argenbright Holdings Limited ("Argenbright"), a holding company for U.S.
operations, and The ADI Group Limited (together with its predecessors, "ADI"), a
holding company for European operations, were contributed to AHL by Mr. Frank A.
Argenbright, Jr., who founded both companies. As a result, Argenbright and ADI
became wholly-owned subsidiaries of the Company. The Company's executive offices
are located at 3353 Peachtree Road, NE, Atlanta, Georgia 30326 and its telephone
number is (404) 267-2222.
---------------------
Unless the context otherwise requires, (i) the "Company" or "AHL" refers to
AHL Services, Inc., including Argenbright and ADI and their predecessors and
subsidiaries, (ii) all information in this Prospectus gives effect to the
Reorganization (as hereinafter defined) and (iii) all information in this
Prospectus assumes no exercise of the Underwriters' over-allotment options. The
"Reorganization" refers to the transactions in which Mr. Argenbright contributed
to the Company (i) the outstanding common stock of Argenbright and ADI, (ii)
certain real estate, a portion of which was previously rented by the Company
(with the Company assuming the related mortgage debt) and (iii) a note with a
balance of $528,000 as of December 31, 1996 payable by the Company to Mr.
Argenbright. All of the above transactions in the Reorganization were brought
forward at historical values. See "Management -- Compensation Committee
Interlocks and Insider Participation."
6
<PAGE> 8
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of the Common Stock offered by this Prospectus. This Prospectus contains certain
forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995, with respect to the financial condition, results
of operations and business of the Company, including statements under the
captions "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business." These forward-looking statements involve
certain risks and uncertainties. No assurance can be given that any of such
matters will be realized. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among others, the following: (i) competitive pressures in the contract staffing
and outsourcing industries; (ii) management and integration of the operations of
acquired businesses; (iii) the Company's business and growth strategies and (iv)
general economic conditions.
Reliance on Major Clients. The Company derives a significant portion of
its revenues from relatively few clients. During fiscal 1996, Delta Air Lines,
British Airways, United Airlines and Federal Express accounted for 23.1%, 12.6%,
11.3% and 4.2% of the Company's revenues, respectively, through an aggregate of
78 contracts and, together, represented 51.2% of the Company's revenues. During
the six months ended June 30, 1997, United Airlines, Delta Air Lines, British
Airways and Federal Express accounted for 20.4%, 17.7%, 11.7% and 4.0% of the
Company's revenues, respectively, through an aggregate of 83 contracts and,
together, represented 53.8% of the Company's revenues. During fiscal 1996 and
the six months ended June 30, 1997, the Company's ten largest clients accounted
for an aggregate of 61.2% and 64.0%, respectively, of the Company's revenues
(excluding the terminated Florida transportation operations). The Company's
contracts with its clients are generally terminable by either party upon 30 to
90 days notice, and these contracts expire at various times over the next
several years. Accordingly, although the Company currently operates under
multiple contracts with most of its major clients (including all of its airline
clients), there can be no assurance that one or more of the Company's major
clients will not terminate or decide not to renew one or more of its contracts
with the Company or that any of the Company's clients will not seek to
renegotiate its contracts at lower margins to the Company. The loss of one or
more of the Company's major clients would have a material adverse effect on the
Company. See "Business -- Services Provided -- Clients."
Dependence on Aviation Industry. The Company's continued success is
largely dependent on continuing demand for the Company's services from passenger
airlines and cargo carriers. In fiscal 1996 and the six months ended June 30,
1997, approximately 63% and 71%, respectively, of the Company's revenues were
derived from services provided to clients in the aviation industry.
Additionally, the financial condition of the Company's airline clients is likely
to have a material impact upon the nature and extent of the services which such
airlines procure from the Company and other independent suppliers and the prices
which such airlines will be willing to pay for such services. Consolidation in
the airline industry may result in the Company losing contracts. The financial
difficulties of airlines may result in their being forced to seek bankruptcy
protection or cease operating, which could result in material uncollectible
accounts receivable and a reduction in the Company's volume of business. The
aviation industry historically has been highly cyclical, and a significant
downturn in the aviation industry could have a material adverse effect on the
Company's business. Although the volume of air travel throughout the world has
experienced significant growth in the past ten years, there can be no assurance
that such growth will continue. Because the Company's typical billing
arrangements are based on the number of hours of service provided by the Company
or flights serviced, a decrease in the level of air travel would have an adverse
effect on the Company's business, results of operations and financial condition.
See "Business -- Industry Overview."
The Company intends to lessen its reliance on the aviation industry by
seeking to expand its client base in other industries and strengthen developing
relationships with its non-aviation clients.
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<PAGE> 9
However, there can be no assurance that these efforts will be successful or that
the Company's services will be widely accepted outside the aviation industry.
See "Business -- Services Provided."
Risks Associated with Managing a Growing Business. The Company has rapidly
expanded its operations in the past several years, and this growth has placed
demands on its management, administrative, operating and financial resources.
The planned continued growth of the Company's client base, the types of services
offered and the geographic markets served can be expected to continue to place a
significant strain on the Company's resources. The Company's future performance
and profitability will depend in large part on its ability to attract and retain
additional management and other key personnel, its ability to successfully
implement enhancements to its management systems and its ability to adapt those
systems, as necessary, to respond to changes in its business. See
"Business -- Growth Strategy", "-- Management Information Systems" and
"Management."
Risks Associated with Acquisition Strategy. An important element of the
Company's growth strategy is to pursue acquisitions that increase density in the
Company's existing markets, add geographic coverage to its existing business,
add new complementary business lines or expand its client base. The Company has
limited experience in making acquisitions, having completed only three
acquisitions prior to its initial public offering, but the Company has recently
embarked on a more aggressive acquisition program, completing three additional
acquisitions since May 1997 and having an acquisition pending. There can be no
assurance that the Company will be able to identify acceptable acquisition
candidates or complete the acquisition of any identified candidates on terms
favorable to the Company or in a timely manner. A substantial portion of the
Company's capital resources, including a portion of the proceeds from this
offering, could be used for these acquisitions. The Company may require
additional debt or equity financings for future acquisitions, which may not be
available on terms favorable to the Company, if at all. There is also no
assurance that the Company will be able to successfully integrate any acquired
business or new business line into the Company's business or that any acquired
business or new business line will be able to be profitably operated by the
Company. See "Business -- Acquisitions."
Dependence on Labor Force. The contract staffing industry is labor
intensive and is characterized by high rates of personnel turnover and periodic
shortages of sufficient personnel in some markets. The Company may from time to
time be required to increase the wages that it pays and the benefits that it
provides in order to attract and retain a sufficient number of qualified
employees. In addition, the Company may not be able to pass along to its clients
any additional costs associated with an increase in the minimum wage. Some of
the Company's security activities require highly trained employees. A higher
turnover rate among the Company's employees would increase the Company's
recruiting and training costs and may adversely affect productivity. If the
Company were unable to recruit and retain a sufficient number of employees, it
would be forced to limit its growth or possibly reduce the scope of its
operations. There is intense competition for qualified personnel among contract
staffing firms as well as other employers of large numbers of hourly workers
located in the markets where the Company operates. There can be no assurance
that the Company will be able to continue to hire and retain a sufficient number
of qualified personnel in its markets or elsewhere to support its planned growth
or existing operations. See "Business -- Workforce Management."
Risks of Conducting International Operations. A substantial portion of the
Company's revenues and earnings comes from its European operations.
International operations and the provision of services in foreign markets are
subject to a number of special risks, including currency exchange rate
fluctuations, trade barriers, exchange controls, national and regional labor
strikes, political risks and risks of increases in duties, taxes and
governmental royalties, as well as changes in laws and policies governing
operations of foreign-based companies. In addition, earnings of foreign
subsidiaries and intercompany payments are subject to foreign income tax rules
that may reduce cash flow available to meet required debt service and other
obligations of the Company.
8
<PAGE> 10
A substantial amount of the Company's revenues are received, and operating
costs are incurred, in foreign currencies, with a significant amount of
operating income having been derived from operations in the United Kingdom.
Because the Company's financial statements are presented in U.S. dollars, any
significant fluctuations in the exchange rates between certain Western European
currencies and the U.S. dollar will affect the Company's results of operations
and financial condition. The Company does not currently engage in
currency-hedging transactions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Liabilities for Client and Employee Actions and Other Claims. The Company
is in the business of placing its employees in public facilities and the
workplaces of other businesses. Attendant risks include possible claims by its
clients' customers or employees of discrimination, harassment and negligence by
the Company's employees and other similar claims. The Company is exposed to
liability for the acts or negligence of its employees while on assignment that
cause personal injury or damages, as well as claims of misuse of client
proprietary information or theft of client property. As a provider of security
services, the Company faces potential liability claims in the event of any
terrorist attempt or other criminal activity which occurs on any airline or
premises subject to the Company's security services. The Company has policies
and guidelines in place to reduce its exposure to these risks, but a failure to
follow these policies and guidelines may result in the payment by the Company of
money damages or fines and adverse publicity. The Company maintains insurance
coverage against certain of these risks, but there can be no assurance that
insurance coverage will continue to be available on acceptable terms or that it
will be adequate to cover any such liability. Any of these situations would have
a material adverse effect on the Company's reputation, business, results of
operations and financial condition. See "Business -- Risk Management and
Safety."
Employee-Related Costs and Claims Exposure. The Company is required to pay
unemployment insurance premiums and workers' compensation benefits for its
employees in the United States. Any increase in the cost of unemployment
insurance or workers' compensation benefits could adversely affect the Company's
profitability. The Company is self-insured for the first $250,000 of each
workers' compensation and automobile or shuttle bus claim and, accordingly,
establishes reserves for future claims and payments. There can be no assurance
that the Company's actual future workers' compensation or liability claims will
not exceed the amount of the Company's reserves. Furthermore, there can be no
assurance that the Company will be able to pass along to its clients any
increased costs related to unemployment and workers' compensation insurance. See
"Business -- Risk Management and Safety."
Impact of Trends Toward Outsourcing, Privatization and Preferred Vendor
Contracts. Outsourcing by U.S. airlines of an increasing number of services not
directly related to flight operations has increased significantly in the past
several years, and the privatization of airport security and other services by
Western European government agencies has recently begun. Although these trends
have increased the demand for the Company's services, there can be no assurance
that these trends will continue or not be reversed or that airlines will not
decide to bring previously outsourced functions back in-house. In addition, the
trend by airlines to select a limited number of preferred vendors to provide all
or a large part of their required pre-departure screening and other services may
not continue or, if it does continue, there can be no assurance that the Company
will be selected as a preferred vendor to provide such services. Adverse
developments with respect to any of these industry trends could have a material
adverse effect on the business, results of operations and financial condition of
the Company. See "Business -- Industry Overview."
A significant element of the Company's growth strategy is to take advantage
of the trends toward outsourcing by seeking contracts to provide labor-intensive
operational support services for companies outside the aviation industry. To the
extent these potential clients decide not to expand the range of services they
outsource or decide to select vendors other than the Company to perform the
outsourced services, the Company may be unsuccessful in executing this element
of its growth strategy. See "Business -- Industry Overview" and "-- Growth
Strategy."
9
<PAGE> 11
Fluctuations in Demand for the Company's Services. Demand for the types of
security services provided by the Company is affected by the perceived threat of
terrorist and other criminal activity in the world generally and, specifically,
in the aviation industry. In addition, the Company's business is affected by
determinations of government agencies that regulate aviation security (e.g., the
FAA and the United Kingdom Department of Transport ("U.K. DOT")). Typically,
demand for the Company's aviation security services rises after events involving
or potentially involving terrorist activity and may thereafter decline as the
threat is perceived to diminish. There can be no assurance that the Company will
be able to manage fluctuations in the demand for its services successfully or
that a decline in demand for the Company's services will not have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Business -- Government Regulation."
Failure to Meet Performance Requirements. The success of the Company will
be dependent upon its ability to continue to meet the performance requirements
set by its clients and the government agencies which regulate them. The Company
is subject to random periodic testing by the FAA with regard to adherence to
regulations relating to pre-departure screening and passenger profiling, hiring
practices (including background checks, drug testing, training and individual
employee file maintenance) and baggage handling, and by the U.K. DOT regarding
regulations relating to passenger and baggage handling, aircraft security,
document verification and employee background checks. Any failure to meet these
performance standards or to pass these tests may result in the loss of a
contract or the Company's license to perform services, either of which is likely
to have a material adverse effect on the Company's reputation, business, results
of operations and financial condition. See "Business -- Government Regulation."
Loss of Required Licenses. In many airports in which the Company operates
(including most of the major international airports in Western Europe), a
license is required from the airport authority in order to perform services at
the airport. Some airport authorities limit the number of licenses they issue.
Although the Company currently has licenses to operate in several of the major
international airports in Western Europe where licenses are required, the loss
of, or failure to obtain, a license to operate in one or more airports is likely
to result in the loss of, or the inability to compete for, a major contract. See
"Business -- Government Regulation."
Development of Alternative Services. The pre-departure screening services
and passenger profiling services currently offered by the Company utilize a
large number of personnel and, in certain markets, include the direct
interviewing of each passenger boarding an aircraft. The development of
technologies requiring less manpower or alternative passenger classification
methodologies which are more effective or less expensive than the Company's
current services would reduce demand for the Company's services. In particular,
the costs associated with the performance of passenger profiling and its impact
on passengers may serve as an incentive for airlines to seek the development of
technological alternatives which would be more effective in detecting weapons
and explosives and identifying terrorists. The Company is aware of ongoing
efforts by certain airlines and the FAA to develop such alternatives and of
various governmental authorities' endorsement of these initiatives. The
development and implementation of such alternative systems could have a material
adverse effect on the Company. See "Business -- Services Provided."
Government Regulation. Aviation security matters affecting airports and
passenger airlines are subject to extensive regulation by the FAA and foreign
government agencies. Demand for the Company's pre-departure screening, passenger
profiling, aviation security and various other services is significantly
affected by applicable regulatory requirements and security directives issued by
governmental authorities. There can be no assurance that applicable regulations
will not be changed in a manner that would adversely affect the demand for the
Company's services. For example, from time to time there have been proposals to
shift responsibility for certain aviation security functions from the airlines
to airport authorities or other governmental agencies and any such shift could
reduce demand for the Company's services. Additionally, major U.S. airlines have
considered the creation of a nationwide non-profit security corporation, funded
by the airlines, to handle airport
10
<PAGE> 12
security. Any shift in responsibility for aviation security functions or any
trend toward the relaxation of aviation security measures could have a material
adverse effect on the Company's business, results of operations or financial
condition. See "Business -- Government Regulation."
Competition. The contract staffing industry is extremely competitive and
highly fragmented, with limited barriers to entry. Companies within the contract
staffing industry compete on the basis of the quality of service provided, their
ability to provide national and international services, the range of services
offered, as well as price. The Company competes in international, national,
regional and local markets with outsourcing companies, specialized contract
service providers and in-house organizations that provide services to potential
clients and third parties. AHL's principal competitors include, in the aviation
services industry, ICTS International N.V., Globe Aviation Securities
Corporation and International Total Services, Inc. and, in the commercial
security industry, Borg-Warner Security Corporation, Guardsmark, Inc. and The
Wackenhut Corporation. The Company's warehouse "pick and pack," light industrial
and shuttle bus services compete primarily with numerous local and regional
companies as well as divisions of several major staffing companies. Certain of
the Company's competitors and potential competitors have significantly greater
financial resources and larger operations than the Company. The Company expects
that the level of competition will remain high or increase in the future, and
there can be no assurance that the Company will continue to compete
successfully. See "Business -- Competition."
Fluctuations in Quarterly Operating Results. The Company has experienced
and expects to continue to experience quarterly variations in revenues and net
income as a result of various factors, including the timing of commencement of
new contracts, changes in its revenue mix, the timing of additional selling,
general and administrative expenses to support new business and the seasonality
of air travel. Since the Company's revenues are typically based on the number of
hours of service provided by the Company or the number of flights serviced,
decreases in air travel generally result in lower revenues for the Company.
While the effects of seasonality on AHL's business often are obscured by the
timing of the addition of new clients, the performance of new services for
existing clients or the timing of acquisitions, the demand for aviation services
tends to decline in the first and fourth fiscal quarters. Consequently, the
Company's operating results may experience significant quarterly fluctuations.
The Company's planned operating expenditures are based on revenue forecasts, and
if revenues are below expectations in any given quarter, operating results are
likely to be materially adversely affected. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Quarterly Results
and Seasonality."
Dependence on Key Personnel. The Company is highly dependent on the
efforts of its senior management team, particularly Frank A. Argenbright, Jr.,
Chairman and Co-Chief Executive Officer; Edwin R. Mellett, Vice Chairman and
Co-Chief Executive Officer; David L. Gamsey, Chief Financial Officer; Thomas J.
Marano, President and Chief Operating Officer - Argenbright Holdings Limited;
Ernest Patterson, Chief Executive - The ADI Group Limited and A. Trevor
Warburton, Managing Director - The ADI Group Limited. The loss of the services
of any of these individuals could have a material adverse effect on the Company.
The Company has key-man life insurance only for Mr. Argenbright and has
employment agreements with Messrs. Mellett, Gamsey, Marano, Patterson and
Warburton. Mr. Mellett's employment agreement expires in December 2000, and the
remaining U.S. employment agreements expire in December 2001. As the Company
continues to grow, it will need to recruit and retain additional qualified
management personnel, and there can be no assurance that it will be able to do
so. See "Management."
Control by Principal Shareholder. Immediately following this offering, Mr.
Argenbright will beneficially own approximately 61.7% of the outstanding Common
Stock (approximately 58.8% if the Underwriters' over-allotment option is
exercised in full). As a result, Mr. Argenbright will continue to be able to
elect the entire Board of Directors and to control the outcome of all other
matters requiring shareholder approval. Such voting concentration may have the
effect of delaying or preventing a change in control of the Company. See
"Management" and "Principal and Selling Shareholders."
11
<PAGE> 13
Potential Volatility of Stock Price. The market price of the Common Stock
may be volatile and be significantly affected by factors such as actual or
anticipated fluctuations in the Company's operating results, announcements of
acquisitions or new services by the Company or its competitors, developments
with respect to conditions and trends in the contract staffing industry or in
the industries served by the Company, governmental regulation, changes in
estimates by securities analysts of the Company's future financial performance,
general market conditions and other factors. In addition, the stock markets have
from time to time experienced significant price and volume fluctuations that
have adversely affected the market prices of securities of companies for reasons
often unrelated to their operating performance.
Shares Eligible for Future Sale. Sales of substantial amounts of Common
Stock in the public market after this offering could adversely affect the market
price of the Common Stock. An aggregate of 8,353,430 shares of Common Stock, all
of which are beneficially owned by Mr. Argenbright, are eligible for public sale
pursuant to Rule 144 under the Securities Act of 1933 (the "Securities Act").
Mr. Argenbright, as well as all persons holding currently exercisable stock
options, have agreed not to sell, offer for sale, or otherwise dispose of any
Common Stock for a period of 90 days from the date of this Prospectus without
the prior written consent of BT Alex. Brown Incorporated. In addition, the
Company has registered the shares of Common Stock issuable pursuant to stock
options and, prior to consummation of this offering, intends to register the
shares of Common Stock issuable pursuant to an employee stock purchase plan that
the Company recently adopted. As of September 30, 1997, outstanding options to
purchase 240,125 shares were currently exercisable and options to purchase
859,375 shares become exercisable at various times between December 1997 and
August 2001. See "Shares Eligible for Future Sale."
Certain Anti-Takeover Provisions. The Company's Amended and Restated
Articles of Incorporation and Bylaws provide for a five member Board of
Directors to be elected to staggered one, two and three year terms and,
thereafter, for successive three year terms. Additionally, directors may only be
removed from office for cause upon a vote of 70% of the Common Stock
outstanding. The Articles and Bylaws also provide that they may not be amended
in certain respects except pursuant to the vote of 70% of the Common Stock
outstanding. These provisions of the Articles of Incorporation and Bylaws could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. See "Description of Capital Stock."
12
<PAGE> 14
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
2,700,000 shares of Common Stock offered by it hereby (at an assumed offering
price of $18.25 per share) are estimated to be approximately $45.9 million
($46.8 million if the overallotment option is exercised in full), after
deducting underwriting discounts and commissions and offering expenses.
The Company intends to use the net proceeds from the offering as follows:
(i) approximately $10.1 million to repay outstanding indebtedness, consisting of
(a) approximately $8.0 million outstanding under a revolving line of credit (the
"Credit Facility") with First Union National Bank of Georgia ("First Union"),
which matures in May 2000 and bears interest, at the Company's option, at the
prime rate, the Federal Funds rate plus 50 basis points or LIBOR plus 150 basis
points (approximately 7.12% as of June 30, 1997), which was incurred primarily
to finance acquisitions, and (b) approximately $2.1 million outstanding under a
mortgage loan with First Bank of Georgia, which matures in January 1999 and
bears interest at 8.5%, and (ii) the balance for general corporate purposes,
including working capital to support the Company's growth and possible
acquisitions. The Company intends to use $6.0 million of the net proceeds from
this offering for the RightSide Up Acquisition if it is consummated. Pending
such uses, the Company intends to invest the net proceeds of this offering in
investment-grade, short-term, interest-bearing securities.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock, and the
Board of Directors currently intends to retain all earnings for use in the
Company's business for the foreseeable future. The Company's credit facility
with First Union prohibits the payment of dividends. Any future payment of
dividends will depend upon the Company's results of operations, financial
condition, cash requirements and other factors deemed relevant by the Board of
Directors.
13
<PAGE> 15
PRICE RANGE OF COMMON STOCK
The Company completed its initial public offering on March 27, 1997 at
$10.00 per share and, since that date, the Company's Common Stock has traded on
the Nasdaq National Market under the symbol "AHLS." The following table sets
forth the high and low closing sale prices per share for the Common Stock, for
the periods indicated, as reported by the Nasdaq National Market.
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1997:
First Quarter (from March 27, 1997)................ $10.75 $10.00
Second Quarter..................................... 15.50 9.50
Third Quarter...................................... 19.50 15.125
Fourth Quarter (through October 6, 1997)........... 18.25 18.125
</TABLE>
On October 6, 1997, the last sale price of the Common Stock as reported on
the Nasdaq National Market was $18.25 per share and there were 12 holders of
record of the Common Stock.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth the short-term debt and capitalization of
the Company as of June 30, 1997 (i) on a historical basis, (ii) on a pro forma
basis to give effect to the Lloyd Acquisition and (iii) as adjusted to reflect
receipt of the net proceeds from the sale of the 2,700,000 shares of Common
Stock pursuant to this offering (at an assumed offering price of $18.25 per
share):
<TABLE>
<CAPTION>
JUNE 30, 1997
------------------------------------
PRO FORMA
ACTUAL PRO FORMA(1) AS ADJUSTED
------- ------------ -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt................. $ 725 $ 725 $ 636
======= ======= =======
Long-term debt, net of current portion:
Credit facility................................. $ 3,842 $ 8,842 $ --
Mortgage debt(2)................................ 2,237 2,237 206
Equipment financing and other................... 1,729 1,729 1,729
------- ------- -------
Total long-term debt.................... 7,808 12,808 1,935
------- ------- -------
Shareholders' equity:
Preferred Stock: no par value; 5,000,000 shares
authorized; none issued or outstanding....... -- -- --
Common Stock: $.01 par value; 50,000,000 shares
authorized; 10,853,430 shares issued and
outstanding actual and pro forma; 13,553,430
shares issued and outstanding pro forma as
adjusted..................................... 109 109 136
Paid in capital................................. 21,978 21,978 67,893
Cumulative translation adjustment............... 71 71 71
Retained earnings............................... 7,256 7,256 7,256
------- ------- -------
Total shareholders' equity.............. 29,414 29,414 75,356
------- ------- -------
Total capitalization............... $37,222 $42,222 $77,291
======= ======= =======
</TABLE>
- ---------------
(1) Does not include the RightSide Up Acquisition, for which a definitive
agreement has not yet been executed.
(2) Consists of mortgage debt on the real estate contributed to the Company by
Mr. Argenbright in the Reorganization. See "Management -- Compensation
Committee Interlocks and Insider Participation."
15
<PAGE> 17
SELECTED COMBINED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND OPERATING DATA)
The following selected financial and operating data of the Company are
qualified by reference to and should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Combined Financial Statements and Notes thereto included elsewhere
in this Prospectus. The selected financial data presented below as of and for
each of the fiscal years in the four-year period ended December 31, 1996 have
been derived from the Company's financial statements which have been audited by
Arthur Andersen LLP, independent accountants. The selected financial data for
the fiscal year ended December 31, 1992 and the six months ended June 30, 1996
and 1997 have been derived from the Company's unaudited financial statements,
which have been prepared on the same basis as the audited financial statements
and, in the opinion of management, contain all adjustments, consisting of only
normal recurring adjustments, necessary for a fair presentation of the financial
position and results of operations for these periods.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED DECEMBER 31,(1) JUNE 30,
--------------------------------------------------- ------------------
1992 1993 1994 1995 1996 1996 1997
------- -------- -------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $82,576 $104,143 $123,234 $168,601 $210,153 $93,162 $124,194
Operating expenses:
Cost of services...................... 59,805 78,019 91,873 124,491 155,926 68,883 92,769
Field operating....................... 13,552 18,284 20,931 30,328 37,492 16,680 20,266
Corporate general and
administrative...................... 6,809 6,796 8,797 10,938 11,692 5,712 7,103
------- -------- -------- -------- -------- ------- --------
Operating income................. 2,410 1,044 1,633 2,844 5,043 1,887 4,056
Interest expense, net................... 429 593 904 1,309 1,726 610 818
Other income, net....................... (108) (89) (26) (820) (301) (138) (242)
------- -------- -------- -------- -------- ------- --------
Income before income taxes and
extraordinary items............ 2,089 540 755 2,355 3,618 1,415 3,480
Income tax provision(2)................. 645 700 627 917 1,447 566 1,375
------- -------- -------- -------- -------- ------- --------
Income (loss) before
extraordinary items............ 1,444 (160) 128 1,438 2,171 849 2,105
Extraordinary items, net of taxes(3).... -- -- -- -- -- -- (385)
------- -------- -------- -------- -------- ------- --------
Net income (loss)................ $ 1,444 $ (160) $ 128 $ 1,438 $ 2,171 $ 849 $ 1,720
======= ======== ======== ======== ======== ======= ========
Net income per share.................... $ 0.25(4) $ 0.10(4) $ 0.17(5)
======== ======= ========
Weighted average common and common
equivalent shares..................... 8,557(4) 8,557(4) 9,895
======== ======= ========
OPERATING DATA (AT PERIOD END):
Number of employees..................... 3,972 5,714 7,334 9,954 12,980 10,085 13,590
Number of offices....................... 11 26 33 69 83 80 89
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................... $ 1,898 $ 4,341 $ (763) $ 13,216 $ 17,353 $21,368
Total assets...................................... 11,426 21,036 29,094 40,687 51,953 62,908
Long-term debt, net of current portion(6)......... 2,446 7,281 1,437 14,609 19,706 7,808
Shareholder's equity.............................. 2,443 2,123 2,252 3,577 5,409 29,414
</TABLE>
- ---------------
(1) The Company's fiscal year ends on the last Friday in December. Each of the
fiscal years presented consists of 52 weeks except that fiscal 1993 consists
of 53 weeks.
(2) The income tax provision for 1993 and 1994 was negatively impacted by the
significance of non-deductible expenses relative to income before income
taxes.
(3) In the second quarter of 1997, the Company recorded extraordinary items
resulting from the early extinguishment of debt.
(4) Pro forma to give effect to the Reorganization.
(5) Excluding the extraordinary items, net income would have been $0.21 per
share.
(6) Includes a note payable to shareholder in the amount of $650,000 and
$528,000 at December 31, 1995 and 1996, respectively.
16
<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
AHL provides contract staffing and management of its clients'
labor-intensive operational support functions on an outsourced basis throughout
the United States and Europe. Through its 62 offices in the United States and 27
offices in seven European countries, AHL is able to service the multinational
outsourcing needs of its largely Fortune 1000 client base. The Company currently
has approximately 500 contracts to provide services and has established
long-term relationships with its largest clients, providing the Company with a
significant source of predictable recurring revenues. Revenues have grown from
$82.6 million in 1992 to $210.2 million in 1996, a compound annual growth rate
of 26.3%. Frank A. Argenbright, Jr., the Company's Chairman and Co-Chief
Executive Officer, founded the Company in 1979. As of February 1, 1997, all of
the outstanding shares of common stock of Argenbright, a holding company for
U.S. operations, and ADI, a holding company for European operations, were
contributed to AHL by Mr. Argenbright. As a result, Argenbright and ADI became
wholly-owned subsidiaries of the Company.
Since 1992, the Company has completed six acquisitions, all of which have
been accounted for under the purchase method of accounting. In March 1992, Mr.
Argenbright acquired a portion of the passenger services operation of British
Airways at Heathrow Airport. This passenger services operation had revenues in
the first twelve months of operations of approximately $18.0 million. The
Company has used ADI as a platform to expand its operations in Europe. In August
1993, ADI acquired Express Baggage Reclaim Services Limited, a provider of lost
baggage delivery and replacement services in the United Kingdom, with revenues
of approximately $1.8 million for the twelve months prior to the acquisition. In
July 1996, the Company acquired Intersec, a provider of commercial and
governmental security services in the mid-Atlantic region of the United States,
with revenues of approximately $10.0 million for the twelve months prior to the
acquisition (the "Intersec Acquisition"). In the second quarter of 1997, the
Company recorded a non-recurring after-tax charge of $385,000 as a result of the
early extinguishment of debt incurred to finance the Intersec Acquisition.
Since its initial public offering in March 1997, the Company has completed
three additional acquisitions. In September 1997, AHL acquired Lloyd, a
Chicago-based company that provides staffing for warehouse "pick and pack" and
light industrial functions, with revenues for the twelve months prior to the
acquisition of approximately $14.0 million. In May 1997, AHL acquired the
commercial security business of New Jersey-based USA Security, with revenues for
the twelve months prior to the acquisition of approximately $8.6 million. In May
1997, AHL acquired EAS, an operation of British Airways at London's Heathrow
Airport. EAS provides ground handling and passenger services for executive
aircraft with revenues for the twelve months prior to the acquisition of
approximately $2.4 million. These acquisitions were financed with borrowings
under the Credit Facility.
The Company's services are primarily provided under contracts, typically
having terms of one to five years, which provide the Company with a significant
source of predictable recurring revenues. Although the terms of the Company's
contracts vary significantly, clients generally agree that the Company will
provide a stated service level and agree to pay an hourly rate for services
provided. Certain of the Company's clients, especially in the cargo services
area, are billed a fixed dollar amount per month for services performed. Under
some contracts, the Company is entitled to rate increases when there are
increases in the Federal minimum wage although most of the Company's employees
are paid at rates in excess of the Federal minimum wage.
The Company recognizes revenues as services are performed. A substantial
amount of the Company's revenues are received, and operating costs are incurred,
in foreign currencies (primarily the British Pound and the German Deutsche
Mark), with a significant amount of operating income
17
<PAGE> 19
having been derived from operations in the United Kingdom. The denomination of
foreign subsidiaries' account balances in their local currency exposes the
Company to certain foreign exchange rate risks. The Company addresses the
exposure by financing most working capital needs in the applicable foreign
currencies. The Company does not engage in other purchased hedging transactions
to reduce any remaining exposure to fluctuations in foreign currency exchange
rates. However, management does not believe the remaining risks to be
significant.
In the fall of 1996, the Company made the decision to terminate the
paratransit and municipal bus services offered by its transportation subsidiary
in Florida. The Company incurred nonrecurring pre-tax losses (including
termination costs) associated with these operations aggregating $665,000 in
1996.
RESULTS OF OPERATIONS
The following table sets forth Statement of Operations data as a percentage
of revenues for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SIX MONTHS
DECEMBER 31,(1) ENDED JUNE 30,
------------------------ ---------------
1994 1995 1996 1996 1997
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Revenues......................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating expenses:
Cost of services............... 74.6 73.8 74.2 73.9 74.7
Field operating................ 17.0 18.0 17.8 17.9 16.3
Corporate general and
administrative.............. 7.1 6.5 5.6 6.1 5.7
------ ------ ------ ------ ------
Operating income............ 1.3 1.7 2.4 2.1 3.3
Interest expense, net............ 0.7 0.8 0.8 0.7 0.7
Other income, net................ -- (0.5) (0.1) (0.1) (0.2)
------ ------ ------ ------ ------
Income before income taxes
and extraordinary items... 0.6 1.4 1.7 1.5 2.8
Income tax provision (2)......... 0.5 0.5 0.7 0.6 1.1
------ ------ ------ ------ ------
Income before extraordinary
items..................... 0.1 0.9 1.0 0.9 1.7
Extraordinary items, net of
taxes.......................... -- -- -- -- (0.3)
------ ------ ------ ------ ------
Net income.................. 0.1% 0.9% 1.0% 0.9% 1.4%
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) The Company's fiscal year ends on the last Friday in December. Each of the
fiscal years presented consists of 52 weeks.
(2) The income tax provision for 1994 was negatively impacted by non-deductible
expenses relative to income before income taxes.
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues. Revenues increased $31.0 million, or 33.3%, to $124.2 million in
the six months ended June 30, 1997 from $93.2 million in the six months ended
June 30, 1996. Of this increase, approximately $6.3 million was attributable to
the Intersec Acquisition, which was completed in July 1996, and $1.2 million was
attributable to the USA Security Acquisition and the EAS Acquisition, both of
which were completed in May 1997. The remaining increase was the result of
entering into contracts to provide services to new clients and providing
additional services to existing clients.
Cost of Services. Cost of services represents the direct costs
attributable to a specific contract, predominantly wages and related benefits,
as well as certain related expenses such as workers' compensation and other
direct labor related expenses. Cost of services increased $23.9 million, or
34.7%, to $92.8 million in the six months ended June 30, 1997 from $68.9 million
in the six months
18
<PAGE> 20
ended June 30, 1996. As a percentage of revenues, cost of services increased to
74.7% in the six months ended June 30, 1997 from 73.9% in the six months ended
June 30, 1996. This percentage increase was primarily attributable to a change
in business mix due to the termination in 1996 of the Company's Florida
transportation operations which had a high gross margin but generated operating
losses.
Field Operating Expenses. Field operating expenses represent expenses
which directly support field operations, such as each district's management,
facilities expenses (such as rent, communication costs and taxes), employee
uniforms, equipment leasing, depreciation and maintenance, local sales and
marketing activities and acquisition-related goodwill. These expenses increased
$3.6 million, or 21.5%, to $20.3 million in the six months ended June 30, 1997
from $16.7 million in the six months ended June 30, 1996. As a percentage of
revenues, field operating expenses decreased to 16.3% in the six months ended
June 30, 1997 from 17.9% in the six months ended June 30, 1996. This percentage
decrease was primarily attributable to the termination of the Company's Florida
transportation operations, which had significant field operating expenses, and
to better leveraging of existing field operations.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses include the cost of services the Company provides to
support and manage its field activities. These expenses, which include corporate
management, accounting and payroll, general administration, human resources
management, professional fees, headquarters occupancy, marketing and management
information services, increased $1.4 million, or 24.4%, to $7.1 million in the
six months ended June 30, 1997 from $5.7 million in the six months ended June
30, 1996. As a percentage of revenues, these expenses decreased to 5.7% in the
six months ended June 30, 1997 from 6.1% in the six months ended June 30, 1996.
This percentage decrease was primarily due to the Company's ability to increase
revenues without a commensurate increase in corporate expenses.
Operating Income. Operating income increased $2.2 million, or 114.9%, to
$4.1 million in the six months ended June 30, 1997 from $1.9 million in the six
months ended June 30, 1996. As a percentage of revenues, operating income
improved to 3.3% in the six months ended June 30, 1997 from 2.0% in the six
months ended June 30, 1996.
Interest Expense, Net. Interest expense, net, increased $208,000, or
34.1%, to $818,000 in the six months ended June 30, 1997 from $610,000 in the
six months ended June 30, 1996. Interest expense for the six months ended June
30, 1997 increased primarily due to the inclusion of interest and amortization
of debt discount associated with the Intersec Acquisition.
Income Before Extraordinary Items. Income before extraordinary items for
the six months ended June 30, 1997 increased $1.3 million, or 147.9%, to $2.1
million from $849,000 for the six months ended June 30, 1996. The Company
expensed extraordinary items during the second quarter of 1997 of $385,000, net
of taxes of $257,000. The extraordinary items consisted of the write-off of
unamortized loan origination costs and debt discount.
Net Income. Net income increased $871,000, or 103%, to $1.7 million, or
1.4% of revenues, in the six months ended June 30, 1997 from $849,000, or 0.9%
of revenues, in the six months ended June 30, 1996. The Company's effective
income tax rate was approximately 40.0%.
FISCAL 1996 COMPARED TO FISCAL 1995
Revenues. Revenues increased $41.6 million, or 24.6%, to $210.2 million in
fiscal 1996 from $168.6 million in fiscal 1995. Of this increase, approximately
$26.2 million was attributable to higher revenues from existing clients,
approximately $9.1 million to services initiated for new clients and $6.3
million to the Intersec Acquisition. Revenues from existing clients increased
15.5% in fiscal 1996 over fiscal 1995 primarily as a result of providing
additional services and expanding into new markets with these clients.
19
<PAGE> 21
Cost of Services. Cost of services increased $31.4 million, or 25.3%, to
$155.9 million in fiscal 1996 from $124.5 million in fiscal 1995. As a
percentage of revenues, cost of services increased to 74.2% in fiscal 1996 from
73.8% in fiscal 1995. This percentage increase was primarily attributable to
lower gross margins on the terminated Florida transportation operations and
operating inefficiencies associated with a contract in Detroit which began in
April 1996. The Company believes based on subsequent operating results that it
has corrected these inefficiencies through a change in management at the Detroit
location and increases in rates paid to the Company with respect to this Detroit
contract.
Field Operating Expenses. Field operating expenses increased $7.2 million,
or 23.6%, to $37.5 million in fiscal 1996 from $30.3 million in fiscal 1995,
primarily as a result of administrative staff, systems and facilities expenses
for new operations in Chicago, Cincinnati, San Francisco, Los Angeles and
Seattle opened during fiscal 1996. As a percentage of revenues, these expenses
decreased to 17.8% in fiscal 1996 from 18.0% in fiscal 1995.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $754,000, or 6.9%, to $11.7 million in fiscal
1996 from $10.9 million in fiscal 1995. As a percentage of revenues, these
expenses decreased to 5.6% in fiscal 1996 from 6.5% in fiscal 1995. This
percentage decrease was primarily due to the Company's ability to increase
revenues without a commensurate increase in corporate expenses.
Operating Income. Operating income increased $2.2 million, or 77.3%, to
$5.0 million in fiscal 1996 from $2.8 million in fiscal 1995. As a percentage of
revenues, operating income improved to 2.4% in fiscal 1996 from 1.7% in fiscal
1995.
Interest Expense, Net. Net interest expense increased $417,000 to $1.7
million in fiscal 1996 from $1.3 million in fiscal 1995. This was the result of
approximately $4.7 million of additional indebtedness incurred in connection
with the Intersec Acquisition in July 1996 and higher borrowings under the
Company's revolving line of credit.
Other Income, Net. Other income, net decreased $519,000 to $301,000 in
fiscal 1996 from $820,000 in fiscal 1995. This decrease was primarily due to the
non-recurring collection of notes received in the sale of the Company's drug
testing subsidiary in October 1995. See Note 3 of the Notes to the Company's
Combined Financial Statements.
Net Income. Net income increased $733,000, or 51.0%, to $2.2 million, or
1.0% of revenues, in fiscal 1996 from net income of $1.4 million, or 0.9% of
revenues, in fiscal 1995. The Company's effective income tax rate was
approximately 40.0% for fiscal 1996 compared to 38.9% in fiscal 1995.
FISCAL 1995 COMPARED TO FISCAL 1994
Revenues. Revenues increased $45.4 million, or 36.8%, to $168.6 million in
fiscal 1995 from $123.2 million in fiscal 1994. Of this increase, approximately
$37.1 million was attributable to higher revenues from existing clients and
approximately $8.3 million to services initiated for new clients. Revenues from
existing clients increased 30.1% in fiscal 1995 over fiscal 1994 primarily as a
result of providing additional services and expanding into new markets with
these clients.
Cost of Services. Cost of services increased $32.6 million, or 35.5%, to
$124.5 million in fiscal 1995 from $91.9 million in fiscal 1994. As a percentage
of revenues, cost of services decreased to 73.8% in fiscal 1995 from 74.6% in
fiscal 1994. The percentage decrease was primarily attributable to improved
scheduling which reduced the amount of non-billable overtime and lower workers'
compensation claims.
Field Operating Expenses. Field operating expenses increased $9.4 million,
or 44.9%, to $30.3 million in fiscal 1995 from $20.9 million in fiscal 1994
primarily as a result of increased expenses attributable to expanded operations,
including entering the Denver and Frankfurt markets, and an increase in the size
of the field sales force from six to 11 people. As a percentage of revenues,
these
20
<PAGE> 22
expenses increased to 18.0% in fiscal 1995 from 17.0% in fiscal 1994. This
percentage increase was primarily attributable to significantly higher
maintenance cost associated with the paratransit and municipal bus services in
Florida (terminated in 1996), increased expenses attributable to expanded
operations and the increase in the size of the field sales force.
Corporate General and Administrative Expenses. Corporate general and
administrative expenses increased $2.1 million, or 24.3%, to $10.9 million in
fiscal 1995 from $8.8 million in fiscal 1994 primarily due to continuing
additions to the Company's senior management team. As a percentage of revenues,
these expenses decreased to 6.5% in fiscal 1995 from 7.1% in fiscal 1994. This
percentage decrease was attributable to the Company's ability to increase
revenues without a commensurate increase in corporate expenses.
Operating Income. Operating income increased $1.2 million, or 74.2%, to
$2.8 million in fiscal 1995 from $1.6 million in fiscal 1994. As a percentage of
revenues, operating income improved to 1.7% in fiscal 1995 from 1.3% in fiscal
1994.
Interest Expense, Net. Net interest expense increased to $1.3 million in
fiscal 1995 from $904,000 in fiscal 1994. This increase was attributable to
higher borrowings under the Company's credit facility.
Other Income, Net. Other income, net increased $794,000 to $820,000 in
fiscal 1995 from $26,000 in fiscal 1994. This increase was attributable to
receipt of the cash portion of the sale price for the Company's drug testing
subsidiary in October 1995, net of associated disposition costs.
Net Income. Net income increased $1.3 million to $1.4 million in fiscal
1995 from $128,000 in fiscal 1994. As a percentage of revenues, net income
increased to 0.9% in fiscal 1995 from 0.1% in fiscal 1994. The Company's
effective tax rate was approximately 38.9% in fiscal 1995 compared to 83.0% in
fiscal 1994, resulting from decreases in nondeductible expenses relative to
income before income taxes. The Company's effective tax rate subsequent to 1994
has more closely approximated statutory rates.
21
<PAGE> 23
QUARTERLY RESULTS AND SEASONALITY
The following table sets forth statement of operations data for the second
two quarters of fiscal 1995, each of the four quarters of fiscal 1996 and the
first two quarters of fiscal 1997. This quarterly information is unaudited but
has been prepared on a basis consistent with the Company's audited financial
statements presented elsewhere herein and, in the Company's opinion, includes
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of results for any future
period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1996 1996 1997 1997
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.............................. $57,320 $59,671 $60,424 $63,770
Operating expenses:
Cost of services.................... 42,453 44,590 45,428 47,341
Field operating..................... 10,193 10,619 9,923 10,343
Corporate general and
administrative................... 2,708 3,272 3,435 3,668
------- ------- ------- -------
Operating income................. 1,966 1,190 1,638 2,418
Interest expense, net................. 549 567 648 170
Other income, net..................... (81) (82) (88) (154)
------- ------- ------- -------
Income before income taxes and
extraordinary items............ 1,498 705 1,078 2,402
Income tax provision.................. 599 282 427 948
------- ------- ------- -------
Income before extraordinary
items.......................... 899 423 651 1,454
Extraordinary items, net of taxes..... -- -- -- (385)
------- ------- ------- -------
Net income....................... $ 899 $ 423 $ 651 $ 1,069
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30,
1995 1995 1996 1996
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.............................. $43,625 $45,482 $45,519 $47,643
Operating expenses:
Cost of services.................... 31,858 33,798 33,541 35,342
Field operating..................... 8,131 8,195 8,253 8,427
Corporate general and
administrative................... 2,736 2,995 2,864 2,848
------- ------- ------- -------
Operating income................. 900 494 861 1,026
Interest expense, net................. 370 441 309 301
Other income, net..................... (10) (785) (57) (81)
------- ------- ------- -------
Income before income taxes....... 540 838 609 806
Income tax provision.................. 210 326 244 322
------- ------- ------- -------
Net income....................... $ 330 $ 512 $ 365 $ 484
======= ======= ======= =======
</TABLE>
The Company's contracts at airports with large volumes of international
passengers (such as New York -- Kennedy and London -- Heathrow) result in an
increase in staffing for certain passenger services during periods of higher air
travel, typically in the summer. The Company's contracts at airports with fewer
international passengers generally require more constant staffing throughout the
year. Therefore, the Company has experienced, and expects to continue to
experience, quarterly variations in its results of operations principally as a
result of the seasonality of air travel primarily to and from Europe. While the
effects of seasonality on AHL's business often are obscured by the timing of the
addition of new clients and the commencement of new services for existing
clients, the Company's operating income tends to be lower in the first and
fourth quarters of
22
<PAGE> 24
the fiscal year and highest in the third quarter of the fiscal year.
Additionally, the Company's operating margin tends to be lower in the fourth
quarter because of the occurrence of holidays during which the Company pays
overtime wages to employees. Under certain of the Company's contracts, the
Company is not entitled to recoup the cost of these overtime wages.
LIQUIDITY AND CAPITAL RESOURCES
To support its rapid growth, AHL has historically relied on borrowings
under its bank revolving credit facility. In May 1997, the Company entered into
a three-year, $35.0 million revolving bank line of credit (of which $10.0
million is available in foreign currencies) (the "Credit Facility") to replace
the Company's prior $25.0 million revolving credit facility. The material terms
of the Credit Facility are described herein. The interest rate was reduced from
the prime rate or LIBOR plus 250 basis points (280 basis points for the European
operations) to the prime rate, the Federal Funds rate plus 50 basis points or
LIBOR plus 150 basis points (approximately 7.12% as of June 30, 1997). The
Credit Facility is collateralized by substantially all of the Company's assets.
In addition, the Credit Facility is subject to certain restrictive covenants. As
of June 30, 1997, there was approximately $3.8 million outstanding under the
Credit Facility. The Company will repay all amounts outstanding under the Credit
Facility from the proceeds of this offering.
Cash provided by operating activities was $1.7 million for the six months
ended June 30, 1997 compared to $3.1 million for the six months ended June 30,
1996. This decrease was the result of the increase of $2.5 million in net income
before depreciation and amortization and extraordinary items offset by $3.9
million of changes in working capital due to increases in accounts receivable as
a result of the increase in revenues and the timing of payments of accounts
payable and accrued expenses. Cash used in investing activities for the six
months ended June 30, 1997 was $6.8 million compared to $470,000 for the six
months ended June 30, 1996. This was principally the result of the USA Security
Acquisition and the EAS Acquisition, both of which were completed in May 1997.
Cash provided by financing activities for the six months ended June 30, 1997 was
$6.6 million compared to the use of cash of $3.1 million for the six months
ended June 30, 1996. The increase in cash in the six months ended June 30, 1997
was principally the result of proceeds from the initial public offering in March
1997, net of expenses, of $22.0 million offset by net payments of debt of $16.0
million. The use of cash in the six months ended June 30, 1996 was principally
the result of repayments under the Company's credit facility.
Cash provided by operating activities was $1.2 million for the year ended
December 31, 1996. This was the result of $6.3 million of net income before
depreciation and amortization and other non-cash charges offset by $5.1 million
of changes in operating assets, primarily accounts receivable, offset by accrued
salaries and related benefits payable. These changes were consistent with the
Company's higher volume of business. Cash used in investing activities for the
year ended December 31, 1996 was $4.0 million, principally as a result of the
Intersec Acquisition made in July 1996. Cash provided by financing activities
for the year ended December 31, 1996 was $3.3 million, principally representing
increases in borrowings under the Company's credit facility and issuance of the
subordinated notes associated with the Intersec Acquisition.
Cash used in operating activities was $3.5 million in fiscal 1995. This was
the result of $4.5 million of net income before depreciation and amortization
and other non-cash charges offset by $8.0 million of changes in operating assets
and liabilities. Cash used in investing activities for fiscal 1995 was $1.6
million, primarily related to the purchase of $2.6 million of management
information systems upgrades and shuttle buses offset by $1.0 million from the
proceeds from the sale of the Company's drug testing subsidiary. Cash provided
by financing activities for fiscal 1995 of $5.1 million resulted primarily from
the refinancing of, and net borrowings under, the previous bank line of credit
and term debt.
Cash provided by operating activities was $132,000 in fiscal 1994. This was
the result of $2.2 million of net income before depreciation and amortization
and other non-cash charges offset by
23
<PAGE> 25
$2.1 million of changes in operating assets and liabilities. Cash used in
investing activities for fiscal 1994 was $1.2 million, primarily related to the
purchase of management information systems upgrades and shuttle buses. Cash
provided by financing activities of $1.1 million resulted primarily from
borrowings under the Company's previous bank line of credit.
Capital expenditures were $2.0 million, $2.6 million and $1.3 million in
fiscal 1996, 1995 and 1994, respectively, and $1.0 million and $551,000 for the
six months ended June 30, 1997 and 1996, respectively. Historically, capital
expenditures have been, and future expenditures are anticipated to be, primarily
to support expansion of the Company's operations and management information
systems. The Company's capital expenditures over the next several years, as a
percentage of its revenues, are expected to be generally consistent with those
of the past three fiscal years.
The Company completed its initial public offering of Common Stock in March
1997, raising net proceeds of approximately $22.0 million. These proceeds were
used to repay all outstanding amounts under the Company's credit facility, to
repurchase an outstanding warrant and to retire other outstanding
acquisition-related debt.
The Company believes that any funds generated from operations, together
with existing cash, the net proceeds of this offering and borrowings under the
Credit Facility, will be sufficient to finance its current operations, planned
capital expenditure requirements, additional acquisitions and internal growth
for at least the next several years. The Company has an executed letter of
intent with respect to the RightSide Up Acquisition. If the Company were to make
a significant acquisition for cash, it may be necessary for the Company to
obtain additional debt or equity financing.
INFLATION
The Company does not believe that inflation has had a material effect on
its results of operations in recent years. However, there can be no assurance
that the Company's business will not be affected by inflation in the future.
24
<PAGE> 26
BUSINESS
AHL provides contract staffing and management of its clients'
labor-intensive operational support functions on an outsourced basis throughout
the United States and Europe. The Company's core competencies include
recruiting, hiring, training, motivating and managing the large numbers of
personnel required to provide many of the support services needed by its clients
while incorporating quality systems and cost efficiency in its operations.
Founded in 1979, the Company is a leader in providing pre-departure screening,
passenger profiling and other passenger services to the aviation industry and,
increasingly, provides services to other large corporations, including Federal
Express, America Online, Georgia Power, BellSouth, Nike and Motorola. Through
its 62 offices in the United States and 27 offices in seven European countries,
AHL is able to service the multinational outsourcing needs of its largely
Fortune 1000 client base. The Company currently has approximately 500 contracts
to provide services and has established long-term relationships with its largest
clients, providing the Company with a significant source of predictable
recurring revenues. The Company intends to take advantage of market trends
toward contract staffing and become the preferred provider of outsourced labor
management solutions for its clients by leveraging its core competencies,
international scale, reputation for quality, performance-based quality
measurement systems, management depth and senior-level relationships with its
key clients. To capitalize on these market trends and to enter new complementary
business lines, the Company has completed three acquisitions since its initial
public offering in March 1997 and has an acquisition pending.
INDUSTRY OVERVIEW
Many corporations and other institutions need to recruit, hire, train,
motivate and manage large numbers of personnel to handle non-core functions, in
labor environments often characterized by relatively low pay and high turnover
rates. Enterprises incur considerable expense and invest substantial amounts of
management time in managing this process. These enterprises are increasingly
contracting with specialized third party providers to better ensure long-term
labor availability for support functions. Contract staffing providers often are
able to provide higher quality services at a lower cost than these enterprises
are able to do themselves. Outsourcing these functions shifts employment costs
and risks, such as workers' compensation, recruitment and turnover costs and
changes in labor regulations, to outside vendors and allows enterprises to
reduce the administrative overhead and time necessary to properly manage
non-core functions.
The nature of the contract staffing industry is changing. As enterprises
centralize purchasing decisions and seek to reduce the number of vendors with
whom they do business, the ability of providers to offer national account
capability and national and international coverage is growing in importance.
Large enterprises are increasingly seeking partnering opportunities whereby the
third party provider, in addition to providing on-site management of staff,
assumes responsibility for a particular function, including designing and
implementing a solution for its client and shares in the economic benefits
derived from improved execution of the function. These trends, as well as the
increasing need for capital and management depth for growth, are creating
consolidation opportunities in the highly fragmented contract staffing industry.
While the aviation industry has historically outsourced certain functions,
such as food service, fueling and pre-departure screening, aviation companies
are increasingly outsourcing operational support functions not directly related
to flight operations. Functions which are increasingly being outsourced include
passenger profiling, baggage claim and check, sky cap, cargo and baggage
handling, aircraft clean and search, frequent flyer lounge operation, ramp
services, wheelchair assistance, shuttle bus, inter-gate cart, ticketing and
check-in services. Opportunities for outsourcing of security-related
labor-intensive operational support functions within the aviation industry have
increased in recent years and are expected to continue to increase if the FAA
approves more stringent security measures. Measures under consideration or
recently recommended by the FAA and the White House Commission on Aviation
Safety and Security (the "Gore Commission") in the United States include
certification of service providers, X-raying and matching all checked baggage,
25
<PAGE> 27
implementation of a passenger profiling system and under-the-wing security
guards for parked aircraft.
Growth in demand for contract staffing and outsourcing services in the
United States and Europe is expected to continue. Companies in numerous
industries are seeking to reduce costs and focus on their core competencies and,
as a result, are increasingly outsourcing support functions which have
traditionally been performed in-house. The trend toward outsourcing labor
management in Europe is not as developed as it is in the United States, due in
part to historically more restrictive labor regulations which are beginning to
be liberalized. Two trends are expected to increase demand for aviation-related
contract staffing services in Europe: (i) the privatization of major airlines,
which should increase their focus on improving operating performance, and (ii)
the liberalization of airport authority licensing, which currently restricts the
number of vendors that may provide aviation services at a particular airport.
The European Union has mandated that European airports be opened to increased
competition to provide various ground services beginning in January 1999.
BUSINESS STRATEGY
The Company intends to take advantage of market trends toward contract
staffing and become the preferred provider of outsourced labor management
solutions for its clients by leveraging its core competencies, international
scale, reputation for quality, increasing focus on performance-based quality
measurement systems, management depth and senior-level relationships with its
key clients. Key elements of the Company's business strategy include:
Exploit Core Competencies. The Company's core competencies include
recruiting, hiring, training, motivating and managing the large numbers of
personnel required to provide many of the support services needed by its clients
and incorporating quality systems and cost efficiency in its operations. In
1996, the Company recruited, hired and trained over 9,000 full-time employees to
provide services for its clients. The Company completed drug tests and
background checks for substantially all of these individuals. Since inception,
the Company has been able to provide quality service and expand its business
despite the high employee turnover that is inherent in low wage, labor-intensive
positions. The Company has been able to leverage its core competencies in labor
management to regularly expand the range of services it offers. The Company
currently performs a variety of aviation passenger services, commercial
security, shuttle bus services and cargo handling and provides staffing for
warehouse "pick and pack" and light industrial functions.
Target Fortune 1000 Clients. AHL targets large corporations and
institutions that have significant contract staffing needs for labor-intensive
operational support functions. AHL's major clients include Delta Air Lines,
British Airways, United Airlines, Federal Express, America Online, The Coca-Cola
Company, Northwest Airlines, BellSouth, Nike, Motorola, United Parcel Service,
Georgia Power, Emory University and several federal, state and local government
agencies. The Company has established long-term relationships with its largest
clients, providing the Company with a significant source of predictable
recurring revenues and establishing the Company as a preferred outsourcing
vendor for these clients. The Company's high quality of services has enabled it
to experience an average annual retention rate of approximately 93% of contract
billable hours over the last three fiscal years (excluding operations the
Company has elected to terminate). The Company's field management and direct
sales force market AHL's services to clients in their assigned regions, while
senior executives concentrate on senior-level relationships and national account
management. Building and maintaining relationships with its clients' senior
executives and local operating personnel has been, and will continue to be, an
important operating philosophy for the Company.
Leverage National and International Coverage. As companies centralize
purchasing decisions and seek to reduce the number of vendors with whom they do
business, the ability of contract staffing providers to offer national and
international coverage is growing in importance. Through its operations in 62
offices in the United States and 27 offices in seven European countries, AHL is
able
26
<PAGE> 28
to service the multinational needs of its Fortune 1000 client base. The Company
believes its ability to provide a consistently high level of service at numerous
locations worldwide provides it with a significant competitive advantage. The
Company's four largest clients use AHL's services in both their North American
and European operations.
Utilize Performance-Based Measurement Systems. The Company's goal is to
assume a leadership position in the adoption of technology-driven,
performance-based measurement systems which will further differentiate AHL in
the contract staffing industry in which quality measurement has not been
prevalent. The Company believes its efforts will enable it to become a preferred
vendor for its clients and attract additional clients. AHL has been developing
and will continue to develop systems to measure performance in order to
demonstrate the quality of the Company's services and productivity gains
achievable by outsourcing labor-intensive functions to the Company. For example,
in conjunction with United Airlines, the Company is reengineering the
pre-departure screening process at Chicago's O'Hare Airport to measure passenger
and baggage throughput, employee retention and labor utilization rates.
Continue Investment in Management and Systems. Historically, the Company
focused primarily on increasing revenues and expanding client relationships. In
December 1994, AHL made the strategic decision to strengthen its management team
and develop a corporate infrastructure to continue its growth strategy and
improve profitability. The Company has recruited senior and regional managers
with operating experience in a variety of industries. For example, the Company
recently hired Ernest Patterson as Chief Executive of The ADI Group Limited and
hired a Vice President of Finance and a Chief Information Officer of
Argenbright. The Company continues to invest substantial resources to develop
budgeting, financial reporting, contract control and human resource tracking
systems designed to provide quality service to its clients and to manage and
effectively control all aspects of its business. These systems represent a
competitive advantage and are designed to enable the Company to improve its
profitability.
GROWTH STRATEGY
AHL believes there are significant opportunities to expand its business as
large corporations and other institutions outsource labor-intensive operational
support functions in order to focus on their core competencies. The Company
follows a disciplined model for growth, entering a new market only after it has
signed a contract with a client to provide specific services in that market.
Once an initial contract is awarded, the Company establishes an office and
begins building management depth in that market. After establishing operations
in a new market and demonstrating its ability to provide high quality services,
the Company has successfully leveraged its local infrastructure by marketing
additional services to its initial client and by providing services to
additional clients in that region. Key elements of the Company's growth strategy
include:
Penetrate Existing Accounts. The Company believes there are substantial
opportunities to expand relationships with existing clients by increasing the
number of client locations served by AHL as well as by cross-selling the full
range of the Company's services. The Company seeks to capitalize on the services
provided in one location of a client by providing its services to other
locations or operations, including foreign operations, of its clients. For
example, in 1993 the Company provided pre-departure screening for United
Airlines in three of United's domestic hubs. As a result of the quality of its
service and its ability to provide national and international coverage, AHL now
provides pre-departure screening and a range of other services at all of
United's domestic hubs and at four European locations.
Expand Service Offerings. The Company believes its core labor management
competencies can be leveraged across a wide range of labor-intensive operational
support functions. The Company seeks to provide new value-added services, which
can increase the average account size, present national account cross-selling
opportunities and strengthen long-term relationships with its clients. As a
result of the Lloyd Acquisition, the Company has begun providing staffing for
warehouse "pick
27
<PAGE> 29
and pack" and light industrial functions. The Company believes that it is
well-positioned to expand its operational support services and to deliver
additional services such as order fulfillment and inbound call management.
Obtain New Clients. To take advantage of the trend towards outsourcing of
non-core functions, the Company intends to target new clients that are seeking
cost-effective solutions for labor-intensive functions. The Company believes it
has a competitive advantage in competing for new clients because of its
reputation for quality service, management depth, ability to provide a broad
range of services and national and international coverage. The Company hired a
Vice President of Marketing and Strategic Planning in September 1996 and is
currently developing a new marketing program that focuses on national accounts.
The Company has fifteen sales representatives in the United States and Europe
and is actively seeking new sales representatives. The Company intends to hire a
national account sales representative in 1997.
Continue to Seek Strategic Acquisitions. AHL intends to take advantage of
the fragmented nature of the contract staffing and operational support
outsourcing industries by seeking domestic and international acquisitions,
thereby leveraging the Company's existing infrastructure and enabling the
Company to expand its geographic coverage and service offerings. The Company
believes it has developed the management team and systems to enable it to
identify acquisition candidates and to successfully acquire and integrate
businesses. To capitalize on these market trends and to enter new complementary
business lines, the Company has completed three acquisitions since its initial
public offering in March 1997 and has an acquisition pending.
ACQUISITIONS
Since 1992, the Company has completed six acquisitions. In March 1992, the
Company acquired a portion of the passenger services operation of British
Airways at Heathrow Airport. The Company has used ADI as a platform to expand
its operations in Europe. In August 1993, ADI acquired Express Baggage Reclaim
Services Limited, a provider of lost baggage delivery and replacement services
in the United Kingdom. In July 1996, the Company acquired Intersec, a provider
of commercial and governmental security services in the Baltimore/Washington
metropolitan area. The Intersec Acquisition added density in a region where the
Company had an existing well-developed infrastructure. All of these acquisitions
have been fully integrated into the Company's operations.
To strengthen its outsourcing relationship with British Airways, in May
1997 ADI entered into a joint venture with British Airways to acquire EAS. EAS
provides ground handling (including arranging fueling, runway and gate access,
baggage handling and transport), passenger handling and concierge services for
executive aircraft. Heathrow licensing rules prevented an outright purchase of
the business by ADI, so the parties entered in a joint venture and agency
agreement under which ADI retained an option to purchase all of the business
when regulatory authorities permit and ADI receives all of the revenues and
profits from the business performed by EAS. ADI paid approximately $2.8 million
to British Airways and British Airways contributed the license to operate the
executive aircraft services business at Heathrow Airport to the joint venture.
In addition, ADI has committed to pay British Airways up to $400,000 for each of
three years if EAS achieves certain operating results. EAS had revenues for the
twelve months prior to the acquisition of approximately $2.4 million.
To increase its operational density in the northeastern region of the
United States, in May 1997 AHL acquired the commercial security business of USA
Security, located in New Jersey, for approximately $2.6 million in cash. USA
Security had revenues for the twelve months prior to the acquisition of
approximately $8.6 million. Since completion of the USA Security Acquisition,
AHL has realized cost efficiencies by integrating USA Security into its existing
New York and New Jersey operations.
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To begin providing warehouse "pick and pack" and light industrial staffing
services, in September 1997 AHL acquired Lloyd for approximately $5.0 million in
cash plus contingent consideration based on future operating results. Lloyd, a
provider of staffing for warehouse "pick and pack" and light industrial (such as
product assembly) functions to companies in the Chicago area, had revenues for
the twelve months prior to the acquisition of approximately $14.0 million. Lloyd
also provides staffing for customers who operate telemarketing call centers. The
Lloyd Acquisition will serve as a platform from which the Company intends to
begin adding branch offices and increasing the number of "vendor on premises"
locations.
In September 1997, the Company signed a letter of intent to purchase
RightSide Up, a California company, for $6.0 million in cash plus contingent
consideration based on future operating results. RightSide Up had revenues of
approximately $6.0 million for the twelve months ended August 31, 1997.
RightSide Up operates telemarketing call centers that take inbound customer
orders and fulfills these orders by "picking and packing" and shipping the items
from the company's warehouse. RightSide Up's clients are predominantly in the
entertainment industry and its clients own the actual inventory, such as
promotional material, shipped to customers. The Company expects to execute a
definitive purchase agreement following consummation of this offering. However,
there can be no assurance that a definitive purchase agreement will be executed
or that the acquisition will be consummated. Through the RightSide Up
Acquisition, the Company intends to expand its services to include order
fulfillment, whereby it would operate telemarketing call centers, provide
warehousing services, fill orders and ship consignment inventory and other
materials to customers.
The Company intends to continue to seek acquisitions that will build
density in the Company's existing markets, add geographic coverage to the
Company's existing businesses, broaden the Company's service offerings and
expand the Company's client base. Through acquisitions of smaller operations
providing the same type of services already provided by the Company, AHL
believes it can leverage its existing management and systems infrastructure and
increase its market share in locations at which the Company already has an
established presence. In most instances, these operations can be integrated into
the Company's existing operations, resulting in elimination of duplicative
overhead and operating costs. The Company also intends to seek strategic
acquisitions that will enable it to enter new markets, provide new services and
complement its client base. The Company will seek to efficiently integrate these
acquired companies while retaining the existing management of those companies.
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SERVICES PROVIDED
The following table presents information with respect to the percentage of
the Company's revenues by major service category for the periods shown:
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEARS ENDED ENDED
DECEMBER 31, JUNE 30,
-------------------------- ----------
SERVICES PROVIDED 1994 1995 1996 1997
----------------- ---- ---- ---- ----------
<S> <C> <C> <C> <C>
Passenger services:
Pre-departure screening and passenger
profiling.......................... 56% 54% 50% 46%
Other passenger services(1).......... 4 4 5 10
Commercial security(2).................. 24 23 28 31
Shuttle bus services.................... 8 8 9 9
Warehouse "pick and pack" and light
industrial(3)........................ 3 6 4 4
Other(4)................................ 5 5 4 *
--- --- --- ---
Total........................... 100% 100% 100% 100%
=== === === ===
</TABLE>
- ---------------
* Less than 1%.
(1) Includes baggage claim and check, aircraft clean and search, lost baggage
delivery and replacement, sky cap, wheelchair assistance, escorting of
unaccompanied minors, inter-gate cart services and frequent flyer lounge
operation. Includes revenues of EAS from the date of acquisition in May
1997.
(2) Includes revenues of Intersec and USA Security, providers of commercial
security services, from the dates of acquisition in July 1996 and May 1997,
respectively.
(3) Includes cargo handling. Does not include revenues of Lloyd.
(4) Includes the terminated paratransit and municipal bus services in Florida.
Passenger Services
Pre-Departure Screening and Passenger Profiling. Management believes,
based on its knowledge of the industry, that the Company is the largest provider
of pre-departure screening and passenger profiling services in the United States
and Europe combined, with approximately 4,100 employees currently providing
services at 34 airports in the United States and 27 airports in Europe.
Pre-departure screening is a security approach maintained at all commercial
airports in the United States and the United Kingdom under mandates of the FAA
and the U.K. DOT and at many other airports throughout the world under similar
mandates of other regulatory authorities. At pre-departure screening
checkpoints, all passengers and other airport patrons must physically pass
through a device called a magnetometer, designed to reveal the presence of metal
objects, and all carry-on baggage and other items carried into the concourse or
gate area must pass through an X-ray device to determine whether certain
suspicious materials are present. Major airports at which the Company provides
pre-departure screening services include Los Angeles International, New York --
Kennedy, Washington -- National and Dulles, Denver International,
Chicago -- O'Hare, San Francisco, Orlando, Boston and Memphis in the United
States.
In Europe, the Company provides a sophisticated passenger profiling
procedure which has been used by certain major European airlines for several
years at high-risk international airports in Europe and was mandated in 1994 by
the FAA for U.S. airlines' international flights from those airports. Passenger
profiling seeks to identify a potential threat before it materializes by means
of interviewing, document verification and behavioral analysis. This procedure
results in the classification of the vast majority of passengers as low risk,
thereby enabling more scrutiny to be focused on higher risk passengers. The
Company has been providing profiling services in Europe since 1992, currently
has over 250 employees providing these services and believes that if the FAA
were to mandate profiling in the United States, the Company would be
well-positioned to quickly implement profiling
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procedures for its U.S. clients. See "-- Government Regulation." The Company has
developed TOPS2 and OSCARGO, proprietary state-of-the-art computer-based
profiling systems, to meet expected future profiling requirements. Major
airports at which the Company provides passenger profiling services include
London -- Heathrow and Gatwick, Paris -- Charles de Gaulle, Frankfurt, Berlin,
Dublin, Vienna and Zurich.
Other Passenger Services. Historically, airlines have utilized their own
employees to provide most passenger services but are increasingly seeking to
outsource support functions. The Company provides a variety of other passenger
services to its airline clients, including baggage claim and check in 22
airports in the United States and Europe, aircraft clean and search in four
European airports and lost baggage delivery or replacement services in 11
European airports. At 18 airports in the United States and Europe, the Company
provides an assortment of services including sky cap, wheelchair assistance,
escorting of unaccompanied minors, inter-gate cart services and frequent flyer
lounge operation (front desk, bartending and cleaning).
Commercial Security
The Company provides uniformed security officer services, business and
facility access control, security consulting, special event security and
security assessment to a broad range of commercial and governmental clients. The
Company's security officers are used at office and government buildings,
airports, hospitals, distribution centers, sports arenas, museums and other
facilities. For aviation clients, the Company provides guarding and control of
airport entrances, checking of employee identification cards and baggage,
guarding and control of employee parking lots and under-the-wing guarding of
parked aircraft in Europe.
Depending on the needs of the client, security officers are on premises,
often around-the-clock, to provide facility security, access control, personnel
security checks and traffic and parking control and to guard against fire,
theft, sabotage and safety hazards. The Company's security officers are trained
to respond appropriately to emergency situations and report fires, intrusions,
natural disasters, work accidents and medical crises to appropriate authorities.
Fewer than one percent of the Company's security personnel are armed. See "Risk
Factors -- Liabilities for Client and Employee Actions and Other Claims."
Shuttle Bus Services
The Company provides dedicated, fixed route shuttle bus services in 10
locations within the United States and two locations in the United Kingdom
through its fleet of approximately 365 shuttle bus vehicles, which generally
seat between 15 and 50 passengers. Under all of its shuttle bus contracts, the
Company provides the shuttle bus and the driver. During fiscal 1996, AHL
vehicles traveled more than seven million miles and operated for more than
700,000 hours. For example, AHL currently provides (i) campus shuttle services
at The Georgia Institute of Technology, Emory University and The American School
in London, (ii) corporate shuttle services between various facilities of The
Coca-Cola Company, Delta Air Lines and the Federal Reserve Bank in Atlanta,
(iii) public parking shuttle services for the Memphis/Shelby County Airport
Authority and the Nashville Airport Authority, (iv) aviation employee
transportation services from employee parking lots for Delta Air Lines (Los
Angeles, Cincinnati, Atlanta and New York) and Federal Express (Memphis,
Indianapolis and Newark) and (v) airside crew and passenger transport at
Heathrow Airport.
Warehouse "Pick and Pack" and Light Industrial
The Company provides staffing for warehouse "pick and pack" and light
industrial functions, which includes providing staffing for warehousing
functions and inventory distribution. The Company entered the warehouse "pick
and pack" and light industrial markets with completion of the Lloyd Acquisition.
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The Company prepares cargo and mail for flight by sorting, packaging and
transporting the cargo and mail to and from airplanes in certain markets, such
as Cincinnati and New York. In certain other markets, such as Las Vegas and
Washington, D.C., the Company provides the actual staffing of customer counters
and data input into the airline's cargo computer system, in addition to handling
the cargo. Cargo services are provided in these other markets pursuant to
outsourcing arrangements, under which the Company manages the entire process for
its clients. The Company processes air cargo for several of its major aviation
clients, including Delta Air Lines in New York, Cincinnati, Washington D.C.,
Seattle, New Orleans, Newark, Philadelphia and Los Angeles, and for United
Airlines, Alaska Airlines, America Trans Air, and Royal Airlines in Las Vegas.
The Company also provides cargo services to Air China and SwissAir in New York
and Cathay Pacific and Vanguard in Seattle pursuant to subcontracts from Delta
Air Lines. In addition to cargo handling, the Company provides U.S. Postal
Service mail handling for Delta Air Lines in Cincinnati, New York, Philadelphia
and Los Angeles.
Other
The Company provides polygraph training and testing services, conducts
investigations such as criminal and background checks, and provides facility
receptionists at commercial locations. The Company utilizes its polygraph
testing and background check services in its own hiring process. The Company has
provided paratransit and municipal bus services, but in 1996, made the decision
to terminate these services. The Company terminated its Tampa paratransit
business in the fall of 1996.
Contract Terms
The Company's services, other than staffing for warehouse "pick and pack"
and light industrial functions, are primarily provided under contracts,
typically having terms of one to five years, which provide the Company with a
significant source of predictable recurring revenues. Although the terms of the
Company's contracts vary significantly, clients generally agree that the Company
will provide a stated service level and agree to pay the Company an hourly rate
for services provided. Certain of the Company's clients, especially in the cargo
services area, are billed a fixed dollar amount per month for services
performed. Under some contracts, the Company is entitled to rate increases when
there are increases in the Federal minimum wage, although most of the Company's
employees are paid at rates in excess of the Federal minimum wage. Most
contracts have multi-year terms and are generally terminable by either party
upon 30 to 90 days written notice. Most of the contracts entered into by the
Company have been renewed or extended upon the expiration of their original
terms. The Company (excluding Lloyd and USA Security) has experienced an average
annual retention rate of approximately 93% of contract billable hours over the
last three fiscal years (excluding operations the Company has elected to
terminate). The Company's security officer services are generally provided under
contracts in which AHL assumes responsibility to employ, schedule and pay all
security officers and provide uniforms, equipment, training, supervision, fringe
benefits, bonding and workers' compensation insurance. The Company's contracts
typically provide that the Company will indemnify the client from and against
any claims for personal injury or death to any person (other than an employee of
the client) and for damage to any property arising out of the acts or omissions
of the Company unless the claim results from any negligent act of the client.
Clients
AHL's ten largest clients in fiscal 1996, which accounted for an aggregate
of 61.2% of the Company's revenues, were Delta Air Lines, British Airways,
United Airlines, Federal Express, the United States government, American
Airlines, Northwest Airlines, Georgia Power, The Coca-Cola Company and the
Nashville Airport Authority (excluding the terminated Florida transportation
operations). During the six months ended June 30, 1997, the Company's ten
largest clients accounted for an aggregate of 64.0% of the Company's revenues.
During fiscal 1996, Delta Air Lines, British Airways, United Airlines and
Federal Express accounted for 23.1%, 12.6%, 11.3% and 4.2% of
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<PAGE> 34
the Company's revenues, respectively, through an aggregate of 78 contracts and,
together, represented 51.2% of the Company's revenues. During the six months
ended June 30, 1997, United Airlines, Delta Air Lines, British Airways and
Federal Express accounted for 20.4%, 17.7%, 11.7% and 4.0% of the Company's
revenues, respectively, through an aggregate of 83 contracts and, together,
represented 53.8% of the Company's revenues. AHL is increasingly providing
services to other large corporations, including America Online, BellSouth, Nike
and Motorola. The Company has 15 contracts in the United States and seven
contracts in Europe that provide annual revenues in excess of $2 million each.
CASE STUDIES
The Company has built strong relationships with a number of Fortune 1000
and other large, multinational companies. The following case studies demonstrate
the Company's ability to effectively utilize its operating and growth strategies
to develop its relationships with its clients.
United Airlines. The Company's relationship with United Airlines began in
1989 with a contract to perform pre-departure screening services at Washington
National Airport and, by 1993, included pre-departure screening services at six
airports in the United States. Since 1993, the Company has expanded the services
provided to United Airlines to include baggage handling, sky cap, wheelchair
services and cargo handling. Today, the Company provides services to United
Airlines at 15 airports in the United States and four in Europe, and provides
commercial security services at United Airlines' corporate headquarters in
Chicago.
British Airways. The Company established its relationship with British
Airways when Mr. Argenbright acquired a portion of the airline's passenger
service operation at Heathrow Airport in March 1992. In the following year,
British Airways awarded AHL additional Heathrow service contracts to provide
under-the-wing guarding of parked aircraft as well as clean and search and
passenger profiling services. The Company subsequently was awarded similar
British Airways service contracts at Gatwick and 16 additional airports
throughout the United Kingdom and in France and Germany. Contemporaneously, AHL
began providing airport services to other international air carriers at these
locations. In 1995 and 1996, AHL was awarded contracts for pre-departure
screening services for British Airways in both Detroit and Philadelphia. In
1996, British Airways and the Company formed a joint venture to provide
passenger and baggage check-in and other passenger services for British Airways
in Nice, France and, in connection with its acquisition of EAS in May 1997,
formed a joint venture to provide ground handling services for executive
aircraft at Heathrow Airport.
Federal Express. In August 1986, the Company began providing shuttle bus
services for Federal Express employees at the Memphis airport. In 1993, AHL was
selected from a pool of 3,500 vendors as Federal Express' Service Provider of
the Year. The services provided by the Company were expanded in August 1994 to
include pre-departure screening of Federal Express' crews. Currently, the
Company provides shuttle bus and/or pre-departure screening or security services
for Federal Express in Atlanta, Indianapolis, Cincinnati, Newark, Memphis, San
Francisco, Dallas, Orlando, Paris, London, Frankfurt and Manila.
Delta Air Lines. The Company began its relationship with Delta Air Lines
in the early 1980s when it began providing shuttle bus services at Delta's
Atlanta headquarters complex. Over the past 15 years, AHL has significantly
expanded both the services it provides Delta as well as the number of locations
at which they are provided. In 1986, the Company began performing pre-departure
screening services for Delta, which currently includes operations in New
York -- Kennedy, Los Angeles, Washington, D.C., Orlando, Boston, Little Rock and
West Palm Beach. In addition, the Company now provides passenger services for
Delta at seven airports in four European countries, including Paris -- Charles
de Gaulle, Vienna, London -- Gatwick and Warsaw. Similarly, Delta awarded the
Company a cargo handling contract for New York in 1992 and thereafter for
Washington, D.C., Cincinnati and Seattle. In 1997, the Company significantly
expanded its cargo and mail
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handling operations for Delta by adding contracts at Newark, Philadelphia, Los
Angeles and New Orleans, bringing the total to eight U.S. cities. In September
1997, the Company was awarded a special services contract (wheelchair and
inter-gate cart services) in Atlanta. The award of this contract was largely
attributable to the introduction of performance measurements developed jointly
by Delta and the Company.
America Online. AHL was initially hired by America Online to provide
commercial security services at its Northern Virginia headquarters in May 1996.
These services were expanded in 1996 to provide commercial security services at
America Online's Jacksonville, Tucson and Albuquerque locations. In February
1997, the Company began these services in Oklahoma City and Salt Lake City. The
America Online contracts demonstrate the success of the Company's new national
account sales program. America Online recently designated AHL as its preferred
national security provider.
SALES AND MARKETING
Building and maintaining relationships with personnel at various levels of
its clients' organizations, including relationships with both senior executives
and local operating personnel has been, and will continue to be, an important
operating philosophy for the Company. The Company uses these relationships to
market its services to potential clients through individuals having senior
management and local operating responsibilities. AHL targets large corporations
and institutions that have significant contract staffing needs for
labor-intensive, task-repetitive functions. The Company has a local sales force
in the United States of 13 representatives located in AHL's regional offices in
New York, Atlanta, Florida, Memphis, Washington, D.C. and Los Angeles and two
sales representatives in Europe. The Company's eight regional vice presidents in
the United States are each responsible for two or three districts. Regional and
district managers also have sales responsibilities and a portion of their
incentive compensation is dependent on meeting sales goals.
The Company is developing a national sales and marketing strategy, under
which the Company focuses on improving the consistency of its sales approach.
Furthermore, the Company has designated certain senior managers as responsible
for specific national account relationships with specific large clients and
intends to add a national accounts sales representative during 1997.
In September 1996, the Company hired a Vice President of Marketing and
Strategic Planning to lead the Company's sales and marketing initiatives. These
initiatives include the development of branded services, strategic partnering
through national accounts, positioning AHL as a full service provider capable of
reducing a client's total costs by establishing performance-based quality
measurement systems, creating national, regional and local marketing plans, and
coordinating the Company's participation in trade shows. In 1996, the Company
began conducting in-house sales seminars, at which regional, district and
national account managers, along with the Company's local sales personnel, focus
on how to sell services to larger accounts.
WORKFORCE MANAGEMENT
The Company's core competencies include recruiting, hiring, training,
motivating and managing the large numbers of personnel required to provide many
of the support services needed by its clients. The Company's district managers
have ongoing responsibility for hiring, recruiting and training the Company's
local workforce.
Recruiting. The Company has developed innovative recruiting methods that
have been particularly effective in reaching targeted pools of prospective
employees, in addition to utilizing traditional recruiting methods such as job
fairs, trade journals, local advertising, and interviewing at vocational
schools. After analyzing the demographics of each market, the Company seeks to
establish relationships with community groups and leaders. For example, in a
number of markets, the Company has found that senior citizens are an excellent
source of potential employees for its pre-departure screening services and
recruiters frequently visit senior citizen centers. The Company leverages these
community relationships to provide a feeder into the Company's employment pool
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and believes that current Company employees serve as effective recruiters for
the Company. The Company believes these methods are more cost-effective than
more traditional recruiting methods.
Hiring. In 1996, the Company recruited, hired and trained over 9,000
full-time employees to provide services for its clients. Within the United
States, every employee must complete a written application and provide proof of
citizenship or resident alien status and is subject to a ten-year background
check, which is conducted internally by the Company. Unlike many of its
competitors, the Company requires mandatory pre-employment drug testing for all
aviation and commercial security services employees. Employees stationed at
airport checkpoint screening monitors are subject to psychological testing.
In Europe, the Company screens potential applicants through a telephone
interview, and each potential employee must complete a written application and
undergo an interview that includes vision, hearing and psychological testing. An
initial one-year background check is required for every new employee. Each
European employee is hired subject to a three month probationary period and
continuity of employment is subject to a 20-year background check. Where legally
permitted, employees in certain European countries are also subject to random
drug testing.
Training. The Company provides in-house classroom and on-the-job training
programs for its hourly personnel through videos, guest lecturers and full-time
trainers who are employed at the Company's major district locations. The Company
is in the process of establishing performance measures to improve job focus and
accountability, create a quality audit process and implement "best practices and
procedures" in the Company's field operations. The Company is ISO 9002-certified
in the United Kingdom. The Company is the only organization approved by the U.K.
DOT to provide aviation security training to personnel of the U.K. DOT, the
agency that regulates aviation security matters in the United Kingdom.
Retention. The Company believes that employee retention is critical to
lowering operating costs and providing high quality service to its clients.
Accordingly, the Company places significant emphasis on programs to motivate its
employees and reduce employee turnover. Since inception, the Company has been
able to provide quality service and expand its business despite the high
employee turnover that is inherent in low wage, task-repetitive positions. The
Company's "110% Club" recognizes employees for superior attendance, attitude,
appearance and performance. Members receive quarterly bonuses and other rewards,
and are recognized throughout the Company. The Company's pre-departure screening
employees receive bonuses for detecting weapons and other illegal objects at
airport security checkpoints, including those detected during FAA-mandated
tests.
Field Management. The Company has developed a management structure under
which significant workforce decisions are made at the local level, thereby
requiring field managers to assume responsibility for recruiting, hiring and
retention. The Company's bonus system for regional and district managers is
based upon achievement of specific performance objectives, including revenue,
gross margin and net contribution, new business and client retention and losses
and claims incurred. Regional and district managers can earn bonuses of up to
35% of their base compensation by achieving all of their objectives established
annually by the Company. As an added incentive, the Company established a stock
option plan for key corporate and field management in early 1997.
Employees. As of September 30, 1997, the Company had over 15,000
employees. A total of 1,285 of the Company's security employees working at New
York -- Kennedy, 789 working at Chicago -- O'Hare and 34 working at government
facilities in the Washington, D.C. area are covered by collective bargaining
agreements. Each of these agreements was assumed by the Company in connection
with an acquisition or an outsourcing contract previously held by another
vendor. In 1996 and 1997, unions initiated three efforts and one effort,
respectively, to organize certain Company employees, each of which failed to
receive sufficient support to require an election. The Company considers its
relations with its employees to be good.
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MANAGEMENT INFORMATION SYSTEMS
The Company has invested, and intends to continue to invest, substantial
resources to develop systems that will enable it to deliver quality customer
service, centrally manage its operations and achieve substantial cost savings.
In April 1997, the Company hired a Vice President and Chief Information Officer.
In addition, the Company recently completed installation of a management
information system, which integrates the Company's financial, human resources,
general ledger, payables, receivables and payroll functions. The system
completes budgeting, forecasting and monthly profit and loss statements on a
contract-by-contract basis. In 1996, the Company brought the payroll function
in-house, resulting in estimated annual savings of approximately $225,000. The
Company has networked its corporate offices and all regional and district
offices in the United States and has E-mail capability to all U.S. offices and
its London headquarters. The Company has also made significant investments to
upgrade field computers and has leased two HP9000 systems which are run parallel
to prevent downtime and give the Company the capacity needed to handle
anticipated future growth.
In 1998, the Company intends to enhance the computerized scheduling,
timekeeping and payroll system for hourly employees. This will enable AHL to
continue to develop performance measurements for its customers and to improve
scheduling to reduce the amount of non-billable overtime. In addition, the
Company will establish real-time links with the Company's European operations.
COMPETITION
The contract staffing industry is extremely competitive and highly
fragmented, with limited barriers to entry. Companies within the contract
staffing industry compete on the basis of the quality of service provided, their
ability to provide national and international services, the range of services
offered, as well as price. The Company believes its competitive advantages
include its reputation for providing high quality service and its ability to
serve large clients in the United States and Europe. Most of the Company's
competitors offer a more limited range of services and focus on a few specific
industries.
The Company competes in international, national, regional and local markets
with outsourcing companies, specialized contract service providers and in-house
organizations that provide services to potential clients and third parties.
AHL's principal competitors include, in the aviation services industry, ICTS
International N.V., Globe Aviation Securities Corporation and International
Total Services, Inc. and, in the commercial security industry, are Borg-Warner
Security Corporation, Guardsmark, Inc. and The Wackenhut Corporation. The
Company's warehouse "pick and pack," light industrial and shuttle bus services
compete primarily with numerous local and regional companies as well as
divisions of several major staffing companies. Certain of the Company's
competitors and potential competitors have significantly greater financial
resources and larger operations than the Company.
GOVERNMENT REGULATION
Current Regulations Relating to Aviation Security. Aviation security in
the United States is subject to regulations and directives issued by the FAA.
Under current regulations, responsibility for aviation security is shared
between the FAA and various other federal, state and local agencies and industry
participants (which include air carriers and airport authorities as well as
independent contractors that perform services for or on behalf of these industry
participants). The FAA conducts threat and vulnerability assessments and,
through its regulatory authority, directs the aviation industry to implement
measures that address existing and anticipated threat situations. The FAA also
tests security measures at airports to assess vulnerabilities in current airport
security systems.
Under FAA regulations, each air carrier and airport authority must adopt
and carry out an FAA-approved security program that provides for the safety of
persons and property traveling in air
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transportation against acts of criminal violence and aircraft piracy. Air
carriers are responsible for providing security measures for all people and
items connected with their aircraft, including passengers, baggage, and
maintenance and flight crews. Airport authorities are responsible for
maintaining a secure environment on airport grounds and for providing law
enforcement support and training.
Each security program adopted by an airline must include: (i) the screening
of passengers and their carry-on baggage, and other persons having access to
controlled areas, to prevent the carriage aboard aircraft of weapons or
explosive devices, (ii) controlling access to aircraft, checked baggage and
cargo, (iii) appropriate controls on shipping of cargo and (iv) security
inspection of any aircraft left unattended.
Airlines may utilize either their own employees or third-party contractors
to carry out their security programs. Proposed FAA regulations would require
pre-departure screeners to undergo a 10-year criminal and employment background
check and a five-year employment verification, with the employer required to
maintain records of these investigations throughout the term of employment.
Screeners operating X-ray systems must receive initial and recurrent training in
the detection of weapons and other dangerous articles.
From time to time, the FAA issues directives requiring the implementation
of specific actions by air carriers and airport authorities. For example,
following the destruction of TWA flight 800 in July 1996, the FAA began to
require additional passenger profiling for specified types of flights, matching
of passengers and checked baggage, additional searching of aircraft cabins and
cargo areas, additional physical searches of carry-on items and other enhanced
security measures.
Generally, European standards for aviation security are more stringent than
those currently in effect in the United States. Passengers are subject to more
comprehensive "profiling" and review of documents; parked aircraft must be
guarded, searched and cleaned in accordance with applicable regulations;
passenger baggage is subject to match procedures as well as random X-ray and
hand searches; commercial cargo is guarded and subject to random X-ray searches;
and airline employees and other crews are subject to additional security
measures. The FAA requires that U.S. airlines utilize similar passenger
profiling programs in their European operations.
Recent Developments Relating to Aviation Security. Several recent
initiatives by United States governmental authorities and industry participants
have considered or recommended significant changes in regulatory requirements
relating to aviation security. These recent initiatives have been undertaken by
the United States Congress, through provisions of the Federal Aviation
Reauthorization Act of 1996 (the "1996 Act"); the White House Commission on
Aviation Safety and Security (the "Gore Commission"), which published its final
report on February 12, 1997; and the Aviation Security Advisory Committee
("ASAC"), a committee of government and industry participants that issued its
recommendations on December 12, 1996. Each of these groups has considered issues
that have ranged from the fundamental structure of, and sharing of
responsibilities relating to, aviation security to specific near-term measures
that could be implemented to improve aviation security.
The Gore Commission, which was formed following the destruction of TWA
Flight 800 in July 1996, included the heads of various federal agencies and was
charged with making recommendations as to how the partnership between the U.S.
government and industry participants can achieve improved aviation security. The
Gore Commission issued its final report on February 12, 1997 and recommended:
(i) development of uniform performance standards for the selection, training and
certification of pre-departure screening companies; (ii) implementation of
procedures for matching of passengers and checked baggage on a nationwide basis
no later than December 31, 1997; (iii) the continued development and
implementation of an automated passenger profiling system; and (iv) utilization
of U.S. Customs Service personnel and computer systems to complement the efforts
of the FAA and other federal agencies. The FAA has initiated rulemaking
procedures that would implement certain of these recommendations.
37
<PAGE> 39
The 1996 Act requires that the FAA conduct a study and report to Congress
on whether to transfer certain responsibilities of air carriers to either
airport authorities or to the federal government or whether to provide for some
other sharing of current responsibilities. This report has not yet been issued
by the FAA. However, the Company believes that the FAA is likely to follow the
final recommendation released by the Gore Commission, as described above. The
1996 Act directs the FAA to "certify" companies that provide pre-departure
screening, continue to assist air carriers in developing computer-assisted
passenger profiling programs, assess programs for matching of passengers and
checked baggage that are currently being utilized in the industry on a test
basis, and report on changes to enhance and supplement the screening and
inspection of cargo and mail shipments.
ASAC was formed following the crash of Pan Am flight 103 in 1989 and is
charged with coordinating the flow of aviation security information and
countermeasures within the United States. ASAC includes representatives of
numerous federal agencies, associations of industry participants and public
interest groups and is chaired by the FAA's Director of Civil Aviation Security.
In July 1996, ASAC began to undertake an effort to strengthen the domestic
aviation security "baseline" and formed a working group to recommend specific
measures. In its report issued on December 12, 1996, ASAC recommended that no
change be made in the current structure or assignment of responsibilities for
aviation security. ASAC did recommend that the FAA initiate rulemaking
procedures for "certification" of security contractors and made numerous
recommendations with respect to specific aviation security measures, which are
generally consistent with those proposed by the Gore Commission.
Other Applicable Regulations. Airport authorities in many foreign
countries require that companies receive licenses in order to be able to perform
services at the airport and limit the number of licenses that are issued. The
Company is also required to maintain various licenses and permits from state and
local government authorities in order to provide commercial security, shuttle
bus and certain other services.
RISK MANAGEMENT AND SAFETY
Because the Company's business is labor intensive, workers' compensation is
a significant operating expense for the Company in the United States. In
addition, the Company is exposed to possible claims by its clients' customers or
employees, alleging discrimination or harassment by the Company's employees. The
Company is also exposed to liability for the acts or negligence of its employees
who cause personal injury or damage while on assignment, as well as claims of
misuse of client proprietary information or theft of client property. The
Company has adopted policies and procedures intended to reduce its exposure to
these risks.
The Company maintains insurance against these risks with policy limits it
considers sufficient, subject to self insurance of $250,000 per incident and an
aggregate stop-loss. In addition, the Company maintains aviation liability
insurance of $500 million per incident. The Company establishes reserves in its
financial statements for the estimated costs of pending claims as well as the
estimated costs of incurred but not yet reported claims. The reserve for these
unreported claims is based on prior experience. The Company's reserves are
periodically revised, as necessary, based on developments related to pending
claims. As of December 31, 1996 and June 30, 1997, the Company's reserve for
workers' compensation and automobile claims was $3.2 million and $3.8 million,
respectively.
In 1996, the Company hired a professional risk management specialist who,
with the assistance of the Company's regional managers, is responsible for
claims management and the establishment of appropriate reserves for the
deductible portion of claims. Additionally, in the first quarter of 1997, the
Company implemented a number of new risk control strategies. These include
establishing a risk allocation program which provided local managers with
financial incentives to improve safety performance by decreasing the number of
workplace accidents. The Company has also implemented quarterly safety committee
meetings with its local managers and field employees, conducted
38
<PAGE> 40
defensive driving training sessions for its transportation employees, conducted
routine safety inspections of local work sites and instructed personnel in
proper lifting techniques in an effort to reduce the number of preventable
accidents.
EQUIPMENT AND FACILITIES
As of June 30, 1997, the Company operated a fleet of approximately 365
shuttle bus vehicles, which generally seat between 15 and 50 passengers. A
majority of these vehicles are leased, with lease terms that generally match the
term of the contract for which the vehicles are provided. In the event of early
termination of a contract, certain of the Company's clients are required to
assume liability for the vehicle leases.
The Company performs its own vehicle maintenance at each major location
through a separate maintenance division. Preventive maintenance is provided at
defined mileage intervals. Each maintenance shop has experience with all
maintenance and repair requirements for the Company's fleet, including air
conditioning and component maintenance. The Company has made reduction in bus
maintenance expense a corporate initiative for 1997.
The Company maintains 89 offices in various metropolitan areas in the
United States and Europe. The Company's executive headquarters and corporate
operations are located in Atlanta, Georgia in leased facilities consisting of
approximately 3,700 and 15,200 square feet of office space, respectively. The
initial term of the executive headquarters lease expires in November 2001. In
February 1997, the Company acquired the corporate operations building from Mr.
Argenbright. See "Management -- Compensation Committee Interlocks and Insider
Participation." In addition, the Company's regional offices each consist of
between 150 and 6,350 square feet. The Company believes its facilities are
adequate to meet its needs for the foreseeable future.
LITIGATION
From time to time, the Company is involved in routine legal proceedings
incidental to the conduct of its business. In the opinion of management, the
litigation, individually or in the aggregate, to which the Company is currently
a party, is not likely to have a material adverse effect on the Company's
results of operations or financial condition.
39
<PAGE> 41
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The Company's executive officers, directors and key employees are as
follows:
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS: AGE POSITION
--------------------------------- --- --------
<S> <C> <C>
Frank A. Argenbright, Jr. ......... 48 Chairman and Co-Chief Executive Officer
Edwin R. Mellett................... 58 Vice Chairman and Co-Chief Executive
Officer
David L. Gamsey.................... 40 Chief Financial Officer
Thomas J. Marano................... 46 President and Chief Operating Officer -
Argenbright Holdings Limited
Ernest Patterson................... 50 Chief Executive - The ADI Group Limited
A. Trevor Warburton................ 55 Managing Director - The ADI Group
Limited
Robert McCullough(1)(2)............ 55 Director
Hamish Leslie Melville(1)(2)....... 52 Director
KEY EMPLOYEES:
- ---------------
Henry F. Anthony................... 45 Vice President of Human Resources -
Argenbright Holdings Limited
Nicholas G. Bailey................. 46 Finance Director - The ADI Group Limited
L. Celeste Bottorff................ 44 Vice President of Marketing and
Strategic Planning - Argenbright
Holdings Limited
Nigel D.J. Cotton.................. 44 Human Resources Director - The ADI Group
Limited
Daniel E. DiGiusto................. 45 Senior Vice President of Field
Operations - Argenbright Holdings
Limited
Barry J. Jenkins................... 35 Vice President of Finance - Argenbright
Holdings Limited
Mark T. Ryall...................... 38 Vice President and Chief Information
Officer - Argenbright Holdings Limited
</TABLE>
- ---------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
Mr. Argenbright founded the Company in 1979 and has been its Chairman and
Chief Executive Officer since that time. Mr. Argenbright graduated from the
Owner/President Management Program at Harvard Business School in 1991.
Mr. Mellett has been Vice Chairman and Co-Chief Executive Officer of the
Company since December 1994 and served on the Company's Advisory Board during
1994. From 1993 to 1994, he was a consultant and private investor. From 1984 to
1992, Mr. Mellett was Senior Vice President of The Coca-Cola Company, serving
also as President of Coca-Cola Northern Europe from 1990 to 1992 and President
of Coca-Cola USA from 1986 to 1988. From 1972 to 1984, Mr. Mellett was President
of the Food Services Division of PepsiCo.
Mr. Gamsey has been Chief Financial Officer of the Company since September
1995. From 1988 to September 1995, Mr. Gamsey was a Managing Director of
Investment Banking of Price Waterhouse LLP. From 1987 to 1988, Mr. Gamsey was
Chief Financial Officer of Visiontech, Inc., and from 1979 to 1987, Mr. Gamsey
was a Senior Audit Manager for Arthur Andersen LLP. Mr. Gamsey is a Certified
Public Accountant.
40
<PAGE> 42
Mr. Marano has been President and Chief Operating Officer - Argenbright
Holdings Limited, the holding company for the Company's U.S. operations, since
July 1995. From 1990 to June 1995, Mr. Marano was Vice President and a Global
Customer Director for The Coca-Cola Company, and from 1986 to 1990, he was Vice
President of U.S. Sales, Fountain Division, of The Coca-Cola Company. From 1985
to 1986, Mr. Marano was Vice President of U.S. Sales of Apple Computer.
Mr. Patterson has been Chief Executive - The ADI Group Limited, the holding
company for AHL's European operations, since June 1997. From 1996 to 1997, Mr.
Patterson was the Group Chief Executive Officer for National Express Group PLC.
From 1990 to 1996, he was the Chief Executive Officer, Worldwide Distribution
Services for B.E.T. PLC, and from 1985 to 1990, he was the Managing Director of
a foreign subsidiary of B.E.T. PLC.
Mr. Warburton has been Managing Director - The ADI Group Limited since
January 1993. From 1990 to 1992, Mr. Warburton was Senior Vice President of
Ground Services for Ogden Aviation Services. From 1989 to 1990, he was
Operations Director for Ogden Aviation Services at London-Gatwick. From 1987 to
1989, he was head of Ground Operations for British Airways at London-Gatwick,
and from 1961 to 1987, he held a number of senior management positions with
British Caledonian Airways.
Mr. McCullough has been a director of the Company since consummation of its
initial public offering in March 1997. Mr. McCullough has been Chief Financial
Officer and member of the Board of Directors of AMVESCO PLC (formerly INVESCO
PLC) since April 1996. He was a partner for Arthur Andersen LLP from 1974 until
April 1996.
Mr. Melville has been a director of the Company since consummation of its
initial public offering in March 1997. Mr. Melville has been Chairman of
Scottish Woodlands Limited since 1992. He was Chairman of Dunedin Fund Managers
Limited from 1992 to 1995, Chairman and Chief Executive Officer of Capel Cure
Myers Capital Management from 1988 to 1991 and Founder and Chief Executive of
Enskilda Securities from 1982 to 1987. Mr. Melville is a director of Fleming
Mercantile Investment Trust PLC, Mithras Investment Trust PLC, Old Mutual South
Africa Trust plc, Persimmon plc and the Scottish Investment Trust PLC. He is
also Chairman of the National Trust for Scotland.
Mr. Anthony has been Vice President of Human Resources - Argenbright
Holdings Limited since January 1996. From 1993 to 1995, Mr. Anthony was Vice
President of Human Resources of National Linen Service. From 1989 to 1993, Mr.
Anthony was Vice President of Human Resources for BET Plant Services, Inc.
Mr. Bailey has been Finance Director - The ADI Group Limited since May
1995. From January 1994 to April 1995, he worked in Kazakhstan establishing the
financial operations for Tengizchevroil, a joint venture between the Government
of Kazakhstan and Chevron Petroleum. From 1992 to 1993, Mr. Bailey was an
independent consultant to the airline industry. Prior thereto, Mr. Bailey held a
number of positions in the airline industry. Mr. Bailey is a Chartered
Accountant.
Ms. Bottorff has been Vice President of Marketing and Strategic
Planning - Argenbright Holdings Limited since September 1996. From 1994 to 1996,
Ms. Bottorff was Marketing Director of The Atlanta Journal-Constitution. From
1990 to 1994, Ms. Bottorff was Director of Strategic Planning of Holiday Inn
Worldwide. From 1987 to 1990, she was Manager of Field Planning for The
Coca-Cola Company and, from 1983 to 1987, she was an Engagement Manager for
McKinsey & Co., Inc.
Mr. Cotton has been Human Resources Director - The ADI Group Limited since
August 1993. From 1989 to 1992, he was Head of Human Resources - United Kingdom
for Ericsson plc and, during 1988, he was a Personnel Manager with British
Airways. Prior thereto, he was employed by British Caledonian Airways.
41
<PAGE> 43
Mr. DiGiusto has been Senior Vice President of Field
Operations - Argenbright Holdings Limited since 1989. From 1974 to 1989, Mr.
DiGiusto was employed by Burns International Security, most recently as its
Northeast Division Vice President.
Mr. Jenkins has been Vice President of Finance - Argenbright Holdings
Limited since May 1997. From 1984 to 1997, he was a senior manager with Price
Waterhouse LLP. Mr. Jenkins is a Certified Public Accountant.
Mr. Ryall has been Vice President and Chief Information
Officer - Argenbright Holdings Limited since April 1997. From 1990 to 1997, he
was Group Manager of Ryder System, Inc. From 1983 to 1990, he was a manager for
Andersen Consulting.
The Company has a four member Board of Directors, with members serving
staggered terms as follows: term expiring 1998, Mr. Melville; term expiring
1999, Mr. McCullough; and term expiring 2000, Messrs. Argenbright and Mellett.
COMPENSATION OF DIRECTORS
Prior to the Company's initial public offering, directors did not receive
compensation for their service as directors. Since consummation of the initial
public offering in March 1997, the Company has paid its independent directors
$10,000 annually plus $1,000 for each Board meeting attended and $500 for each
committee meeting attended. In addition, directors are reimbursed for expenses
incurred in connection with attendance at Board and committee meetings. The
Company has granted to each independent director options to purchase 5,000
shares of Common Stock at an exercise price of $10.00 per share. See "--Employee
Benefit Plans--Stock Option Plan."
EMPLOYMENT AGREEMENTS
In February 1997, the Company entered into employment agreements with
Messrs. Mellett, Marano and Gamsey. The agreement with Mr. Mellett expires on
December 1, 2000, and the agreements with Messrs. Marano and Gamsey expire on
December 1, 2001 (the "Expiration Date"). Each agreement also may be terminated
by the Company with or without cause or upon the employee's death or inability
to perform his duties on account of a disability for a period of three months
during any consecutive twelve month period or by the employee. If any agreement
is terminated by the Company prior to the Expiration Date, except for cause or
upon the employee's death or disability, the Company must continue to pay the
employee's base salary and bonus for one year (six months with respect to Mr.
Gamsey) from the date of termination. The agreements provide for annual base
salaries of $200,000, $250,000 and $165,000 for Messrs. Mellett, Marano and
Gamsey, respectively, and for annual bonuses dependent upon the Company's
financial performance and achievement of personal objectives established for
each employee by the Board of Directors. On July 1, 1997, Mr. Marano's salary
was increased to $300,000, after the achievement of a specified revenue level by
Argenbright Holdings Limited. Each agreement also contains two-year
noncompetition and nonsolicitation provisions.
The Company also has an employment agreement with Mr. Patterson. The
agreement is indefinite in length but provides that in the event Mr. Patterson
is terminated without cause, he will be entitled to receive 12 months salary.
The agreement provides for an annual base salary of approximately $300,000 and
for an annual bonus of up to 50% of base salary, based upon the Company's
financial performance and achievement of personal objectives established for Mr.
Patterson by the Board of Directors. The agreement also grants Mr. Patterson
options to purchase 150,000 shares of Common Stock, exercisable 25% per year
over four years, at an exercise price of $15.00 per share. As a condition to
employment, Mr. Patterson also agreed to one year noncompetition and
nonsolicitation provisions.
The Company also has an employment agreement with Mr. Warburton. The
agreement is indefinite in length but may be terminated (i) immediately by the
Company for cause, (ii) by the
42
<PAGE> 44
Company on December 31 of any year with or without cause provided that the
Company gives at least twelve months prior written notice, (iii) automatically
upon Mr. Warburton's sixtieth birthday or (iv) by Mr. Warburton at any time
provided that he gives at least six months prior written notice. The agreement
provides for an annual base salary of $144,000 and for an annual bonus dependent
upon the Company's financial performance and achievement of personal objectives
established for Mr. Warburton by the Board of Directors. The agreement also
contains one-year noncompetition and nonsolicitation provisions.
Substantially all of the employees of ADI have also entered into employment
agreements. In addition, substantially all of the Company's officers and
managers sign a noncompetition agreement as a condition to their employment.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the aggregate
compensation earned by the Co-Chief Executive Officers and the other three
highest paid executive officers (collectively, the "Named Executive Officers")
for services rendered in all capacities to the Company during the fiscal year
ended December 31, 1996:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
ANNUAL COMPENSATION ------------
--------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
--------- --------- --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Frank A. Argenbright, Jr...... $600,000(1) $ -- $200,388(2) -- $12,000(3)
Chairman and Co-Chief
Executive Officer
Edwin R. Mellett.............. 160,577 100,000 -- 322,500 --
Vice-Chairman and Co-Chief
Executive Officer
Thomas J. Marano.............. 250,000(4) 125,000 -- 268,750 --
President and Chief
Operating Officer --
Argenbright Holdings
Limited
David L. Gamsey............... 153,173 65,000 -- 107,500 --
Chief Financial Officer
A. Trevor Warburton........... 144,000 45,000 -- -- 27,176(5)
Managing Director --
The ADI Group Limited
</TABLE>
- ---------------
(1) Effective January 1, 1997, Mr. Argenbright's annual salary was reduced to
$350,000.
(2) Includes approximately $55,000 relating to club dues and initiation fees.
Effective January 1, 1997, other annual compensation will be significantly
reduced as the Company has revised its expense reimbursement policies.
(3) Represents life insurance premiums paid by the Company.
(4) Effective July 1, 1997, Mr. Marano's annual salary was increased to
$300,000.
(5) Represents medical and life insurance payments and contributions to Mr.
Warburton's pension plan.
43
<PAGE> 45
OPTION GRANTS
The following table sets forth information regarding option grants during
fiscal 1996 to each of the Named Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
% OF TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED ANNUAL
NUMBER OF GRANTED RATES OF STOCK PRICE
SECURITIES TO APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM
OPTIONS IN FISCAL PRICE EXPIRATION -----------------------
GRANTED(#)(1) 1996 ($/SH) DATE 5%($) 10%($)
------------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Frank A. Argenbright, -- -- -- -- -- --
Jr......................
Edwin R. Mellett.......... 107,500 15.4% $ 4.64 10/15/06 $ 313,693 $ 794,959
215,000 30.8 10.00(2) 12/01/06 1,352,123 3,426,546
Thomas J. Marano.......... 268,750 38.4 10.00(2) 12/01/06 1,690,154 4,283,183
David L. Gamsey........... 107,500 15.4 10.00(2) 12/01/06 676,062 1,713,273
A. Trevor Warburton....... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Subsequent to December 31, 1996, the Company granted Messrs. Mellett, Marano
and Gamsey additional options to purchase 7,500, 6,250 and 2,500 shares of
Common Stock, respectively, with an exercise price of $10.00 per share.
(2) The exercise price of these options was changed to $10.75 per share from
$11.76 per share on February 28, 1997 and was changed to $10.00 on the date
of the Prospectus relating to the initial public offering.
OPTION HOLDINGS
The following table sets forth certain information concerning the value of
unexercised options held by each of the Named Executive Officers as of December
31, 1996:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1996 AT DECEMBER 31, 1996(1)
---------------------------- ----------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Frank A. Argenbright, Jr................ -- -- -- --
Edwin R. Mellett........................ 161,250 161,250 $576,200 --
Thomas J. Marano........................ 53,750 215,000 -- --
David L. Gamsey......................... 21,500 86,000 -- --
A. Trevor Warburton(2).................. -- -- -- --
</TABLE>
- ---------------
(1) Based on the initial public offering price of $10.00 per share.
(2) Concurrently with the consummation of the initial public offering, the
Company granted to Mr. Warburton options to purchase 30,000 shares of Common
Stock at an exercise price of $10.00 per share.
EMPLOYEE BENEFIT PLANS
Stock Option Plan. The Company's stock option plan (the "Stock Option
Plan") provides for the award of incentive stock options to officers and
employees of the Company and non-qualified stock options to independent
directors of the Company. AHL has reserved 385,000 shares of Common Stock for
issuance under the Stock Option Plan, of which options to purchase 384,500
shares of Common Stock are currently outstanding. The Plan is administered by
the Compensation Committee of the Board of Directors. The purchase price of
Common Stock upon exercise of incentive stock options must not be less than the
fair market value of the Common Stock on the date of grant or, in the case of
incentive stock options issued to holders of more than 10% or greater of the
outstanding voting securities of the Company, 110% of fair market value on the
date of grant. The maximum term of any incentive stock option is ten years, or
five years in the case of options granted to 10% or greater shareholders. The
aggregate fair market value on the date of the grant of
44
<PAGE> 46
the stock for which incentive stock options are exercisable for the first time
by an employee during any calendar year may not exceed $100,000. Options are
exercisable over a period of time in accordance with the terms of option
agreements entered into at the time of grant. Options granted under the Stock
Option Plan are generally nontransferable by the optionee and, unless otherwise
determined by the Committee, must be exercised by the optionee during the period
of the optionee's employment or service with the Company.
Employee Stock Purchase Plan. The Company has adopted an Employee Stock
Purchase Plan, pursuant to which employees are able to purchase shares of Common
Stock through a payroll deduction program. The Company intends to purchase such
shares of Common Stock on the open market.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1996, the Company did not have a compensation committee
of the Board of Directors. Executive officer compensation decisions were made by
Messrs. Argenbright and Mellett.
On February 1, 1997, pursuant to the Reorganization, Mr. Argenbright
contributed all of the outstanding shares of common stock of Argenbright and ADI
to the Company in exchange for 8,352,430 shares of Common Stock of the Company
and $5,000 in cash.
In March 1989, the Company borrowed $650,000 from Mr. Argenbright as
evidenced by a subordinated promissory note due January 12, 1999 at an interest
rate of 12% per annum. The Company used the proceeds of the loan for general
working capital purposes. The outstanding balance was approximately $528,000 at
December 31, 1996. The Company paid interest of $78,000, $78,000 and $75,000 for
the years ended December 31, 1994, 1995 and 1996, respectively. On February 1,
1997, Mr. Argenbright contributed this note to the Company as part of the
Reorganization, along with certain Company-occupied offices and facilities in
Atlanta, Orlando and Memphis and other assets. These properties were transferred
at their carrying values (which are less than their appraised values). In
connection with this transaction, the Company assumed the associated mortgage
debt of approximately $2.5 million, which is less than the appraised value. The
Company was a guarantor of certain of these mortgages.
Through the end of December 1996, the Company periodically made loans to
unrelated businesses which are solely owned by Mr. Argenbright in the aggregate
principal amount of $438,000. In addition, Mr. Argenbright has periodically
borrowed money from the Company which aggregated approximately $449,000. These
loans, which do not bear interest, were unsecured and are repayable on demand.
Mr. Argenbright repaid all of such indebtedness in May 1997.
The Company has adopted a policy, effective upon the consummation of the
initial public offering in March 1997, prohibiting loans (other than travel
advances in the ordinary course of business) to its executive officers,
directors and principal shareholders unless such loans first are approved by the
Compensation Committee, which must determine that such loans are in the best
interests of the Company. Any loans made will bear interest at a rate and be on
such terms as determined by the Compensation Committee to be fair to the
Company.
During fiscal years 1994, 1995 and 1996, the Company purchased uniforms for
approximately $1.3 million, $1.4 million and $1.8 million, respectively, from
ASAP Uniform Co., a company that is 20% owned by AHL. During the fiscal years
ended 1994, 1995 and 1996, the Company made rent payments of approximately
$461,000, $435,000 and $372,000, respectively, to Argenbright Office Park, a
company that is wholly-owned by Mr. Argenbright. The Company believes that the
terms of the lease were no less favorable than could be obtained from an
unaffiliated third party.
Any future transactions between the Company and its officers, directors or
principal shareholders will be approved by a majority of the disinterested
members of the Board of Directors.
45
<PAGE> 47
CERTAIN TRANSACTIONS
See "Management -- Compensation Committee Interlocks and Insider
Participation" for a description of certain transactions between the Company and
its affiliates.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth information with respect to beneficial
ownership of the Common Stock as of September 30, 1997 and as adjusted for the
sale of shares offered hereby by (i) each Named Executive Officer; (ii) each of
the Company's directors; (iii) all executive officers and directors of the
Company as a group and (iv) each person who beneficially owns more than 5% of
the Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE OF
SHARES OWNED
--------------------
NUMBER OF SHARES BEFORE AFTER
NAME AND ADDRESS BENEFICIALLY OWNED(1) OFFERING OFFERING
---------------- --------------------- -------- --------
<S> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
Frank A. Argenbright, Jr.(2).................. 8,358,430 77.0% 61.7%
Edwin R. Mellett(3)........................... 218,750 2.0 1.6
Thomas J. Marano(3)........................... 110,000 1.0 *
David L. Gamsey(3)............................ 44,000 * *
A. Trevor Warburton........................... -- -- --
Robert McCullough............................. -- -- --
Hamish Leslie Melville........................ 10,000 * *
All executive officers and directors as a
group
(8 persons)................................ 8,741,180 77.9 62.8
OTHER 5% SHAREHOLDER:
Caledonia Investments (Bermuda) Limited(4).... 850,000 7.8 6.3
</TABLE>
- ---------------
* Less than 1.0%.
(1) Includes shares of Common Stock that may be acquired upon the exercise of
stock options exercisable within 60 days. Each person named above has sole
voting and dispositive power with respect to all shares listed opposite such
person's name, except as otherwise noted.
(2) Includes (a) 522,090 shares beneficially owned by Argenbright Partners,
L.P., of which a limited liability company managed by Mr. Argenbright and
his spouse is the general partner and (b) 5,000 shares owned by Mr.
Argenbright's spouse. If the Underwriters exercise the over-allotment option
in full to purchase up to 353,430 shares from Argenbright Partners, L.P.,
Mr. Argenbright will beneficially own 8,005,000 shares of Common Stock, or
58.8% of the outstanding Common Stock. Mr. Argenbright's address is c/o AHL
Services, Inc., Atlanta Financial Center, 3353 Peachtree Road, Northeast,
Suite 1120, North Tower, Atlanta, Georgia 30026.
(3) Represents shares of Common Stock issuable pursuant to currently exercisable
options.
(4) Represents shares of Common Stock beneficially owned by Caledonia
Investments (Bermuda) Limited, an investment holding company ("Caledonia").
This information is included in reliance upon a Schedule 13D filed by
Caledonia on April 2, 1997. Caledonia's address is c/o Caledonia Investments
plc, Cayzer House, 1 Thomas More Street, London E1 9AR.
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<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 55,000,000 shares of capital stock
consisting of 50,000,000 shares of Common Stock, par value $.01 per share, and
5,000,000 shares of preferred stock, no par value. Immediately prior to the date
of this offering, 10,853,430 shares of Common Stock were outstanding and
1,099,500 shares of Common Stock were issuable pursuant to outstanding options
to purchase Common Stock.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
on which the holders of Common Stock are entitled to vote and do not have any
cumulative voting rights. Subject to the prior rights of any outstanding
preferred stock, each outstanding share of Common Stock is entitled to
participate equally in any distribution of net assets made to the shareholders
in liquidation of the Company and is entitled to participate equally in
dividends as and when declared by the Board of Directors. There are no
redemption, sinking fund, conversion, or preemptive rights with respect to the
shares of Common Stock. All outstanding shares of Common Stock are fully paid
and non-assessable.
PREFERRED STOCK
The Board of Directors of the Company generally has the power to issue
shares of preferred stock without shareholder approval. The Board of Directors
is authorized to establish the rights, preferences and limitations of the
undesignated stock and to divide such shares into one or more classes, with or
without voting rights. The ability of the Board of Directors to issue additional
shares could impede or deter an unsolicited tender offer or takeover proposal
regarding the Company. Shares of undesignated stock could be issued with terms,
provisions and rights which would make more difficult and, therefore, less
likely, a takeover of the Company not approved by the Board of Directors. The
rights of the holders of the Common Stock could be adversely affected by the
future issuance of Preferred Stock. The Company has no current plans to issue
any Preferred Stock.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF ARTICLES OF INCORPORATION AND BYLAWS
The Company's Restated and Amended Articles of Incorporation and Bylaws
provide for a five member Board of Directors to be elected to staggered one, two
and three year terms and, thereafter, for successive three year terms. In
addition, directors may only be removed from office for cause upon a vote of 70%
of the Common Stock outstanding. The Articles of Incorporation and Bylaws also
provide that they may not be amended in certain respects except pursuant to the
vote of 70% of the Common Stock outstanding. These provisions of the Articles of
Incorporation and Bylaws could discourage potential acquisition proposals and
could delay or prevent a change in control of the Company.
GEORGIA ANTI-TAKEOVER STATUTES
The Georgia Business Combination Code restricts certain business
combinations with "interested shareholders" and contains fair price requirements
applicable to certain mergers with certain "interested shareholders" that are
summarized below. The restrictions imposed by these statutes will not apply to a
corporation unless it elects to be governed by these statutes. The Company has
elected to be covered by such restrictions.
The Georgia business combination statute regulates business combinations
such as mergers, consolidations, share exchanges and asset purchases where the
acquired business has at least 100 shareholders residing in Georgia and has its
principal office in Georgia, and where the acquiror became an "interested
shareholder" of the corporation, unless either (i) the transaction resulting in
47
<PAGE> 49
such acquiror becoming an "interested shareholder" or the business combination
received the approval of the corporation's board of directors prior to the date
on which the acquiror became an "interested shareholder", or (ii) the acquiror
became the owner of at least 90% of the outstanding voting stock of the
corporation (excluding shares held by directors, officers and affiliates of the
corporation and shares held by certain other persons) in the same transaction in
which the acquiror became an "interested shareholder." For purposes of this
statute, an "interested shareholder" generally is any person who directly or
indirectly, alone or in concert with others, beneficially owns or controls 10%
or more of the voting power of the outstanding voting shares of the corporation.
The statute prohibits business combinations with an unapproved "interested
shareholder" for a period of five years after the date on which such person
became an "interested shareholder." The statute restricting business
combinations is broad in its scope and is designed to inhibit unfriendly
acquisitions.
The Georgia fair price statute prohibits certain business combinations
between a Georgia business corporation and an "interested shareholder" unless
(i) certain "fair price" criteria are satisfied, (ii) the business combination
is unanimously approved by the continuing directors, (iii) the business
combination is recommended by at least two-thirds of the continuing directors
and approved by a majority of the votes entitled to be cast by holders of voting
shares, other than voting shares beneficially owned by the "interested
shareholder," or (iv) the interested shareholder has been such for at least
three years and has not increased his ownership position in such three-year
period by more than one percent in any twelve-month period. The fair price
statute is designed to inhibit unfriendly acquisitions that do not satisfy the
specified "fair price" requirements.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is First Union
Shareholder Services.
SHARES ELIGIBLE FOR FUTURE SALE
Upon consummation of this offering, the Company will have 13,553,430 shares
of Common Stock outstanding. Of these shares, 5,200,000 shares of Common Stock
will be freely tradable without restriction or further registration under the
Securities Act, unless purchased by "affiliates" of the Company, as defined
under the Securities Act.
The remaining 8,353,430 shares of Common Stock are "restricted shares" and
are subject to restrictions under the Securities Act and lock-up agreements. Mr.
Argenbright, who beneficially owns all of the restricted shares of Common Stock,
as well as all persons holding currently exercisable stock options, have agreed
not to sell, offer for sale, or otherwise dispose of any Common Stock for a
period of 90 days from the date of this prospectus without the prior written
consent of BT Alex. Brown Incorporated. Following expiration of the lock-up
agreement, all of these restricted shares will become available for sale in the
public market, subject to the volume and other limitations of Rule 144.
In general, under Rule 144, a person (or person whose shares are
aggregated) who has beneficially owned Restricted Shares for at least one year,
including a person who may be deemed an affiliate of the Company, is entitled to
sell within any three-month period a number of shares of Common Stock that does
not exceed the greater of 1% of the then-outstanding shares of Common Stock
(approximately 135,534 shares after giving effect to this offering) or the
average weekly trading volume of the Common Stock on the Nasdaq Stock Market
during the four calendar weeks preceding such sale. Sales under Rule 144 are
subject to certain restrictions relating to manner of sale, notice and the
availability of current public information about the Company. A person who has
not been an affiliate of the Company at any time during the 90 days preceding a
sale and who has beneficially owned shares for at least two years would be
entitled to sell such shares without regard to the volume limitations, manner of
sale provisions and other requirements of Rule 144.
48
<PAGE> 50
In addition, the Company has registered on Form S-8 under the Securities
Act all shares of Common Stock subject to outstanding options or future grants
under the Company's Stock Option Plan. Shares covered by this registration
statement will be eligible for sale after the lock-up agreements with the
Underwriters have expired. Prior to consummation of this offering, the Company
intends to register the shares of Common Stock issuable pursuant to the
Company's employee stock purchase plan.
Sales of substantial amounts of such shares in the public market, or the
perception that such sales could occur, could adversely affect the market price
of the Common Stock and could impair the Company's future ability to raise
capital through an offering of its equity securities.
49
<PAGE> 51
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their representatives, BT
Alex. Brown Incorporated, Credit Suisse First Boston Corporation and The
Robinson-Humphrey Company, LLC (the "Representatives"), have severally agreed to
purchase from the Company the following respective number of shares of Common
Stock at the public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
BT Alex. Brown Incorporated.................................
Credit Suisse First Boston Corporation......................
The Robinson-Humphrey Company, LLC..........................
---------
Total............................................. 2,700,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase the total number of shares of Common Stock offered
hereby if any of such shares are purchased.
The Company and the Selling Shareholder have been advised by the
Representatives of the Underwriters that the Underwriters propose to offer the
shares of Common Stock to the public at the public offering price set forth on
the cover page of this Prospectus and to certain dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may reallow, a concession not to exceed $ per share to certain
other dealers. After commencement of the public offering, the offering price and
other selling terms may be changed by the Representatives of the Underwriters.
The Company and the Selling Shareholder have granted to the Underwriters an
option, exercisable not later than 30 days after the date of this Prospectus, to
purchase up to 51,570 shares and 353,430 shares, respectively, of Common Stock
at the public offering price set forth on the cover page of this Prospectus. To
the extent that the Underwriters exercise such option, each of the Underwriters
will have a firm commitment to purchase approximately the same percentage
thereof that the number of shares of Common Stock purchased by each of them as
shown in the above table, bears to 2,700,000, and the Company and the Selling
Shareholder will be obligated, pursuant to the option, to sell such shares to
the Underwriters. The Underwriters may exercise such option only to cover
over-allotments made in connection with the sale of Common Stock offered hereby.
If purchased, the Underwriters will offer such additional shares on the same
terms as those on which the 2,700,000 shares are being offered.
In connection with this offering, certain Underwriters may engage in
passive market making transactions in the Common Stock on the Nasdaq National
Market immediately prior to the commencement of sales in this offering in
accordance with Rule 103 of Regulation M. Passive market making consists of
displaying bids on the Nasdaq National Market limited by the bid prices of
independent market makers and making purchases limited by such prices and
effected in response to order flow. Net purchases by a passive market maker on
each day are limited to a specified percentage of the passive market maker's
average daily trading volume in the Common Stock during a specified period and
must be discontinued when such limit is reached. Passive market making may
stabilize the market price of the Common Stock at a level above that which might
otherwise prevail and, if commenced, may be discontinued at any time.
50
<PAGE> 52
Subject to applicable limitations, the Underwriters, in connection with
this offering, may place bids for or make purchases of the Common Stock in the
open market or otherwise, for long or short account, or cover short positions
incurred, to stabilize, maintain or otherwise affect the price of the Common
Stock, which may be higher than the price that might otherwise prevail in the
open market. There can be no assurance that the price of the Common Stock will
be stabilized, or that stabilizing, if commenced, will not be discontinued at
any time. Subject to applicable limitations, the Underwriters may also place
bids or make purchases on behalf of the underwriting syndicate to reduce a short
position created in connection with this offering. The Underwriters are not
required to engage in these activities and may end these activities at any time.
The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company and the Selling Shareholder with
respect to certain civil liabilities, including liabilities under the Securities
Act.
The Company's directors and executive officers, who following the offering
will beneficially own an aggregate of 8,741,180 shares of Common Stock, and the
Company have agreed not to offer, sell or otherwise dispose of any of such
Common Stock or any shares of Common Stock issuable upon exercise of any options
for Common Stock for a period of 90 days after the date of this Prospectus
without the prior written consent of BT Alex. Brown Incorporated.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by King & Spalding, Atlanta, Georgia. Certain legal matters in
connection with this offering will be passed upon for the Underwriters by Piper
& Marbury L.L.P., Baltimore, Maryland.
EXPERTS
The financial statements included in this Prospectus and elsewhere in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
ADDITIONAL INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934 and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy and information statements and other information filed by the
Company can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at its regional offices located at Seven World
Trade Center, New York, New York 10048 and Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission, Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 at prescribed
rates or through the Commission's Internet address at "http://www.sec.gov". The
Company's Common Stock is quoted on the Nasdaq National Market. Reports, proxy
statements and other information concerning the Company can be inspected at the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement under
the Securities Act, with respect to the shares of Common Stock offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such shares of Common Stock,
reference is hereby made to such Registration Statement and to the exhibits and
schedules thereto. The Registration Statement can be inspected without charge at
the office of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and the Commission's
51
<PAGE> 53
Regional Offices at Seven World Trade Center, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and copies may be obtained at prescribed rates from the public
reference section of the SEC, Washington, D.C. 20549. The Registration Statement
may also be obtained through the Commission's Internet address at
"http://www.sec.gov".
52
<PAGE> 54
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Combined Balance Sheets as of December 31, 1995 and 1996 and
June 30, 1997 (unaudited)................................. F-3
Combined Statements of Operations for the Years Ended
December 31, 1994,
1995 and 1996 and the Six Months Ended June 30, 1996 and
1997 (unaudited).......................................... F-4
Combined Statements of Shareholder's Equity for the Years
Ended December 31, 1994, 1995 and 1996 and the Six Months
Ended June 30, 1997 (unaudited)........................... F-5
Combined Statements of Cash Flows for the Years Ended
December 31, 1994,
1995 and 1996 and the Six Months Ended June 30, 1996 and
1997 (unaudited).......................................... F-6
Notes to Combined Financial Statements...................... F-7
</TABLE>
F-1
<PAGE> 55
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AHL Services:
We have audited the accompanying combined balance sheets of ARGENBRIGHT
HOLDINGS LIMITED (a Georgia corporation) AND THE ADI GROUP LIMITED (an English
corporation) (collectively "AHL SERVICES") as of December 31, 1995 and 1996 and
the related combined statements of operations, shareholder's equity, and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AHL Services as of December
31, 1995 and 1996 and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 28, 1997
F-2
<PAGE> 56
AHL SERVICES
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------- JUNE 30,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash...................................................... $ 1,169 $ 1,842 $ 3,298
Restricted cash........................................... 2,287 0 0
Accounts receivable, less allowance for doubtful accounts
of $200, $341 and $420, in 1995, 1996 and 1997.......... 27,452 34,692 35,083
Due from related parties.................................. 113 269 0
Uniforms in service, net.................................. 1,388 1,987 1,947
Prepaid expenses and other................................ 1,548 2,085 3,686
------- ------- -------
Total current assets............................... 33,957 40,875 44,014
------- ------- -------
PROPERTY AND EQUIPMENT, net of accumulated depreciation of
$6,846, $8,308 and $9,253 in 1995, 1996 and 1997.......... 5,282 5,674 7,883
------- ------- -------
INTANGIBLES, net of accumulated amortization of $211, $497
and $527 in 1995, 1996 and 1997........................... 380 4,141 9,796
------- ------- -------
DEFERRED INCOME TAXES....................................... 595 708 708
------- ------- -------
OTHER ASSETS................................................ 473 555 507
------- ------- -------
$40,687 $51,953 $62,908
======= ======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................... $ 4,199 $ 4,667 $ 2,257
Accrued payroll and other liabilities..................... 11,260 15,413 16,663
Current portion of self-insurance reserves................ 440 640 760
Income taxes payable...................................... 3,580 1,018 2,030
Current portion of long-term debt......................... 1,089 1,617 725
Deferred income taxes..................................... 173 167 211
------- ------- -------
Total current liabilities.......................... 20,741 23,522 22,646
------- ------- -------
LONG-TERM DEBT, less current portion........................ 13,959 19,178 7,808
------- ------- -------
SELF-INSURANCE RESERVES, less current portion............... 1,760 2,560 3,040
------- ------- -------
DEFERRED INCOME TAXES....................................... 0 50 0
------- ------- -------
DEBT GUARANTEES, COMMITMENTS AND CONTINGENCIES (Notes 6, 7
and 10)
REDEEMABLE WARRANT.......................................... 0 706 0
------- ------- -------
NOTE PAYABLE TO SHAREHOLDER................................. 650 528 0
------- ------- -------
SHAREHOLDER'S EQUITY:
Common stock of Argenbright, $1 par value; 50,000 shares
authorized, 500, 500 and no shares issued and
outstanding in 1995, 1996 and 1997...................... 1 1 0
Common stock of ADI, no par value; 5,000,000 shares
authorized, 296,868, 296, 868 and no shares issued and
outstanding in 1995, 1996 and 1997...................... 0 0 0
Preferred stock of AHL Services, Inc., no par value;
5,000,000 shares authorized; no shares outstanding...... 0 0 0
Common Stock of AHL Services, Inc., $.01 par value;
50,000,000 shares authorized, 10,853,430 shares issued
and outstanding at June 30, 1997........................ 0 0 109
Cumulative translation adjustment......................... 2 74 71
Paid in capital........................................... 0 0 21,978
Retained earnings......................................... 3,869 5,952 7,256
Due from shareholder...................................... (295) (618) 0
------- ------- -------
Shareholder's equity, net............................... 3,577 5,409 29,414
------- ------- -------
$40,687 $51,953 $62,908
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined balance sheets.
F-3
<PAGE> 57
AHL SERVICES
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES................................ $123,234 $168,601 $210,153 $ 93,162 $124,194
OPERATING EXPENSES:
Cost of services...................... 91,873 124,491 155,926 68,883 92,769
Field operating....................... 20,931 30,328 37,492 16,680 20,266
Corporate general and
administrative..................... 8,797 10,938 11,692 5,712 7,103
-------- -------- -------- -------- --------
Total operating expenses...... 121,601 165,757 205,110 91,275 120,138
-------- -------- -------- -------- --------
OPERATING INCOME........................ 1,633 2,844 5,043 1,887 4,056
INTEREST EXPENSE, net................... 904 1,309 1,726 610 818
OTHER INCOME, net....................... (26) (820) (301) (138) (242)
-------- -------- -------- -------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS................... 755 2,355 3,618 1,415 3,480
INCOME TAX PROVISION.................... 627 917 1,447 566 1,375
-------- -------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEMS....... 128 1,438 2,171 849 2,105
EXTRAORDINARY ITEMS FOR EARLY
EXTINGUISHMENT OF DEBT, NET OF TAXES
OF $257............................... 0 0 0 0 (385)
-------- -------- -------- -------- --------
NET INCOME.............................. $ 128 $ 1,438 $ 2,171 $ 849 $ 1,720
======== ======== ======== ======== ========
INCOME BEFORE EXTRAORDINARY ITEMS PER
COMMON AND COMMON EQUIVALENT SHARES... $ 0.25 $ 0.10 $ 0.21
======== ======== ========
EXTRAORDINARY ITEMS PER COMMON AND
COMMON EQUIVALENT SHARES.............. $ 0 $ 0 $ (0.04)
======== ======== ========
NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARES..................... $ 0.25 $ 0.10 $ 0.17
======== ======== ========
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES..................... 8,557 8,557 9,895
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-4
<PAGE> 58
AHL SERVICES
COMBINED STATEMENTS OF SHAREHOLDER'S EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ARGENBRIGHT ADI
COMMON STOCK COMMON STOCK AHL SERVICES, INC. CUMULATIVE
--------------- ----------------- ------------------- TRANSLATION RETAINED PAID IN DUE FROM
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT ADJUSTMENT EARNINGS CAPITAL SHAREHOLDER
------ ------ -------- ------ ---------- ------ ----------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, December 31,
1993............... 500 $1 296,868 $0 0 $ 0 $ 17 $2,303 $ 0 $(198)
Translation
adjustment....... 0 0 0 0 0 0 1 0 0 0
Net income......... 0 0 0 0 0 0 0 128 0 0
---- -- -------- -- ---------- ---- ---- ------ ------- -----
BALANCE, December 31,
1994............... 500 1 296,868 0 0 0 18 2,431 0 (198)
Increase in due
from
shareholder...... 0 0 0 0 0 0 0 0 0 (97)
Translation
adjustment....... 0 0 0 0 0 0 (16) 0 0 0
Net income......... 0 0 0 0 0 0 0 1,438 0 0
---- -- -------- -- ---------- ---- ---- ------ ------- -----
BALANCE, December 31,
1995............... 500 1 296,868 0 0 0 2 3,869 0 (295)
Increase in due
from
shareholder...... 0 0 0 0 0 0 0 0 0 (323)
Accretion of
redeemable
warrant.......... 0 0 0 0 0 0 0 (88) 0 0
Translation
adjustment....... 0 0 0 0 0 0 72 0 0 0
Net income......... 0 0 0 0 0 0 0 2,171 0 0
---- -- -------- -- ---------- ---- ---- ------ ------- -----
BALANCE, December 31,
1996............... 500 1 296,868 0 0 0 74 5,952 0 (618)
Reorganization (Note
1)................. (500) (1) (296,868) 0 8,353,430 84 0 (372) 0 0
Issuance of Common
Stock.............. 0 0 0 0 2,500,000 25 0 0 21,978 0
Accretion of
Redeemable
Warrant............ 0 0 0 0 0 0 0 (44) 0 0
Decrease in due from
shareholder........ 0 0 0 0 0 0 0 0 0 618
Translation
Adjustment......... 0 0 0 0 0 0 (3) 0 0 0
Net Income........... 0 0 0 0 0 0 0 1,720 0 0
---- -- -------- -- ---------- ---- ---- ------ ------- -----
Balance, June 30,
1997 (unaudited)... 0 $0 0 $0 10,853,430 $109 $ 71 $7,256 $21,978 $ 0
==== == ======== == ========== ==== ==== ====== ======= =====
<CAPTION>
TOTAL
-------
<S> <C>
BALANCE, December 31,
1993............... $ 2,123
Translation
adjustment....... 1
Net income......... 128
-------
BALANCE, December 31,
1994............... 2,252
Increase in due
from
shareholder...... (97)
Translation
adjustment....... (16)
Net income......... 1,438
-------
BALANCE, December 31,
1995............... 3,577
Increase in due
from
shareholder...... (323)
Accretion of
redeemable
warrant.......... (88)
Translation
adjustment....... 72
Net income......... 2,171
-------
BALANCE, December 31,
1996............... 5,409
Reorganization (Note
1)................. (289)
Issuance of Common
Stock.............. 22,003
Accretion of
Redeemable
Warrant............ (44)
Decrease in due from
shareholder........ 618
Translation
Adjustment......... (3)
Net Income........... 1,720
-------
Balance, June 30,
1997 (unaudited)... $29,414
=======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-5
<PAGE> 59
AHL SERVICES
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1994 1995 1996 1996 1997
------- -------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................. $ 128 $ 1,438 $ 2,171 $ 849 $ 1,720
------- -------- --------- -------- --------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Extraordinary items.................................... 0 0 0 0 385
Depreciation and amortization.......................... 2,060 3,897 4,158 1,376 2,482
(Gain) loss on sales of subsidiary..................... 0 (823) (325) (81) 2
Loss on sales of assets................................ 6 0 133 0 0
Amortization of debt discount.......................... 0 0 180 0 93
Minority interest in net income........................ (32) (26) 0 0 0
Changes in assets and liabilities, net of assets of
acquired businesses:
Accounts receivable, net........................... (2,630) (12,511) (7,860) 1,109 (626)
Due from related parties........................... (40) 305 (538) 10 205
Uniforms in service, net........................... (1,006) (1,912) (2,575) 433 (1,048)
Prepaid expenses and other......................... (3,738) 1,343 3,304 1,398 (1,953)
Accounts payable................................... 1,685 (343) 141 (137) (2,386)
Accrued payroll and other liabilities.............. 3,114 2,844 4,068 (1,658) 903
Self-insurance reserves............................ 773 1,427 1,000 750 600
Income taxes payable............................... 118 1,769 (2,634) (985) 1,283
Deferred income taxes.............................. (306) (949) (42) 6 0
------- -------- --------- -------- --------
Total adjustments.................................... 4 (4,979) (990) 2,221 (60)
------- -------- --------- -------- --------
Net cash provided by (used in) operating
activities......................................... 132 (3,541) 1,181 3,070 1,660
------- -------- --------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net................... (1,254) (2,571) (1,974) (551) (992)
Proceeds from sale of property and equipment............... 0 0 245 0 0
Proceeds from sale of subsidiary........................... 0 975 325 81 0
Purchase of businesses..................................... 0 0 (2,500) 0 (5,655)
Other activities, net...................................... 77 0 (102) 0 (136)
------- -------- --------- -------- --------
Net cash used in investing activities................ (1,177) (1,596) (4,006) (470) (6,783)
------- -------- --------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt................................ (1,550) (909) (1,609) (599) (5,848)
Repayments of line of credit............................... (85,658) (115,617) (142,350) (65,761) (69,318)
Borrowings under line of credit............................ 88,623 107,938 144,094 63,300 59,119
Proceeds from IPO.......................................... 0 0 0 0 23,250
Expenses of IPO............................................ 0 0 0 0 (818)
Repurchase of outstanding warrants......................... 0 0 0 0 (750)
Proceeds from refinancing of debt.......................... 0 13,965 0 0 0
Proceeds from issuance of long-term debt................... 0 0 4,000 0 0
(Increase) decrease in due from shareholder................ 0 (97) (323) 0 618
Repayment of notes from shareholder........................ 0 0 0 0 346
Repayment of note payable to shareholder................... (200) 0 (122) 0 0
Payment of debt issuance costs............................. (149) (166) (340) 0 0
------- -------- --------- -------- --------
Net cash provided by (used in) financing
activities......................................... 1,066 5,114 3,350 (3,060) 6,599
------- -------- --------- -------- --------
EFFECT OF EXCHANGE RATES ON CASH............................ 53 (18) 148 15 (20)
------- -------- --------- -------- --------
NET CHANGE IN CASH.......................................... 74 (41) 673 (445) 1,456
CASH AT BEGINNING OF PERIOD................................. 1,136 1,210 1,169 1,169 1,842
------- -------- --------- -------- --------
CASH AT END OF PERIOD....................................... $ 1,210 $ 1,169 $ 1,842 $ 724 $ 3,298
======= ======== ========= ======== ========
CASH PAID DURING THE PERIOD FOR:
Interest................................................... $ 827 $ 1,381 $ 1,427 $ 610 $ 818
======= ======== ========= ======== ========
Income taxes............................................... $ 791 $ 562 $ 2,538 $ 1,391 $ 130
======= ======== ========= ======== ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Equipment purchases under capital lease obligations........ $ 413 $ 530 $ 546 $ 0 $ 472
======= ======== ========= ======== ========
Redeemable warrant issued in connection with Sirrom
Notes.................................................... $ 0 $ 0 $ 618 $ 0 $ 0
======= ======== ========= ======== ========
Accretion of redeemable warrant............................ $ 0 $ 0 $ 88 $ 0 $ 44
======= ======== ========= ======== ========
Notes issued for Intersec acquisition...................... $ 0 $ 0 $ 1,155 $ 0 $ 0
======= ======== ========= ======== ========
Contribution of real estate................................ $ 0 $ 0 $ 0 $ 0 $ 1,637
======= ======== ========= ======== ========
Forgiveness of note payable to shareholder................. $ 0 $ 0 $ 0 $ 0 $ 528
======= ======== ========= ======== ========
Assumption of real estate debt............................. $ 0 $ 0 $ 0 $ 0 $ 2,532
======= ======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-6
<PAGE> 60
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1996
1. DESCRIPTION OF THE BUSINESS
The accompanying AHL Services financial statements represent the
combination of the consolidated financial statements of Argenbright Holdings
Limited ("Argenbright") and The ADI Group Limited and its predecessor entities
("ADI") (collectively, "AHL" or the "Company"). The Company provides
pre-departure screening, passenger profiling, commercial security, shuttle bus,
cargo handling and other services primarily throughout the United States, the
United Kingdom, France and Germany to various customers, including airlines,
governmental entities, corporations and other enterprises. Frank A. Argenbright,
Jr. (the "sole shareholder") beneficially owns all of the outstanding shares of
Common Stock of both Argenbright and ADI.
On February 1, 1997, Mr. Argenbright contributed all of the outstanding
shares of Common Stock of Argenbright and ADI to AHL. In addition to the
contribution of the shares of Argenbright and ADI to AHL, Mr. Argenbright
contributed certain real estate, a portion of which was previously rented by the
Company (with the Company assuming the related mortgage debt) and a note with a
balance of $528,000 as of December 31, 1996 payable by the Company to Mr.
Argenbright (collectively the "Reorganization"). All of these transactions were
brought forward at historical values. Effective with the Reorganization, the
capital structure of AHL consists of 50,000,000 shares authorized, 8,353,430
shares issued and outstanding of $.01 par value Common Stock and 5,000,000
shares authorized, 0 shares issued and outstanding of no par value preferred
stock. Shares outstanding and all other references to shares of Common Stock as
of June 30 and December 31, 1996 are pro forma to give effect to the revised
capital structure.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The accompanying combined financial statements include the accounts of
Argenbright and its wholly-owned subsidiaries and ADI and its wholly-owned
subsidiaries. All significant intercompany accounts have been eliminated.
FISCAL YEAR-END
Argenbright maintains its books using a 52/53-week fiscal year ending on
the last Friday in December. Fiscal years 1994, 1995 and 1996 contain 52 weeks.
The end of Argenbright's 1996 fiscal year was December 27. ADI's fiscal year-end
is December 31. For purposes of the combined financial statements, the year-end
is stated as of December 31. The impact of the use of different year-ends is
immaterial.
PRESENTATION
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
UNAUDITED INTERIM FINANCIAL INFORMATION
The accompanying financial statements and footnote data as of June 30, 1997
and for the six months ended June 30, 1996 and 1997 are unaudited. In the
opinion of the management of the Company, these financial statements reflect all
adjustments, consisting only of normal and recurring
F-7
<PAGE> 61
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
adjustments, necessary for a fair presentation of the financial statements. The
results of operations for the six months ended June 30, 1996 and 1997, are not
necessarily indicative of the results that may be expected for the full year.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly liquid investments with original
purchase maturities of three months or less.
RESTRICTED CASH
During 1995, the Company was required to maintain an insurance collateral
account. The cash, which was held in an interest-bearing trust account, was
restricted to offset any potential claims. In January 1996, the account was
closed, and the cash was returned to the Company and applied against the
outstanding line of credit. The collateral account was satisfied with letters of
credit.
UNIFORMS IN SERVICE
Uniforms in service are recorded at cost and are amortized over their
estimated useful life of 18 months.
START-UP COSTS
One-time, nonrecurring and incremental out-of-pocket expenditures directly
related to and incurred during the start-up phase of new major contracts,
typically 3 to 6 months, are deferred and amortized on a straight-line basis
over a period not to exceed 12 months. Amortization begins upon the conclusion
of the start-up period. There were no capitalized start-up costs at December 31,
1995 and 1996.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation and amortization are provided using the
straight-line method over estimated useful lives of 2 to 10 years for office
furniture and equipment and transportation equipment and 25 years for buildings.
Leasehold improvements are amortized over the lesser of their useful lives or
the lives of the related leases.
At December 31, 1995 and 1996, property and equipment was comprised of the
following items:
<TABLE>
<CAPTION>
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Buildings and leasehold improvements........................ $ 1,345 $ 1,493
Office furniture and equipment.............................. 5,313 6,223
Transportation equipment.................................... 5,470 6,266
------- -------
12,128 13,982
Less accumulated depreciation............................... 6,846 8,308
------- -------
$ 5,282 $ 5,674
======= =======
</TABLE>
F-8
<PAGE> 62
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER INTANGIBLES
Goodwill and other intangibles are amortized using the straight-line method
over periods ranging up to 40 years. Amortization expense for goodwill and other
intangibles was $184,000, $153,000 and $236,000 for the years ended December 31,
1994, 1995 and 1996, respectively.
ACCOUNTS PAYABLE
Accounts payable include book overdrafts created by outstanding checks. At
December 31, 1995 and 1996, the book overdrafts totaled $1,564,000 and
$2,098,000, respectively.
REVENUE RECOGNITION
The Company recognizes revenues as services are performed. At December 31,
1995 and 1996, the Company recorded $7,843,000 and $9,957,000, respectively, of
unbilled revenues, which is included in accounts receivable.
NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
shares of Common Stock and dilutive common stock equivalent shares ("CSEs") from
stock options and warrants (using the treasury stock method). Pursuant to the
Securities and Exchange Commission Staff Accounting Bulletins, common stock and
CSEs issued at prices below the expected public offering price during the
12-month period prior to the Company's planned Offering have been included in
the calculation as if they were outstanding for all periods prior to the
Offering, regardless of whether they are dilutive (using the treasury stock
method). Net income is not reduced by the $88,000 provision for accretion of the
redeemable warrant redemption value because the calculation assumes that the
related Common Stock was outstanding in lieu of the Redeemable Warrant (Notes 6
and 8).
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 "Earnings Per
Share" which specifies the computation, presentation, and disclosure
requirements for earnings per share. The Company will be required to adopt SFAS
No. 128 in the fourth quarter 1997. All prior period earnings per share data
will be restated to conform with the provisions of SFAS No. 128. Based on a
preliminary evaluation of this Standards' requirements, the Company does not
expect the per share amounts reported under SFAS No. 128 to be materially
different from those calculated and presented under Accounting Principles Board
Opinion. No. 15.
LONG-LIVED ASSETS
In October 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The Company's adoption of SFAS No. 121 in the first quarter of 1996 did not have
a material impact on the Company's financial statements.
FOREIGN CURRENCY TRANSLATION AND EXPOSURE
All asset and liability accounts of foreign subsidiaries are translated
into U.S. dollars at the rate of exchange in effect at the balance sheet date.
Shareholder's equity is translated at historical rates. All income statement
accounts of foreign subsidiaries are translated at average exchange rates during
the year. Resulting translation adjustments arising from these translations are
charged or credited directly to shareholder's equity. Gains or losses on foreign
currency transactions are included in income as incurred. The denomination of
foreign subsidiaries' account balances in their local currency exposes the
Company to certain foreign exchange rate risks. The Company addresses the
F-9
<PAGE> 63
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
exposure by financing most working capital needs in the applicable foreign
currencies. The Company does not engage in other purchased hedging transactions
to reduce any remaining exposure to fluctuations in foreign currency exchange
rates. However, management does not believe the remaining risks to be
significant.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The book values of cash, trade accounts receivable and trade accounts
payable approximate their fair values principally because of the short-term
maturities of these instruments. The fair value of the Company's long-term debt
is estimated based on current rates offered to the Company for debt of similar
terms and maturities. Under this method, the Company's fair value of long-term
debt was not significantly different than the stated value at December 31, 1995
and 1996.
SIGNIFICANT CUSTOMER CONCENTRATION
During the years ended December 31, 1994, 1995 and 1996, the following
clients individually accounted for more than 10% of the Company's revenues:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995 1996
---- ---- ----
(PERCENT OF TOTAL
REVENUES)
<S> <C> <C> <C>
Customer A.................................................. 29.1% 23.6% 23.1%
Customer B.................................................. 16.6 15.7 12.6
Customer C.................................................. * 10.5 11.3
</TABLE>
- ---------------
* Accounted for less than 10% of total revenues for the period indicated.
In addition, a substantial portion of the Company's revenues is from
clients in the aviation industry. As of December 31, 1995 and 1996,
approximately 40.4% and 37.9%, respectively, of the Company's accounts
receivable were from three clients. The Company's policy does not require
significant collateral or other security to support such receivables.
3. SALE OF SUBSIDIARY
In October 1995, the Company sold substantially all of the assets of
Intergram, Inc., Argenbright's wholly-owned subsidiary which provided drug
testing, for $1,300,000, of which $975,000 was received in cash and the
remaining $325,000 was in the form of a note receivable. During fiscal 1995, the
cash portion of the sale resulted in a gain of $823,000, which is reflected in
the accompanying statements of operations as other income, net in 1995. The
balance of the gain reflected by the note receivable of $325,000 was recognized
during 1996 upon receipt of the proceeds.
4. ACQUISITION
In July 1996, the Company acquired Intersec, Inc. ("Intersec") for
$2,500,000 in cash and $1,155,000 in the form of notes payable. The transaction
was accounted for as a purchase. Intangibles of approximately $3,605,000 were
recognized in connection with the purchase, of which $250,000 was allocated to
purchased customer contracts and $75,000 to non-compete agreements that are
being amortized over 5 and 10 years, respectively, and which $3,280,000 was
allocated to goodwill that is being amortized over 40 years. The combined
financial statements include the operating results of Intersec from the date of
acquisition.
F-10
<PAGE> 64
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's unaudited pro forma results of operations are presented
assuming that the Intersec acquisition had been consummated January 1 of each
year presented and are not necessarily indicative of the results of operations
which would have actually been obtained for the years ended December 31, 1995
and 1996:
<TABLE>
<CAPTION>
1995 1996
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Pro forma revenue........................................... $178,361 $216,540
======== ========
Pro forma net income........................................ $ 1,067 $ 2,131
======== ========
Pro forma earnings per share................................ $ 0.25
========
</TABLE>
Pro forma adjustments were recorded to include (i) increased net interest
expense to reflect interest expense on long-term debt that would have been
incurred to finance the purchase, (ii) increased depreciation and amortization
expense as a result of the excess of the purchase price over the book value, and
(iii) provision for income taxes for net income of the acquired company and for
pro forma adjustments. No pro forma adjustments have been made for rent and
owners compensation, which were eliminated upon purchase.
5. INCOME TAXES
The income tax provision (benefit) consists of the following as of December
31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
1994 1995 1996
---- ----- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................... $265 $ 861 $ 517
State..................................................... 165 153 76
Foreign................................................... 181 852 785
---- ----- ------
611 1,866 1,378
---- ----- ------
Deferred:
United States............................................. (50) (630) 39
Foreign................................................... 66 (319) 30
---- ----- ------
16 (949) 69
---- ----- ------
Total............................................. $627 $ 917 $1,447
==== ===== ======
</TABLE>
The reconciliation of the federal statutory rate to the Company's effective
tax provision is as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate.................................. 34.0% 34.0% 34.0%
State income taxes, net of federal benefit.................. 8.6 2.5 2.0
Effect of foreign losses and foreign taxes greater than U.S.
statutory federal rate.................................... 22.8 0.0 2.2
Other....................................................... 17.6 2.4 1.8
----- ---- ----
Total............................................. 83.0% 38.9% 40.0%
===== ==== ====
</TABLE>
F-11
<PAGE> 65
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts. The tax effect of significant temporary differences
representing deferred tax assets and liabilities is as follows as of December
31, 1995 and 1996:
<TABLE>
<CAPTION>
1995 1996
------- ------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts........................... $ 80 $ 115
Targeted jobs tax credit.................................. 141 0
Self-insurance reserves................................... 880 1,229
Accruals.................................................. 0 339
Other..................................................... 0 61
------- ------
1,101 1,744
------- ------
Deferred tax liabilities:
Tax depreciation in excess of book........................ (85) (351)
Prepaid expenses currently deductible..................... (429) (882)
Other..................................................... (165) (20)
------- ------
(679) (1,253)
------- ------
Net deferred tax asset............................ $ 422 $ 491
======= ======
</TABLE>
6. LONG-TERM DEBT
At December 31, 1995 and 1996, long-term debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1995 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revolving lines of credit, interest at prime (8.25% at
December 31, 1996) with a LIBOR option at LIBOR plus 2.5%
(8.25% at December 31, 1996), due in full in December
1998...................................................... $12,166 $14,088
</TABLE>
Term note, interest at prime plus .75% (9.0% at December 31,
1996) with a LIBOR option at LIBOR plus 3.0% (8.75% at
December 31, 1996), payable in 36 equal monthly
installments through December 1998........................ 1,500 542
Subordinated notes payable to Sirrom Capital Corporation
("Sirrom" or "Sirrom Notes"), interest at 13.5%, principal
of $3,500,000 due July 9, 2001, secured by a second
security interest in substantially all of the assets of
Argenbright............................................... 0 3,130
Subordinated notes payable to former owners of Intersec,
interest at 9%, payable in varying installments through
April 1998................................................ 0 1,155
Transportation and other equipment notes payable, interest
ranging from 7% to 15%, payable monthly through 2001,
secured by related equipment.............................. 1,357 1,780
Other....................................................... 25 100
------- -------
15,048 20,795
Less current portion........................................ 1,089 1,617
------- -------
$13,959 $19,178
======= =======
F-12
<PAGE> 66
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Future aggregate annual maturities of long-term debt are as follows as of
December 31, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1997........................................................ $ 1,617
1998........................................................ 15,197
1999........................................................ 256
2000........................................................ 188
2001........................................................ 3,308
Thereafter.................................................. 229
-------
$20,795
=======
</TABLE>
In December 1995, the Company refinanced its revolving line of credit
("revolver"), raising the availability to $25,000,000, of which $20,000,000 is
denominated in U.S. dollars and $5,000,000 is denominated in either U.S. dollars
or pounds sterling, at the Company's option. Borrowings are based on a
percentage of accounts receivable, less amounts outstanding under letters of
credit. At December 31, 1996, $14,088,000 was outstanding and $7,527,000 was
available under the revolver. In January 1996, $3,320,000 of the availability
was utilized via the issuance of letters of credit in connection with the
Company's insurance program. Concurrent with the issuance of the letters of
credit, restricted cash of $2,287,000 was returned to the Company and applied
against the revolver. Any unpaid balance on the revolver is due upon expiration
of the agreement in December 1998. The revolver is secured by substantially all
of the Company's assets. In addition, the revolver is subject to certain
restrictive covenants, including maintaining minimum tangible net worth and a
specified debt-to-net worth ratio, and is personally guaranteed by the Company's
chairman and sole shareholder. In connection with the refinancing, the Company
entered into a term note agreement with financial covenants and other
restrictions similar to the revolver.
The Sirrom Notes were issued in July 1996 for $3,500,000. As discussed in
Note 8, a warrant ("Redeemable Warrant") to purchase 3.5% of Argenbright's
common shares for an exercise price of $18.00 was issued with the notes (before
adjustment associated with the Reorganization). The value of this warrant at
issuance was determined to be $618,000 based on the relative fair value of the
warrant to the notes. A corresponding amount of the proceeds that has been
allocated to the warrant, net of deferred tax effects, has been accounted for as
a debt discount and is being amortized over the expected life of the related
notes using the effective interest method. At December 31, 1996, the unamortized
debt discount amounted to $370,000.
Under the terms of a contract with a major airline customer, the customer
will buy all buses used by the Company to serve the customer if the customer
terminates the contract prior to the expiration date, which has been extended
through 1997. The purchase price paid by the customer for each bus would be
equal to the remaining balance owed by the Company on debt secured by the bus or
$500, whichever is greater. The related debt balance at December 31, 1995 and
1996 totaled $239,000 and $92,000, respectively, and is included in
transportation equipment notes payable.
See Note 7 regarding the Company's guarantee of outstanding debt of the
Company's chairman and sole shareholder.
June 30, 1997 (unaudited)
On May 2, 1997, the Company and its lender, First Union National Bank,
entered into a new three year credit facility which increased the maximum
borrowings to $35 million, lowered the interest rate to Prime or LIBOR plus 150
basis points and reduced certain other fees associated with
F-13
<PAGE> 67
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the credit facility. The credit facility is to be used for general working
capital purposes and to fund future acquisitions.
7. RELATED PARTY TRANSACTIONS
The note payable to shareholder at December 31, 1995 and 1996 consists of a
$650,000 and $528,000, respectively subordinated note payable to the Company's
chairman and sole shareholder, due in full on March 23, 1999, including interest
at 12%. The Company incurred interest expense of $78,000 and $75,000 in 1995 and
1996 related to the aforementioned note.
In addition to the note payable discussed above, the Company has other
transactions with the Company's chairman and sole shareholder and other
companies related by common ownership, including Argenbright Investments, Inc.,
Argenbright Leasing, Inc., and other affiliates. Significant related-party
transactions during 1994, 1995 and 1996 are as follows:
- Unsecured, noninterest-bearing advances were made to the Company's
chairman and sole shareholder totaling $295,000 and $449,000 at December
31, 1995 and 1996, respectively, which are included in due from
shareholder, a component of shareholder's equity, in the accompanying
balance sheets. Additionally, the Company's assets, as of December 31,
1996, included $77,000 of deposits paid on behalf of the sole shareholder.
- Unsecured, non-interest bearing advances were made to the sole
shareholder in connection with certain real estate holdings totaling
$169,000 at December 31, 1996. Effective February 1, 1997 the underlying
real estate was contributed to the Company (Note 12) and the amounts owed
became a liability of the sole shareholder. The amounts are included in
due from shareholder in the accompanying balance sheets.
- Unsecured, noninterest-bearing advances were made to an affiliate
totaling $105,000 and $269,000 at December 31, 1995 and 1996 and are
included in due from related parties in the accompanying balance sheets.
- Certain real estate is leased from the Company's chairman and sole
shareholder under informal agreements. Actual rental expense related to
these agreements was $461,000, $435,000 and $372,000 for the years ended
December 31, 1994, 1995, and 1996, respectively.
- The Company has an unsecured promissory note from Argenbright
Investments, Inc. with a balance of $8,000 and $0 as of December 31, 1995
and 1996, respectively, bearing interest at a rate of 10.5% per annum.
- The Company's chairman and sole shareholder has personally guaranteed the
revolver, the term note and the Sirrom Notes, as described in Note 6. The
Company has guaranteed the outstanding mortgage payable of $2,140,000 as
of December 31, 1996 for certain real estate leased by the Company from
the Company's chairman and sole shareholder. The real estate and related
mortgage notes were contributed to the Company in connection with the
Reorganization.
- During fiscal 1996, the Company bought a 20% and a 49% interest in ASAP
Uniform Company, Inc. ("ASAP") and Premium Services Management, Inc.
("PSM"), respectively. Both investments are accounted for using the equity
method of accounting and had an immaterial effect on the current year
financial statements. The Company made payments of $1,829,000 and $48,000
to ASAP and PSM, respectively, for uniforms and services performed.
F-14
<PAGE> 68
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. REDEEMABLE WARRANT
In connection with issuance of the Sirrom Notes (Note 6), the Company
issued a Redeemable Warrant to purchase 3.5% of Argenbright's common shares
(146,185 pro forma shares of AHL at December 31, 1996, as adjusted for the
Reorganization), for an exercise price of $18.00. In the event that the notes
remain outstanding on December 31, 1997, Sirrom receives an additional warrant
to purchase 1% of Argenbright's shares. Beginning July 30, 1998, warrants to
purchase additional shares accrue at 1% per year until prepayment or maturity of
the notes. The Company has the right to repurchase the warrant through December
31, 1997 for a purchase price of $750,000.
Sirrom also has the option to require the Company to redeem the warrant
beginning in 2001 for fair value, as defined. The excess of the redemption value
over the carrying value is being accrued by periodic charges to retained
earnings over the redemption period. This accretion amounted to $88,000 for the
year ended December 31, 1996.
9. STOCK BASED COMPENSATION
In October 1996, the Company issued nonqualified stock options to purchase
107,500 common shares at $4.64 per share. The options became exercisable upon
grant.
In December 1996, the Company issued nonqualified stock options to purchase
591,250 common shares at $11.76 per share. The options become exercisable in
varying percentages over four years.
The options above were granted at exercise prices which were not less than
estimated fair value of the Common Stock at the dates of grant as determined by
the Board of Directors. While the Company estimates that the fair value of the
common stock increased between the October and December grant dates, the Company
believes that the $11.76 per share exercise price exceeds the estimated fair
value of the Common Stock at December 1, 1996, as there was no public market for
the Company's stock at that time. Events that contributed to the increase in the
value of the common stock between the dates of the grants included the award of
new contracts to the Company by certain major clients and commitments by these
clients for additional contract awards.
The Company had 698,750 total options outstanding and 237,000 exercisable
at December 31, 1996 with a weighted-average exercise price of $10.66 and $5.85,
respectively.
The Company accounts for these stock option grants under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
under which no compensation cost has been recognized. Had compensation cost for
these plans been determined consistent with the SFAS No. 123, "Accounting for
Stock-Based Compensation," the Company's net income and earnings per share would
have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1996
----------
<S> <C>
Net income:
As reported............................................... $2,171,000
Pro forma................................................. $1,701,000
Primary EPS:
As reported............................................... $ 0.25
Pro forma................................................. $ 0.20
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions used for
the October and December grants,
F-15
<PAGE> 69
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
respectively: risk-free interest rates of 5.95% and 5.80%; no expected
dividends; expected lives of 2 and 4.5 years, and expected volatility of 37%.
See Note 12 for a discussion of option activity subsequent to December 31,
1996.
June 30, 1997 (unaudited)
In April, 1997 the Company adopted a stock incentive plan (the "Plan"),
under which the Company may grant 385,000 incentive or nonqualified common stock
options to directors and full-time employees. Options are granted at an exercise
price which is not less than fair market value as estimated by the Board of
Directors and become exercisable as determined by the Board of Directors,
generally 4 to 5 years. Options granted under the Plan expire 10 years from the
date of grant. As of June 30, 1997, 378,500 options have been granted under the
Plan.
10. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases office space, transportation equipment and office
equipment from unrelated parties under lease agreements expiring through
December 1999. Rental expense under these operating leases was $3,071,000,
$4,390,000 and $6,297,000 in 1994, 1995 and 1996, respectively.
Future minimum lease payments for noncancelable leases, including leases
with the Company's chairman and sole shareholder discussed in Note 7, were as
follows at December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDING: (IN THOUSANDS)
<S> <C>
1997...................................................... $4,801
1998...................................................... 2,396
1999...................................................... 1,674
2000...................................................... 1,211
2001...................................................... 826
</TABLE>
PERFORMANCE BONDS
At December 31, 1996, the Company has outstanding performance bonds of
$4,502,000.
INSURANCE
In 1994, Argenbright began participating in partially self-insured,
large-deductible workers' compensation, auto and health insurance plans.
Argenbright's exposure is limited per occurrence ($250,000 for workers'
compensation and auto liability claims) and in the aggregate. Reserves are
estimated for both reported and unreported claims. Revisions to estimated
reserves are recorded in the periods in which they become known. Estimated
self-insurance reserves as of December 31, 1995 and 1996 totaling $2,200,000 and
$3,200,000, respectively, represent management's best estimate. While there can
be no assurance that actual future claims will not exceed the amount of the
Company's reserves, in the opinion of the Company's management, any future
adjustments to estimated reserves included in the accompanying balance sheets
will not have a material impact on the financial statements.
The Company is exposed to liability for the acts or negligence of its
employees while on assignment that cause personal injury or damages, as well as
claims of misuse of client proprietary information or theft of client property.
As a provider of security services, the Company faces potential liability claims
in the event of any terrorist attempt or other criminal activity which occurs
F-16
<PAGE> 70
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
on any airline or premises subject to the Company's security services. The
Company has policies, guidelines and insurance to reduce its exposure to these
risks.
EMPLOYMENT AGREEMENTS
In December 1996, the Company entered into employment agreements with three
officers which expire through December 1, 2001. If any agreement is terminated
by the Company prior to the expiration date, except for cause or upon the
employee's death or disability, the Company must continue to pay the employee's
base salary and bonus for up to one year. The agreements provide for annual-base
salaries of up to $300,000 per officer and bonuses up to 50% of salaries.
DEFERRED COMPENSATION
In September 1996, Argenbright entered into a non-qualified deferred
compensation arrangement with certain eligible employees by which they could
elect to defer a specified portion of their compensation. The participant may
choose among several investment options, but returns are not guaranteed. As of
December 31, 1996, the Company has an obligation of $10,000 under the plan.
BENEFIT PLAN
In April 1996, Argenbright began a 401(k) plan covering salaried employees,
excluding highly compensated employees, who were employed as of such date.
Employees who were not employed as of April 1, 1996 must complete one year of
service to become eligible. Participants may contribute up to 15% of their
compensation to the plan. The Company has the discretion to match these
contributions. As of December 31, 1996, no company contributions have been made
to the plan.
LITIGATION
The Company is involved in various routine litigation arising in the
ordinary course of business. Management is of the opinion that the resolution of
these matters will not have a material effect on the combined results of
operations or financial condition of the Company.
F-17
<PAGE> 71
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
11. OPERATIONS BY GEOGRAPHICAL AREA
The following table presents information regarding the Company's different
geographical regions based on the historical operations of the Company as of
December 31, 1994, 1995 and 1996:
<TABLE>
<CAPTION>
DOLLARS
------------------------------
1994 1995 1996
-------- -------- --------
<S> <C> <C> <C>
Revenue:
United States..................................... $ 81,256 $107,388 $140,295
United Kingdom.................................... 26,313 41,013 47,028
Germany........................................... 13,767 15,638 17,617
Other European.................................... 1,898 4,562 5,213
-------- -------- --------
$123,234 $168,601 $210,153
======== ======== ========
Operating income:
United States..................................... $ 1,316 $ 1,208 $ 2,639
United Kingdom.................................... 686 1,809 2,182
Germany........................................... (127) 312 319
Other European.................................... (242) (485) (97)
-------- -------- --------
$ 1,633 $ 2,844 $ 5,043
======== ======== ========
Capital expenditures:
United States..................................... $ 683 $ 1,143 $ 1,556
United Kingdom.................................... 571 1,351 357
Germany........................................... -- 66 47
Other European.................................... -- 11 14
-------- -------- --------
$ 1,254 $ 2,571 $ 1,974
======== ======== ========
Identifiable assets:
United States..................................... $ 18,232 $ 27,681 $ 36,740
United Kingdom.................................... 7,230 8,994 10,487
Germany........................................... 2,905 2,792 3,715
Other European.................................... 727 1,220 1,011
-------- -------- --------
$ 29,094 $ 40,687 $ 51,953
======== ======== ========
</TABLE>
12. SUBSEQUENT EVENTS (UNAUDITED)
INITIAL PUBLIC OFFERING
In March 1997, the Company completed an initial public offering of its
Common Stock. The Company issued 2,500,000 shares at an initial public offering
price of $10.00 per share. The total proceeds of the initial public offering,
net of underwriting discounts and offering expenses, were approximately $22.0
million. Subsequent to the public offering of Common Stock, the Company repaid
outstanding debt of approximately $19.3 million, repurchased the outstanding
warrant of $750,000 and wrote off $642,000 of debt issuance costs, before income
tax benefit of $257,000.
REORGANIZATION
Effective February 1, 1997, the Company's chairman and sole shareholder
contributed all of the outstanding shares of Common Stock of Argenbright and ADI
to AHL. In addition, the sole shareholder contributed certain real estate and
other properties, with a net carrying value of $1,731,000 as of December 31,
1996, and the related mortgage notes payable, with an outstanding
F-18
<PAGE> 72
AHL SERVICES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
balance of $2,485,000 as of December 31, 1996, to the Company. Simultaneously,
the Company's chairman and sole shareholder contributed the note payable to
shareholder, which had a balance of $528,000 as of December 31, 1996. The net
result of these transactions was a reduction of shareholder's equity of
approximately $226,000. Effective with the Reorganization, the capital structure
of AHL consists of 50,000,000 shares authorized, 8,353,430 shares issued and
outstanding of $.01 par value Common Stock and 5,000,000 shares authorized, 0
shares issued and outstanding of no par value preferred stock.
EMPLOYEE STOCK PURCHASE PLAN
Subsequent to the planned offering, the Company intends to adopt an
employee stock purchase plan.
EMPLOYMENT AGREEMENTS
Effective February 28, 1997, the Company amended its employment agreements
with three officers. The amendment provides for 16,250 additional options to
purchase shares of Common Stock at $10.75 per share exercisable in varying
percentages over four years. The amendment also reduces the exercise price of
the December 1996 option grants (Note 9) from $11.76 per share to $10.75 per
share. Both the additional option grants and the amended option grants are
exercisable at prices which are not less than the fair value of the stock at the
date of amendment, as determined by the Board of Directors. Concurrent with the
initial public offering in March 1997, the exercise prices were changed from
$10.75 to $10.00 per share.
13. ACQUISITION AND POTENTIAL STOCK OFFERING SUBSEQUENT TO JUNE 30, 1997
(UNAUDITED)
In September 1997, AHL acquired Lloyd Creative Temporaries, Inc., a
Chicago-based company that provides staffing for light industrial and warehouse
"pick and pack" functions for approximately $5.0 million in cash plus contingent
consideration. In May 1997, AHL acquired the commercial security business of New
Jersey-based USA Security Services, Inc. for approximately $2.6 million in cash.
In May 1997, AHL acquired British Airways' executive aircraft services business
at Heathrow Airport ("EAS"), for approximately $2.8 million in cash plus
contingent consideration. EAS provides ground handling and passenger services
for non-commercial aircraft. All of these acquisitions have been accounted for
under the purchase method of accounting. As a result, the purchase prices have
been allocated to the assets acquired, including intangibles, on a preliminary
basis according to their respective fair values.
In October 1997, the Company is planning an offering of 2,700,000 shares of
its common stock (the "Offering"). There can, however, be no assurance that the
Offering will be completed.
F-19
<PAGE> 73
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN
ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 13
Dividend Policy....................... 13
Price Range of Common Stock........... 14
Capitalization........................ 15
Selected Combined Financial and
Operating Data...................... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 17
Business.............................. 25
Management............................ 40
Certain Transactions.................. 46
Principal and Selling Shareholders.... 46
Description of Capital Stock.......... 47
Shares Eligible for Future Sale....... 48
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 51
Additional Information................ 51
Index to Combined Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
2,700,000 SHARES
AHL SERVICES, INC.
COMMON STOCK
(AHL LOGO)
-----------------------
PROSPECTUS
-----------------------
BT Alex. Brown
Credit Suisse First Boston
The Robinson-Humphrey
Company
, 1997
======================================================
<PAGE> 74
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses in connection with the
issuance and distribution of the securities being registered hereunder. Except
for the SEC registration fee and NASD filing fee, all amounts are estimates.
<TABLE>
<S> <C>
SEC registration fee........................................ $ 17,054
--------
NASD filing fee............................................. 6,128
--------
Nasdaq National Market Listing Fee.......................... 17,500
--------
Accounting fees and expenses................................ 100,000
--------
Legal fees and expenses..................................... 150,000
--------
Printing and Engraving expenses............................. 75,000
--------
Transfer Agent and Registrar fees and expenses.............. 10,000
--------
Miscellaneous Expenses...................................... 124,318
--------
Total............................................. $500,000
========
</TABLE>
- ---------------
* To be provided by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Georgia Business Corporation Code permits a corporation to eliminate or
limit the personal liability of a director to the corporation or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, provided that no provision shall eliminate or limit the liability of a
director: (A) for any appropriation, in violation of his duties, of any business
opportunity of the corporation; (B) for acts or omissions which involve
intentional misconduct or a knowing violation of law; (C) for unlawful corporate
distributions; or (D) for any transaction from which the director received an
improper personal benefit. This provision pertains only to breaches of duty by
directors in their capacity as directors (and not in any other corporate
capacity, such as officers) and limits liability only for breaches of fiduciary
duties under Georgia corporate law (and not for violation of other laws, such as
the Federal securities laws). The Company's Restated and Amended Articles of
Incorporation (the "Restated Articles") exonerate the Company's directors from
monetary liability to the extent permitted by this statutory provision.
The Company's Bylaws (the "Bylaws") also provide that the Company 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 (including any action by or in
the right of the Company), by reason of the fact that such person is or was a
director or officer of the Company, or is or was serving at the request of the
Company as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including reasonable
attorneys' fees), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the Company
(and with respect to any criminal action or proceeding, if such person had no
reasonable cause to believe such person's conduct was unlawful), to the maximum
extent permitted by, and in the manner provided by, the Georgia Business
Corporation Code. In addition, the Bylaws provide that the Company will advance
to its directors or officers reasonable expenses of any such proceeding.
II-1
<PAGE> 75
Notwithstanding any provision of the Company's Amended and Restated
Articles and Bylaws to the contrary, the Georgia Business Corporation Code
provides that the Company shall not indemnify a director or officer for any
liability incurred in a proceeding in which the director is adjudged liable to
the Company or is subjected to injunctive relief in favor of the Company: (1)
for any appropriation, in violation of his duties, of any business opportunity
of the Company; (2) for acts or omissions which involve intentional misconduct
or a knowing violation of law; (3) for unlawful corporate distributions; (4) for
any transaction from which the director or officer received an improper personal
benefit.
Section 8 of the Underwriting Agreement filed as Exhibit 1.1 hereto also
contains certain provisions pursuant to which certain officers, directors and
controlling persons of the Company may be entitled to be indemnified by the
underwriters named therein.
The Company has purchased insurance with respect to, among other things,
any liabilities that may accrue under the statutory provisions referred to
above.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On January 31, 1997, the Company issued 999 shares of common stock to Mr.
Argenbright in connection with the Company's formation. This issuance was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933 (the
"Securities Act").
On February 1, 1997, the Company issued one share of common stock to Mr.
Argenbright in connection with the Reorganization. This issuance was exempt from
registration pursuant to Section 4(2) of the Securities Act.
On February 1, 1997, the Company issued 8,352,430 shares of common stock to
Mr. Argenbright and his affiliates in exchange for all of the outstanding shares
of Argenbright and ADI. This issuance was exempt from registration pursuant to
Section 4(2) of the Securities Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER NUMBER DESCRIPTION
- ------- ------------------
<S> <C> <C>
1.1 -- Form of Underwriting Agreement
3.1 -- Restated and Amended Articles of Incorporation of the
Company (incorporated by reference to the Registration
Statement on Form 8-A dated March 25, 1997)
3.2 -- Bylaws of the Company (incorporated by reference to the
Registration Statement on Form 8-A dated March 25, 1997)
4.1 -- Specimen Common Stock Certificate (incorporated by reference
to the Registration Statement on Form S-1, File No.
333-20315)
4.2 -- 1997 Stock Incentive Plan (incorporated by reference to the
Registration Statement on Form S-1, File No. 333-20315)
5.1 -- Opinion of King and Spalding as to the legality of the
Common Stock being registered
10.1 -- Restated Employment Agreement between the Company and Edwin
R. Mellett dated as of February 1, 1997, as amended on
February 28, 1997 (incorporated by reference to the
Registration Statement on Form S-1, File No. 333-20315)
10.2 -- Restated Employment Agreement between the Company and Thomas
J. Marano dated as of February 1, 1997, as amended on
February 28, 1997 (incorporated by reference to the
Registration Statement on Form S-1, File No. 333-20315)
</TABLE>
II-2
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT
NUMBER NUMBER DESCRIPTION
- ------- ------------------
<S> <C> <C>
</TABLE>
10.3 -- Restated Employment Agreement between the Company and David
L. Gamsey dated as of February 1, 1997, as amended on
February 28, 1997 (incorporated by reference to the
Registration Statement on Form S-1, File No. 333-20315)
10.4 -- Director's Service Agreement between The ADI Group Limited
and Alan Trevor Warburton dated as of January 1, 1993
(incorporated by reference to the Registration Statement on
Form S-1, File No. 333-20315)
10.5 -- Letter Agreement between the Company and Ernest Patterson
dated as of May 23, 1997
10.6 -- Credit Agreement dated as of May 2, 1997 by and among AHL
Services, Inc., Argenbright Security, Inc., Argenbright,
Inc., Intersec, Inc., ADI U.K. Limited, Aviation Defence
International Germany Limited, Argenbright Holdings Limited
and The ADI Group Limited, as borrowers, the Lenders
referred to therein, First Union National Bank (London
Branch), as European Facility Lender and First Union
National Bank of Georgia, as Administrative Agent
10.7+ -- Agreement between Argenbright Security Inc. and United Air
Lines, Inc., dated as of November 16, 1996 (incorporated by
reference to the Registration Statement on Form S-1, File
No. 333-20315)
10.8+ -- Agreement between Argenbright Security, Inc. and United Air
Lines, Inc., dated as of December 8, 1996 (incorporated by
reference to the Registration Statement on Form S-1, File
No. 333-20315)
10.9+ -- Security Services Agreement between Argenbright Security,
Inc. and America Online Inc., dated as of March 12, 1997 and
relating to services commenced on June 1, 1996 (incorporated
by reference to the Registration Statement on Form S-1, File
No. 333-20315)
11.1 -- Computation of Earnings Per Share
21.1 -- List of subsidiaries
23.1 -- Consent of King and Spalding (contained in Exhibit 5.1)
23.2 -- Consent of Arthur Andersen LLP
24.1 -- Powers of Attorney (contained on signature page)
- ---------------
+ The Company has applied for confidential treatment of portions of this
Exhibit. Accordingly, portions thereof have been omitted and filed separately
with the Commission.
(b) Financial Statement Schedules.
Not Applicable
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act of 1933 (the "Securities Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered hereunder,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
II-3
<PAGE> 77
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 78
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta, State of Georgia, on October 7, 1997.
AHL SERVICES, INC.
By: FRANK A. ARGENBRIGHT, JR.
------------------------------------
Frank A. Argenbright, Jr.
Chairman and Co-Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENT, that each person whose signature appears
below constitutes and appoints Frank A. Argenbright, Jr., Edwin R. Mellett and
David L. Gamsey, and each of them, his or her true and lawful attorney-in-fact
and agents, with full power of substitution and resubstitution, from such person
and in each person's name, place and stead, in any and all capacities, to sign
any and all amendments (including post-effective amendments) to the Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission and to sign
and file any other registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933,
as amended, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 7, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
FRANK A. ARGENBRIGHT, JR. Chairman and Co-Chief Executive Officer
- ----------------------------------------------------- (Principal Executive Officer)
Frank A. Argenbright, Jr.
EDWIN R. MELLETT Vice Chairman and Co-Chief Executive Officer
- -----------------------------------------------------
Edwin R. Mellett
DAVID L. GAMSEY Chief Financial Officer (Principal Financial
- ----------------------------------------------------- and Principal Accounting Officer)
David L. Gamsey
ROBERT F. MCCULLOUGH Director
- -----------------------------------------------------
Robert F. McCullough
HAMISH LESLIE MELVILLE Director
- -----------------------------------------------------
Hamish Leslie Melville
</TABLE>
II-5
<PAGE> 1
EXHIBIT 1.1
______________ SHARES
AHL SERVICES, INC.
Common Stock
UNDERWRITING AGREEMENT
______________, 1997
BT ALEX. BROWN INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
THE ROBINSON-HUMPHREY COMPANY, LLC
As Representatives of the Several Underwriters
c/o BT Alex. Brown Incorporated
One South Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
AHL Services, Inc., a Georgia corporation (the "Company"), proposes to
sell to the several underwriters (the "Underwriters") named in Schedule I
hereto for whom you are acting as representatives (the "Representatives") an
aggregate of 2,700,000 shares of the Company's Common Stock, $.01 par value
(the "Firm Shares"). The respective amounts of the Firm Shares to be so
purchased by the several Underwriters are set forth opposite their names in
Schedule I hereto. The Company and a shareholder of the Company (the "Selling
Shareholder) also proposes to sell at the
- 1 -
<PAGE> 2
Underwriters' option an aggregate of up to 51,570 and 353,430 additional
shares, respectively, of the Company's Common Stock (the "Option Shares") as
set forth below. The Company and the Selling Shareholder are sometimes
referred to herein collectively as the "Sellers."
As the Representatives, you have advised the Company and the Selling
Shareholder (a) that you are authorized to enter into this Agreement on behalf
of the several Underwriters, and (b) that the several Underwriters are willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite their respective names in Schedule I, plus their pro rata
portion of the Option Shares if you elect to exercise the over-allotment option
in whole or in part for the accounts of the several Underwriters. The Firm
Shares and the Option Shares (to the extent the aforementioned option is
exercised) are herein collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1. Representations and Warranties of the Company and the Selling
Shareholder.
(a) The Company represents and warrants as follows:
(i) A registration statement on Form S-1 (File No.
333-________) with respect to the Shares has been prepared by the Company in
conformity with the requirements of the Securities Act of 1933, as amended,
(the "Act") and the Rules and Regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder and has been
filed with the Commission under the Act. Copies of such registration
statement, including any amendments thereto, the preliminary prospectuses
(meeting the requirements of Rule 430A of the Rules and Regulations) contained
therein and the exhibits, financial statements and schedules, as finally
amended and revised, have heretofore been delivered by the Company to you.
Such registration statement, together with any registration statement filed by
the Company pursuant to Rule 462(b) of the Act, herein referred to as the
"Registration Statement," which shall be deemed to include all information
omitted therefrom in reliance upon Rule 430A and contained in the Prospectus
referred to below, has become effective under the Act and no post-effective
amendment to the Registration Statement has been filed as of the date of this
Agreement. "Prospectus" means (a) the form of prospectus first filed with the
Commission pursuant to Rule 424(b) or (b) the last preliminary prospectus
included in the Registration Statement filed prior to the time it becomes
effective or filed pursuant to Rule 424(b) under the Act that is delivered by
the Company to the Underwriters for delivery to purchasers of the Shares,
together with any term sheet or abbreviated term sheet filed with the
Commission pursuant to Rule 424(b)(7) under the Act. Each preliminary
prospectus included in the Registration Statement prior to the time it becomes
effective is herein referred to as a "Preliminary Prospectus."
(ii) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Georgia, with corporate power and authority to own its properties and conduct
its business as described in the Registration Statement; each of the
subsidiaries of the Company that conduct business and hold assets
(collectively, the "Subsidiaries") has been duly
- 2 -
<PAGE> 3
organized and is validly existing as a corporation in good standing (to the
extent that good standing is a concept recognized by such jurisdiction) under
the laws of the jurisdiction of its incorporation, with corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement; the Company and each of the Subsidiaries are
duly qualified to transact business in all jurisdictions in which the conduct
of their business requires such qualification, except to the extent that the
failure to be so qualified would not have a material adverse effect on the
Company and the Subsidiaries taken as a whole; the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized and validly
issued, are fully paid and non-assessable and are owned by the Company or
another Subsidiary free and clear of all liens, encumbrances and security
interests, other than the security interest granted to First Union National
Bank of Georgia ("First Union") pursuant to the Company's 1997 credit facility
with First Union, as amended; and no options, warrants or other rights to
purchase, agreements or other obligations to issue or other rights to convert
any obligations into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
(iii) The outstanding shares of Common Stock of the
Company, including all shares to be sold by the Selling Shareholder, have been
duly authorized and validly issued and are fully paid and non-assessable; the
portion of the Shares to be issued and sold by the Company have been duly
authorized and when issued and paid for as contemplated herein will be validly
issued, fully-paid and non-assessable; and no preemptive rights of shareholders
exist with respect to any of the Shares or the issue and sale thereof.
(iv) The Shares conform with the description thereof
contained in the Registration Statement.
(v) The Commission has not issued an order preventing or
suspending the use of any Preliminary Prospectus relating to the proposed
offering of the Shares nor instituted proceedings for that purpose. The
Registration Statement contains and the Prospectus and any amendments or
supplements thereto in all respects conform or will conform, as the case may
be, to the requirements of, the Act and the Rules and Regulations. Neither the
Registration Statement nor any amendment thereto, and neither the Prospectus
nor any supplement thereto, contains or will contain, as the case may be, any
untrue statement of a material fact or omits or will omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading;
provided, however, that the Company makes no representations or warranties as
to information contained in or omitted from the Registration Statement or the
Prospectus, or any such amendment or supplement, in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf
of any Underwriter through the Representatives, specifically for use in the
preparation thereof.
(vi) The combined financial statements of the Company and
each of its subsidiaries, together with related notes and schedules as set
forth in the Registration Statement, present fairly in all material respects
the financial position and the results of operations of the Company and each of
its subsidiaries, taken as a whole, at the indicated dates and for the
indicated periods. Such financial statements have been prepared in accordance
with generally accepted principles of accounting and all
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<PAGE> 4
adjustments necessary for a fair presentation of results for such periods have
been made. The selected and summary financial, operating and statistical data
included in the Registration Statement presents fairly in all material respects
the information shown therein and have been compiled on a basis consistent with
the financial statements presented therein.
(vii) There is no action or proceeding pending or, to the
knowledge of the Company, threatened against the Company or any of the
Subsidiaries before any court or administrative agency which might reasonably
be expected to result in any material adverse change in the business or
financial condition of the Company and of the Subsidiaries taken as a whole,
except as set forth in the Registration Statement.
(viii) The Company and the Subsidiaries have good and
marketable title to all of the real properties and own all assets reflected in
the financial statements hereinabove described (or as described in the
Registration Statement), subject to no lien, mortgage, pledge, charge or
encumbrance of any kind except those reflected in such financial statements (or
as described in the Registration Statement) or which are not material. The
Company and the Subsidiaries occupy their leased properties under valid and
binding leases with such exceptions as are not material to the Company and the
Subsidiaries taken as a whole. Such leases conform to the descriptions thereof
set forth in the Registration Statement.
(ix) The Company and the Subsidiaries have filed all
Federal, State and foreign income tax returns which have been required to be
filed and have paid all taxes indicated by said returns and all assessments
received by them or any of them to the extent that such taxes have become due
and are not being contested in good faith.
(x) Since the respective dates as of which information is
given in the Registration Statement, as it may be amended or supplemented,
there has not been any material adverse change or any development involving a
prospective material adverse change in or affecting the condition, financial or
otherwise, of the Company and its Subsidiaries taken as a whole or the
earnings, business affairs, management, or business prospects of the Company
and its Subsidiaries taken as a whole, whether or not occurring in the ordinary
course of business, and there has not been any material transaction entered
into by the Company or the Subsidiaries, other than transactions in the
ordinary course of business and changes and transactions contemplated by the
Registration Statement, as it may be amended or supplemented. The Company and
the Subsidiaries have no material contingent obligations which are required to
be disclosed by generally accepted accounting principles and which are not
disclosed in the Registration Statement, as it may be amended or supplemented.
(xi) Neither the Company nor any of the Subsidiaries is in
default under any agreement, lease, contract, indenture or other instrument or
obligation to which it is a party or by which it or any of its properties is
bound, except for such defaults that would not have a material adverse effect
on the Company and the Subsidiaries taken as a whole. The consummation of the
transactions herein contemplated and the fulfillment of the terms hereof will
not conflict with or result in a breach of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust or other
agreement or instrument to which the Company or any Subsidiary is a party, or
of the Charter
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<PAGE> 5
or by-laws of the Company or any order, rule or regulation applicable to the
Company or any Subsidiary of any court or of any regulatory body or
administrative agency or other governmental body having jurisdiction over the
Company or any Subsidiary, except for such breaches that would not result in a
material adverse effect on the Company and the Subsidiaries taken as a whole.
(xii) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory, administrative or
other governmental body necessary in connection with the execution and delivery
by the Company of this Agreement and the consummation of the transactions
herein contemplated (except such additional steps as may be required by the
National Association of Securities Dealers, Inc. (the "NASD") or may be
necessary to qualify the Shares for public offering by the Underwriters under
State securities or Blue Sky laws) has been obtained or made and is in full
force and effect.
(xiii) The Company and each of the Subsidiaries holds all
material licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their businesses, except where the failure to
possess such licenses, certificates and permits would not have a material
adverse effect on the Company and the Subsidiaries taken as a whole; and, to
the knowledge of the Company, neither the Company nor any of the Subsidiaries
has received notice of infringement of any patents, patent rights, trade names,
trademarks or copyrights, which infringement is material to the business of the
Company and the Subsidiaries taken as a whole.
(xiv) Neither the Company, nor to the Company's best
knowledge, any of its affiliates, has taken a may take, directly or indirectly,
any action designed to cause or result in, or which has constituted or which
might reasonably be expected to constitute, the stablization or manipulation of
the price of the shares of Common Stock to facilitate the sale or resale of the
shares. The Company acknowledges that the Underwriters may engage in passive
market making transactions in the Shares on the Nasdaq Stock Market in
accordance with Rule 103 under Regulation M of the Exchange Act.
(xv) Arthur Andersen LLP, the firm that has certified
certain of the financial statements filed with the Commission as part of the
Registration Statement, are independent public accountants as required by the
Act and the Rules and Regulations.
(xvi) The Company's application for designation of the
Shares on the Nasdaq Stock Market (National Market) (the "Nasdaq National
Market") has been approved.
(xvii) To the best of the Company's knowledge, there are no
affiliations or associations between any member of the National Association of
Securities Dealers, Inc. and any of the Company's officers, directors or 5% or
greater security holders, except as otherwise disclosed in writing to the
Representatives.
(b) The Selling Shareholder represents and warrants as follows:
(i) The Selling Shareholder has and at the Closing Date
and the Option Closing Date, as the case may be (as such dates are
hereinafter defined) will have good and marketable title to the Option
Shares to be sold by the Selling Shareholder, free of any liens,
encumbrances, equities and claims, and full right, power and authority
to effect the sale and delivery of such Option Shares; and upon the
delivery of and payment for such Option Shares pursuant to this
Agreement, good and marketable title thereto, free of any liens,
encumbrances, equities and claims, will be transferred to the several
Underwriters.
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<PAGE> 6
(ii) The consummation by the Selling Shareholder of the
transactions herein contemplated and the fulfillment by the Selling
Shareholder of the terms hereof will not result in a breach of any of
the terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust or other agreement or instrument to
which the Selling Shareholder is a party, or of any order, rule or
regulation applicable to the Selling Shareholder of any court or of
any regulatory body or administrative agency or other governmental
body having jurisdiction over the Selling Shareholder.
(iii) The Selling Shareholder has not taken and will not
take, directly or indirectly, any action designed to, or which has
constituted, or which might reasonably be expected to cause or result
in stabilization or manipulation of the price of the Common Stock of
the Company.
(iv) No offering, sale or other disposition of any Common
Stock of the Company, any options or warrants to purchase shares of
Common Stock or any securities convertible into or exchangeable for
shares of Common Stock will be made for a period of 90 days after the
date of this Agreement, directly or indirectly, by such Selling
Shareholder otherwise than hereunder or with the prior written consent
of BT Alex. Brown Incorporated.
(v) Without having undertaken to determine independently
the accuracy or completeness of either the representations and
warranties of the Company contained herein or the information
contained in the Registration Statement, the Selling Shareholder has
no reason to believe that the representations and warranties of the
Company contained in this Section 1 are not true and correct, has read
the Registration Statement and has no knowledge of any material fact,
condition or information not disclosed in the Registration Statement
which has adversely affected or may be reasonably likely to adversely
affect the business of the Company or any of the Subsidiaries; and the
sale of the Option Shares by the Selling Shareholder pursuant hereto
is not prompted by any information concerning the Company or any of
the Subsidiaries which is not set forth in the Registration Statement.
In order to document the Underwriters' compliance with the reporting
and withholding provisions of the Tax Equity and Fiscal Responsibility Act of
1982 and the Interest and Dividend Tax Compliance Act of 1983 with respect to
the transactions herein contemplated, the Selling Shareholder agrees to deliver
to you prior to or at the Closing Date a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or statement
specified by Treasury Department regulations in lieu thereof).
2. Purchase, Sale and Delivery of the Firm Shares. On the basis
of the representations, warranties and covenants herein contained, and subject
to the conditions herein set forth, the Company agrees to sell to the
Underwriters and each Underwriter agrees, severally and not jointly, to
purchase, at a price of $______ per share, the number of Firm Shares set forth
opposite the name of each Underwriter in Schedule I hereof, subject to
adjustments in accordance with Section 9 hereof.
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<PAGE> 7
Payment for the Firm Shares to be sold hereunder is to be made by wire
transfer of immediately available funds to a bank account designated by the
Company against delivery of certificates therefor to the Representatives for
the several accounts of the Underwriters. Such delivery is to be made at the
offices of BT Alex. Brown Incorporated, One South Street, Baltimore, Maryland,
at 10:00 A.M., Baltimore time, on the third business day after the date of this
Agreement or at such other time and date not later than three business days
thereafter as you and the Company shall agree upon, such time and date being
herein referred to as the "Closing Date." (As used herein, "business day"
means a day on which the New York Stock Exchange is open for trading and on
which banks in New York are open for business and are not permitted by law or
executive order to be closed.) The certificates for the Firm Shares will be
delivered in such denominations and in such registrations as the
Representatives request in writing not later than the third full business day
prior to the Closing Date and will be made available for inspection by the
Representatives at least one business day prior to the Closing Date.
In addition, on the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
and the Selling Shareholder hereby grant an option to the several Underwriters
to purchase the Option Shares at the price per share as set forth in the first
paragraph of this Section 2. The option granted hereby may be exercised in
whole or in part but only once and at any time upon written notice given within
30 days after the date of this Agreement, by you, as Representatives of the
several Underwriters, to the Selling Shareholder setting forth the number of
Option Shares as to which the several Underwriters are exercising the option,
the names and denominations in which the Option Shares are to be registered and
the time and date at which such certificates are to be delivered. The time and
date at which certificates for Option Shares are to be delivered shall be
determined by the Representatives but shall not be earlier than three nor later
than 10 full business days after the exercise of such option, nor in any event
prior to the Closing Date (such time and date being herein referred to as the
"Option Closing Date"). If the date of exercise of the option is three or more
days before the Closing Date, the notice of exercise shall set the Closing Date
as the Option Closing Date. The option with respect to the Option Shares
granted hereunder may be exercised only to cover over-allotments in the sale of
the Firm Shares by the Underwriters. You, as Representatives of the several
Underwriters, may cancel such option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that the option is exercised, payment for the Option Shares shall be made
on the Option Closing Date by wire transfer of immediately available funds to
bank accounts designated by the the Company and the Selling Shareholder against
delivery of certificates therefor at the offices of BT Alex. Brown
Incorporated, One South Street, Baltimore, Maryland.
3. Offering by the Underwriters. It is understood that the
several Underwriters are to make a public offering of the Firm Shares as soon
as the Representatives deem it advisable to do so. The Firm Shares are to be
initially offered to the public at the public offering price set forth in the
Prospectus. The Representatives may from time to time thereafter change the
public offering price and other selling terms. To the extent, if at all, that
any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters
will offer them to the public on the foregoing terms.
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<PAGE> 8
It is further understood that you will act as the Representatives for
the Underwriters in the offering and sale of the Shares in accordance with a
Master Agreement Among Underwriters entered into by you and the several other
Underwriters.
4. Covenants of the Company. The Company covenants and agrees
with the several Underwriters and the Selling Shareholder that:
(a) The Company will (i) prepare and timely file with the
Commission under Rule 424(b) of the Rules and Regulations a Prospectus
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Rules and Regulations,
and (ii) not file any amendment to the Registration Statement or supplement to
the Prospectus of which the Representatives shall not previously have been
advised and furnished with a copy or to which the Representatives shall have
reasonably objected in writing or which is not in compliance with the Rules and
Regulations and (iii) file on a timely basis all reports and any definitive
proxy or information statements required to be filed by the Company with the
Commission subsequent to the date of the Prospectus and prior to the
termination of the offering of the Shares by the Underwriters.
(b) The Company will advise the Representatives promptly of any
request of the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, or of the
issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or the use of the Prospectus or of the institution
of any proceedings for that purpose, and the Company will use its best efforts
to prevent the issuance of any such stop order preventing or suspending the use
of the Prospectus and to obtain as soon as possible the lifting thereof, if
issued.
(c) The Company will cooperate with the Representatives in
endeavoring to qualify the Shares for sale under the securities laws of such
jurisdictions as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or to file a
general consent to service of process in any jurisdiction where it is not now
so qualified or required to file such a consent. The Company will, from time
to time, prepare and file such statements, reports, and other documents, as are
or may be required to continue such qualifications in effect for so long a
period as the Representatives may reasonably request for distribution of the
Shares.
(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus as the Representatives may reasonably request. The Company will
deliver to, or upon the order of, the Representatives during the period when
delivery of a Prospectus is required under the Act, as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to the
Representatives at or before the Closing Date, two signed copies of the
Registration Statement and all amendments thereto including all exhibits filed
therewith, and will deliver to the Representatives such
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<PAGE> 9
number of copies of the Registration Statement, but without exhibits, and of
all amendments thereto, as the Representatives may reasonably request.
(e) If during the period in which a prospectus is required by law
to be delivered by an Underwriter or dealer any event shall occur as a result
of which, in the judgment of the Company or in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not
misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with law.
(f) The Company will make generally available to its security
holders, as soon as it is practicable to do so, but in any event not later than
15 months after the effective date of the Registration Statement, an earnings
statement (which need not be audited) in reasonable detail, covering a period
of at least 12 consecutive months beginning after the effective date of the
Registration Statement, which earnings statement shall satisfy the requirements
of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will
advise you in writing when such statement has been so made available.
(g) The Company will, for a period of five years from the Closing
Date, deliver to the Representatives copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended. The Company will deliver to the
Representatives similar reports with respect to significant subsidiaries, as
that term is defined in the Rules and Regulations, which are not consolidated
in the Company's financial statements.
(h) No offering, sale or other disposition of any Common Stock of
the Company, any options or warrants to purchase shares of Common Stock or any
securities convertible into or exchangeable for shares of Comon Stock will be
made for a period of 90 days after the date of this Agreement, directly or
indirectly, by the Company otherwise than hereunder or with the prior written
consent of the Representatives except that the Company may, without such
consent, (i) issue stock options and shares of Common Stock pursuant to the
Stock Option Plan and the Employee Stock Purchase Plan which are described in
the Registration Statement and (ii) issue shares of Common Stock as
consideration for future acquisitions, provided that each recipient of such
shares in any such acquisition agrees in writing to be subject to the transfer
restrictions imposed pursuant to this Section 4(h) to the extent the 90 day
period following the date of this Agreement has not expired.
(i) The Company will not take, directly or indirectly, any action
designed to cause or result in, or that has constituted or might reasonably be
expected to constitute, the stabilization or manipulation of the price of any
securities of the Company.
5. Costs and Expenses. The Company will pay all costs, expenses
and fees incident to the performance of the obligations of the Sellers under
this Agreement, including, without limiting the generality of the foregoing,
the following: accounting fees of the Company; the fees and disbursements of
counsel for the Company and the Selling Shareholder; the cost of printing and
delivering to, or as
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<PAGE> 10
requested by, the Underwriters copies of the Registration Statement,
Preliminary Prospectuses, the Prospectus, and any supplements or amendments
thereto; the filing fees of the Commission; the filing fees of the NASD; and
the expenses, including the fees and disbursements of counsel for the
Underwriters, incurred in connection with the qualification of the Shares under
State securities or Blue Sky laws. To the extent, if at all, that the Selling
Shareholder engages special legal counsel to represent him in connection with
this offering, the fees and expenses of such counsel shall be borne by the
Selling Shareholder. Any transfer taxes imposed on the sale of the Shares to
the several Underwriters will be paid by the Sellers pro rata. The Sellers
shall not, however, be required to pay for any of the Underwriters' expenses
(other than those related to qualification under State securities or Blue Sky
laws) except that, if this Agreement shall not be consummated because the
conditions in Section 7 hereof are not satisfied, or because this Agreement is
terminated by the Representatives pursuant to Section 6 hereof, or by reason of
any failure, refusal or inability on the part of the Company or the Selling
Shareholder to perform any undertaking or satisfy any condition of this
Agreement or to comply with any of the terms hereof on their part to be
performed, unless such failure to satisfy said condition or to comply with said
terms be due to the default or omission of any Underwriter, then the Company
shall reimburse the several Underwriters for reasonable out-of-pocket expenses,
including fees and disbursements of counsel, reasonably incurred in connection
with investigating, marketing and proposing to market the Shares or in
contemplation of performing their obligations hereunder; but the Company and
the Selling Shareholder shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the
sale by them of the Shares.
6. Conditions of Obligations of the Underwriters. The several
obligations of the Underwriters to purchase the Firm Shares on the Closing Date
and the Option Shares, if any, on the Option Closing Date are subject to the
accuracy, as of the Closing Date or the Option Closing Date, as the case may
be, of the representations and warranties of the Company and the Selling
Shareholder contained herein, and to the performance by the Company and the
Selling Shareholder of their covenants and obligations hereunder and to the
following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been taken or, to the knowledge of the
Company or the Selling Shareholder, shall be contemplated by the Commission.
(b) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, the opinion of King & Spalding,
counsel for the Company and the Selling Shareholder, dated the Closing Date or
the Option Closing Date, as the case may be, addressed to the Underwriters to
the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State
of Georgia, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus; each of the
Subsidiaries has been duly organized and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation (to the extent "good standing" is a concept recognized
by such jurisdiction), with corporate power and authority to own its
properties and
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<PAGE> 11
conduct its business as described in the Prospectus; the Company and
each of the Subsidiaries are duly qualified to transact business in
all jurisdictions in which the conduct of their business requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect upon the business of the Company and
the Subsidiaries taken as a whole; and the outstanding shares of
capital stock of each of the Subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable and are owned by
the Company or a Subsidiary; and, to the best of such counsel's
knowledge, the outstanding shares of capital stock of each of the
Subsidiaries is owned free and clear of all liens, encumbrances and
security interests, other than the security interest granted to First
Union National Bank of Georgia ("First Union") pursuant to the
Company's 1997 credit facility with First Union, as amended, and no
options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into
any shares of capital stock or of ownership interests in the
Subsidiaries are outstanding.
(ii) The Company has authorized and outstanding capital
stock as set forth under the caption "Capitalization" in the
Prospectus; the authorized shares of its Common Stock have been duly
authorized; the outstanding shares of its Common Stock, including the
Shares to be sold by the Selling Shareholder, have been duly
authorized and validly issued and are fully paid and non-assessable;
the Shares conform to the description thereof contained in the
Prospectus; the certificates for the Shares comply with the
requirements of Georgia law; the shares of Common Stock, including the
Option Shares, if any, to be sold by the Company pursuant to this
Agreement have been duly authorized and will be validly issued, fully
paid and non-assessable when issued and paid for as contemplated by
this Agreement; and no preemptive rights of shareholders exist with
respect to any of the Shares or the issue and sale thereof.
(iii) The Registration Statement has become effective under
the Act and, to the best of the knowledge of such counsel, no stop
order proceedings with respect thereto have been instituted or are
pending or threatened under the Act.
(iv) The Registration Statement, the Prospectus and each
amendment or supplement thereto comply as to form in all material
respects with the requirements of the Act and the applicable rules and
regulations thereunder (except that such counsel need express no
opinion as to the financial statements, schedules and other financial
and statistical information included therein).
(v) The statements under the captions "Management -
Employment Agreements," "Management - Employee Benefits Plans,"
"Description of Capital Stock" and "Shares Eligible for Future Sale"
in the Prospectus, insofar as such statements constitute a summary of
documents referred to therein or matters of law, are accurate
summaries and fairly and correctly present the information called for
with respect to such documents and matters.
(vi) Such counsel does not know of any contracts or
documents required to be filed as exhibits to the Registration
Statement or described in the Registration Statement or the
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<PAGE> 12
Prospectus which are not so filed or described as required, and such
contracts and documents as are summarized in the Registration
Statement or the Prospectus are fairly summarized in all material
respects.
(vii) Such counsel knows of no material legal proceedings
pending or threatened against the Company or any of the Subsidiaries
except as set forth in the Prospectus.
(viii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will
not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, the Charter or by-laws
of the Company, or any agreement or instrument known to such counsel
to which the Company or any of the Subsidiaries is a party or by which
the Company or any of the Subsidiaries may be bound.
(ix) This Agreement has been duly executed and delivered by
the Company.
(x) No approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body is necessary in connection
with the execution and delivery of this Agreement and the consummation
of the transactions herein contemplated (other than as may be required
by the National Association of Securities Dealers, Inc. or as required
by State securities and Blue Sky laws as to which such counsel need
express no opinion) except such as have been obtained or made,
specifying the same.
(xi) This Agreement has been duly authorized, executed and
delivered on behalf of the Selling Shareholder.
(xii) To such counsel's knowledge, the Selling Shareholder
has full legal right, power and authority, and any approval required
by law (other than as required by State securities and Blue Sky laws
as to which such counsel need express no opinion), to sell, assign,
transfer and deliver the portion of the Shares to be sold by the
Selling Shareholder.
(xiii) The Underwriters (assuming that they are bona fide
purchasers within the meaning of the Uniform Commercial Code) will
acquire all of the rights of the Selling Shareholder in the Shares
being sold by the Selling Shareholder on the Closing Date, free and
clear of any adverse claim.
In rendering such opinion, King & Spalding may rely as to matters
governed by the laws of states other than Georgia or Federal laws, and as to
matters governed by the laws of the United Kingdom or other foreign
jurisdictions, on local counsel in such jurisdictions, provided that in each
case King & Spalding shall state that they believe that they and the
Underwriters are justified in relying on such other counsel. In addition to
the matters set forth above, such opinion shall also include a statement to the
effect that nothing has come to the attention of such counsel which leads them
to believe that the Registration Statement, as of the time it became effective
under the Act, the Prospectus or any amendment or supplement thereto, on the
date it was filed pursuant to Rule 424(b) and the Registration Statement and
the Prospectus, or any amendment or supplement thereto, as of the Closing
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<PAGE> 13
Date or the Option Closing Date, as the case may be, contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading
(except that such counsel need express no view as to financial statements,
schedules and other financial or statistical information included therein).
With respect to such statement, King & Spalding may state that their belief is
based upon the procedures set forth therein, but is without independent check
and verification.
(c) The Representatives shall have received from Piper & Marbury
L.L.P., counsel for the Underwriters, an opinion dated the Closing Date or the
Option Closing Date, as the case may be, substantially to the effect specified
in subparagraphs (ii), (iii), (iv), (ix) and (x) of Paragraph (b) of this
Section 6, and that the Company is a validly organized and existing corporation
under the laws of the State of Georgia. In rendering such opinion Piper &
Marbury L.L.P. may rely as to all matters governed other than by the laws of
the State of Maryland or Federal laws on the opinion of counsel referred to in
paragraph (b) of this Section 6. In addition to the matters set forth above,
such opinion shall also include a statement to the effect that nothing has come
to the attention of such counsel which leads them to believe that the
Registration Statement, as of the time it became effective under the Act, and
the Prospectus or any amendment or supplement thereto, on the date it was filed
pursuant to Rule 424(b) and the Registration Statement and the Prospectus, or
any amendment or supplement thereto, as of the Closing Date or the Option
Closing Date, as the case may be, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (except that such
counsel need express no view as to financial statements, schedules and other
financial or statistical information included therein). With respect to such
statement, Piper & Marbury L.L.P. may state that their belief is based upon the
procedures set forth therein, but is without independent check and
verification.
(d) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a signed letter from Arthur
Andersen LLP, dated the Closing Date or the Option Closing Date, as the case
may be, which shall confirm, on the basis of a review in accordance with the
procedures set forth in the letter signed by such firm and dated and delivered
to the Representatives on the date hereof that nothing has come to their
attention during the period from the date five days prior to the date hereof,
to a date not more than five days prior to the Closing Date or the Option
Closing Date, as the case may be, which would require any change in their
letter dated the date hereof if it were required to be dated and delivered on
the Closing Date or the Option Closing Date, as the case may be. All such
letters shall be in form and substance satisfactory to the Representatives.
(e) The Representatives shall have received on the Closing Date or
the Option Closing Date, as the case may be, a certificate or certificates of
the Co-Chief Executive Officers and the Chief Financial Officer of the Company
to the effect that, as of the Closing Date or the Option Closing Date, as the
case may be, each of them severally represents as follows:
(i) The Registration Statement has become effective under
the Act and no stop order suspending the effectiveness of the
Registration Statement has been issued, and no proceedings for such
purpose have been taken or are, to his knowledge, contemplated by the
Commission.
- 13 -
<PAGE> 14
(ii) He does not know of any litigation instituted or
threatened against the Company of a character required to be disclosed
in the Registration Statement which is not so disclosed; he does not
know of any material contract required to be filed as an exhibit to
the Registration Statement which is not so filed; and the
representations and warranties of the Company contained in Section 1
hereof are true and correct as of the Closing Date or the Option
Closing Date, as the case may be.
(iii) He has carefully examined the Registration Statement
and the Prospectus and, in his opinion, as of the effective date of
the Registration Statement, the statements contained in the
Registration Statement did not omit to state a material fact required
to be stated therein or necessary in order to make the statements
therein not misleading and, in his opinion, since the effective date
of the Registration Statement, no event has occurred which should have
been set forth in a supplement to or an amendment of the Prospectus
which has not been so set forth in such supplement or amendment.
(f) The Company and the Selling Shareholder shall have furnished
to the Representatives such further certificates and documents confirming the
representations and warranties contained herein and related matters as the
Representatives may reasonably have requested.
(g) The Firm Shares, and Option Shares, if any, have been approved
for listing upon official notice of issuance on the Nasdaq National Market.
The opinions and certificates mentioned in this Agreement shall be
deemed to be in compliance with the provisions hereof only if they are in all
material respects reasonably satisfactory to the Representatives and to Piper &
Marbury L.L.P., counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6
shall not have been fulfilled when and as required by this Agreement to be
fulfilled, the obligations of the Underwriters hereunder may be terminated by
the Representatives by notifying the Company and the Selling Shareholder of
such termination in writing or by telegram at or prior to the Closing Date or
the Option Closing Date, as the case may be.
In such event, the Selling Shareholder, the Company and the
Underwriters shall not be under any obligation to each other (except to the
extent provided in Sections 5 and 8 hereof).
7. Conditions of the Obligations of the Sellers. The obligations
of the Sellers to sell and deliver the portion of the Shares required to be
delivered as and when specified in this Agreement are subject to the conditions
that at the Closing Date or the Option Closing Date, as the case may be, no
stop order suspending the effectiveness of the Registration Statement shall
have been issued and be in effect or proceedings therefor initiated or
threatened.
- 14 -
<PAGE> 15
8. Indemnification
(a) The Company and the Selling Shareholder, jointly and
severally, agree to indemnify and hold harmless each Underwriter and each
person, if any, who controls any Underwriter within the meaning of the Act
against any losses, claims, damages or liabilities to which such Underwriter or
such controlling person may become subject under the Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of or are based upon (i) any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus or any amendment or
supplement thereto, or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by such
Underwriter or such controlling person in connection with investigating or
defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that the Company and the Selling Shareholder will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement, or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in
reliance upon and in conformity with written information furnished to the
Company by or through the Representatives specifically for use in the
preparation thereof. In no event, however, shall the liability of the Selling
Shareholder for indemnification under this Section 8(a) exceed the net proceeds
received by the Selling Shareholder from the Underwriters pursuant to this
Agreement. This indemnity agreement will be in addition to any liability which
the Company or the Selling Shareholder may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the Registration
Statement, the Selling Shareholder, and each person, if any, who controls the
Company or the Selling Shareholder within the meaning of the Act, against any
losses, claims, damages or liabilities to which the Company or any such
director, officer, Selling Shareholder or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company
or any such director, officer, Selling Shareholder or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that each Underwriter will
be liable in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission has been
made in the Registration Statement, any Preliminary Prospectus, the Prospectus
or such amendment or supplement, in reliance upon and in conformity with
written information furnished to the Company by or through the Representatives
specifically for use in the preparation thereof. This indemnity agreement will
be in addition to any liability which such Underwriter may otherwise have.
- 15 -
<PAGE> 16
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to this Section 8, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing. No
indemnification provided for in Section 8(a) or (b) shall be available to any
party who shall fail to give notice as provided in this Section 8(c) if the
party to whom notice was not given was unaware of the proceeding to which such
notice would have related and was prejudiced by the failure to give such
notice, but the failure to give such notice shall not relieve the indemnifying
party or parties from any liability which it or they may have to the
indemnified party for contribution or otherwise than on account of the
provisions of Section 8(a) or (b). In case any such proceeding shall be
brought against any indemnified party and it shall notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party and shall pay as incurred
the fees and disbursements of such counsel related to such proceeding. In any
such proceeding, any indemnified party shall have the right to retain its own
counsel at its own expense. Notwithstanding the foregoing, the indemnifying
party shall pay as incurred the fees and expenses of the counsel retained by
the indemnified party in the event (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such counsel
or (ii) the named parties to any such proceeding (including any impleaded
parties) include both the indemnifying party and the indemnified party and
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. It is understood that
the indemnifying party shall not, in connection with any proceeding or related
proceedings in the same jurisdiction, be liable for the reasonable fees and
expenses of more than one separate firm for all such indemnified parties. Such
firm shall be designated in writing by you in the case of parties indemnified
pursuant to Section 8(a) and by the Company and the Selling Shareholder in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion
as is appropriate to reflect the relative benefits received by the Company and
the Selling Shareholder on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if the
indemnified party failed to give the notice required under Section 8(c) above,
then each indemnifying party shall contribute to such amount paid or payable by
such indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Selling Shareholder on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions
- 16 -
<PAGE> 17
or proceedings in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company and the Selling
Shareholder on the one hand and the Underwriters on the other shall be deemed
to be in the same proportion as the total net proceeds from the offering
(before deducting expenses) received by the Company and the Selling Shareholder
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Selling Shareholder on the one hand
or the Underwriters on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company, the Selling Shareholder and the Underwriters agree that
it would not be just and equitable if contributions pursuant to this Section
8(d) were determined by pro rata allocation (even if the Underwriters were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to above
in this Section 8(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions or proceedings
in respect thereof) referred to above in this Section 8(d) shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter shall
be required to contribute any amount in excess of the underwriting discounts
and commissions applicable to the Shares purchased by such Underwriter, (ii) no
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation and (iii) Selling Shareholder shall
not be required to contribute any amount in excess of the net proceeds received
by the Selling Shareholder from the Underwriters in the offering. The
Underwriters' obligations in this Section 8(d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
9. Default by Underwriters. If on the Closing Date or the Option
Closing Date, as the case may be, any Underwriter shall fail to purchase and
pay for the portion of the Shares which such Underwriter has agreed to purchase
and pay for on such date (otherwise than by reason of any default on the part
of the Company or the Selling Shareholder), you, as Representatives of the
Underwriters, shall use your best efforts to procure within 24 hours thereafter
one or more of the other Underwriters, or any others, to purchase from the
Company and the Selling Shareholder such amounts as may be agreed upon and upon
the terms set forth herein, the Firm Shares or Option Shares, as the case may
be,
- 17 -
<PAGE> 18
which the defaulting Underwriter or Underwriters failed to purchase. If during
such 24 hours you, as such Representatives, shall not have procured such other
Underwriters, or any others, to purchase the Firm Shares or Option Shares, as
the case may be, agreed to be purchased by the defaulting Underwriter or
Underwriters, then (a) if the aggregate number of shares with respect to which
such default shall occur does not equal or exceed 10% of the Firm Shares or
Option Shares, as the case may be, covered hereby, the other Underwriters shall
be obligated, severally, in proportion to the respective numbers of Firm Shares
or Option Shares, as the case may be, which they are obligated to purchase
hereunder, to purchase the Firm Shares or Option Shares, as the case may be,
which such defaulting Underwriter or Underwriters failed to purchase, or (b) if
the aggregate number of shares of Firm Shares or Option Shares, as the case may
be, with respect to which such default shall occur exceeds 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the Company and
the Selling Shareholder or you as the Representatives of the Underwriters will
have the right, by written notice given within the next 24-hour period to the
parties to this Agreement, to terminate this Agreement without liability on the
part of the non-defaulting Underwriters or of the Company or of the Selling
Shareholder except to the extent provided in Section 8 hereof. In the event of
a default by any Underwriter or Underwriters, as set forth in this Section 9,
the Closing Date or Option Closing Date, as the case may be, may be postponed
for such period, not exceeding seven days, as you, as Representatives, may
determine in order that the required changes in the Registration Statement or
in the Prospectus or in any other documents or arrangements may be effected.
The term "Underwriter" includes any person substituted for a defaulting
Underwriter. Any action taken under this Section 9 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
10. Notices. All communications hereunder shall be in writing
and, except as otherwise provided herein, will be mailed, delivered or
telegraphed and confirmed as follows: if to the Underwriters, to BT Alex.
Brown Incorporated, One South Street, Baltimore, Maryland 21202, Attention:
David B. Hartzell; if to the Company or the Selling Shareholder, to AHL
Services, Inc., 3353 Peachtree Road, NE, Suite 1120, North Tower, Atlanta
Georgia 30326, Attention: Frank A. Argenbright, Jr., Chairman and Co-Chief
Executive Officer.
11. Termination. This Agreement may be terminated by you by
notice to the Sellers as follows:
(a) at any time prior to the earlier of (i) the time the Shares
are released by you for sale by notice to the Underwriters, or (ii) 11:30 A.M.
on the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following
has occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any material adverse change
or any development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, of the Company and its
Subsidiaries taken as a whole or the earnings, business affairs, management or
business prospects of the Company and its Subsidiaries taken as a whole,
whether or not arising in the ordinary course of business, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change on the financial markets of the
- 18 -
<PAGE> 19
United States would, in your reasonable judgment, make the offering or delivery
of the Shares impracticable, (iii) suspension of trading in securities on the
New York Stock Exchange or the American Stock Exchange or limitation on prices
(other than limitations on hours or numbers of days of trading) for securities
on either such Exchange, (iv) the enactment, publication, decree or other
promulgation of any federal or state statute, regulation, rule or order of any
court or other governmental authority which in your reasonable opinion
materially and adversely affects or will materially and adversely affect the
business or operations of the Company, (v) declaration of a banking moratorium
by either federal or New York State authorities, or (vi) the taking of any
action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your reasonable opinion has a material
adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 and 9 of this Agreement.
This Agreement also may be terminated by you, by notice to the Seller,
as to any obligation of the Underwriters to purchase the Option Shares, upon
the occurrence at any time prior to the Option Closing Date of any of the
events described in subparagraph (b) above or as provided in Sections 6 and 9
of this Agreement.
12. Successors. This Agreement has been and is made solely for
the benefit of the Underwriters, the Company and the Selling Shareholder and
their respective successors, executors, administrators, heirs and assigns, and
the officers, directors and controlling persons referred to herein, and no
other person will have any right or obligation hereunder. The term "successors"
shall not include any purchaser of the Shares merely because of such purchase.
- 19 -
<PAGE> 20
13. Miscellaneous. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and
effect regardless of (a) any termination of this Agreement, (b) any
investigation made by or on behalf of any Underwriter or controlling person
thereof, or by or on behalf of the Company or its directors or officers and (c)
delivery of and payment for the Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Maryland.
If the foregoing letter is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Selling Shareholder, the
Company and the several Underwriters in accordance with its terms.
Very truly yours,
AHL SERVICES, INC.
By:
-----------------------------------
Frank A. Argenbright, Jr.
Chaiman and Co-Chief Executive Officer
SELLING SHAREHOLDER
---------------------------------------
Frank A. Argenbright, Jr.
- 20 -
<PAGE> 21
The foregoing Underwriting Agreement
is hereby confirmed and accepted as
of the date first above written.
BT ALEX. BROWN INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
THE ROBINSON-HUMPHREY COMPANY, LLC
As Representatives of the several Underwriters
listed on Schedule I
By: BT ALEX. BROWN INCORPORATED
By:
----------------------
Authorized Officer
- 21 -
<PAGE> 22
SCHEDULE I
Schedule of Underwriters
<TABLE>
<CAPTION>
Number of Firm Shares
Underwriter to be Purchased
----------- ---------------------
<S> <C>
BT Alex. Brown Incorporated . . . . . . . . . . . . . . . . . . . .
Credit Suisse First Boston Corporation . . . . . . . . . . . . . .
The Robinson-Humphrey Company, LLC. . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . 2,700,000
=========
</TABLE>
- 22 -
<PAGE> 1
EXHIBIT 5.1
(404) 572-4600 (404) 572-5100
October 6, 1997
AHL Services, Inc.
3353 Peachtree Road, N.E.
Suite 1120, North Tower
Atlanta, Georgia 30326
Re: AHL Services, Inc. -- Registration Statement on
Form S-1 relating to 2,700,000 shares of Common Stock
Ladies and Gentlemen:
We have acted as counsel for AHL Services, Inc., a Georgia
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-1 (the "Registration Statement") filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
relating to the proposed public offering and sale of up to (i) 2,700,000 shares
of the Company's Common Stock, par value $.01 per share (the "Firm Shares") by
the Company, (ii) 51,570 shares of the Company's Common Stock, par value $.01
per share, subject to an overallotment option by the Company (the "Company
Option Shares") and (iii) 353,430 shares of the Company's Common Stock, par
value $.01 per share, subject to an overallotment option by the Selling
Shareholder (the "Shareholder Option Shares") pursuant to the Underwriting
Agreement (the "Underwriting Agreement") to be entered into among the Company,
BT Alex. Brown Incorporated, Credit Suisse First Boston Corporation and The
Robinson-Humphrey Company, LLC, as representatives of the several underwriters.
In connection with this opinion, we have examined and relied upon such
records, documents, certificates and other instruments as in our judgment are
necessary or appropriate to form the basis for the opinions hereinafter set
forth. In all such examinations, we have assumed the genuineness of signatures
on original documents and the conformity to such original documents of all
copies submitted to us as certified, conformed or photographic copies, and as to
certificates of public officials, we have assumed the same to have been properly
given and to be accurate. As to matters of fact material to this opinion, we
have relied upon statements and representations of representatives of the
Company and of public officials.
<PAGE> 2
AHL Services, Inc.
October 6, 1997
Page 2
The opinions expressed herein are limited in all respects to
the Georgia Business Corporation Code, and no opinion is expressed with respect
to the laws of any other jurisdiction or any effect which such laws may have on
the opinions expressed herein. This opinion is limited to the matters stated
herein, and no opinion is implied or may be inferred beyond the matters
expressly stated herein.
Based upon and subject to the foregoing, we are of the opinion
that:
(i) The Firm Shares are duly authorized and, upon
the issuance of the Firm Shares against payment therefore as provided
in the Underwriting Agreement, the Firm Shares will be validly issued,
fully paid and nonassessable.
(ii) The Company Option Shares are duly authorized
and, upon the issuance of the Firm Shares against payment therefore
as provided in the Underwriting Agreement, the Company Option Shares
will be validly issued, fully paid and nonassessable.
(iii) The Shareholder Option Shares are duly
authorized, validly issued, fully paid and nonassessable.
This opinion is given as of the date hereof, and we assume no
obligation to advise you after the date hereof of facts or circumstances that
come to our attention or changes in law that occur which could affect the
opinions contained herein. This letter is being rendered solely for the benefit
of the Company in connection with the matters addressed herein. This opinion may
not be furnished to or relied upon by any person or entity for any purpose
without our prior written consent.
We hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement and to the reference to us under the caption
"Legal Matters" in the Prospectus that is included in the Registration
Statement.
Very truly yours,
KING & SPALDING
<PAGE> 1
EXHIBIT 10.5
[AHL SERVICES, INC. LETTERHEAD]
May 23, 1997
Mr. Ernest Patterson
Hargene House
Hillside Road
Penn
Bucks HP108JJ
Dear Ernie:
Frank and I are most pleased to confirm to you our offer to join AHL Services,
Inc. as Managing Director, The ADI Group. We are convinced your contributions
will be substantial over the long term and we look forward to a mutually
rewarding association.
The purpose of this letter is to summarize the financial aspects of our offer:
1. Base Compensation
-----------------
Total base compensation will be 190,000 British Pounds. This amount
covers salary, pension contribution, private health insurance and car
allowance. The total amount may be allocated by you, subject to our
final approval, in any combination of these elements that is best for
you personal situation.
2. Annual Bonus
------------
An annual incentive bonus will have a target of 50% of base salary,
based upon company performance and personal performance. Bonus awards
are at the discretion of the Compensation Committee of the Board of
Directors.
3. Stock Option Award
------------------
We will provide a Stock Option Grant for 150,000 shares of AHL
Services, Inc. This grant is for a ten year period and will vest over
four years at the rate of 25% per year.
<PAGE> 2
4. Termination
If you are terminated without cause, you will be provided a severance
allowance equal to twelve months salary.
5. "Non-Compete" Agreement
As a condition of Employment, we require you to execute our standard
Confidentiality, Non-Competion Agreement.
6. Holiday
As agreed, we will provide 4 weeks paid Holiday per year.
Frank and I enthusiastically look forward to your joining our organization. We
have the opportunity to build a great company and have some fun doing it.
If these terms are acceptable to you, please sign and return to me a duplicate
original.
Sincerely,
/s/ Edwin R. Mellett
Edwin R. Mellett
Accepted and Agreed to this ___ day of May, 1997.
/s/ Ernest Patterson
- ------------------------
Ernest Patterson
<PAGE> 1
EXHIBIT 10.6
CREDIT AGREEMENT
DATED AS OF MAY 2, 1997
BY AND AMONG
AHL SERVICES, INC.,
ARGENBRIGHT SECURITY, INC.,
ARGENBRIGHT, INC.,
INTERSEC, INC.,
ADI U.K., LIMITED,
AVIATION DEFENCE INTERNATIONAL GERMANY LIMITED,
ARGENBRIGHT HOLDINGS LIMITED AND
THE ADI GROUP LIMITED
AS BORROWERS,
THE LENDERS REFERRED TO HEREIN,
FIRST UNION NATIONAL BANK (LONDON BRANCH)
AS EUROPEAN FACILITY LENDER
AND
FIRST UNION NATIONAL BANK OF GEORGIA,
AS ADMINISTRATIVE AGENT
<PAGE> 2
CREDIT AGREEMENT
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS...........................................................................1
SECTION 1.1 Definitions................................................................1
SECTION 1.2 General...................................................................16
SECTION 1.3 Accounting Matters........................................................17
SECTION 1.4 Other Definitions and Provisions..........................................17
ARTICLE II CREDIT FACILITY.....................................................................17
SECTION 2.1 Revolver Loans............................................................17
SECTION 2.2 Procedure for Advances of Revolver Loans..................................18
SECTION 2.3 Swingline Loan Subfacility................................................18
SECTION 2.4 Repayment of Revolver Loans...............................................21
SECTION 2.5 Letters of Credit.........................................................22
SECTION 2.6 Revolver Notes............................................................26
SECTION 2.7 Termination of Revolver Facility..........................................27
SECTION 2.8 Use of Proceeds...........................................................27
SECTION 2.9 Security..................................................................27
SECTION 2.10 Maximum Borrower Liability...............................................27
SECTION 2.11 Waiver of Subrogation....................................................29
SECTION 2.12 European Facility Loans..................................................29
SECTION 2.13 Procedures for Advance of European Facility Loans........................30
ARTICLE III GENERAL LOAN PROVISIONS............................................................30
SECTION 3.1 Interest..................................................................30
SECTION 3.2 Notice and Manner of Conversion or Continuation of Loans..................32
SECTION 3.3 Fees......................................................................33
SECTION 3.4 Manner of Payment.........................................................34
SECTION 3.5 Crediting of Payments and Proceeds........................................35
SECTION 3.6 Nature of Obligations of Lenders Regarding Loans; Assumption by
Administrative Agent......................................................35
SECTION 3.7 Changed Circumstances.....................................................36
SECTION 3.8 Indemnity.................................................................37
SECTION 3.9 Capital Requirements......................................................38
SECTION 3.10 Taxes; Currency..........................................................38
SECTION 3.11 Special Lenders..........................................................41
ARTICLE IV CLOSING: CONDITIONS OF CLOSING AND BORROWING........................................41
SECTION 4.1 Closing...................................................................41
SECTION 4.2 Conditions to Closing and Initial Loan....................................42
SECTION 4.3 Conditions to All Loans...................................................45
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BORROWERS..........................................45
SECTION 5.1 Representations and Warranties............................................45
SECTION 5.2 Survival of Representations and Warranties, Etc...........................51
ARTICLE VI FINANCIAL INFORMATION AND NOTICES...................................................51
SECTION 6.1 Financial Statements and Projections......................................51
SECTION 6.2 Officer's Compliance Certificate..........................................52
SECTION 6.3 Other Reports.............................................................52
SECTION 6.4 Notice of Litigation and Other Matters....................................53
SECTION 6.5 Accuracy of Information...................................................54
ARTICLE VII AFFIRMATIVE COVENANTS..............................................................54
SECTION 7.1 Preservation of Corporate Existence and Related Matters...................54
SECTION 7.2 Maintenance of Property...................................................54
SECTION 7.3 Insurance.................................................................54
SECTION 7.4 Accounting Methods and Financial Records..................................55
SECTION 7.5 Payment and Performance of Obligations....................................55
SECTION 7.6 Compliance With Laws and Approvals........................................55
SECTION 7.7 Environmental Laws........................................................55
SECTION 7.8 Compliance with ERISA and the Code........................................55
SECTION 7.9 Compliance With Agreements................................................56
SECTION 7.10 Conduct of Business......................................................56
SECTION 7.11 Visits and Inspections...................................................56
SECTION 7.12 Subsidiaries.............................................................56
SECTION 7.13 Further Assurances.......................................................56
ARTICLE VIII FINANCIAL COVENANTS...............................................................57
SECTION 8.1 Funded Debt to EBITDA.....................................................57
SECTION 8.2 Interest Coverage Ratio...................................................57
SECTION 8.3 Current Ratio.............................................................57
SECTION 8.4 Capitalization Ratio......................................................57
ARTICLE IX NEGATIVE COVENANTS..................................................................57
SECTION 9.1 Limitations on Debt.......................................................57
SECTION 9.2 Limitations on Contingent Obligations.....................................58
SECTION 9.3 Limitations on Liens......................................................58
SECTION 9.4 Limitations on Loans, Advances, Investments and Acquisitions..............58
SECTION 9.5 Limitations on Mergers and Liquidation....................................59
SECTION 9.6 Limitations on Sale of Assets.............................................60
SECTION 9.7 Limitations on Dividends and Distributions................................60
SECTION 9.8 Transactions with Affiliates..............................................60
SECTION 9.9 Certain Accounting Changes................................................61
SECTION 9.10 Licenses.................................................................61
SECTION 9.11 Restrictive Agreements...................................................61
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ARTICLE X DEFAULT AND REMEDIES.................................................................61
SECTION 10.1 Events of Default........................................................61
SECTION 10.2 Remedies.................................................................63
SECTION 10.3 Rights and Remedies Cumulative; Non-Waiver; etc..........................64
SECTION 10.4 Set-off..................................................................64
SECTION 10.5 Adjustments..............................................................64
SECTION 10.6 Consents.................................................................65
ARTICLE XI THE ADMINISTRATIVE AGENT............................................................65
SECTION 11.1 Appointment..............................................................65
SECTION 11.2 Nature of Duties.........................................................65
SECTION 11.3 Exculpatory Provisions...................................................66
SECTION 11.4 Reliance by Administrative Agent.........................................66
SECTION 11.5 Non-Reliance on Administrative Agent and Other Lenders...................66
SECTION 11.6 Notice of Default........................................................67
SECTION 11.7 Indemnification..........................................................67
SECTION 11.8 The Administrative Agent in its Individual Capacity......................68
SECTION 11.9 Successor Administrative Agent...........................................68
ARTICLE XII MISCELLANEOUS......................................................................69
SECTION 12.1 Notices..................................................................69
SECTION 12.2 Expenses.................................................................70
SECTION 12.3 Governing Law............................................................71
SECTION 12.4 Consent to Jurisdiction..................................................71
SECTION 12.5 Arbitration..............................................................71
SECTION 12.6 WAIVER OF JURY TRIAL.....................................................72
SECTION 12.7 Reversal of Payment......................................................72
SECTION 12.8 Successors and Assigns; Participations...................................72
SECTION 12.9 Amendments, Waivers and Consents: Renewal................................75
SECTION 12.10 Performance of Duties...................................................75
SECTION 12.11 Indemnification.........................................................76
SECTION 12.12 All Powers Coupled with Interest........................................76
SECTION 12.13 Survival of Indemnities.................................................76
SECTION 12.14 Provision of Loan Documents.............................................76
SECTION 12.15 Titles and Captions.....................................................76
SECTION 12.16 Severability of Provisions..............................................76
SECTION 12.17 Counterparts............................................................76
SECTION 12.18 AHL as Agent for Other Borrowers........................................77
SECTION 12.19 Term of Agreement.......................................................77
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EXHIBITS
Exhibit A-1 Form of Revolver Note
Exhibit A-2 Form of Swingline Note
Exhibit A-3 Form of European Facility Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Conversion/Continuation
Exhibit D Form of Officer's Certificate
Exhibit E Form of Assignment and Acceptance
Exhibit F Form of Pledge Agreement
Exhibit G Form of Security Agreement
Exhibit H Form of Intercompany Subordination Agreement
Exhibit I Form of Joinder Agreement
SCHEDULES
Schedule 1.1 - Lenders and Commitments
Schedule 5.1(a) - Jurisdictions of Organization and Qualification to Do
Business as Foreign Corporation
Schedule 5.1(b) - Subsidiaries and capitalization
Schedule 5.1(d) - Regulatory Matters
Schedule 5.1(g) - Environmental Matters
Schedule 5.1(h) - ERISA Plans
Schedule 5.1(1) - Material Contracts
Schedule 5.1(m) - Labor and Collective Bargaining Agreements
Schedule 5.1(0) - Liabilities Not Reflected in Financial Statements
Schedule 5.1(r) - Real Property
Schedule 5.1(t) - Debt and Contingent Obligations
Schedule 5.1(u) - Litigation
Schedule 9.1 - Existing Debt
Schedule 9.3 - Existing Liens
Schedule 9.4 - Existing Loans, Advances and Investments
</TABLE>
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CREDIT AGREEMENT, dated as of the 2nd day of May, 1997, by and among
AHL SERVICES, INC. ("AHL"), ARGENBRIGHT SECURITY, INC. ("Argenbright
Security"), ARGENBRIGHT, INC. ("Argenbright Transportation") INTERSEC, INC.
("Intersec"), ADI U.K. LIMITED ("ADI U.K.") and AVIATION DEFENCE INTERNATIONAL
GERMANY LIMITED ("ADI Germany"), ARGENBRIGHT HOLDINGS LIMITED ("U.S. Holdings")
and THE ADI GROUP LIMITED ("European Holdings") (each of AHL, Argenbright
Security, Argenbright Transportation, Intersec, ADI U.K., ADI Germany, U.S.
Holdings, and European Holdings is sometimes individually referred to as a
"Borrower" and collectively are referred to as the "Borrowers"), each a
corporation with its chief executive office and principal place of business at
the address specified in the signature page to this Agreement, the financial
institutions who are or may become party hereto (the "Lenders"), FIRST UNION
NATIONAL BANK (LONDON BRANCH) (the "European Facility Lender"), and FIRST UNION
NATIONAL BANK OF GEORGIA, a national banking association ("First Union"), as
Administrative Agent for the Lenders and individually a Lender.
STATEMENT OF PURPOSE
The Borrowers have requested that First Union, the Lenders, and the
European Facility Lender provide the credit facilities hereunder. The parties
have agreed that the credit facilities are to be governed by the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the agreements,
covenants and provisions herein contained and for TEN DOLLARS ($10.00) and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, each of the Borrowers, jointly and severally, the Lenders,
the European Facility Lender, and First Union hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. In addition to the terms defined above and
the terms defined elsewhere herein, the following terms when used in this
Agreement shall have the meanings assigned to them below:
"Accounts Designation Letter" means the letter executed by each of the
Borrowers, delivered on the Closing Date and from time to time thereafter,
designating the accounts of AHL or the other Borrowers to which proceeds of
Loans are to be disbursed and authorizing Loan proceeds to be disbursed to such
accounts.
"Administrative Agent" means First Union in its capacity as
administrative agent hereunder, and any successor thereto appointed pursuant to
Section 11.9.
<PAGE> 7
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of Section
12.1.
"Affiliate" a Person: (i) that directly or indirectly, through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a Person; (ii) that beneficially owns or holds 25% or more of any class
of voting stock or other equity interest of the Person; or (iii) 25% or more of
whose voting stock (or in the case of a Person which is not a corporation, 25%
or more of whose equity interest) is beneficially owned or held by the Person.
For purposes hereof, "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting stock or other equity
interests, by contract, or otherwise.
"Aggregate Commitment" means Thirty-Five Million Dollars ($35,000,000).
"Agreement" means this Credit Agreement, as amended or supplemented
from time to time.
"AHL" shall have the meaning assigned thereto in the preamble hereof.
"Alternative Currency" means English pounds or German deutsche marks,
or any other currency (other than Dollars) requested by a Foreign Borrower and
acceptable to the European Facility Lender.
"Applicable Law" means all applicable provisions of constitutions,
laws, statutes, treaties, rules, regulations and orders of all Governmental
Authorities and all orders and decrees of all courts and arbitrators.
"Applicable Margin" shall have the meaning assigned thereto in Section
3.1(a).
"Assigned Dollar Value" shall mean, in respect of any Foreign Currency
Loan, the Dollar equivalent thereof determined based upon the applicable Spot
Exchange Rate as of the Denomination Date for such Loan.
"Assigned Dollar Value Excess" shall mean the Dollar amount by which,
at the end of any Interest Period for a Foreign Currency Loan, the Assigned
Dollar Value of outstanding Foreign Currency Loans under the subject Loan
facility exceeds the applicable Foreign Currency Sublimit.
"Assignment and Acceptance" shall have the meaning assigned thereto in
Section 12.9(a).
"Avoidance Provisions" shall have the meaning assigned thereto in
Section 2.10(a).
"Bankruptcy Code" means the U.S. Bankruptcy Code, 11 U.S.C. ss. 101 et
seq., as amended.
"Base Rate" means, at any time, (i) with respect to Revolver Loans
made in Dollars and Swingline Loans the higher of (a) the U.S. Prime Rate or
(b) the Federal Funds Rate plus 1/2 of 1%, and (ii) with respect to Foreign
Currency Loans made in the Base Rate Currency, the Prime Rate;
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<PAGE> 8
each change in the Base Rate shall take effect simultaneously with the
corresponding change or changes in the U.S. Prime Rate, Prime Rate, or the
Federal Funds Rate.
"Base Rate Currency" means English pounds but no other Alternative
Currency.
"Base Rate Loan" means any loan made by the Lenders under the Revolver
Facility or by the European Facility Lender under the European Facility and
bearing interest at a rate determined with reference to the Base Rate.
"Benefitted Lender" shall have the meaning assigned thereto in Section
10.5.
"Borrowers" shall have the meaning assigned thereto in the preamble
hereof.
"Business Day" means (a) for all purposes other than as set forth in
clause (b) below, any day other than a Saturday, Sunday or legal holiday on
which banks in Charlotte, North Carolina and Atlanta, Georgia are open for the
conduct of their commercial banking business, and (b) with respect to all
notices and determinations in connection with, and payments of principal and
interest on, any LIBOR Rate Loan or Foreign Currency Loan, any day that is a
Business Day described in clause (a) and that is also, with respect to LIBOR
Rate Loans, a day for trading by and between banks in deposits in the London
interbank market, and, with respect to such Foreign Currency Loans, is a day in
which the banks in the capitol of the country of the foreign currency are open.
"Capital Asset" means, with respect to AHL and its Subsidiaries, any
asset that would, in accordance with GAAP, be required to be classified and
accounted for as a capital asset on a Consolidated balance sheet of AHL and its
Subsidiaries.
"Capital Expenditures" means, with respect to AHL and its Subsidiaries
for any period, the aggregate cost of all Capital Assets acquired by AHL and
its Subsidiaries during such period, determined in accordance with GAAP.
"Capital Lease" means, with respect to AHL and its Subsidiaries, any
lease of any property that would, in accordance with GAAP, be required to be
classified and accounted for as a capital lease on a Consolidated balance sheet
of AHL and its Subsidiaries.
"Cash Collateral Account" shall have the meaning assigned thereto in
Section 2.5(a).
"Change in Control" means (i) any person or group of persons other
than Frank A. Argenbright, Jr. shall obtain beneficial ownership or control
(within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934,
as amended) in one or more series of transactions of more than fifty percent
(50%) of the common stock of AHL or more than fifty percent (50%) of the voting
power of shareholders of AHL entitled to vote in the election of members of the
board of directors (ii) during any period of twenty-four consecutive months,
individuals who at the beginning of such period constituted the board of
directors of AHL cease for any reason to constitute a majority of the members
of the board of directors of such company, or (iii) there shall have occurred
under any indenture or other instrument evidencing any Debt in excess of $5
million any "change in control" (as
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<PAGE> 9
defined in such indenture or other evidence of Debt) obligating AHL or any
Subsidiary to repurchase, redeem or repay all or any part of the Debt or
capital stock provided for therein.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, and the rules and
regulations thereunder, each as amended or supplemented from time to time.
"Collateral" means any assets pledged by any of the Borrowers or any
of their Subsidiaries in order to secure the Obligations or a portion thereof.
"Commitment" means the commitment of a Lender to make Loans under the
Revolver Facility, the commitment of the Swingline Lender to make Swingline
Loans, the commitment of the Issuing Bank to issue the Letters of Credit, and
the commitment of the European Facility Lender to make the European Facility
Loans hereunder.
"Commitment Percentage" means, with respect to any Lender, the Issuing
Bank, or the European Facility Lender, the ratio of (a) the Dollar and Assigned
Dollar Value of the amount of its Commitment to (b) the aggregate Commitments.
"Consolidated" means, when used with reference to financial statements
or financial statement items of AHL and its Subsidiaries, such statements or
items on a consolidated basis in accordance with applicable principles of
consolidation under GAAP.
"Contributing Borrower" shall have the meaning assigned thereto in
Section 2.10(d).
"Contributed Real Estate" means that real property contributed by
Frank A. Argenbright, Jr. to AHL as described in Schedule 5.1(r).
"Contingent Obligation" means, with respect to AHL and its
Subsidiaries, without duplication, any obligation, contingent or otherwise, of
any such Person pursuant to which such Person has directly or indirectly
guaranteed any Debt or other obligation of any other Person and, without
limiting the generality of the foregoing, any obligation, direct or indirect,
contingent or otherwise, of any such Person (a) to purchase or pay (or advance
or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep
well, to purchase assets, goods, securities or services, to take-or-pay, or to
maintain financial statement condition or otherwise) or (b) entered into for
the purpose of assuring in any other manner the obligee of such Debt or other
obligation of the payment thereof or to protect such obligee against loss in
respect thereof (in whole or in part); provided, that the term Contingent
Obligation shall not include (i) customary indemnification obligations provided
in connection with previously-consummated acquisition or sale transactions or
provided in connection with future acquisition or sale transactions consummated
in compliance with the terms of this Agreement or (ii) endorsements for
collection or deposit in the ordinary course of business.
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"Correspondent(s) means the financial institution(s) or office(s),
which may or may not be an Affiliate of the Administrative Agent or the
European Facility Lender, which the Administrative Agent or the European
Facility Lender from time to time designates to the Borrowers as its
correspondent hereunder in disbursing proceeds of a Loan and/or receiving
payments with respect to a Loan.
"Credit Facility" means the several credits to be extended to the
Borrowers pursuant to Article II.
"Current Assets" at any date, the amount at which all of the
Consolidated current assets of AHL and Subsidiaries would be properly
classified in accordance with GAAP as current assets on a balance sheet at such
date.
"Current Liabilities" at any date, the amount at which all of the
Consolidated current liabilities of AHL and Subsidiaries would be properly
classified in accordance with GAAP as current liabilities on a balance sheet at
such date, excluding the Loans, current maturities of any Funded Indebtedness,
amounts due to Affiliates, and the current portion of the reserve maintained by
AHL and its Subsidiaries for the payment of workers' compensation and vehicle
claims.
"Debt" means, with respect to AHL and its Subsidiaries, at any date
and without duplication, the sum, calculated in accordance with GAAP, of (a)
all liabilities, obligations and indebtedness for borrowed money including but
not limited to obligations evidenced by bonds, debentures, notes or other
similar instruments of any such Person, (b) all obligations to pay the deferred
purchase price of property or services of any such Person, except trade
payables or accrued liabilities arising in the ordinary course of business not
more than ninety (90) days past due or, if more than ninety (90) days past due,
being contested by such Person in good faith, (c) all obligations of any such
Person as lessee under Capital Leases, (d) all Debt of any other Person secured
by a Lien on any asset of any such Person, (e) all obligations, contingent or
otherwise, of any such Person relative to the face amount of letters of credit,
whether or not drawn, and banker's acceptances issued for the account of any
such Person, (f) all Contingent Obligations of such Person, (g) all obligations
to redeem, repurchase, exchange, defease or otherwise make payments in respect
of capital stock or other securities of such Person and (h) all termination
payments which would be due and payable by any such Person pursuant to a
Hedging Agreement.
"Default" means any of the events specified in Section 10.1 which with
the passage of time, the giving of notice or any other condition, would
constitute an Event of Default.
"Denomination Date" means, (i) in determining the Assigned Dollar
Value of any European Facility Loan, in determining the conversion to Dollars
pursuant to Section 3.1(f), or in determining the Assigned Dollar Value
pursuant to Section 3.10(g), the same Business Day and, (ii) for all other
Foreign Currency Loan outstandings, the Spot Exchange Rate in effect on the
date that is two Business Days before (A) the last day of the Interest Period,
in determining whether there is an Assigned Dollar Value Excess at the end of
the Interest Period (B) the date on which a Loan is to be made, continued,
converted, or prepaid, in determining minimum amounts or multiples thereof for
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the making, continuation, conversion, or prepayment of such Loan, (C) the day
on which a Loan is to be made, continued, converted, or prepaid, or a Letter of
Credit is to be issued, in determining whether any Commitment would be exceeded
in the making of the Loan or issuance of the Letter of Credit, or (D) the day
on which the determination required by Section 2.4(b) is to be made.
"Dollars" or "$" means, unless otherwise qualified, dollars in lawful
currency of the United States.
"EBITDA" as applied to AHL and the Subsidiaries, means, for any
period, AHL and the Subsidiaries' net income (but without deduction of income
and franchise taxes that have been accrued), plus (a) Interest Expense paid or
accrued, (b) amortization and depreciation deducted in determining Net Income,
(c) the Special Accruals and (d) the Reserve Increase during the period,
provided that in calculating net income for the purpose of calculating EBITDA
there shall be excluded therefrom (i) any gain arising from the sale of capital
assets; (ii) any gain arising from any write-up of assets; (iii) unless the
Required Lenders in their discretion shall otherwise agree, all earnings of any
Subsidiary accrued prior to the date it became a Subsidiary; (iv) all earnings
of any entity (other than a Subsidiary) substantially all the assets of which
have been acquired in any manner by AHL and the Subsidiaries, realized by such
entity prior to the date of such acquisition; (v) all net earnings of any
entity (other than a Subsidiary) in which AHL has an ownership interest unless
such net earnings have actually been received by AHL and the Subsidiaries in
the form of cash distributions; (vi) any portion of the net earnings of any
Subsidiary which for any reason is unavailable for payment of dividends to the
AHL and the Subsidiaries; (vii) all earnings of AHL and the Subsidiaries to
which any assets of AHL and the Subsidiaries have been sold, transferred or
disposed of, or into which such Person has merged, or with which such Person
has been a party to any consolidation or other form of reorganization, prior to
the date of such transaction; (viii) any gain arising from the acquisition of
any securities of any entity or person; and (ix) any gain arising from
extraordinary or nonrecurring items.
"Eligible Assignee" means (i) a commercial bank organized under the
laws of the United States or any state thereof and having total assets in
excess of $1,000,000,000, (ii) a commercial bank organized under the laws of
any other country that is a member of the Organization for Economic Cooperation
and Development or any successor thereto (the "OECD") or a political
subdivision of any such country and having total assets in excess of
$1,000,000,000, provided that such bank or other financial institution is
acting through a branch or agency located in the United States, in the country
under the laws of which it is organized or in another country that is also a
member of the OECD, (iii) the central bank of any country that is a member of
the OECD, (iv) a finance company, insurance company or other financial
institution or fund that is engaged in making, purchasing or otherwise
investing in loans in the ordinary course of its business and having total
assets in excess of $500,000,000, (v) any Affiliate of an existing Lender or
(vi) any other Person approved by the Administrative Agent and AHL, which
approval shall not be unreasonably withheld.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which (a) is maintained for employees or
former employees of any Borrower or any ERISA Affiliate or (b) has at any time
within the preceding six years been maintained for the employees or former
employees of any Borrower or any current or former ERISA Affiliate.
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"Environmental Laws" means any and all federal, state, provincial and
local laws, statutes, ordinances, rules, regulations, permits, licenses,
approvals and interpretations, and orders of courts or Governmental
Authorities, relating to the protection of human health or the environment,
including, but not limited to, requirements pertaining to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation,
handling, reporting, licensing, permitting, investigation or remediation of
Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, and
the rules and regulations thereunder, each as amended or modified from time to
time.
"ERISA Affiliate" means any Person who together with any Borrower is
treated as a single employer within the meaning of Section 414(b), (c), (m) or
(o) of the Code or Section 4001(b) of ERISA.
"European Facility" means the revolving credit facility extended in
English pounds to the Foreign Borrowers by the European Facility Lender in the
aggregate principal amount not to exceed at any time the Foreign Currency
Sublimit.
"European Facility Lender" shall have the meaning assigned thereto in
the preamble hereof.
"European Facility Loan" means any Loan made pursuant to the European
Facility.
"European Facility Note" means the European Facility Note made by the
Borrowers and payable to the order of the European Facility Lender
substantially in the form of Exhibit A-3 hereto, evidencing the European
Facility, and any amendments and modifications thereto, any substitutes
therefor, and any replacements, restatements, renewals or extension thereof, in
whole or in part; "European Facility Note" means any of such Notes.
"European Facility Termination Date" means the date that is the
Revolver Facility Termination Date.
"Event of Default" means any of the events specified in Section 10.1,
provided that any requirement for passage of time, giving of notice, or any
other condition, has been satisfied.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Expiration Date" means the third anniversary of the Closing Date.
"Federal Funds Rate" means, for any day, a fluctuating interest rate
per annum (rounded upward, if necessary, to the next 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published at 11:00 a.m. (Eastern Standard or Daylight Time) for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal
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funds brokers of recognized standing selected by it in good faith as reasonably
representative of such rate.
"First Union" shall have the meaning assigned thereto in the preamble
hereof.
"Fiscal Year" means each fiscal year of AHL and its Subsidiaries
ending on the last Friday in December, or, with respect to the Foreign
Borrowers, ending on December 31.
"Foreign Borrowers" means each of ADI U.K., ADI Germany, and European
Holdings.
"Foreign Currency Loan" means any Loan that is borrowed in, and to be
repaid in, an Alternative Currency.
"Foreign Currency Sublimit" means, with respect to the Revolver
Facility, the Assigned Dollar Value of $10,000,000, and with respect to the
European Facility, the Assigned Dollar Value of $5,000,000, being the maximum
aggregate Loans to be made in the Alternative Currency under the respective
Facilities.
"Foreign Subsidiary Note" means each and every promissory note made to
AHL from a foreign Subsidiary and made to evidence the loans to be made by AHL
to the foreign Subsidiary from proceeds of the Loans and other cash sources.
"Funded Indebtedness" means all (i) interest-bearing Debt for money
borrowed, (ii) all guaranties of Funded Indebtedness described in clauses (i),
(iii), and (iv) of this definition, (iii) the face amount of the Letters of
Credit then outstanding, and (iv) Capital Lease obligations, in each case that
by their terms mature more than one year from the date of any calculation
thereof or that are renewable or extendable at the option of the obligor to a
date beyond one year from such date of calculation.
"Funding Borrower" shall have the meaning assigned thereto in Section
2.10(d).
"GAAP" means generally accepted accounting principles, as recognized
by the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for AHL and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of AHL and the Subsidiaries.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all Governmental Authorities.
"Governmental Authority" means any nation, province, state or
political subdivision thereof, and any government or any Person exercising
executive, legislative, regulatory or administrative functions of or pertaining
to government, and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing having
jurisdiction over the Person and the subject matter, including, without
limitation, the Federal Reserve Board and the Bank of England.
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"Hazardous Materials" means any substances or materials (a) which are
or become defined as hazardous wastes, hazardous substances, pollutants,
contaminants or toxic substances under any Environmental Law, (b) which are
toxic, explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise harmful to human health or the environment and are or
become regulated by any Governmental Authority, (c) the presence of which
require investigation or remediation under any Environmental Law or common law,
(d) the discharge or emission or release of which requires a permit or license
under any Environmental Law or other Governmental Approval, (e) which are
deemed to constitute a nuisance, a trespass or pose a health or safety hazard
to persons or neighboring properties, (f) which are materials consisting of
underground or aboveground storage tanks, whether empty, filled or partially
filled with any substance, or (g) which contain, without limitation, asbestos,
polychlorinated biphenyls, urea formaldehyde foam insulation, petroleum
hydrocarbons, petroleum derived substances or waste, crude oil, nuclear fuel,
natural gas or synthetic gas.
"Hedging Agreement" means any agreement with any Lender with respect
to an interest rate swap, collar, cap, floor or a forward rate agreement or
other agreement regarding the hedging of interest rate or currency risk
exposure executed in connection with hedging the interest rate or currency
exposure of the Borrowers, and any confirming letter executed pursuant to such
hedging agreement, all as amended or supplemented from time to time.
"Intercompany Subordination Agreement" means the Intercompany
Subordination Agreement of even date by and among AHL, certain Subsidiaries of
AHL identified therein and the Administrative Agent, for the benefit of itself
and the Lenders, substantially in the form of Exhibit H attached hereto, as
amended or supplemented from time to time.
"Interest Expense" means, with respect to AHL and the Subsidiaries,
for any period of calculation and without duplication, gross interest expense
(including without limitation, interest expense attributable to Capital Leases
and, after taking into account appropriate netting, all amounts due or
receivable, pursuant to hedging agreements), determined for such period in
accordance with GAAP.
"Interest Payment Date" means, with respect to Base Rate Loans, the
last Business Day of each calendar quarter commencing with the first calendar
quarter ending after the Closing Date, and with respect to LIBOR Rate Loans,
the last day of each Interest Period applicable thereto (unless such Interest
Period extends over three (3) months, in which case "Interest Payment Date"
shall also include the last Business Day of the third month during such
Interest Period).
"Interest Period" shall have the meaning assigned thereto in Section
3.1(b).
"Issuing Bank" means First Union, as the issuer of a Letter of Credit.
"Joinder Agreement" means a Joinder Agreement substantially in the
form of Exhibit I executed by each Subsidiary in accordance with Section 7.12,
as amended or supplemented from time to time.
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"Lender" includes the European Facility Lender, each Person executing
this Agreement as a Lender set forth on the signature pages hereto, and each
Person that hereafter becomes a party to this Agreement as a Lender pursuant to
Section 12.9.
"Letter of Credit" means a letter of credit at any time issued by the
Issuing Bank for the account of the Borrowers and includes each of the two
letters of credit issued for the account of the Borrowers prior to the Closing
Date and specified in Schedule 9.1.
"LIBOR" means, with respect to each Revolver Loan, a rate of interest
determined by the Administrative Agent to be equal to the rate of interest at
which Dollar deposits or deposits in the Alternative Currency, for a period
comparable to the Interest Period for, and in an amount comparable to the
amount of, such Revolver Loan, are offered to the Administrative Agent in the
London interbank market.
"LIBOR Rate" means (a) LIBOR divided by (b) one (1) less the Reserve
Percentage (such rate to be rounded upward to the next whole multiple of 1/16
of 1%).
"LIBOR Rate Loan" means any Loan bearing interest at a rate determined
with reference to the LIBOR Rate.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, a Person shall be deemed to own subject to
a Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, Capital Lease or other
title retention agreement relating to such asset.
"Loan" means any loan or advance made by any Lender pursuant to this
Agreement, including without limitation, any Revolver Loan, any Swingline Loan,
any European Facility Loan, and all such Loans collectively as the context
requires.
"Loan Documents" means, collectively, this Agreement, the Notes, the
Intercompany Subordination Agreement, any Joinder Agreement, the Security
Documents and any supplements thereto executed in connection with any Joinder
Agreement, any Hedging Agreement executed by any Lender and each other
document, instrument and agreement executed and delivered by any Borrower or a
Subsidiary thereof in connection with this Agreement or otherwise referred to
herein or contemplated hereby, all as may be amended or supplemented from time
to time.
"Loan Office" means the office specified by the Administrative Agent
or any Lender from time to time as its office for disbursement or receipt of
Loan proceeds.
"LOC Committed Amount" means Ten Million Dollars ($10,000,000).
"LOC Obligations" means, as to each Letter of Credit, all liabilities
of the Borrowers or any of their Subsidiaries thereunder or in respect thereof,
whether contingent or otherwise, including (a) the amount available to be drawn
or which may become available to be drawn, (b) all amounts that
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have been paid or made available by the Administrative Agent or the Issuing
Bank to the extent not reimbursed, and (c) all unpaid interest, fees and
expenses relating thereto.
"Master Funding Account" means the zero-balance depository account
maintained by AHL at First Union pursuant to the Sweep Plus Services cash
management system.
"Material Adverse Effect" means, with respect to AHL and its
Subsidiaries, taken as a whole, a material adverse effect on the properties,
business, prospects, operations or condition (financial or otherwise) of AHL
and its Subsidiaries, taken as a whole, or the ability of AHL or any of its
Subsidiaries to perform its obligations under the Loan Documents to which it is
a party.
"Material Contract" means (a) any contract or other agreement, written
or oral, of AHL or any of its Subsidiaries involving monetary liability of or
to any such Person in an amount in excess of $1,000,000 per annum, or (b) any
other contract or agreement, written or oral, of AHL or any of its Subsidiaries
the failure to comply with which could reasonably be expected to have a
Material Adverse Effect.
"Material Judgment Amount" means $1,000,000.
"Material Subsidiary" means (i) each Borrower other than Intersec and
(ii) any Subsidiary having at any fiscal quarter end, a Revenue Percentage, for
the period consisting of the quarter just ended, equal to or greater than ten
percent (10%).
"Maximum Borrower Liability" shall have the meaning assigned thereto
in Section 2.10(a).
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which any Borrower or any ERISA Affiliate has
made, or accrued an obligation to make, contributions within the preceding six
years.
"Net Cash Proceeds" means, as applicable, (a) with respect to any sale
or other disposition of assets (including sale/leaseback transactions), the
gross cash proceeds received by AHL or any of its Subsidiaries from such sale
or other disposition less (i) the sum of (A) all legal, title, recording,
transfer and income tax expenses, commissions and other fees and expenses
incurred, and all other federal, state, local and foreign taxes assessed in
connection therewith and (ii) the principal amount of, premium, if any, and
interest on any Debt secured by a Lien on the asset (or a portion thereof) sold
or disposed of, which Debt is required to be repaid in connection with such
sale, (b) with respect to any offering of debt or equity securities, the gross
cash proceeds received by AHL or any of its Subsidiaries therefrom less all
legal, underwriting and other fees, commissions and expenses incurred in
connection therewith and (c) with respect to any payment in excess of $250,000
under an insurance policy, the amount of cash proceeds received by AHL or its
applicable Subsidiary from the related insurance company, unless (i) such
payment does not exceed $1,000,000 in any single instance (ii) such payment is
applied by AHL or its applicable Subsidiary to replace the property to which
the payment relates and (iii) such replacement property is ordered by AHL or
its applicable Subsidiary within one hundred and eighty (180) days after
receipt of such payment by AHL or its applicable Subsidiary.
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"Net Income" means, with respect to AHL and its Subsidiaries, for any
period and without duplication, net income (or loss) for such period determined
in accordance with GAAP.
"Notes" means the Revolver Notes, the Swingline Note, the European
Facility Note and collectively all of such Notes.
"Notice of Borrowing" shall have the meaning assigned thereto in
Section 2.2(a).
"Notice of Conversion/Continuation" shall have the meaning assigned
thereto in Section 3.2.
"Obligations" means, in each case, whether now in existence or
hereafter arising: (a) the principal of and interest on (including interest
accruing after the filing of any bankruptcy or similar petition) the Loans, (b)
all payment and other obligations owing by a Borrower to any Lender under any
Hedging Agreement and (c) all other fees and commissions (including attorney's
fees), charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by a Borrower to the Lenders or to the
Administrative Agent under or in respect of this Agreement, any Note or any of
the other Loan Documents, of every kind, nature and description, direct or
indirect, absolute or contingent, due or to become due, contractual or
tortious, liquidated or unliquidated, and whether or not evidenced by any note,
and whether or not for the payment of money.
"Officer's Compliance Certificate" shall have the meaning assigned
thereto in Section 6.2.
"Other Debtor Relief Law" shall have the meaning assigned thereto in
Section 2.10(a).
"Other Taxes" shall have the meaning assigned thereto in Section
3.10(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"Pension Plan" means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to the provisions of Title IV of ERISA or
Section 412 of the Code and which (a) is maintained for employees or former
employees of any Borrower or any ERISA Affiliates or (b) has at any time within
the preceding six years been maintained for the employees or former employees
of any Borrower or any of their current or former ERISA Affiliates.
"Permitted Liens" means (a) Liens for taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to
any of the provisions of ERISA or Environmental Laws) not yet due or as to
which the period of grace (not to exceed thirty (30) days), if any, related
thereto has not expired or which are being contested in good faith and by
appropriate proceedings if adequate reserves are maintained to the extent
required by GAAP, (b) the claims of materialmen, mechanics, carriers,
warehousemen, processors or landlords for labor, materials, supplies or rentals
incurred in the ordinary course of business, (i) which are not overdue for a
period of more than thirty (30) days or (ii) which are being contested in good
faith and by appropriate proceedings, (c) Liens consisting of deposits
or pledges made in the ordinary course of business in connection with, or to
secure payment of, obligations under workers' compensation, unemployment
insurance or similar
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legislation or obligations under customer service contracts, (d) Liens
constituting encumbrances in the nature of zoning restrictions, easements and
rights or restrictions of record on the use of real property, which in the
aggregate are not substantial in amount and which do not, in any case,
materially detract from the value of such property or impair the use thereof in
the ordinary conduct of business, (e) Liens of the Administrative Agent
for the benefit of the Administrative Agent and the Lenders, (f) Liens securing
Debt permitted by Section 9.1(h) and (i), but only if such Liens are expressly
subordinated to newly-created or existing Liens in favor of the Administrative
Agent for the benefit of the Lenders pursuant to subordination documentation
with terms and in a form approved by the Administrative Agent and (g) Existing
liens described on Schedule 9.3.
"Person" means an individual, corporation, partnership, association,
trust, business trust, limited liability company, joint venture, joint stock
company, pool, syndicate, sole proprietorship, unincorporated organization,
Governmental Authority or any other form of entity or group.
"Pledge Agreement" means, collectively, the Pledge Agreements of even
date executed by each of AHL, U.S. Holdings, and European Holdings with respect
to the stock of the Material Subsidiaries and in favor of the Administrative
Agent for the benefit of itself and the Lenders substantially in the form of
Exhibit F, as amended or supplemented from time to time.
"Possible Obligation Liability" means, with respect to any Borrower,
the maximum amount of the outstanding Obligations at the time of determination
which the Administrative Agent determines in its sole discretion that the
individual Borrower would be required to pay upon an Event of Default, taking
into consideration the financial resources of all of the other Borrowers that
are jointly and severally obligated upon the Obligations.
"Prime Rate" means, at any time, with respect to European Facility
Loans in the Base Rate Currency, the fluctuating and publicly announced base
rate of Midland Bank, plc, plus 2%. Each change in the Prime Rate shall be
effective as of the opening of business on the day such change in the Prime
Rate occurs. The parties hereto acknowledge that the rate that may be announced
publicly as the Prime Rate is an index or base rate and shall not necessarily
be the lowest or best rate charged to customers or other banks.
"Projections" shall have the meaning assigned thereto in Section
6.1(c).
"Register" shall have the meaning assigned thereto in Section 12.9(b).
"Required Lenders" means, at any date, any combination of the Lenders
holding at least 51% of the combined sum of the Revolver Facility Commitment
and European Facility Commitment.
"Reserve Increase" means for any period the amount by which the
reserve maintained by AHL and its Subsidiaries for the payment of workers'
compensation and vehicle claims increased during the period after netting and
deducting any charges or offsets to the reserve during the period.
"Reserve Percentage" means the maximum daily arithmetic (expressed as
a decimal) reserve requirement imposed by any Governmental Authority on Dollar
or Alternative Currency liabilities,
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including, without limitation, any reserve requirement or increased cost
imposed by any Governmental Authority, including, without limitation, the Board
of Governors of the Federal Reserve System (or any successor) under Regulation
D.
"Revenue Percentage" means, for any Subsidiary of any Borrower, for
any period of calculation, the percentage derived by dividing (A) the product
of (i) Consolidated revenues for such Subsidiary during the period, multiplied
by (ii) the percentage amount of direct or indirect ownership by all Borrowers
of all outstanding capital stock or other ownership interests in the Subsidiary
at the end of the period by (B) Consolidated revenues for AHL and all its
Subsidiaries during the period.
"Revolver Facility" means the revolving credit facility extended to
the Borrowers pursuant to Section 2.1 in the aggregate principal amount not to
exceed at any time (i) the Aggregate Commitment less (ii)(A) the undrawn amount
of outstanding Letters of Credit and (B) the Assigned Dollar Value of all
principal amounts outstanding under the European Facility.
"Revolver Loan" means any Loan made to the Borrowers pursuant to
Section 2.1, and all such Loans collectively as the context requires.
"Revolver Notes" means the separate Revolving Credit Notes made by the
Borrowers payable to the order of each Lender, substantially in the form of
Exhibit A-1 hereto, evidencing the Revolver Facility, and any amendments and
modifications thereto, any substitutes therefor, and any replacements,
restatements, renewals or extension thereof, in whole or in part; "Revolver
Note" means any of such Notes.
"Revolver Facility Termination Date" means the earliest of the dates
referred to in Section 2.7.
"Revolver Loan Commitment" means, as to any Lender, the obligation of
such Lender to make Revolver Loans to the Borrowers hereunder in an aggregate
principal amount at any time outstanding not to exceed the amount set forth
opposite such Lender's name on Schedule 1.1, as the same may be reduced or
modified at any time or from time to time pursuant to Section 12.9.
"Revolver Loan Commitment Percentage" means, as to any Lender at any
time, the ratio of (a) the amount of the Revolver Loan Commitment of such
Lender to (b) the aggregate Revolver Loan Commitments of all of the Lenders.
"SEC" means the Securities and Exchange Commission.
"Security Agreement" means the Security Agreement of even date
substantially in the form of Exhibit G executed by the Borrowers in favor of
the Administrative Agent for the benefit of itself and the Lenders, as amended,
modified or supplemented from time to time.
"Security Documents" means the collective reference to the Security
Agreement, the Pledge Agreement, and each other agreement or writing pursuant
to which AHL or any Subsidiary thereof
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pledges or grants a security interest in the Collateral or such Person
guaranties the payment or performance of the Obligations.
"Solvent" means, with respect to each of AHL and each of its
Subsidiaries, that such Person (a) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is
about to engage and is able to pay its debts as they mature, (b) owns property
having a value, both at fair valuation and at present fair saleable value,
greater than the amount required to pay its probable liabilities (including
contingencies), and (c) does not believe that it will incur debts or
liabilities beyond its ability to pay such debts or liabilities as they mature.
"Special Accruals" means the lesser of (i) $800,000 and (ii) the
amount of those noncash charges against Net Income of the Borrowers during the
fiscal quarter ended June 30, 1997, with respect to the accelerated
amortization of fees, expenses, and original issue discount charges incurred in
earlier financings provided to the Borrowers by First Union Capital Corporation
and Sirrom Capital Corporation.
"Spot Exchange Rate" shall mean, on any day, (i) with respect to any
Alternative Currency, the spot rate at which Dollars are offered on such day by
the European Facility Lender for delivery two Business Days forward for such
Alternative Currency at approximately 11:00 a.m. (London time), and (ii) with
respect to Dollars in relation to any specified Alternative Currency, the spot
rate at which such specified Alternative Currency is offered for Dollars for
delivery two Business Days forward on such day by the European Facility Lender
at approximately 11:00 a.m. (London time).
"Subsidiary" means any corporation, partnership or other entity of
which more than fifty percent (50%) of the outstanding capital stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other managers of such corporation, partnership or other
entity is at the time, directly or indirectly, owned by AHL or the management
is otherwise controlled by such Person (irrespective of whether, at the time,
capital stock or other ownership interests of any other class or classes of
such corporation, partnership or other entity shall have or might have voting
power by reason of the happening of any contingency).
"Sweep Plus Services" means those investments services entered into
between AHL and First Union with respect to the maintenance of the Master
Funding Account maintained by AHL at First Union.
"Swingline Committed Amount" means $10,000,000.
"Swingline Lender" means First Union, as the Lender with respect to
Swingline Loans.
"Swingline Loans" shall have the meaning assigned thereto in Section
2.3.
"Swingline Note" shall have the meaning assigned thereto in Section
2.3.
"Taxes" shall have the meaning assigned thereto in Section 3.10(a).
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"Term Sheet" shall have the meaning assigned thereto in Section
3.3(b).
"Termination Event" means: (a) a "Reportable Event" described in
Section 4043 of ERISA (other than a Reportable Event as to which the provision
of 30 days' notice has been waived by the PBGC under applicable regulations);
(b) the withdrawal of any Borrower or any ERISA Affiliate from a Pension Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA; (c) the termination of a Pension Plan, the filing
of a notice of intent to terminate a Pension Plan or the treatment of a Pension
Plan amendment as a distress termination under Section 4041(c) of ERISA; (d)
the institution of proceedings to terminate, or the appointment of a trustee
with respect to, any Pension Plan by the PBGC; (e) any other event or condition
which would constitute grounds under Section 4042(a) of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension
Plan; (f) the partial or complete withdrawal of any Borrower or any ERISA
Affiliate from a Multiemployer Plan; (g) the imposition of a Lien pursuant to
Section 412 of the Code or Section 302 of ERISA; (h) any event or condition
which results in the reorganization or insolvency of a Multiemployer Plan under
Sections 4241 or 4245 of ERISA; or (i) any event or condition which results in
the termination of a Multiemployer Plan under Section 4041A of ERISA or the
institution by PBGC of proceedings to terminate a Multiemployer Plan under
Section 4042 of ERISA.
"Total Capitalization" means, as of any date of determination,
Borrower's Consolidated shareholders equity, plus Consolidated Funded
Indebtedness, as of such date.
"UCC" means the Uniform Commercial Code as in effect in the State of
Georgia.
"United States" means the United States of America.
"U.S. Prime Rate" means, with respect to Revolver Loans made in U.S.
Dollars, the rate of interest publicly announced by First Union from time to
time as its prime rate. Each change in the Prime Rate shall be effective as of
the opening of the Business Day on the day such change in the Prime Rate
occurs. The parties hereto acknowledge that the rate announced publicly by
First Union as the Prime Rate is an index or base rate and shall not
necessarily be its lowest or best rate charged to its customers or other banks.
"Wholly-Owned" means, with respect to a Subsidiary, a Subsidiary all
of the shares of capital stock or other ownership interests of which are,
directly or indirectly, owned or controlled by AHL and/or one or more of its
Wholly-Owned Subsidiaries.
SECTION 1.2. General. All terms of an accounting nature not
specifically defined herein shall have the meanings assigned thereto by GAAP.
Unless otherwise specified, a reference in this Agreement to a particular
section, subsection, Schedule or Exhibit is a reference to that section,
subsection, Schedule or Exhibit of this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and plural, and pronouns stated in the masculine, feminine
or neuter gender shall include the masculine, the feminine and the neuter. Any
reference herein to "Atlanta time" shall refer to the applicable time of day in
Atlanta, Georgia.
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SECTION 1.3. Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including without limitation, all computations utilized by the
Borrowers or any Subsidiary thereof to determine compliance with any covenant
contained herein, shall, except as otherwise expressly contemplated hereby or
unless there is an express written direction by the Administrative Agent to the
contrary agreed to by the Borrowers, be performed in accordance with GAAP. In
the event that changes in GAAP (as in effect on the Closing Date) shall be
mandated by the Financial Accounting Standards Board or any similar accounting
body of comparable standing or shall be recommended by the Borrowers' certified
public accountants, to the extent that such changes would modify such
accounting terms or the interpretation or computation thereof, such changes
shall be followed in defining such accounting terms only from and after the
date the Borrowers, the Required Lenders and the Administrative Agent shall
have entered into an amendment of this Agreement to the extent necessary to
reflect any such changes in the financial covenants and other terms and
conditions of this Agreement.
SECTION 1.4. Other Definitions and Provisions.
(a) Use of Capitalized Terms. Unless otherwise defined therein, all
capitalized terms defined in this Agreement shall have the defined meanings
when used in this Agreement, the Notes and the other Loan Documents or any
certificate, report or other document made or delivered pursuant to this
Agreement.
(b) Miscellaneous. The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement.
ARTICLE II
CREDIT FACILITY
SECTION 2.1. Revolver Loans. Subject to the terms and conditions of
this Agreement, each Lender severally but not jointly agrees to make Revolver
Loans to the Borrowers jointly and severally from time to time from the Closing
Date through the Revolver Facility Termination Date as requested by AHL, on
behalf of Borrowers, in accordance with the terms of Section 2.2; provided that
(i) the aggregate principal amount (reflecting the Assigned Dollar Value of any
outstanding Foreign Currency Loans) of all outstanding Revolver Loans (after
giving effect to any amount requested) shall not exceed (i) (A) the Aggregate
Commitment less (A) the undrawn amount of outstanding Letters of Credit, (B)
the aggregate principal amount of all outstanding Swingline Loans, and (C) the
Assigned Dollar Value of all outstanding European Facility Loans at the
Denomination Date with respect to the most recent Notice of Borrowing for a
Revolver Loan, and (ii) the principal amount of Revolver Loans from any single
Lender shall not at any time exceed such Lender's Revolver Loan Commitment.
Each Revolver Loan by a Lender shall be in a principal amount equal to such
Lender's Revolver Loan Commitment Percentage of the aggregate principal amount
of Revolver Loans requested on such occasion. Subject to the terms and
conditions hereof, the Borrowers may borrow, repay and reborrow Revolver Loans
hereunder until the Revolver Facility Termination Date.
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SECTION 2.2. Procedure for Advances of Revolver Loans.
(a) Requests for Borrowing. AHL, on behalf of the Borrowers, shall
give the Administrative Agent irrevocable prior written notice in the form
attached hereto as Exhibit B (a "Notice of Borrowing") not later than 11:00
a.m. (Atlanta time) (i) on the date of borrowing with respect to each Revolver
Loan constituting a Base Rate Loan that is not a Foreign Currency Loan (ii) at
least three (3) Business Days before each Dollar LIBOR Rate Loan, and (iii) at
least four (4) Business Days before each Foreign Currency Loan of its intention
to borrow, specifying (A) the Borrower to whom loan proceeds are to be
advanced, (B) the date of such borrowing, which shall be a Business Day, (C)
the amount of such borrowing, which shall, with respect to Foreign Currency
Loans and LIBOR Rate Loans, be in an aggregate principal amount of $500,000 or
a whole multiple of $100,000 in excess thereof, and, with respect to Base Rate
Loans, be in an aggregate principal amount of $500,000 and or a whole multiple
of $100,000 in excess thereof, (D) if not a Foreign Currency Loan, whether the
Loans are to be LIBOR Rate Loans or Base Rate Loans, and (E) in the case of a
LIBOR Rate Loan, the duration of the Interest Period applicable thereto.
Notices received after 11:00 a.m. (Atlanta time) shall be deemed received on
the next Business Day. The Administrative Agent shall promptly notify the
Lenders of each Notice of Borrowing.
(b) Disbursement of Revolver Loans. Not later than 1:00 p.m.
(Atlanta time) on the proposed borrowing date for any Revolver Loan, each
Lender will make available to the Administrative Agent, for the account of the
Borrowers, at the Correspondent or Loan Office designated by the Administrative
Agent, in Dollars or the Alternative Currency in which the Loan is to be made,
and funds immediately available to the Administrative Agent, such Lender's
Revolver Loan Commitment Percentage of the Revolver Loans requested. The
proceeds of each Dollar Loan requested pursuant to this Section 2.2 shall be
disbursed in immediately available funds by crediting or wiring such proceeds
to the account of Borrowers designated in the Accounts Designation Letter. The
proceeds of each Foreign Currency Loan requested pursuant to this Section 2.2
shall be transferred by wire from the Loan Office or an account maintained by
the Administrative Agent at a Correspondent to the account of the Foreign
Borrower specified by the Foreign Borrower in its Notice of Borrowing. All
costs incurred and paid by the Administrative Agent in advancing Loan proceeds,
including all wire transfer fees charged to the Administrative Agent and the
Administrative Agent's own wire transfer fees, shall be borne solely by the
Borrowers and shall be paid or reimbursed to the Administrative Agent
immediately upon billing, or, at the option of the Administrative Agent, shall
be paid by deduction from the Loan proceeds. Subject to Section 3.6 hereof, the
Administrative Agent shall not be obligated to disburse the proceeds of any
Revolver Loan requested pursuant to this Section 2.2 until each Lender shall
have made available to the Administrative Agent its applicable Revolver Loan
Commitment Percentage of such Revolver Loan; provided, however, that the
failure of a Lender to make available to the Administrative Agent such Revolver
Loan Commitment Percentage shall not affect the obligation of the
Administrative Agent to disburse the proceeds of any Revolver Loan with respect
to that portion of such loan as to which the Administrative Agent shall have
received the applicable Revolver Loan Commitment Percentage.
SECTION 2.3. Swingline Loan Subfacility.
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(a) Swingline Commitment. Subject to the terms and conditions of this
Agreement, First Union, in its individual capacity, agrees to make certain
revolving credit loans requested by the Borrowers in Dollars to the Borrowers
(each a "Swingline Loan" and, collectively, the "Swingline Loans") from time to
time from the Closing Date until the Revolver Facility Termination Date for the
purposes hereinafter set forth; provided, however, that at any time (i) the
aggregate principal amount of Swingline Loans outstanding shall not exceed the
Swingline Committed Amount, and (ii) the aggregate principal amount (reflecting
the Assigned Dollar Value of any outstanding Foreign Currency Loans) of all
outstanding Revolver Loans plus the aggregate principal amount of outstanding
Swingline Loans shall not exceed the aggregate Revolver Loan Commitments.
Swingline Loans hereunder shall be made as Base Rate Loans and may be repaid
and reborrowed in accordance with the provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. Whenever the Borrowers desire a
Swingline Loan advance hereunder AHL, on behalf of the Borrowers, shall give
written notice (or telephone notice promptly confirmed in writing) to the
Swingline Lender not later than 12:00 Noon (Atlanta time) on the Business Day
of the requested Swingline Loan advance. Each such notice shall be irrevocable
and shall specify (A) that a Swingline Loan advance is requested, (B) the date
of the requested Swingline Loan advance (which shall be a Business Day) and (C)
the principal amount of the Swingline Loan advance requested.
In addition, automatically, on each Business Day, the
Borrowers shall be deemed to have requested, and the Swingline Lender shall
advance, if all conditions for funding have been satisfied, the lesser of (i)
the remaining amount of the Swingline Committed Amount and (ii) a Swingline
Loan advance in the amount of any deficit in the Master Funding Account at the
conclusion of the Business Day. On any Business Day at whose conclusion there
is a surplus amount in collected balances in the Master Funding Account, the
full amount of the surplus, if there are no outstanding Swingline Loans, will
be invested automatically pursuant to the Sweep Plus Services Program, and, if
there are Swingline Loans outstanding, shall automatically be applied to
principal on outstanding Swingline Loans in the order in which the Swingline
Loans were extended by the Swingline Lender.
Each Swingline Loan shall be made as a Base Rate Loan and
shall mature as provided in subsection (b)(iii) below.
(ii) Minimum Amounts. Each Swingline Loan advance made by the
Swingline Lender in response to a notice submitted by the Borrowers pursuant to
the first paragraph of this Section 2.3(b) (as opposed to an automatic
Swingline Loan made in response to a deficit in the Master Funding Account)
shall be in a minimum principal amount of $100,000 and in integral multiples of
$50,000 in excess thereof (or the remaining amount of the Swingline Committed
Amount, if less).
(iii) Repayment of Swingline Loans. The principal amount of
all Swingline Loans shall be due and payable on the earlier of (A) the maturity
date specified by the Swingline Lender or (B) the Revolver Facility Termination
Date. The Swingline Lender may, at any time, in its sole
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discretion, by written notice to the Borrowers and the Lenders, demand
repayment of its Swingline Loans by way of an advance under the Revolver
Facility, in which case the Borrowers shall be deemed to have requested a
Revolver Loan comprised solely of Base Rate Loans in the amount of such
Swingline Loans; provided, however, that any such demand shall be deemed to
have been given one Business Day prior to the Revolver Facility Termination
Date and on the date of the occurrence of any Event of Default described in
Section 10.1 and upon acceleration of the Obligations hereunder and the
exercise of remedies in accordance with the provisions of Section 10.2. Each
Lender hereby irrevocably agrees to make its pro rata share of each such
Revolver Loan in the amount, in the manner and on the date specified in the
preceding sentence notwithstanding (I) the amount of such borrowing may not
comply with the minimum amount for advances of Revolver Loans otherwise
required hereunder, (II) whether any conditions specified in Section 4.3 are
then satisfied, (III) whether a Default or an Event of Default then exists,
(IV) failure of any such request or deemed request for a Revolver Loan to be
made by the time otherwise required hereunder, (V) whether the date of such
borrowing is a date on which Revolver Loans are otherwise permitted to be made
hereunder or (VI) any termination of the Revolver Facility relating thereto
immediately prior to or contemporaneously with such borrowing. In the event
that any Revolver Loan cannot for any reason be made on the date otherwise
required above (including, without limitation, as a result of the commencement
of a proceeding under the Bankruptcy Code with respect to any Borrower or any
Subsidiary of any Borrower), then each Lender hereby agrees that it shall
forthwith purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from such Borrower on or after
such date and prior to such purchase) from the Swingline Lender such
participations in the outstanding Swingline Loans as shall be necessary to
cause each such Lender to share in such Swingline Loans ratably based upon its
Revolver Loan Commitment Percentage of the aggregate Revolver Loan Commitments
(determined before giving effect to any termination of the Revolver Facility
pursuant to Section 2.7), provided that (A) all interest payable on the
Swingline Loans shall be for the account of the Swingline Lender until the date
as of which the respective participation is purchased and (B) at the time any
purchase of participations pursuant to this sentence is actually made, the
purchasing Lender shall be required to pay to the Swingline Lender, to the
extent not paid to the Swingline Lender by the Borrowers in accordance with the
terms of subsection (c)(ii) hereof, interest on the principal amount of
participation purchased for each day from and including the day upon which such
borrowing would otherwise have occurred to but excluding the date of payment
for such participation, at the rate equal to the Federal Funds Rate.
(c) Interest on Swingline Loans.
(i) Subject to the provisions of Section 3.1, each Swingline
Loan shall bear interest at a per annum rate (computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be) equal to the Base Rate.
(ii) Payment of Interest. Interest on Swingline Loans shall
be payable in arrears on each applicable Interest Payment Date and at such
other times as the Swingline Lender may specify from time to time.
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(d) Swingline Note. The Swingline Loans shall be evidenced by a duly
executed promissory note (the "Swingline Note") of the Borrowers to the
Swingline Lender in substantially the form of Exhibit A-2.
SECTION 2.4. Repayment of Revolver Loans.
(a) Repayment on Revolver Facility Termination Date. The Borrowers
shall repay the outstanding principal amount of all Revolver Loans made to such
Borrowers in full, together with all accrued but unpaid interest thereon, on
the Revolver Facility Termination Date.
(b) Mandatory Repayment of Excess Loans. If at any time the sum of
(i) the outstanding aggregate principal amount of all outstanding Revolver
Loans (after giving effect to the Assigned Dollar Value of any Foreign Currency
Loans) plus (ii) the undrawn amount of outstanding Letters of Credit plus (iii)
the outstanding aggregate principal amount of all Swingline Loans and plus (iv)
the Assigned Dollar Value of all outstanding European Facility Loans exceeds
the Aggregate Commitment, the Borrowers shall immediately repay such excess,
and such payment shall be applied in the following order: (i) first, to
Swingline Loans; (ii) secondly, to Revolver Loans which are Base Rate Loans;
(iii) thirdly, to Revolver Dollar Loans which are LIBOR Loans; and finally (iv)
to Foreign Currency Loans. Each such repayment shall be accompanied by accrued
interest on the amount repaid and any amount required to be paid pursuant to
Section 3.8 hereof.
(c) Mandatory Repayment and Reduction Upon Net Proceeds
Realization. At the time of and upon the consummation of any sale or other
disposition of assets (other than a sale of Contributed Real Estate) producing
Net Cash Proceeds in excess of $5,000,000 in any single transaction and,
together with all other sales or dispositions of assets during the current
Fiscal Year, $7,000,000, the Borrowers shall apply all Net Cash Proceeds from
such sale or other disposition (including all amounts up to the $5,000,000 and
$7,000,000 minimum triggering amounts) to repay the Revolver Loans and the
Swingline Loans and reduce the Revolver Loan Commitment by the amount of such
repayment. The payment shall be applied in the following order: (i) first to
Swingline Loans; (ii) secondly, to Revolver Loans which are Base Rate Loans;
and (iii) thirdly, to LIBOR Loans.
(d) Optional Repayments and Commitment Reductions. Without fee or
penalty, the Borrowers may at any time and from time to time repay the Revolver
Loans made thereto, in whole or in part, upon irrevocable notice to the
Administrative Agent not later than 11:00 a.m. (Atlanta time) on the date of
repayment with respect to Base Rate Loans, at least three (3) Business Days
before with respect to LIBOR Rate Loans, and at least four (4) Business Days
before with respect to Foreign Currency Loans, specifying the date and amount
of repayment and whether the repayment is of Base Rate Loans, LIBOR Rate Loans,
or Foreign Currency Loans, or a combination thereof, and, if of a combination
thereof, the amount allocable to each. Upon receipt of such notice, the
Administrative Agent shall promptly notify each Lender. If any such notice is
given, the amount specified in such notice shall be due and payable on the date
set forth in such notice. Partial repayments shall be in an aggregate amount of
$500,000 or a whole multiple of $100,000 in excess thereof with respect to
LIBOR Rate Loans or Foreign Currency Loans, and $500,000 or a whole multiple of
$100,000 in excess thereof with respect to Base Rate Loans. Each such repayment
shall
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be accompanied by any amount required to be paid pursuant to Section 3.8. Upon
the repayment of any Loan, the Borrowers, without fee or penalty, upon
irrevocable notice to the Administrative Agent at least five (5) Business Days
prior to the proposed commitment reduction, may reduce the Revolver Loan
Commitment for more or less than the repaid Loan amount, but with such
commitment reduction to be in a minimum amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof.
(e) Limitation on Repayment of LIBOR Rate Loans. No Borrower may
repay any LIBOR Rate Loan hereunder on any day other than on the last day of
the Interest Period applicable thereto unless such repayment is accompanied by
any amount required to be paid pursuant to Section 3.8.
SECTION 2.5. Letters of Credit.
(a) Issuance of Letters of Credit. Issuing Bank shall from time to
time issue, extend or renew Letters of Credit that are payable in Dollars for
the account of each of the Borrowers, upon such terms and conditions as Issuing
Bank may then require; provided that (i) the aggregate LOC Obligations shall at
no time exceed the LOC Committed Amount, and (ii) the sum of (A) the aggregate
principal amount of Revolver Loans outstanding (reflecting the Assigned Dollar
Value of all Foreign Currency Loans), (B) the aggregate LOC Obligations, and
(C) the aggregate principal amount of outstanding Swingline Loans and (D) the
Assigned Dollar Value of the aggregate European Facility Loans outstanding
shall all at no time exceed the Aggregate Commitment. No Letter of Credit shall
have an original expiry date more than one year from the date of issuance.. The
joint and several reimbursement obligations of Borrowers under any such Letters
of Credit are to be Obligations hereunder, and the coming due of any
reimbursement obligation under any such Letter of Credit is shall be deemed to
be a request for a Revolver Loan in the amount of such Obligation. Borrowers
jointly and severally are to pay to Issuing Bank on each date that is three
months from the issuance date of the Letter of Credit, and, upon its
expiration, letter of credit fees on the average daily undrawn amount of the
Letter of Credit at a per annum rate of one hundred fifty percent (150%). If an
Event of Default occurs or exists, or, if at the Revolver Facility Termination
Date, there is outstanding a Letter of Credit that as originally issued or as
extended had an expiry date extending beyond the Revolver Facility Termination
Date, Borrowers, on demand, are to deliver to the Administrative Agent good
funds equal to 100% of the maximum liability under all outstanding Letters of
Credit, which funds are to be deposited in a separate, blocked account (the
"Cash Collateral Account") maintained by Borrowers and are to be held in the
Cash Collateral Account for the benefit of the Lenders as cash collateral for
the Borrowers' joint and several reimbursement obligations and the other
Obligations.
(b) Participation. To the extent that Issuing Bank has not been
reimbursed as required hereunder or under any such Letter of Credit, the
Administrative Agent shall notify each of the Lenders, and each such Lender
shall pay to the Administrative Agent for the Issuing Bank such Lender's
Commitment Percentage of the Revolver Loan made to pay such unreimbursed
drawing in same day funds on the day of notification by Issuing Bank of an
unreimbursed drawing pursuant to the provisions of subsection (c) hereof. The
obligation of each Lender to fund any Revolver Loan as provided above shall be
absolute and unconditional and shall not be affected by any dispute over
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the propriety of payment under any Letter of Credit, the occurrence of a
Default, an Event of Default or any other occurrence or event. Any such
reimbursement shall not relieve or otherwise impair the joint and several
obligations of the Borrowers to reimburse Issuing Bank under any Letter of
Credit, together with interest on such reimbursement amounts as provided in
subsection (c) hereof.
(c) Reimbursement. Issuing Bank will promptly notify the Borrowers
of any drawing under any Letter of Credit. Unless AHL, on behalf of the
Borrowers, shall immediately notify Issuing Bank that the Borrowers intend to
reimburse Issuing Bank for such drawing other than from proceeds of Revolver
Loans, the Borrowers shall be deemed to have requested that the Lenders make
Revolver Loans in the amount of such drawing as provided in subsection (d)
hereof on the related Letter of Credit, the proceeds of which will be used to
satisfy the related reimbursement obligations to Issuing Bank. The Borrowers
jointly and severally agree to reimburse Issuing Bank on the date of drawing
under any Letter of Credit (either with the proceeds of Revolver Loans or
otherwise) in immediately available funds. If the conditions for making a
Revolver Loan deemed requested pursuant to this Section 2.3(c) to reimburse any
Letter of Credit drawing have not been satisfied, and the Administrative Agent
in its sole discretion has not waived the unsatisfied conditions for making the
Revolver Loan but has not accelerated the payment date of the Obligations
pursuant to Section 10.2 hereof because of the Borrowers' failure to reimburse
such drawing, the Borrowers shall pay the Letter of Credit drawing in full, or
the unreimbursed amount of such drawing shall bear interest at a rate per annum
equal to (i) the higher of the U.S. Prime Rate or the Federal Funds Rate plus
1/2 of 1% plus (ii) two percent (2%). The Borrowers' reimbursement obligations
hereunder shall be absolute and unconditional under all circumstances
irrespective of any rights of setoff, counterclaim or defense to payment any
Borrower may claim or have against Issuing Bank, the Administrative Agent, the
Lenders, the beneficiary of such Letter of Credit or any other Person,
including without limitation any defense based on any failure of any Borrower
or any Subsidiary of any Borrower to receive consideration or the legality,
validity or unenforceability of the Letter of Credit. Issuing Bank will
promptly notify the other Lenders of the amount of any unreimbursed drawing and
each Lender shall promptly pay to the Administrative Agent for the account of
Issuing Bank, in Dollars and in immediately available funds, the amount of such
Lender's Revolver Loan Commitment Percentage of such unreimbursed drawing. Such
payment shall be made on the day such notice is received by such Lender from
Issuing Bank if such notice is received at or before 3:00 P.M. (Atlanta time);
otherwise, such payment shall be made at or before 1:00 P.M. (Atlanta time) on
the Business Day next succeeding the day such notice is received. If such
Lender does not pay such amount to Issuing Bank in full upon such request, such
Lender shall, on demand, pay to the Administrative Agent for the account of
Issuing Bank interest on the unpaid amount during the period from the date of
such drawing until such Lender pays such amount to Issuing Bank in full at a
rate per annum equal to, if paid within two (2) Business Days of the date that
such Lender is required to make payments of such amount pursuant to the
preceding sentence, the Federal Funds Rate and thereafter at a rate equal to
the Base Rate. Each Lender's obligation to make such payment to Issuing Bank,
and the right of Issuing Bank to receive the same, shall be absolute and
unconditional, shall not be affected by any circumstance whatsoever and without
regard to the termination of this Agreement or the Commitments hereunder, the
existence of a Default or Event of Default or the acceleration of the
obligations of Borrowers hereunder and shall be made without any offset,
abatement, withholding or reduction whatsoever. Simultaneously with the making
of each such payment by a Lender to Issuing Bank, such Lender shall,
automatically and without any further action on the part of Issuing Bank or
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such Lender, acquire a participation in an amount equal to such payment
(excluding the portion of such payment constituting interest owing to Issuing
Bank) in the related unreimbursed drawing portion of the LOC Obligation and in
the interest thereon, and shall have a claim against Borrowers with respect
thereto.
(d) Repayment with Revolver Loans. On any day on which the Borrowers
shall have requested, or been deemed to have requested as provided in (c)
above, a Revolver Loan advance to reimburse a drawing under a Letter of Credit,
the Administrative Agent shall give notice to the Lenders that a Revolver Loan
has been requested or deemed requested by the Borrowers to be made in
connection with a drawing under a Letter of Credit, in which case Lenders shall
make Revolver Loans to the Borrowers jointly and severally in a principal
amount for each Lender equal to such Lender's Revolver Loan Commitment
Percentage of such Revolver Loan requested or deemed to be requested by the
Borrowers. Each Lender shall make available to the Administrative Agent, at the
office of the Administrative Agent in Dollars in funds immediately available to
the Administrative Agent, such Lender's Revolver Loan Commitment Percentage of
the Revolver Loans requested, and the proceeds thereof shall be paid directly
to Issuing Bank for application to the respective LOC Obligations. Each such
Lender hereby irrevocably agrees to make its Revolver Loan Commitment
Percentage of each such Revolver Loan immediately upon any such request or
deemed re quest in the amount, in the manner and on the date specified in the
preceding sentence notwithstanding (i) the amount of such borrowing may not
comply with the minimum amount for advances of Revolver Loans otherwise
required hereunder, (ii) whether any conditions specified Section 4.2 are then
satisfied, (iii) whether a Default or an Event of Default then exists, (iv)
failure for any such request or deemed request for Revolver Loans to be made by
the time otherwise required hereunder, (v) whether the date of such borrowing
is a date on which Revolver Loans are otherwise permitted to be made hereunder
or (vi) any termination of the Commitments relating thereto immediately prior
to or contemporaneously with such borrowing. In the event that any Revolver
Loan cannot for any reason be made on the date otherwise required above
(including, without limitation, as a result of the commencement of a proceeding
under the Bankruptcy Code with respect to any Borrower or any other Person
obligated upon the Obligations), then each such Lender hereby agrees that it
shall forthwith purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from the Borrowers on or after
such date and prior to such purchase) from Issuing Bank such participation in
the outstanding LOC Obligations as shall be necessary to cause each such Lender
to share in such LOC Obligations ratably (based upon the respective Revolver
Loan Commitment Percentages of the Lenders (determined before giving effect to
any termination of the Commitments pursuant to Section 2.7)), provided that at
the time any such purchase of a participation is actually made, the purchasing
Lender shall be required to pay to Issuing Bank, to the extent not paid to the
Issuing Bank by the Borrowers in accordance with the terms of subsection (c)
hereof, interest on the principal amount of participation purchased for each
day from and including the day upon which such borrowing would otherwise have
occurred to but excluding the date of payment for such participation, if paid
within two (2) Business Days of the date of the Revolver Loan, at the Federal
Funds Rate, and thereafter at the Base Rate.
(e) Renewal, Extension. The renewal or extension of any Letter of
Credit shall, for purposes hereof, be treated in all respects the same as the
issuance of a new Letter of Credit hereunder.
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(f) Uniform Customs and Practices. Issuing Bank may have the Letters
of Credit be subject to the Uniform Customs and Practices for Documentary
Credits, as published as of the date of issue by the International Chamber of
Commerce (the "UCP") that shall be specified in the Letter of Credit, in which
case the UCP may be incorporated therein and deemed in all respects to be a
part thereof.
(g) Indemnification; Nature of Issuing Bank's Duties.
(i) In addition to its other obligations under this Section,
the Borrowers jointly and severally shall and do hereby protect,
indemnify, pay and save Issuing Bank harmless from and against any and
all claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) that Issuing Bank may
incur or be subject to as a consequence, direct or indirect, of (A)
the issuance of any Letter of Credit or (B) the failure of Issuing
Bank to honor a drawing under a Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present or
future de jure or de facto government or governmental authority (all
such acts or omissions, herein called "Government Acts").
(ii) As between the Borrowers and Issuing Bank, the Borrowers
shall assume all risks of the acts, omission or misuse of any Letter
of Credit by the beneficiary thereof, and Issuing Bank shall not be
responsible (A) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any party in
connection with the application for and issuance of any Letter of
Credit, even if any such document should in fact prove to be in any or
all respects invalid, insufficient, inaccurate, fraudulent or forged,
(B) for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of Credit or
the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason, (C)
for errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher, (D) for any loss or delay
in the transmission or otherwise of any document required in order to
make a drawing under a Letter of Credit or of the proceeds thereof,
and (E) for any consequences arising from causes beyond the control of
Issuing Bank, including, without limitation, any Government Acts. None
of the above shall affect, impair, or prevent the vesting of Issuing
Bank's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of
the specific provisions of the foregoing, any action taken or omitted
by Issuing Bank, under or in connection with any Letter of Credit or
the related certificates, if taken or omitted in good faith, shall not
put such Issuing Bank under any resulting liability to the Borrowers
or any of their Subsidiaries. It is the intention of the parties that
this Agreement shall be construed and applied to protect and indemnify
Issuing Bank against any and all risks involved in the issuance of the
Letters of Credit, all of which risks are hereby assumed by the
Borrowers (on behalf of themselves and each of their Subsidiaries),
including, without limitation, any and all Government Acts. Issuing
Bank shall not, in any way, be liable for any failure by Issuing Bank
or anyone else to
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pay any drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of Issuing Bank.
(iv) Nothing in this subsection (g) is intended to limit the
joint and several reimbursement obligations of the Borrowers contained
in subsection (d) above. The joint and several obligations of the
Borrowers under this subsection (g) shall survive the termination of
this Agreement. No act or omissions of any current or prior
beneficiary of a Letter of Credit shall in any way affect or impair
the rights of Issuing Bank to enforce any right, power or benefit
under this Agreement.
(v) Notwithstanding anything to the contrary contained in
this subsection (g), the Borrowers shall not have an obligation to
indemnify Issuing Bank in respect of any liability incurred by Issuing
Bank (A) arising solely out of the gross negligence or willful
misconduct of Issuing Bank, as determined by a court of competent
jurisdiction, or (B) caused by Issuing Bank's failure to pay under any
Letter of Credit after presentation to it of a request strictly
complying with the terms and conditions of such Letter of Credit, as
determined by a court of competent jurisdiction, unless such payment
is prohibited by at law, regulation, court order or decree.
(h) Responsibility of Issuing Bank. It is expressly understood and
agreed that the obligations of Issuing Bank to the Lenders are only those
expressly set forth in this Agreement and that Issuing Bank shall be entitled
to assume with respect to any Revolver Loans requested or deemed to be
requested hereunder that the conditions precedent to borrowings set forth in
Section 4.3 have been satisfied; provided, however, that nothing set forth in
this Section 2.5 shall be deemed to prejudice the right of any Lender to
recover from Issuing Bank any amounts made available by such Lender to Issuing
Bank pursuant to this Section 2.5 in the event that it is determined by a court
of competent jurisdiction that the payment with respect to a Letter of Credit
constituted gross negligence or willful misconduct on the part of Issuing Bank.
(i) Conflict with Letter of Credit Documents. All documents and
instruments executed in connection with the issuance of any Letter of Credit
shall be interpreted in a manner to be consistent with, and not in conflict of,
this Agreement and the other Loan Documents, but in the event of any conflict
between the provisions of this Agreement and any document or instrument
executed in connection with the issuance of any Letter of Credit (including any
letter of credit application), the terms and provisions of this Agreement shall
control.
SECTION 2.6. Revolver Notes. Each Lender's Revolver Loans and the
joint and several obligation of the Borrowers to repay the Revolver Loans made
thereto shall be evidenced by the Revolver Note executed by the Borrowers
payable to the order of such Lender representing the Borrowers' joint and
several obligation to pay such Lender's Revolver Loan Commitment or, if less,
the aggregate unpaid principal amount of all Revolver Loans made and to be made
by such Lender to the Borrowers hereunder, plus interest and all other fees,
charges and other amounts due thereon. Each Revolver Note shall be dated the
date hereof and shall bear interest on the unpaid principal amount thereof at
the applicable interest rate per annum specified in Section 3.1.
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SECTION 2.7. Termination of Revolver Facility. The Lenders' Revolver
Loan Commitments under Sections 2.1 and 2.2 shall terminate on the earlier of
(a) the Expiration Date or (b) the date of termination by the Administrative
Agent on behalf of the Lenders pursuant to Section 10.2(a); provided, however,
the Administrative Agent and Lenders in their sole discretion may, by written
notice to the Borrowers, extend the Revolver Facility and the Revolver Loan
Commitments for a period of one (1) year following the Expiration Date, subject
in all respects to prior termination of the Revolver Facility by the
Administrative Agent on behalf of the Lenders pursuant to Section 10.2(a).
SECTION 2.8. Use of Proceeds. The Borrowers shall use the proceeds of
the Loans (a) to refinance the existing Debt of the Borrowers and (b) for
working capital and general corporate requirements of the Borrowers, including
the payment of consideration in acquisitions and investments permitted by this
Agreement and the payment of certain fees and expenses incurred in connection
with the transactions contemplated hereby.
SECTION 2.9. Security. The obligations of each Borrower shall be
secured in accordance with the terms of the applicable Security Documents.
SECTION 2.10. Maximum Borrower Liability.
(a) It is the intent of the Borrowers, the Administrative
Agent, the Lenders and any other Person holding any of the Obligations that each
Borrower's maximum obligations hereunder (such Borrower's "Maximum Borrower
Liability") in any case or proceeding referred to below (but only in such a
case or proceeding) shall not be in excess of:
(i) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code on or within one year from the date on which
any of the Obligations of such Borrower are incurred, the maximum amount that
would not otherwise cause the obligations of such Borrower hereunder (or any
other obligations of such Borrower to the Administrative Agent, the Lenders and
any other Person holding any of the Obligations) to be avoidable or
unenforceable against such Borrower under (A) Section 548 of the Bankruptcy
Code or (B) any state fraudulent transfer or fraudulent conveyance act or
statute applied in such case or proceeding by virtue of Section 544 of the
Bankruptcy Code; or
(ii) in a case or proceeding commenced by or against such
Borrower under the Bankruptcy Code subsequent to one year from the date on
which any of the Obligations of such Borrower are incurred, the maximum amount
that would not otherwise cause the obligations of such Borrower hereunder (or
any other obligations of such Borrower to the Administrative Agent, the Lenders
and any other Person holding any of the Obligations) to be avoidable or
unenforceable against such Borrower under any state fraudulent transfer or
fraudulent conveyance act or statute applied in any such case or proceeding by
virtue of Section 544 of the Bankruptcy Code; or
(iii) in a case or proceeding commenced by or against such
Borrower under any law, statute or regulation other than the Bankruptcy Code
relating to dissolution, liquidation, conservatorship, bankruptcy, moratorium,
readjustment of debt, compromise, rearrangement,
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receivership, insolvency, reorganization or similar debtor relief from time to
time in effect affecting the rights of creditors generally (collectively,
"Other Debtor Relief Law"), the maximum amount that would not otherwise cause
the obligations of such Borrower hereunder (or any other obligations of such
Borrower to the Administrative Agent, the Lenders and any other Person holding
any of the Obligations) to be avoidable or unenforceable against such Borrower
under such Other Debtor Relief Law, including, without limitation, any state
fraudulent transfer or fraudulent conveyance act or statute applied in any such
case or proceeding. (The substantive state or federal laws under which the
possible avoidance or unenforceability of the obligations of any Borrower
hereunder (or any other obligations of such Borrower to the Administrative
Agent, the Lenders and any other Person holding any of the Obligations) shall
be determined in any such case or proceeding shall hereinafter be referred to
as the "Avoidance Provisions").
(b) To the extent set forth in Section 2.10(a), but only to the extent
that the Obligations of any Borrower hereunder, or the transfers made by such
Borrower under the Pledge Agreement or the Security Agreement, would otherwise
be subject to avoidance under any Avoidance Provisions if such Borrower is not
deemed to have received valuable consideration, fair value, fair consideration
or reasonably equivalent value for such transfers or obligations, or if such
transfers or obligations of any Borrower hereunder would render such Borrower
insolvent, or leave such Borrower with an unreasonably small capital or
unreasonably small assets to conduct its business, or cause such Borrower to
have incurred debts (or to have intended to have incurred debts) beyond its
ability to pay such debts as they mature, in each case as of the time any of
the obligations of such Borrower are deemed to have been incurred and transfers
made under such Avoidance Provisions, then the obligations of such Borrower
hereunder shall be reduced to that amount which, after giving effect thereto,
would not cause the Obligations of such Borrower hereunder (or any other
obligations of such Borrower to the Administrative Agent, the Lenders or any
other Person holding any of the Obligations), as so reduced, to be subject to
avoidance under such Avoidance Provisions. This Section 2.10(b) is intended
solely to preserve the rights hereunder of the Administrative Agent, the
Lenders and any other Person holding any of the Obligations to the maximum
extent that would not cause the obligations of the Borrowers hereunder to be
subject to avoidance under any Avoidance Provisions, and no Borrower nor any
other Person shall have any right, defense, offset, or claim under this Section
2.10(b) as against the Administrative Agent, the Lenders or any other Person
holding any of the Obligations that would not otherwise be available to such
Person under the Avoidance Provisions.
(c) Each Borrower agrees that the Obligations may at any time and from
time to time exceed the Maximum Borrower Liability of such Borrower, and may
exceed the aggregate Maximum Borrower Liability of all Borrowers hereunder,
without impairing this Agreement or any provision contained herein or affecting
the rights and remedies of the Lenders and the Administrative Agent hereunder.
(d) In the event any Borrower (a "Funding Borrower") shall make any
payment or payments under this Agreement or shall suffer any loss as a result
of any realization upon any collateral granted by it to secure its obligations
hereunder, each other Borrower (each, a "Contributing Borrower") shall
contribute to such Funding Borrower an amount equal to such payment or payments
made, or losses suffered, by such Funding Borrower determined as of the date
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on which such payment or loss was made multiplied by the ratio of (i) the
Maximum Borrower Liability of such Contributing Borrower (without giving effect
to any right to receive any contribution or other obligation to make any
contribution hereunder), to (ii) the aggregate Maximum Borrower Liability of
all Borrowers (including the Funding Borrowers) hereunder (without giving
effect to any right to receive, or obligation to make, any contribution
hereunder). Nothing in this Section 2.10(d) shall affect each Borrower's joint
and several liability to the Administrative Agent and the Lenders for the
entire amount of its Obligations. Each Borrower covenants and agrees that its
right to receive any contribution hereunder from a Contributing Borrower shall
be subordinate and junior in right of payment to all obligations of the
Borrowers to the Administrative Agent and Lenders hereunder.
(e) Notwithstanding anything to the contrary appearing herein or in
the other Loan Documents, no Foreign Borrower shall be liable with respect to
the Obligations except for (i) the principal, interest, and other amounts owing
with respect to Loans made under the European Facility; (ii) the principal,
interest, and other amounts owing with respect to Revolver Loans or Swingline
Loans made to, and Letters of Credit issued for the benefit of, one or more of
the Foreign Borrowers; (iii) the costs incurred by the Administrative Agent or
any Lender in enforcing obligations of the Foreign Borrowers; and (iv) the
maximum principal amount at any time outstanding under all Foreign Subsidiary
Notes executed by such Foreign Borrower.
SECTION 2.11. Waiver of Subrogation. Except for the contribution
provided for in Section 2.10(d) above, each Borrower hereby waives, to the
fullest extent possible, as against each other Borrower and its assets, any and
all rights, whether at law, in equity, by agreement or otherwise, to
subrogation, indemnity, reimbursement, contribution, or any other similar
claim, cause of action or remedy that otherwise would arise out of such
Borrower's payment or performance of the Obligations. The preceding waiver is
intended by each Borrower, the Lenders and the Administrative Agent to be for
the benefit of each other Borrower and any of their successors or assigns as an
absolute defense, other than under Section 2.10(d), to any action by any such
Borrower against any other Borrower or its assets.
SECTION 2.12. European Facility Loans. Subject to the terms and
conditions of this Agreement, the European Facility Lender agrees to make
European Facility Loans, which shall be Base Rate Loans in the Base Rate
Currency, to the Foreign Borrowers (but with each of the Borrowers, including,
without limitation, each of the Foreign Borrowers, jointly and severally
obligated to repay such Loans) from time to time from the Closing Date through
the European Facility Termination Date as requested by the Foreign Borrowers,
in accordance with the terms of Section 2.13; provided, that the Assigned
Dollar Value of all outstanding European Facility Loans (after giving effect to
any amount requested) when added to the sum of (i) the aggregate principal
amount (reflecting the Assigned Dollar Value of any outstanding Foreign
Currency Loans) of all outstanding Revolver Loans plus (ii) the undrawn amount
of outstanding Letters of Credit and plus (iii) the aggregate principal amount
of any outstanding Swingline Loans, shall not exceed the Aggregate Commitment
and the Assigned Dollar Value of all outstanding European Facility Loans (after
giving effect to any amount requested) shall not exceed the Foreign Currency
Loan Sublimit. Subject to the terms and conditions hereof, the Foreign
Borrowers may borrow, repay and reborrow Revolver Loans hereunder until the
European Facility Termination Date.
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SECTION 2.13. Procedures for Advance of European Facility Loans . The
Foreign Borrowers shall give the European Facility Lender notice in the form
and at the times required by the European Facility Lender from time to time,
and the European Facility Lender shall advance funds to a bank account of the
Foreign Borrower in London pursuant to procedures approved by the European
Facility Lender from time to time.
ARTICLE 3.
GENERAL LOAN PROVISIONS
SECTION 3.1. Interest.
(a) Interest Rate Options. Loans made on the Closing Date shall be
made only as Base Rate Loans and shall bear interest at the Base Rate.
Thereafter, Base Rate Loans shall bear interest at a rate equal to the Base
Rate, Swingline Loans shall bear interest at the Base Rate, and, LIBOR Rate
Loans (which shall include all Revolver Loans made as Foreign Currency Loans)
shall bear interest at the LIBOR Rate plus the Applicable Margin (the
"Applicable Margin") as set forth below in this Section 3.1. On behalf of the
Borrowers, AHL shall determine whether a Revolver Loan is to be a Foreign
Currency Loan, Base Rate Loan or LIBOR Rate Loan and select the Interest
Period, if any, applicable to at the time a request for borrowing is given or
at the time a Notice of Conversion/Continuation is given pursuant to Section
3.2. Any Loan or any portion thereof as to which the Company has not duly
specified an interest rate as provided herein shall, if it is a Loan made in a
Base Rate Currency or Dollars, be deemed a Base Rate Loan in the currency in
which made, and, so long as no Event of Default has occurred and shall be
continuing, but if it is a Foreign Currency Loan made in German deutsche marks,
shall be paid in full, with in each case, no Event of Default arising as a
result thereof.
(b) Interest Periods. In connection with each Foreign Currency Loan
and LIBOR Rate Loan, AHL, on behalf of the Borrowers for Revolver Loans, by
giving notice at the times required hereunder, shall elect an interest period
(each, an "Interest Period") to be applicable to such Loan, which Interest
Period shall be a period of one, two, three, or six months; provided that:
(i) the Interest Period shall commence on the date of
advance of or conversion to LIBOR Rate Loan and, in the case of
immediately successive Interest Periods, each successive Interest
Period shall commence on the date on which the next preceding Interest
Period expires;
(ii) if any Interest Period would otherwise expire on a
day that is not a Business Day, such Interest Period shall expire on
the next succeeding Business Day; provided, that, with respect to any
LIBOR Rate Loan, if any Interest Period would otherwise expire on a
day that is not a Business Day but is a day of the month after which
no further Business Day occurs in such month, such Interest Period
shall expire on the next preceding Business Day;
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(iii) with respect to any LIBOR Rate Loan, any Interest
Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the
calendar month at the end of such Interest Period) shall end on the
last Business Day of the calendar month at the end of such Interest
Period;
(iv) no Interest Period for Revolver Loans shall extend
beyond the Revolver Facility Termination Date;
(v) at any time there shall be no more than eight Tranches of
LIBOR Rate Loans under the Revolver Facility, no more than three of
which Tranches may be Foreign Currency Loans; for purposes of this
provision, a "Tranch" of Loan shall refer to Loans with Interest
Periods beginning and ending on the same date; and
(vi) such right of election is subject to Section 3.1(f).
(c) Initial Applicable Margin. Base Rate Loans under the Revolver
Facility shall always bear interest at the Base Rate without any additional
Applicable Margin. European Facility Loans shall always bear interest at the
Base Rate which, as defined, represents a margin over the base rate quoted
publicly by Midland Bank, plc. The Applicable Margin provided for in Section
3.1(a) with respect to other Loans shall initially be 1.50%.
(d) Applicable Margin. The Applicable Margin with respect to LIBOR
Rate Loans shall vary from time to time, beginning with the delivery by
Borrowers pursuant to Section 6.1(a) of the financial statements of AHL and its
Subsidiaries for the fiscal quarter ending on June 30, 1997. At the end of each
fiscal quarter thereafter, the Applicable Margin with respect to such LIBOR
Rate Loans shall be determined at the end of each fiscal quarter by reference
to the ratio of Consolidated Funded Indebtedness of AHL and Subsidiaries as of
the end of such fiscal quarter to Consolidated EBITDA for AHL and Subsidiaries
for the period of four consecutive fiscal quarters ending on the last day of
such fiscal quarter, as follows:
<TABLE>
<CAPTION>
Funded Indebtedness/EBITDA LIBOR Margin
- -------------------------- ------------
<S> <C>
Greater than or equal to 3.00 to 2.25%
1.0
Greater than or equal to 2.50 to 1.0 but 2.00%
less than 3.00 to 1.0
Greater than or equal to 1.50 to 1.0 but 1.75%
less than 2.5 to 1.0
Less than 1.50 to 1.0 1.50%
</TABLE>
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<PAGE> 37
(e) Adjustments to Applicable Margin. Adjustments, if any, in the
Applicable Margin shall be made by the Administrative Agent five (5) Business
Days after receipt by the Administrative Agent of quarterly financial
statements for AHL and its Subsidiaries and the accompanying Officer's
Compliance Certificate setting forth the ratio of Consolidated Funded
Indebtedness to Consolidated EBITDA for AHL and its Subsidiaries as of the most
recent fiscal quarter end (calculated as provided in subsection (d) above).
Subject to Section 3.1(f), in the event AHL fails to deliver such financial
statements and certificate within the time required by Section 6.2 hereof, the
Applicable Margin shall be the highest Applicable Margin set forth above until
five (5) Business Days after the delivery of such financial statements and
certificate.
(f) Default Rate. Upon the occurrence and during the continuance of an
Event of Default, (i) the Borrowers shall no longer have the option to request
LIBOR Rate Loans and Foreign Currency Loans, (ii) all outstanding LIBOR Rate
Loans shall bear interest at a rate per annum equal to two percent (2%) in
excess of the rate then applicable to LIBOR Rate Loans until the end of the
applicable Interest Period and, if Foreign Currency Loans under the Revolver
Facility, and the acceleration rights under Section 10.2(a) shall have been
exercised by the Administrative Lender, shall be converted on the date of
acceleration to Loans payable in Dollars at the Assigned Dollar Value of the
outstanding amount of the Loans, and (iii) all other Loans shall bear interest
at a rate per annum equal to two percent (2%) in excess of the rate then
applicable to Base Rate Loans. Interest shall continue to accrue on the Notes
after the filing by or against any Borrower of any petition seeking any relief
in bankruptcy or under any act or law pertaining to insolvency or debtor
relief, whether state, federal or foreign.
(g) Interest Payment and Computation. Interest on each Base Rate Loan
shall be payable in arrears on each Interest Payment Date. Interest on Base
Rate Loans and Foreign Currency Loans made in the Base Rate Currency shall be
computed on the basis of a year of 365 or 366 days, as the case may be, and
assessed for the actual number of days elapsed, and interest on all other Loans
shall be computed on the basis of a year of 360 days and assessed for the
actual number of days elapsed.
(h) Maximum Rate. In no contingency or event whatsoever shall the
aggregate of all amounts deemed interest hereunder or under any of the Notes
charged or collected pursuant to the terms of this Agreement or pursuant to any
of the Notes exceed the highest rate permissible under any Applicable Law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that the Lenders
have charged or received interest hereunder in excess of the highest applicable
rate, the rate in effect hereunder shall automatically be reduced to the
maximum rate permitted by Applicable Law and the Lenders shall at the
Administrative Agent's option promptly refund to the applicable Borrower or
Borrowers any interest received by Lenders in excess of the maximum lawful rate
or shall apply such excess to the principal balance of the Obligations. It is
the intent hereof that the Borrowers not pay or contract to pay, and that
neither the Administrative Agent nor any Lender receive or contract to receive,
directly or indirectly in any manner whatsoever, interest in excess of that
which may be paid by the Borrowers under Applicable Law.
SECTION 3.2. Notice and Manner of Conversion or Continuation of
Loans. Provided that no Default or Event of Default has occurred and is then
continuing, the Borrowers, with respect to
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<PAGE> 38
Revolver Loans, shall have the option to (i) convert at any time all or any
portion of their outstanding Base Rate Loans in a principal amount equal to
$500,000 or any whole multiple of $100,000 in excess thereof into LIBOR Rate
Loans, (ii) upon the expiration of any Interest Period, convert all or any part
of their outstanding LIBOR Rate Loans in a principal amount equal to $500,000 or
a whole multiple of $100,000 in excess thereof into Base Rate Loans, and (iii)
upon the expiration of its Interest Period, continue any LIBOR Rate Loan in a
principal amount of $500,000 or any whole multiple of $100,000 in excess thereof
as a LIBOR Rate Loan; provided, that the Borrowers shall not be entitled to
continue, but shall repay, such portion of the Foreign Currency Loan that equals
the Assigned Dollar Value Excess as of the end of the Interest Period. Whenever
the Borrowers desire to convert or continue Loans as provided above, AHL, on
behalf of the Borrowers, shall give the Administrative Agent irrevocable prior
written notice in the form attached hereto as Exhibit C (a "Notice of
Conversion/Continuation") not later than 11:00 a.m. (Atlanta time or London
time, respectively) three (3) Business Days before the Business Day, in the case
of a conversion to or a continuation of a LIBOR Rate Loan, four (4) Business
Days before the Business Day, in the case of a continuation of a LIBOR Rate Loan
that is a Foreign Currency Loan, and the same Business Day, in the case of a
conversion to a Base Rate Loan, on which a proposed conversion or continuation
of such Loan is to be effective specifying (i) the Loans to be converted or
continued and, with respect to any LIBOR Rate Loan to be converted or continued,
the last day of the current Interest Period therefor, (ii) the effective date of
such conversion or continuation (which shall be a Business Day), (iii) the
principal amount of such Loans to be converted or continued and (iv) with
respect to a continuation of Foreign Currency Loan, the Alternative Currency and
the Interest Period to be applicable thereto. The Administrative agent shall
promptly notify the Lenders of such Notice of Conversion/Continuation received
with respect to Revolver Loans.
SECTION 3.3. Fees.
(a)Commitment Fee. Commencing on the Closing Date and continuing
through and including the Revolver Facility Termination Date, the Borrowers
shall pay to the Administrative Agent, for the account of the Lenders and the
European Facility Lender, a non-refundable commitment fee at a rate per annum
(based on a 360 day year) calculated with respect to the average daily unused
portion of the aggregate Commitment. At the Closing Date the initial percentage
rate for the Commitment Fee shall equal .25%, but, for each fiscal quarter
following the delivery by Borrowers pursuant to Section 6.1(a) of the quarterly
financial statements of AHL and its Subsidiaries for the fiscal quarter ending
June 30, 1997, the percentage rate shall be determined for such fiscal quarter
by reference to the ratio of Consolidated Funded Indebtedness of AHL and
Subsidiaries as of the end of such fiscal quarter to Consolidated EBITDA for
AHL and Subsidiaries for the period of four consecutive fiscal quarters ending
on the last day of such fiscal quarter, as follows:
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Funded Indebtedness/EBITDA Commitment Fee
- -------------------------- --------------
Percentage
----------
Greater than or equal to 3.0 to 1.0 .375%
Greater than or equal to 1.50 to 1.0 but .30%
less than 3.0 to 1.0
Less than 1.50 to 1.0 .25%
The commitment fee shall be payable on the last Business Day of each calendar
quarter commencing June 30, 1997, and on the Revolver Facility Termination
Date. Such commitment fee shall be distributed by the Administrative Agent
between the Lenders pro rata in accordance with the Lenders' respective
Revolver Loan Commitment Percentages.
(b) Agent's Fees. In order to compensate the Administrative Agent for
its obligations hereunder, the Borrowers jointly and severally agree to pay to
the Administrative Agent and First Union Capital Markets Corp., for their own
account, the fees set forth in the Commitment and Term Sheet between First
Union and AHL dated February 25, 1997 and the Fee Letter executed by AHL in
connection therewith (collectively, the "Term Sheet").
SECTION 3.4. Manner of Payment.
(a) Revolver Loan Payments. Each Revolver Loan payment (including
repayments described in Article II) by any Borrower on account of the principal
of or interest on the Revolver Loans or of any fee, commission or other amounts
payable to the Lenders under this Agreement or any Note shall be made in
Dollars or the applicable Alternative Currency not later than 1:00 p.m. (local
time at the Loan Office specified with respect to the Loan) on the date
specified for payment under this Agreement to the Administrative Agent for the
account of the Lenders to be distributed pro rata among the Revolver Loans, and
among such Lenders in accordance with their respective Revolver Loan Commitment
Percentages, as applicable, at the Administrative Agent's Office, in
immediately available funds, and shall be made without any set-off,
counterclaim or deduction whatsoever. Any payment received after such time but
before 2:00 p.m. (Atlanta time) on such day shall be deemed a payment on such
date for the purposes of Section 10.1, but for all other purposes shall be
deemed to have been made on the next succeeding Business Day. Any Revolver Loan
payment received after 2:00 p.m. (Atlanta time) shall be deemed to have been
made on the next succeeding Business Day for all purposes.
(b) European Facility Loan Payments. Each Payment by a Borrower on
account of the principal of or interest on the European Facility Loans or of
any fee, commission or other amounts payable to the European Facility Lender
under this Agreement or the European Facility Note shall be made not later than
1:00 p.m. (local time of the Loan Office designated by the European Facility
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<PAGE> 40
Lender to receive Loan repayments) on the date specified for payment under this
Agreement at the Loan Office, in immediately available funds, and shall be made
without any set-off, counterclaim or deduction whatsoever. Any payment received
after such time shall be deemed to have been made on the next succeeding
Business Day for all purposes. All Loans shall be repayable in the Base Rate
Currency.
(c) Business Days. If any payment under this Agreement or any Note
shall be specified to be made upon a day which is not a Business Day, it shall
be made on the next succeeding day which is a Business Day and such extension
of time shall in such case be included in computing any interest if payable
along with such payment.
SECTION 3.5. Crediting of Payments and Proceeds. In the event that
any Borrower shall fail to pay any of the Obligations when due and the
Obligations have been accelerated pursuant to Section 10.2, all payments
received by the Lenders upon the Notes and the other Obligations and all net
proceeds from the enforcement of the Obligations shall be first applied to all
Administrative Agent's fees and expenses then due and payable, then to all
other expenses then due and payable by the Borrowers hereunder, then to all
indemnity obligations then due and payable by the Borrowers hereunder, then to
all commitment and other fees and commissions then due and payable, then to
accrued and unpaid interest on the Notes and any termination payments due in
respect of a Hedging Agreement with any Lender (pro rata in accordance with all
such amounts due), then to the principal amount of the Notes (pro rata in
accordance with all amounts due), in that order.
SECTION 3.6. Nature of Obligations of Lenders Regarding Loans;
Assumption by Administrative Agent. The obligations of the Lenders under this
Agreement to make the Loans are several and are not joint or joint and several.
Unless the Administrative Agent shall have received notice from a Lender prior
to a proposed borrowing date that such Lender will not make available to the
Administrative Agent such Lender's ratable portion of the amount to be borrowed
on such date (which notice shall not release such Lender of its obligations
hereunder), the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the proposed borrowing date in
accordance with Section 2.2 and the Administrative Agent may, in reliance upon
such assumption, make available to the Borrowers on such date a corresponding
amount. If such amount is made available to the Administrative Agent on a date
after such borrowing date, such Lender shall pay to the Administrative Agent on
demand an amount, until paid, equal to such Lender's applicable Revolver Loan
Commitment Percentage of such borrowing and interest thereon at a rate per
annum equal to the daily average Federal Funds Rate during such period as
determined by the Administrative Agent. A certificate of the Administrative
Agent with respect to any amounts owing under this Section shall be conclusive,
absent manifest error. If such Lender's applicable Revolver Loan Commitment
Percentage of such borrowing is not made available to the Administrative Agent
by such Lender within three (3) Business Days of such borrowing date, the
Administrative Agent shall be entitled to recover such amount made available by
the Administrative Agent with interest thereon at the rate per annum then
applicable to such Loan hereunder, on demand, from the applicable Borrower or
Borrowers. The failure of any Lender to make its applicable Revolver Loan
Commitment Percentage of any Loan available shall not relieve it or any other
Lender of its obligation, if any, hereunder to make its applicable Revolver
Loan Commitment Percentage of such Loan available on such borrowing date, but
no Lender shall be responsible for the
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<PAGE> 41
failure of any other Lender to make its applicable Revolver Loan Commitment
Percentage of such Loan available on the borrowing date.
SECTION 3.7. Changed Circumstances.
(a) Circumstances Affecting Foreign Currency and LIBOR Rate
Availability. If the Administrative Agent, any Lender, or any Loan Office shall
determine that by reason of circumstances affecting the foreign exchange and
interbank markets generally, LIBOR deposits in dollars or deposits in the
Alternative Currency are not being offered to the Person, then such Person
shall forthwith give notice thereof to each of the Borrowers. Thereafter, until
such Person notifies each of the Borrowers that such circumstances no longer
exist, the obligation of the Person to make the affected Loan, and the right of
each of the Borrowers to convert any Loan to the affected Loan or to continue
any Foreign Currency Loan or LIBOR Rate Loan or otherwise defer payment of any
Loan, shall be suspended, and each of the Borrowers shall repay in full (or
cause to be repaid in full) the then-outstanding principal amount of each such
Loan, together with accrued interest thereon and any payments required by
Section 3.8 hereof.
(b) Laws Affecting Foreign Currency and LIBOR Rate Availability. If,
after the date hereof, the introduction of, or any change in, any Applicable
Law or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Administrative
Agent, any Lender or any Loan Office with any request or directive (whether or
not having the force of law) of any such Governmental Authority, central bank
or comparable agency, shall make it unlawful or impossible for the
Administrative Agent, any Lender, or any Loan Office to honor its obligations
hereunder to make or maintain any Foreign Currency Loan or LIBOR Rate Loan,
then such Person shall forthwith give notice thereof to each of the Borrowers.
Thereafter, until such Person notifies each of the Borrowers that such
circumstances no longer exist, the obligation of the Person to make the
affected Loan, and the right of each of the Borrowers to convert any Loan to
the affected Loan or to continue any Foreign Currency Loan or LIBOR Rate Loan
or otherwise defer payment of any Loan, shall be suspended, and each of the
Borrowers shall repay in full (or cause to be repaid in full) the
then-outstanding principal amount of each such Loan, together with accrued
interest thereon and any payments required by Section 3.8 hereof.
(c) Increased Costs. If, after the date hereof, the introduction of,
or any change in, any Applicable Law, or in the interpretation or
administration thereof by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by the Administrative Agent, any Lender, or the European Facility
Lender (or any Loan Office) with any request or directive (whether or not
having the force of law) of such Governmental Authority, central bank or
comparable agency:
(i) shall subject the Administrative Agent, any Lender, or
the European Facility Lender (or any Loan Office) to any tax, duty or other
charge with respect to any Foreign Currency Loan, LIBOR Rate Loan, any Letter
of Credit, or any Note or shall change the basis of taxation of payments to the
Lender (or any Loan Office) of the principal of or interest on any Foreign
Currency Loan, LIBOR Rate Loan, any Letter of Credit, or the Note or any other
amounts due under this
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<PAGE> 42
Agreement in respect thereof (except for changes in the rate of tax or any tax,
duty, or other charge imposed on the overall net income of the Administrative
Agent, any Lender, or the European Facility Lender or any Loan Office imposed
by the jurisdiction in which the Administrative Agent, any Lender, or the
European Facility Lender is organized or is or should be qualified to do
business or such Loan Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Bank of England or Board of Governors of
the Federal Reserve System), special deposit, insurance or capital or similar
requirement against assets of, deposits with or for the account of, or credit
extended by the Administrative Agent, any Lender, or the European Facility
Lender(or any Loan Office) or shall impose on the Administrative Agent, any
Lender, or the European Facility Lender or any Loan Office or the foreign
exchange and interbank markets any other condition affecting any Foreign
Currency Loan, LIBOR Rate Loan, any Letter of Credit, or the Note; and the
result of any of the foregoing is to increase the costs to the Lender of
maintaining any Foreign Currency Loan, LIBOR Rate Loan, or Letter of Credit
(after consideration of any changes in the Reserve Percentage) or to reduce the
yield or amount of any sum received or receivable by the Lender under this
Agreement or under the Note in respect of a Foreign Currency Loan, LIBOR Rate
Loan, or Letter of Credit, then the affected Person shall promptly notify each
of the Borrowers of such fact and demand compensation therefor and, within
fifteen (15) days after such notice, each of the Borrowers shall pay to such
Person such additional amount or amounts as will compensate such Person for
such increased cost or reduction. The Administrative Agent will promptly notify
each of the Borrowers of any event of which it has knowledge that will entitle
any Person to compensation pursuant to this Section 3.7(c); provided, that the
Administrative Agent shall incur no liability whatsoever to any of the
Borrowers in the event it fails to do so. A certificate of the Administrative
Agent setting forth the basis for determining such additional amount or amounts
necessary to compensate the any Person shall be conclusively presumed to be
correct absent manifest error. If any Person claims compensation under this
Section, each of the Borrowers may at any time, upon at least four (4) Business
Days' prior notice to the Administrative Agent, pay in full the affected Loan
or substitute a letter of credit issued other than pursuant to this Agreement.
SECTION 3.8. Indemnity. Each of the Borrowers does hereby indemnify
each of the Administrative Agent, any Lender, and the European Facility Lender
against any loss or expense (including without limitation any foreign exchange
costs) which may arise or be attributable to the Lender's obtaining,
liquidating or employing deposits or other funds acquired to effect, fund or
maintain the Loans or the Issuing Bank's issuance or honor of a Letter of
Credit (i) as a consequence of any failure by any of the Borrowers to make any
payment when due of any amount due hereunder in connection with a Foreign
Currency Loan or a LIBOR Rate Loan, (ii) due to any failure of any of the
Borrowers to borrow on a date specified therefor in a Notice of Borrowing or
Notice of Continuation/Conversion with respect to any Foreign Currency Loan or
a LIBOR Rate Loan or (iii) due to any payment, prepayment or conversion of any
Foreign Currency Loan or LIBOR Rate Loan on a date other than the last day of
the Interest Period therefor. The Lender's calculations of any such loss or
expense shall be furnished to each of the Borrowers and shall be presumed to be
correct, absent manifest error.
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SECTION 3.9. Capital Requirements. If either (i) the introduction of,
or any change in, or in the interpretation of, any Applicable Law or (ii)
compliance with any guideline or request after the Closing Date from any
central bank or comparable agency or other Governmental Authority (whether or
not having the force of law), has or would have the effect of reducing the rate
of return on the capital of, or has affected or would affect the amount of
capital required to be maintained by the Administrative Agent, any Lender or
the European Facility Lender or any corporation controlling such Person as a
consequence of, or with reference to the Commitment and other commitments of
this type, below the rate which the Person or such other corporation could have
achieved but for such introduction, change or compliance, then within five (5)
Business Days after written demand by any such Lender, each of the Borrowers
shall pay to such Person from time to time as specified by the Person
additional amounts sufficient to compensate (after consideration of any change
in the Reserve Percentage) the Administrative Agent, any Lender, or the
European Facility Lender or other corporation for such reduction. A certificate
as to such amounts submitted to each of the Borrowers by the Administrative
Agent, any Lender, or the European Facility Lender shall, in the absence of
manifest error, be presumed to be correct and binding for all purposes.
SECTION 3.10. Taxes; Currency.
(a) Payments Free and Clear. Any and all payments by each of the
Borrowers hereunder or under the Note shall be made free and clear of and
without deduction for any and all present or future taxes, levies, imposts,
deductions, charges or withholding, and all liabilities with respect thereto
excluding income and franchise taxes imposed by the jurisdiction under the laws
of which the Administrative Agent, any Lender, or the European Facility Lender
is organized or is or should be qualified to do business or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, with each of the Borrowers and liabilities being hereinafter referred
to as "Taxes"). If any of the Borrowers shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under any Note to the
Administrative Agent, any Lender, or the European Facility Lender, (A) the sum
payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 3.10) the Administrative Agent, any Lender, or the European
Facility Lender receives an amount equal to the amount the Lender would have
received had no such deductions been made, (B) such Borrower shall make such
deductions, (C) such Borrower shall pay the full amount deducted to the
relevant taxing authority or other authority in accordance with Applicable Law,
and (D) such Borrower shall deliver to the Administrative Agent, any Lender, or
the European Facility Lender evidence of such payment to the relevant taxing
authority or other authority in the manner provided in Section 3.10(d).
(b) Stamp and Other Taxes. In addition, each of the Borrowers shall
pay any present or future stamp, registration, recordation or documentary taxes
or any other similar fees or charges or excise or property taxes, levies of the
United States or any state or political subdivision thereof or any applicable
foreign jurisdiction which arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement, the Loans, the other Loan Documents, or the perfection of any rights
in respect thereto (hereinafter referred to as "Other Taxes").
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(c) Indemnity. Each of the Borrowers shall and does hereby indemnify
the Administrative Agent, any Lender, or the European Facility Lender for the
full amount of Taxes and Other Taxes (including, without limitation, any Taxes
and Other Taxes imposed by any jurisdiction on amounts payable under this
Section 3.10) paid by such Lender or Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes or Other Taxes were correctly
or legally asserted. Such indemnification shall be made within thirty (30) days
from the date such Lender or the Administrative Agent, any Lender, or the
European Facility Lender (as the case may be) makes written demand therefor.
(d) Evidence of Payment. Within ten (10) days after the date of any
payment of Taxes or Other Taxes, the affected Borrower shall furnish to the
Administrative Agent, any Lender, or the European Facility Lender, at its
address referred to in Section 12.1, the original or a certified copy of a
receipt evidencing payment thereof or other evidence of payment satisfactory to
the Administrative Agent, the Lender, or the European Facility Lender
(e) If any Lender is incorporated or organized under the laws of a
jurisdiction other than the United States of America or any state thereof (a
"Non-U.S. Lender"), such Non-U.S. Lender will deliver to each of the
Administrative Agent and each of the Borrowers, on or prior to the Closing Date
(or, in the case of a Non-U.S. Lender that becomes a party to this Agreement as
a result of an assignment after the Closing Date, on the effective date of such
assignment), (i) in the case of a Non-U.S. Lender that is a "bank" for purposes
of Section 881(c)(3)(A) of the Internal Revenue Code, a properly completed
Internal Revenue Service Form 4224 or 1001, as applicable (or successor forms),
certifying that such Non-U.S. Lender is entitled to an exemption from or a
reduction of withholding or deduction for or on account of United States
federal income taxes in connection with payments under this Agreement or any of
the Notes, together with a properly completed Internal Revenue Service Form W-8
or W-9, as applicable (or successor forms), and (ii) in the case of a Non-U.S.
Lender that is not a "bank" for purposes of Section 881(c)(3)(A) of the
Internal Revenue Code, a certificate in form and substance reasonably
satisfactory to the Agent and each of the Borrowers and to the effect that such
Non-U.S. Lender (x) is not a "bank" for purposes of Section 881(c)(3)(A) of the
Internal Revenue Code, is not subject to regulatory or other legal requirements
as a bank in any jurisdiction, and has not been treated as a bank for purposes
of any tax, securities law or other filing or submission made to any
governmental authority, any application made to a rating agency or
qualification for any exemption from any tax, securities law or other legal
requirements, (y) is not a 10-percent shareholder for purposes of Section
881(c)(3)(B) of the Internal Revenue Code and (z) is not a controlled foreign
corporation receiving interest from a related person for purposes of Section
881(c)(3)(C) of the Internal Revenue Code, together with a properly completed
Internal Revenue Service Form W-8 or W-9, as applicable (or successor forms).
Each such Non-U.S. Lender further agrees to deliver to each of the
Administrative Agent and the Borrower an additional copy of each such relevant
form on or before the date that such form expires or becomes obsolete or after
the occurrence of any event (including a change in its applicable Loan Office)
requiring a change in the most recent forms so delivered by it, in each case
certifying that such Non-U.S. Lender is entitled to an exemption from
withholding or deduction for or on account of United States federal income
taxes in connection with payments under this Agreement or any of the Notes,
unless an event (including, without limitation, any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required, which event renders all such forms inapplicable or the
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exemption to which such forms relate unavailable and such Non-U.S. Lender
notifies the Administrative Agent and the Borrower that it is not entitled to
receive payments without deduction or withholding of United States federal
income taxes. Each such Non-U.S. Lender will promptly notify the Administrative
Agent and each of the Borrowers of any changes in circumstances that would
modify or render invalid any claimed exemption or reduction.
(f) Survival. Without prejudice to the survival of any other agreement
of each of the Borrowers hereunder, the agreements and obligations of each of
the Borrowers contained in this Section 3.10 shall survive the payment in full
of the Obligations and the termination of the Commitments.
(g) Failure to Pay in Foreign Currency. If any of the Borrowers is
unable for any reason to effect payment of a Loan or to reimburse a drawing
under the Letter of Credit in the Alternative Currency as required by this
Agreement, the Administrative Agent, any Lender, or the European Facility
Lender may require such payment to be made in Dollars in the Assigned Dollar
Value of such payment. In any case in which each of the Borrowers shall make
such payment in Dollars, such Borrower agrees to hold the Administrative Agent,
any Lender, or the European Facility Lender harmless from any loss incurred by
the Lender arising from any change in the value of Dollars in relation to such
Alternative Currency between the date such payment became due and the date of
payment thereof. Without limiting the generality of the foregoing, if any of
the Borrowers is unable for any reason to effect payment of a Loan in the
Alternative Currency as required by this Agreement or if any of the Borrowers
shall default in the payment of any Foreign Currency Loan, then the
Administrative Agent, any Lender, or the European Facility Lender shall be
authorized, without notice to the Borrowers, to extend Base Rate Loans under
the Revolver Facility in an amount sufficient to purchase an amount of the
Alternative Currency sufficient to repay the Foreign Currency Loan in full.
(h) Judgment Currency. If for the purpose of obtaining judgment in any
court or enforcing any such judgment it is necessary to convert any amount due
in any Alternative Currency into any other currency, the rate of exchange used
shall be the Administrative Agent, any Lender, or the European Facility
Lender's spot rate of exchange for the purchase of the Alternative Currency
with such other currency at the close of business on the Business Day preceding
the date on which judgment is given or any order for payment is made. The
obligation of each of the Borrowers in respect of any amount due from it
hereunder shall, notwithstanding any judgment or order for a liquidated sum or
sums in respect of amounts due hereunder or under any judgment or order in any
other currency or otherwise, be discharged only to the extent that on the
Business Day following receipt by the Administrative Agent, any Lender, or the
European Facility Lender of any payment in a currency other than the
Alternative Currency, the Administrative Agent, any Lender, or the European
Facility Lender is able (in accordance with normal banking procedures) to
purchase the Alternative Currency, with such other currency. If the amount of
the Alternative Currency that the Administrative Agent, any Lender, or the
European Facility Lender is able to purchase with such other currency is less
than the amount due in the relevant Alternative Currency, notwithstanding any
judgment or order, each of the Borrower shall indemnify the Lender for the
shortfall.
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SECTION 3.11. Special Lenders. Unless the Required Lenders seek
indemnification, payment, or reimbursement under, or invoke the provisions of,
Sections 3.6, 3.7, 3.8, 3.9, or 3.10, if any Borrower is obligated to pay to
the Administrative Agent or any Lender any amount under said Sections, the
Borrowers may, so long as no Default or Event of Default then exists, replace
such Lender with a new Lender reasonably acceptable to the Administrative
Agent, and such Lender hereby agrees to be so replaced subject to the
following:
(a) the obligations of the Borrowers hereunder to the Lender
to be replaced (including such increased or additional costs incurred
from the date of notice to the Borrowers of such increase or
additional costs through the date such Lender is replaced hereunder)
shall be paid in full to such Lender concurrently with such
replacement;
(b) The replacement Lender shall be a Lender that is not
subject to the increased costs arising under such Sections which may
have effectuated the Borrower's election to replace any Lender
hereunder;
(c) Each such replacement Lender shall execute and deliver to
the Administrative Agent such documentation reasonably satisfactory to
the Administrative Agent pursuant to which such Lender is to become a
party hereto with a Commitment equal to that of the Lender being
replaced and shall make a Loan or Loans in the aggregate principal
amount equal to the aggregate outstanding principal amount of the Loan
or Loans of the Lender being replaced;
(d) Upon such execution of such documents referred to in
clause (c) and repayment of the amounts referred to in clause (a), the
replacement Lender shall be a "Lender" with a Commitment as specified
hereinabove and the Lender being replaced shall cease to be a "Lender"
hereunder, except with respect to indemnification provisions under
this Agreement, which shall survive as to such replaced Lender;
(e) The Administrative Agent shall reasonably cooperate in
effectuating the replacement of any Lender hereunder, but at no time
shall the Administrative Agent be obligated to initiate any such
replacement; and
(f) Any Lender replaced hereunder shall be replaced at the
Borrower's sole cost and expense and at no cost or expense to the
Administrative Agent.
ARTICLE IV
CLOSING: CONDITIONS OF CLOSING AND BORROWING
SECTION 4.1. Closing. The closing shall take place at the offices of
Sutherland, Asbill & Brennan at First Union Plaza, 999 Peachtree Street, N.E.,
23rd Floor, Atlanta, Georgia at 10:00 a.m. on the Closing Date.
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SECTION 4.2. Conditions to Closing and Initial Loan . The obligations
of the Lenders and the Administrative Agent to close this Agreement and of the
Lenders to make the initial Loans are subject to the satisfaction of each of
the following conditions:
(a) Executed Loan Documents. (i) This Agreement, (ii) the Notes, (iii)
the Intercompany Subordination Agreement, (iv) the Security Agreement
(including foreign documentation with respect to the United Kingdom and
Germany), and (v) the Pledge Agreement shall have been duly authorized and
executed by the parties thereto in form and substance satisfactory to the
Administrative Agent, shall be in full force and effect and no default shall
exist thereunder, and the Borrowers shall have delivered original counterparts
thereof to the Administrative Agent.
(b) Closing Certificates; etc.
(i) Officer's Certificate. The Administrative Agent shall
have received a certificate from the chief executive officer and chief
financial officer of AHL, on behalf of the Borrowers, in form and substance
reasonably satisfactory to the Administrative Agent, to the effect that all
representations and warranties of the Borrowers contained in this Agreement and
the other Loan Documents are true, correct and complete; that the Borrowers are
not in violation of any of the covenants contained in this Agreement and the
other Loan Documents; that, after giving effect to the transactions
contemplated by this Agreement, no Default or Event of Default has occurred and
is continuing; that the Borrowers have satisfied each of the closing conditions
to be satisfied thereby; and that the Borrowers have filed all required tax
returns and owe no delinquent taxes.
(ii) Certificate of Secretary of Each Borrower. The
Administrative Agent shall have received a certificate of the secretary or
assistant secretary of each Borrower certifying, as applicable, that attached
thereto is a true and complete copy of the articles of incorporation or other
charter documents of such Borrower and all amendments thereto, certified as of
a recent date by the appropriate Governmental Authority in its jurisdiction of
incorporation; that attached thereto is a true and complete copy of the bylaws
of such Borrower as in effect on the date of such certification; that attached
thereto is a true and complete copy of resolutions duly adopted by the Board of
Directors of such Borrower, authorizing the borrowings contemplated hereunder
and the execution, delivery and performance of this Agreement and the other
Loan Documents to which it is a party; and as to the incumbency and genuineness
of the signature of each officer of such Borrower executing Loan Documents to
which such Borrower is a party.
(iii) Certificates of Good Standing. The Administrative
Agent shall have received certificates as of a recent date of the good standing
of each Borrower under the laws of their respective jurisdictions of
organization.
(iv) Accounts Designation Letter. The Accounts Designation
Letter to be delivered by the Borrowers pursuant to Section 2.2, dated as of
the Closing Date.
(v) Opinions of Counsel. The Administrative Agent shall have
received favorable opinions of counsel to the Borrowers addressed to the
Administrative Agent and Lenders with respect to the Borrowers and such other
Persons, the Loan Documents, the transactions contemplated
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thereby, regulatory matters and such other matters as the Administrative Agent
and the Lenders may reasonably request, reasonably satisfactory in form and
substance to the Administrative Agent and Lenders.
(vi) Tax Forms. The Administrative Agent shall have received
copies of the United States Internal Revenue Service forms required by Section
3.10 hereof.
(c) Collateral.
(i) Filings and Recordings. All filings that are necessary
to perfect the Liens of the Administrative Agent and the Lenders in the
Collateral described in the Security Documents shall have been filed for
recording in all appropriate jurisdictions, including, without limitation, the
United Kingdom and Germany and the Administrative Agent shall have received
evidence satisfactory to the Administrative Agent that such security interests
constitute valid and perfected first priority Liens therein.
(ii) Pledged Stock. The Administrative Agent shall have
received original stock certificates evidencing the capital stock pledged
pursuant to the Pledge Agreement, together with an appropriate undated stock
power and irrevocable proxy for each certificate duly executed in blank by the
registered owner thereof.
(iii) UCC Lien Searches. The Borrowers shall have delivered
the results of a Lien search of all filings made against such Borrowers under
the Uniform Commercial Code as in effect in those jurisdictions as required by
the Administrative Agent, indicating among other things that their assets are
free and clear of any Lien except for Permitted Liens.
(v) Insurance. The Administrative Agent shall have received
certificates of insurance and copies of insurance policies in the form required
under Section 7.3 and the Security Documents and otherwise in form and
substance reasonably satisfactory to the Administrative Agent.
(d) Consents; No Adverse Change.
(i) Governmental and Third Party Approvals. All necessary
approvals, authorizations and consents, if any be required, of any Person and
of all Governmental Authorities and courts having jurisdiction with respect to
the execution and delivery of this Agreement and the other Loan Documents shall
have been obtained.
(ii) Permits and Licenses. All permits and licenses,
including permits and licenses required under Applicable Laws, necessary to the
conduct of business by the Borrowers and their Subsidiaries shall have been
obtained.
(iii) No Injunction, Etc. No action, proceeding,
investigation, regulation or legislation shall have been instituted, threatened
or proposed before any Governmental Authority to enjoin, restrain, or prohibit,
or to obtain substantial damages in respect of, or which is related to or
arises out of this Agreement or the other Loan Documents or the consummation of
the transactions
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contemplated hereby or thereby, or which, in the Administrative Agent's
reasonable discretion, would make it inadvisable to consummate the transactions
contemplated by this Agreement and such other Loan Documents.
(iv) No Material Adverse Change. Since December 27, 1996,
there shall not have occurred any material adverse change in the condition
(financial or otherwise), operations, properties, business or prospects of AHL
or any of its Subsidiaries, taken as a whole, or any event or condition that
has had or could be reasonably expected to have a Material Adverse Effect.
(v) No Event of Default. No Default or Event of Default
shall have occurred and be continuing.
(e) Financial Matters.
(i) Financial Statements. The Administrative Agent and each
Lender shall have received recent annual and interim financial statements and
other financial information with respect to AHL and its Subsidiaries prepared
in accordance with GAAP. Without limitation of the foregoing, the
Administrative Agent and each Lender shall have received audited financial
statements for AHL and its Subsidiaries for the Fiscal Year ended December 27,
1996 and unaudited financial statements for AHL and its Subsidiaries for the
three month period ended March 31, 1997.
(ii) Financial Condition Certificate. AHL, on behalf of the
Borrowers, shall have delivered to the Administrative Agent a certificate, in
form and substance satisfactory to the Administrative Agent, and certified as
accurate in all material respects by the chief executive officer or chief
financial officer of AHL, to the effect that (A) attached thereto is a pro
forma balance sheet of AHL and its Subsidiaries setting forth on a pro forma
basis the financial condition of AHL and its Subsidiaries on a Consolidated
basis as of that date, reflecting on a pro forma basis the effect of the
transactions contemplated herein, and evidencing compliance on a pro forma
basis with the covenants contained in Articles VIII and IX hereof, (B) the
financial projections previously delivered to the Administrative Agent
represent the good faith opinions of the Borrowers and senior management
thereof as to the projected results contained therein, and (C) that AHL and
each of its Subsidiaries singly (i) has capital sufficient to carry on its
business and transactions and all business and transactions in which it is
about to engage and is able to pay its debts as they mature, (ii) owns property
having a value, both at fair valuation and at present fair saleable value,
greater than the amount required to pay its probable liabilities (including
contingencies and its liabilities with respect to the Obligations), and (iii)
does not believe that it will incur debts or liabilities beyond its ability to
pay such debts or liabilities as they mature.
(f) Miscellaneous.
(i) Refinanced Facilities. The Administrative Agent shall
have received evidence, in form and substance reasonably satisfactory to the
Administrative Agent, that with proceeds of the Loans the obligations of AHL
and its Subsidiaries evidenced by the Loan Agreement dated December 22, 1995
between the Borrowers (other than AHL) and First Union have been fully paid,
satisfied and discharged.
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(ii) Notice of Borrowing. The Administrative Agent shall
have received written instructions from AHL, on behalf of the Borrowers,
directing the payment of any proceeds of Loans made under this Agreement that
are to be made on the Closing Date.
(iii) Proceedings and Documents. All opinions, certificates
and other instruments and all proceedings in connection with the transactions
contemplated by this Agreement shall be reasonably satisfactory in form and
substance to the Lenders. The Lenders shall have received copies of all other
instruments and other evidence as the Lenders may reasonably request, in form
and substance reasonably satisfactory to the Lenders, with respect to the
transactions contemplated by this Agreement and the taking of all actions in
connection therewith.
(iv) Due Diligence and Other Documents. The Borrowers shall
have delivered to the Administrative Agent such other documents, certificates
and opinions as the Administrative Agent reasonably request.
SECTION 4.3. Conditions to All Loans. The obligations of the Lenders
to make any Loan is subject to the satisfaction of the following conditions
precedent on the relevant borrowing date:
(i) Continuation of Representations and Warranties. The
representations and warranties contained in Article V shall be true and correct
on and as of such borrowing date with the same effect as if made on and as of
such date, except to the extent that such representations and warranties relate
solely to an earlier date, in which case such representations and warranties
shall have been true and correct on and as of such earlier date.
(ii) No Existing Default. No Default or Event of Default
shall have occurred and be continuing hereunder on the borrowing date with
respect to such Loan or after giving effect to the Loans to be made on such
date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BORROWERS
SECTION 5.1. Representations and Warranties. To induce the
Administrative Agent and the Lenders to enter into this Agreement and to induce
the Lenders and the European Facility Lender to make the Loans, the Borrowers
hereby jointly and severally represent and warrant to the Administrative Agent,
the Lenders, and the European Facility Lender that:
(a) Organization; Power; Qualification. Each of AHL and its
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or formation, has the power and
authority to own its properties and to carry on its business as now being
conducted and is duly qualified and authorized to do business in each
jurisdiction where the failure to be so qualified or authorized could
reasonably be expected to have a Material Adverse Effect. The jurisdictions in
which AHL and its Subsidiaries are organized and qualified to do business are
described on Schedule 5.1(a).
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(b) Ownership. Each Subsidiary of AHL is listed on Schedule 5.1(b).
The capitalization of each of the Subsidiaries of AHL consists of the number of
shares, authorized, issued and outstanding, of such classes and series, with or
without par value, described on Schedule 5.1(b). All outstanding shares have
been duly authorized and validly issued and are fully paid and nonassessable.
The shareholders of each of the Subsidiaries of AHL and the number of shares
owned by each are described on Schedule 5. 1 (b). There are no outstanding
stock purchase warrants, subscriptions, options, securities, instruments or
other rights of any type or nature whatsoever, which are convertible into,
exchangeable for or otherwise provide for or permit the issuance of capital
stock of any Subsidiaries of AHL, except as described on Schedule 5.1(b).
(c) Authorization of Agreement, Loan Documents and Borrowing. Each of
AHL and its Subsidiaries has the right, power and authority and has taken all
necessary corporate and other action to authorize the execution, delivery and
performance of this Agreement and each of the other Loan Documents to which it
is a party in accordance with their respective terms. This Agreement and each
of the other Loan Documents have been duly executed and delivered by the duly
authorized officers of AHL and each of its Subsidiaries party thereto and each
such document constitutes the legal, valid and binding obligation of AHL or its
Subsidiary party thereto, enforceable in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors' rights in general and the
availability of equitable remedies.
(d) Compliance of Agreement, Loan Documents and Borrowing with Laws,
Etc. The execution, delivery and performance by AHL and each of its
Subsidiaries of the Loan Documents to which each such Person is a party in
accordance with their respective terms, the borrowings hereunder and the
transactions contemplated hereby do not and will not, by the passage of time,
the giving of notice or otherwise, (i) except as set forth on Schedule 5.1(d)
hereto, require any Governmental Approval or violate any Applicable Law
relating to AHL or any of its Subsidiaries, (ii) conflict with, result in a
breach of or constitute a default under the articles of incorporation, bylaws
or other organizational documents of AHL or any of its Subsidiaries or any
Material Contract to which such Person is a party or by which any of its
properties may be bound or any Governmental Approval relating to such Person or
(iii) result in or require the creation or imposition of any Lien upon or with
respect to any material property now owned or hereafter acquired by such Person
other than Liens arising under the Loan Documents.
(e) Compliance with Law; Governmental Approvals. Each of AHL and its
Subsidiaries (i) has all Governmental Approvals required by any Applicable Law
material to the conduct of its business and (ii) is in compliance with each
such Governmental Approval applicable to it and in compliance with all other
Applicable Laws relating to it or any of its respective properties, except
where the failure to be in such compliance could not reasonably be expected to
have a Material Adverse Effect. Each such Governmental Approval is in full
force and effect, is final and not subject to review on appeal and is not the
subject of any pending or, to the best knowledge of the Borrowers, threatened
attack by direct or collateral proceeding.
(f) Tax Returns and Payments. Each of AHL and its Subsidiaries has
duly filed or caused to be filed all federal, state, local and other tax
returns required by Applicable Law to be filed, and
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has paid, or made adequate provision for the payment of, all federal, state,
local and other taxes, assessments and governmental charges or levies upon it
and its property, income, profits and assets which are due and payable, except
where the payment of such tax is being disputed in good faith and adequate
reserves have been established in accordance with GAAP. No Governmental
Authority has asserted any Lien or other claim against AHL or any Subsidiary
thereof with respect to material unpaid taxes which has not been discharged or
resolved or is not being contested in good faith. The charges, accruals and
reserves on the books of AHL and any of its Subsidiaries in respect of federal,
state, local and other taxes for all Fiscal Years and portions thereof are in
the judgment of the Borrowers adequate, and the Borrowers do not anticipate any
additional material taxes or assessments for any of such years.
(g) Environmental Matters. The properties of AHL and its Subsidiaries
are in compliance in all material respects with all applicable Environmental
Laws. There is no contamination at, under or about such properties or such
operations which could interfere in any material respect with the continued
operation of such properties or, except as set forth on Schedule 5.1(g), impair
in any material respect the fair saleable value thereof. Neither AHL nor any of
its Subsidiaries has received any written notice of material violation, alleged
violation, non-compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with regard to any
of its properties or the operations conducted in connection therewith, nor does
AHL nor any of its Subsidiaries have knowledge or reason to believe that any
such notice will be received or is being threatened.
(h) ERISA.
(i) Neither any Borrower nor any ERISA Affiliate maintains
or contributes to, or has any obligation under, any Employee Benefit Plans
other than those identified on Schedule 5.1(h);
(ii) Each Borrower and each ERISA Affiliate is in material
compliance with all applicable provisions of ERISA and all other laws
applicable to any Employee Benefit Plans and the regulations and published
interpretations thereunder with respect to all Employee Benefit Plans except
for any required amendments for which the remedial amendment period as defined
in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has been
determined by the Internal Revenue Service to be so qualified, and each trust
related to such plan has been determined to be exempt under Section 501(a) of
the Code. Each such Employee Benefit Plan has been operated in a manner to
preserve such qualification. No liability has been incurred by any Borrower or
any ERISA Affiliate which remains unsatisfied for any taxes or penalties with
respect to any Employee Benefit Plan or any Multiemployer Plan;
(iii) No Pension Plan has been terminated, nor has any
accumulated funding deficiency (as defined in Section 412 of the Code) been
incurred (without regard to any waiver granted under Section 412 of the Code),
nor has any funding waiver from the Internal Revenue Service been received or
requested with respect to any Pension Plan, nor has any Borrower or any ERISA
Affiliate failed to make any contributions or to pay any amounts due and owing
as required by Section 412 of the Code, Section 302 of ERISA or the terms of
any Pension Plan prior to the due
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dates of such contributions under Section 412 of the Code or Section 302 of
ERISA, nor has there been any event requiring any disclosure under Section
4041(c)(3)(C) or 4063(a) of ERISA with respect to any Pension Plan;
(iv) Neither any Borrower nor any ERISA Affiliate has: (A)
engaged in a nonexempt prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Code; (B) incurred any liability to the PBGC which
remains outstanding other than the payment of premiums and there are no premium
payments which are due and unpaid; (C) failed to make a required contribution
or payment to a Multiemployer Plan; or (D) failed to make a required
installment or other required payment under Section 412 of the Code;
(v) The execution and delivery by Borrowers of this
Agreement and the borrowings hereunder will not involve any prohibited
transaction under ERISA or the Code;
(vi) No Termination Event has occurred or is reasonably
expected to occur; and
(vii) No material proceeding, claim, lawsuit and/or
investigation is existing or, to the best knowledge of any Borrower after due
inquiry, threatened concerning or involving any (A) employee welfare benefit
plan (as defined in Section 3(1) of ERISA) maintained or contributed to by any
Borrower or any ERISA Affiliate, (B) Pension Plan or (C) Multiemployer Plan.
(i) Margin Stock. Neither AHL nor any Subsidiary thereof is engaged
principally or as one of its significant activities in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" (as each such term is defined or used in Regulations G and U of the
Board of Governors of the Federal Reserve System). No part of the proceeds of
any of the Loans will be used for purchasing or carrying margin stock or for
any purpose which violates, or which would be inconsistent with, the provisions
of Regulation G, T, U or X of such Board of Governors.
(j) Government Regulation. Neither AHL nor any Subsidiary thereof is
an "investment company" or a company "controlled" by an "investment company"
(as each such term is defined or used in the Investment Company Act of 1940, as
amended) and neither AHL nor any Subsidiary thereof is, or after giving effect
to any Loan will be, a "Holding Company" or a "Subsidiary Company" of a
"Holding Company" or an "Affiliate" of a "Holding Company" within the
respective meanings of each of the quoted terms of the Public Utility Holding
Company Act of 1935 as amended, or any other Applicable Law which materially
limits its ability to incur or consummate the transactions contemplated hereby.
(k) Patents, Copyrights and Trademarks. Each of AHL and its
Subsidiaries owns or possesses all patent, copyright and trademark rights which
are material to the conduct of its business without infringing upon any validly
asserted rights of others. No event has occurred which permits, or after notice
or lapse of time or both would permit, the revocation or termination of any
such rights. Except as set forth on Schedule 5.1(k), neither AHL nor any of its
Subsidiaries has been threatened with any litigation regarding patents,
copyrights or trademarks that would present a material impediment to the
business of AHL and its Subsidiaries, taken as a whole.
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(l) Material Contracts. Schedule 5.1(1) sets forth a complete and
accurate list of all Material Contracts of AHL and its Subsidiaries in effect
as of the Closing Date not listed on any other Schedule hereto; other than as
set forth in Schedule 5.1(1), each of AHL and any Subsidiary thereof party
thereto has performed all of its obligations under such Material Contracts and,
to the best knowledge of the Borrowers, each other party thereto is in
compliance with each such Material Contract, and each such Material Contract
is, and after giving effect to the consummation of the transactions
contemplated by the Loan Documents will be, in full force and effect in
accordance with the terms thereof. AHL and its Subsidiaries have delivered to
the Administrative Agent a true and complete copy of each Material Contract
required to be listed on Schedule 5.1(1).
(m) Employee Relations. Each of AHL and its Subsidiaries is not,
except as set forth on Schedule 5.1(m), party to any collective bargaining
agreement nor has any labor union been recognized as the representative of its
employees. AHL knows of no pending, threatened or contemplated strikes, work
stoppage or other collective labor disputes involving its employees or those of
its Subsidiaries.
(n) Burdensome Provisions. Neither AHL nor any Subsidiary thereof is a
party to any indenture, agreement, lease or other instrument, or subject to any
corporate or partnership restriction, Governmental Approval or Applicable Law
which is so unusual or burdensome as in the foreseeable future could be
reasonably expected to have a Material Adverse Effect. AHL and its Subsidiaries
do not presently anticipate that future expenditures needed to meet the
provisions of any statutes, orders, rules or regulations of a Governmental
Authority will be so burdensome as to have a Material Adverse Effect.
(o) Financial Statements. All balance sheets, statements of income,
retained earnings, stockholders' equity and cash flows, and all other financial
information of AHL and its Subsidiaries which have been furnished by the
Borrowers to the Administrative Agent and the Lenders for the purposes of or in
connection with this Agreement, including without limitation the financial
statements described in Section 4.2 (e), have been prepared in accordance with
GAAP consistently applied (except to the extent pro forma statements are based
upon reasonable estimates in accordance with Section 4.2(e)(ii)) throughout the
periods involved and present fairly in all material respects the matters
reflected therein subject, in the case of unaudited statements, to changes
resulting from normal year-end audit adjustments and items that would be
disclosed in footnotes to the audited statements. As of the Closing Date,
except as set forth on Schedule 5.1(o), neither AHL nor any of its Subsidiaries
has any contingent liability or liability for taxes, long-term leases or
unusual forward or long-term commitments which are not reflected in the
financial statements described above or in the notes thereto.
(p) No Material Adverse Change. Since December 27, 1996, there has
been no material adverse change in the condition (financial or otherwise),
operations, properties, business or prospects of AHL and its Subsidiaries,
taken as a whole, including any event or condition that has had or is
reasonably likely to have a Material Adverse Effect.
(q) Solvency. As of the Closing Date and after giving effect to each
Loan made hereunder, each of AHL and each of its Subsidiaries will be Solvent.
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(r) Titles to Properties. Each of AHL and its Subsidiaries has such
title to the real property owned or leased by it as is material to the conduct
of its business and good and marketable title to all of its personal property
material to its business as presently conducted, except such property as has
been disposed of by AHL or its Subsidiaries subsequent to such date which
dispositions have been in the ordinary course of business or as otherwise
expressly permitted hereunder. Schedule 5.1(r) hereto sets forth the address of
all real property owned or leased by a Borrower.
(s) Liens. None of the properties and assets of AHL or any Subsidiary
thereof is subject to any Lien, except in each case Permitted Liens. No
financing statement under the Uniform Commercial Code of any state which names
AHL or any Subsidiary thereof or any of their respective trade names or
divisions as debtor and which has not been terminated, has been filed in any
state or other jurisdiction and neither AHL nor any Subsidiary thereof has
signed any such financing statement or any security agreement authorizing any
secured party thereunder to file any such financing statement, except to
perfect Permitted Liens.
(t) Debt and Contingent Obligations. Schedule 5.1(t) is a complete and
correct listing of all Debt and Contingent Obligations of AHL and its
Subsidiaries. Each of AHL and its Subsidiaries have performed and are in
material compliance with all of the terms of such Debt and Contingent
Obligations and all instruments and agreements relating thereto, and no default
or event of default, or event or condition which with notice or lapse of time
or both would constitute such a default or event of default on the part of AHL
or its Subsidiaries exists with respect to any such Debt or Contingent
Obligation.
(u) Litigation. Except as set forth on Schedule 5.1(u), as of the
Closing Date there are no actions, suits or proceedings pending nor, to the
knowledge of the Borrowers, threatened against or in any other way relating
adversely to or adversely affecting AHL or any Subsidiary thereof or any of
their respective properties in any court or before any arbitrator of any kind
or before or by any Governmental Authority which, if adversely determined, is
reasonably likely to have a Material Adverse Effect.
(v) Franchise and License Fees. AHL and each of its Subsidiaries have
paid all material franchise, license or other fees and charges which have
become due pursuant to any Governmental Approval in respect of its business and
has made appropriate provision as is required by GAAP for any such fees and
charges which have accrued.
(w) Absence of Defaults. No event has occurred or is continuing which
constitutes a Default or an Event of Default, or which constitutes, or which
with the passage of time or giving of notice or both would constitute, a
default or event of default by AHL or any Subsidiary thereof under any Material
Contract or judgment, decree or order to which AHL or its Subsidiaries is a
party or by which AHL or its Subsidiaries or any of their respective properties
may be bound.
(x) Accuracy and Completeness of Information. All written information,
reports and other papers and data produced by or on behalf of AHL or any
Subsidiary thereof and furnished to the Lenders were, at the time the same were
so furnished, complete and correct in all material respects.
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No document furnished or written statement made to the Administrative Agent or
the Lenders by AHL or any Subsidiary thereof in connection with the
negotiation, preparation or execution of this Agreement or any of the Loan
Documents contains any untrue statement of a fact material to the
creditworthiness of AHL or its Subsidiaries or omits to state a material fact
necessary in order to make the statements contained therein not misleading. AHL
is not aware of any facts which it has not disclosed in writing to the
Administrative Agent having a Material Adverse Effect, or insofar as AHL can
now foresee, could reasonably be expected to have a Material Adverse Effect.
SECTION 5.2. Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this Article V and all
representations and warranties contained in any certificate or in any of the
Loan Documents (including without limitation, any such representation or
warranty made in or in connection with any amendment thereto) shall constitute
representations and warranties made under this Agreement. All representations
and warranties made under this Agreement shall be made or deemed to be made at
and as of the Closing Date, shall survive the Closing Date and shall not be
waived by the execution and delivery of this Agreement, any investigation made
by or on behalf of the Lenders or any borrowing hereunder.
ARTICLE VI
FINANCIAL INFORMATION AND NOTICES
Until all the Obligations have been paid and satisfied in full (other
than any Obligations that survive the termination of this Agreement pursuant to
Section 12.13) and the Commitments terminated, unless consent has been obtained
in the manner set forth in Section 12.9 hereof, the Borrowers will furnish or
cause to be furnished to the Administrative Agent and each Lender at their
respective addresses set forth in Section 12.1 hereof, or such other address as
may be designated by such Administrative Agent or Lenders from time to time:
SECTION 6.1. Financial Statements and Projections.
(a) Quarterly Financial Statements. As soon as practicable and in any
event within forty-five (45) days after the end of each fiscal quarter, an
unaudited Consolidated balance sheet of AHL and its Subsidiaries as of the
close of such fiscal quarter and unaudited Consolidated statements of income,
retained earnings and cash flows for the fiscal quarter then ended and that
portion of the Fiscal Year then ended, including the notes thereto, all in
reasonable detail setting forth in comparative form the corresponding figures
for the preceding Fiscal Year for the portion of the Fiscal Year then ended and
prepared by AHL in accordance with GAAP, and certified by the chief financial
officer of AHL to present fairly in all material respects the financial
condition of AHL and its Subsidiaries as of their respective dates and the
results of operations of AHL and its Subsidiaries for the respective periods
then ended.
(b) Annual Financial Statements. As soon as practicable and in any
event within ninety (90) days after the end of each Fiscal Year, an audited
Consolidated balance sheet of AHL and its Subsidiaries as of the close of such
Fiscal Year and audited Consolidated statements of income,
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retained earnings and cash flows for the Fiscal Year then ended, including the
notes thereto, all in reasonable detail setting forth in comparative form the
corresponding figures for the preceding Fiscal Year and prepared by an
independent certified public accounting firm of nationally recognized standing
in accordance with GAAP, and accompanied by a report thereon by such certified
public accountants that is not qualified with respect to scope limitations
imposed by AHL or any of its Subsidiaries or with respect to accounting
principles followed by AHL or any of its Subsidiaries not in accordance with
GAAP.
(c) Annual Business Plan and Financial Projections. As soon as
practicable and in any event within thirty (30) days after the beginning of
each Fiscal Year, a business plan of AHL and its Subsidiaries for the ensuing
four fiscal quarters, such plan to include, on a quarterly basis, the
following, prepared in GAAP format: a quarterly operating and capital budget, a
projected income statement, statement of cash flows and balance sheet and a
report, if such a report is requested by the Administrative Agent from time to
time, containing management's discussion and analysis of such projections (such
business plan and projections, the "Projections"), accompanied by a certificate
from the chief financial officer of AHL to the effect that, to the best of such
officer's knowledge, the Projections are good faith estimates of the financial
condition and operations of AHL and its Subsidiaries for such four quarter
period.
SECTION 6.2. Officer's Compliance Certificate. At each time financial
statements are delivered pursuant to Sections 6.1(a) or (b), a certificate of
the chief financial officer of AHL in the form of Exhibit D attached hereto (an
"Officer's Compliance Certificate"):
(a) stating that such officers have reviewed such financial statements
and such statements fairly present the financial condition of AHL and its
Subsidiaries as of the dates indicated and the results of their operations and
cash flows for the periods indicated;
(b) stating that to such officer's knowledge, based on a reasonable
examination, no Default or Event of Default exists, or, if such is not the
case, specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the Borrowers
with respect to such Default or Event of Default; and
(c) setting forth as at the end of such fiscal quarter or Fiscal Year,
as the case may be, the calculations required to establish whether or not AHL
and its Subsidiaries were in compliance with the financial covenants set forth
in Article VIII hereof as at the end of each respective period, and the
calculation of the Applicable Margin pursuant to Section 3.1(d) as at the end
of each respective period.
SECTION 6.3. Other Reports.
(a) Promptly upon receipt thereof, copies of any management report and
any management responses thereto submitted to any Borrower or its Board of
Directors by its independent public accountants in connection with their
auditing function;
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(b) Such other information regarding the operations, business affairs
and financial condition of AHL or any of its Subsidiaries as the Administrative
Agent or the Required Lenders may reasonably request; and
(c) All filings by, or in connection with and received by, AHL, with
or from the SEC (other than filings made by individuals and not involving a
Change in Control on Forms 3 or 4 pursuant to Section 16 of the Exchange Act)
and all notices and proxy and other information provided by AHL to its
shareholders generally.
SECTION 6.4. Notice of Litigation and Other Matters . Prompt (but in
no event later than three (3) days after an officer of any Borrower obtains
knowledge thereof) telephonic and written notice of:
(a) the commencement of all material proceedings and investigations by
or before any Governmental Authority and all material actions and proceedings
in any court or before any arbitrator against or involving AHL or any
Subsidiary thereof or any of their respective properties, assets or businesses;
(b) any notice of any material violation received by AHL or any
Subsidiary thereof from any Governmental Authority, including without
limitation, any notice of a material violation of Environmental Laws;
(c) any material labor controversy that has resulted in, or could
reasonably be expected to result in, a strike or other work action against AHL
or any Subsidiary thereof;
(d) any attachment, judgment, lien, levy or order exceeding the
Material Judgment Amount that may be assessed against or threatened against AHL
or any of its Subsidiaries;
(e) any Default or Event of Default, or any event which constitutes or
which with the passage of time or giving of notice or both would constitute a
default or event of default under any Material Contract to which AHL or any of
its Subsidiaries is a party or by which AHL or any Subsidiary thereof or any of
their respective properties may be bound;
(f) (i) the failure of any Borrower or any ERISA Affiliate to make a
required installment or payment under Section 302 of ERISA or Section 412 of
the Code by the due date, (ii) any Termination Event or "prohibited
transaction," as such term is defined in Section 406 of ERISA or Section 4975
of the Code, in connection with any Employee Benefit Plan or any trust created
thereunder, along with a description of the nature thereof, what action such
Borrower has taken, is taking or proposes to take with respect thereto and,
when known, any action taken or threatened by the Internal Revenue Service, the
Department of Labor or the PBGC with respect thereto, (iii) all notices
received by any Borrower or any ERISA Affiliate of the PBGC's intent to
terminate any Pension Plan or to have a trustee appointed to administer any
Pension Plan, (iv) all notices received by any Borrower or any ERISA Affiliate
from a Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA, (v) any Borrower
obtaining knowledge or reason to know that AHL or any ERISA Affiliate has filed
or intends to file
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a notice of intent to terminate any Pension Plan under a distress termination
within the meaning of Section 4041(c) of ERISA, and (vi) the requirement to
file any notice with the Internal Revenue Service, Department of Labor, PBGC or
any plan participant, beneficiary or alternate payee required under Sections
101(d), 302(f)(4), 303 and 307 of ERISA or under Section 401(a)(29) of the Code
with respect to any Employee Benefit Plan of any Borrower or any ERISA
Affiliate; or
(g) any event which makes any of the representations set forth in
Section 5.1 inaccurate in any material respect.
SECTION 6.5. Accuracy of Information. All written information,
reports, statements and other papers and data furnished by or on behalf of any
Borrower to any Agent or Lender whether pursuant to this Article VI or any
other provision of this Agreement, or any of the Security Documents, shall be,
at the time the same is so furnished, complete and correct in all material
respects based on the applicable Borrower's knowledge thereof.
ARTICLE VII
AFFIRMATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full
(other than Obligations that survive the termination of this Agreement pursuant
to Section 12.13) and the Commitments terminated, unless consent has been
obtained in the manner provided for in Section 12.9, AHL and each Borrower
will, and will cause each of its Subsidiaries to:
SECTION 7.1. Preservation of Corporate Existence and Related Matters.
Except as permitted by Section 9.5, preserve and maintain its separate
corporate existence and all rights, franchises, licenses and privileges
material to the conduct of its business, and qualify and remain qualified as a
foreign corporation and authorized to do business in each jurisdiction where
its business requires such qualification and authorization, if failure to
qualify or to remain so qualified would have or could reasonably be expected to
have a Material Adverse Effect.
SECTION 7.2. Maintenance of Property. Protect and preserve all
properties useful in and material to its business, including material
copyrights, patents, trade names and trademarks; maintain in good working order
and condition (reasonable wear and tear excepted) all buildings, equipment and
other tangible real and personal property useful in and material to its
business; and from time to time make or cause to be made all renewals,
replacements and additions to such property necessary in the reasonable
judgement of such Borrower for the conduct of its business, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times.
SECTION 7.3. Insurance. In addition to the requirements set forth in
the Security Documents, maintain insurance with financially sound and reputable
insurance companies against such risks and in such amounts as are customarily
maintained by similar businesses and as may be required by Applicable Law, and
on the Closing Date and from time to time thereafter deliver to the
Administrative Agent upon its request a detailed list of the insurance then in
effect, stating the names
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of the insurance companies, the amounts and rates of the insurance, the dates
of the expiration thereof and the properties and risks covered thereby.
SECTION 7.4. Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete in all material respects) as may be required or as may be
necessary to permit the preparation of financial statements in accordance with
GAAP and in compliance with the regulations of any Governmental Authority
having jurisdiction over it or any of its properties.
SECTION 7.5. Payment and Performance of Obligations. Pay and perform
all Obligations under this Agreement and the other Loan Documents and pay or
perform (a) all taxes, assessments and other governmental charges that may be
levied or assessed upon it or any of its property, and (b) all other
indebtedness, obligations and liabilities in accordance with customary trade
practices; provided, that such Borrower and its Subsidiaries may contest any
item described in clauses (a) and (b) hereof in good faith so long as adequate
reserves are maintained with respect thereto in accordance with GAAP.
SECTION 7.6. Compliance With Laws and Approvals. Observe and remain
in material compliance with all Applicable Laws and maintain in full force and
effect all material Governmental Approvals, in each case to the extent that
failure to so observe or remain in material compliance could reasonably be
expected to have a Material Adverse Effect.
SECTION 7.7. Environmental Laws. In addition to and without limiting
the generality of Section 7.6, (a) comply in all material respects with, and
use its best efforts to ensure such compliance by all of its tenants and
subtenants, if any, with, all applicable Environmental Laws and obtain and
comply with and maintain, and use its best efforts to ensure that all of its
tenants and subtenants obtain and comply with and maintain, any and all
licenses, approvals, notifications, registrations or permits required by
applicable Environmental Laws; (b) conduct and complete all investigations,
studies, sampling and testing, and all remedial, removal and other actions
required under Environmental Laws, and timely comply with all lawful orders and
directives of any Governmental Authority regarding Environmental Laws; and (c)
defend, indemnify and hold harmless the Administrative Agent and the Lenders,
and their respective parents, Subsidiaries, Affiliates, employees, agents,
officers and directors, from and against any claims, demands, penalties, fines,
liabilities, settlements, damages, costs and expenses of whatever kind or
nature known or unknown, contingent or otherwise, arising out of, or in any way
relating to the violation of, noncompliance with or liability under any
Environmental Laws applicable to the operations of such Borrower or its
subsidiaries, or any orders, requirements or demands of Governmental
Authorities related thereto, including, without limitation, reasonable
attorney's and consultant's fees, investigation and laboratory fees, response
costs, court costs and litigation expenses, except to the extent that any of
the foregoing arise out of or relate to the gross negligence or willful
misconduct of the party seeking indemnification therefor.
SECTION 7.8. Compliance with ERISA and the Code. In addition to and
without limiting the generality of Section 7.6, make timely payment of
contributions required to meet the minimum funding standards set forth in ERISA
or the Code with respect to any Employee Benefit Plan; not
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take any action or fail to take action the result of which could be a liability
to the PBGC or to a Multiemployer Plan; not participate in any prohibited
transaction that could result in any civil penalty under ERISA or tax under the
Code; furnish to the Administrative Agent upon the Administrative Agent's
request such additional information about any Employee Benefit Plan as may be
reasonably requested by the Administrative Agent; and operate each Employee
Benefit Plan in such a manner that such plan will not incur any tax liability
under Section 4980B of the Code or any liability to any qualified beneficiary
as defined in Section 4980B of the Code.
SECTION 7.9. Compliance With Agreements. Comply in all material
respects with each term, condition and provision of all leases, agreements and
other instruments entered into in the conduct of its business if noncompliance
would have or could reasonably be expected to have a Material Adverse Effect,
including, without limitation, any Material Contract; provided, that such
Borrower or Subsidiary may contest any such lease, agreement or other
instrument in good faith so long as adequate reserves are maintained in
accordance with GAAP.
SECTION 7.10. Conduct of Business. Engage only in businesses in
substantially the same fields as the businesses conducted on the Closing Date
and in lines of business reasonably related thereto.
SECTION 7.11. Visits and Inspections. Upon reasonable notice
therefrom and during normal business hours, permit representatives of any of
the Administrative Agent or Lenders, from time to time, to visit and inspect
its properties; inspect, audit and make extracts from its books, records and
files, including, but not limited to, management letters prepared by
independent accountants; and discuss with its principal officers, and its
independent accountants, its business, assets, liabilities, financial
condition, results of operations and business prospects.
SECTION 7.12. Subsidiaries. Unless a new Subsidiary is, as a part of
an acquisition transaction, merged upon the consummation thereof into one of
the Borrowers with such Borrower being the surviving entity, then the Borrowers
shall cause each new Subsidiary that is a Material Subsidiary, to cause to be
executed and delivered to the Administrative Agent: (a) a Joinder Agreement and
the documents referred to therein, (b) the supplement substantially in the form
attached to the Security Agreement, (c) the supplement substantially in the
form attached to the Pledge Agreement, or if the owner of such Subsidiary is
not AHL, a pledge agreement substantially in the form of the Pledge Agreement
executed by such owner with such modifications thereto as requested by the
Administrative Agent, (d) such other documents reasonably requested by the
Administrative Agent consistent with the terms of this Agreement which provide
that such Subsidiary shall become a Borrower hereunder bound by all of the
terms, covenants and agreements contained in the Loan Documents and that the
assets of such Subsidiary shall become Collateral for the Obligations and (e)
such other documents as the Administrative Agent shall reasonably request,
including without limitation, officers' certificates, financial statements,
opinions of counsel, board resolutions, charter documents, certificates of
existence and authority to do business and any other closing certificates and
documents described in Section 4.2.
SECTION 7.13. Further Assurances. Make, execute and deliver all such
additional and further acts, things, deeds and instruments as any Agent or
Lender may reasonably require to
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document and consummate the transactions contemplated hereby and to vest
completely in and insure each Agent and the Lenders their respective rights
under this Agreement, the Notes and the other Loan Documents.
ARTICLE VIII
FINANCIAL COVENANTS
Until all of the Obligations have been paid and satisfied (other than
Obligations that survive the termination of this Agreement pursuant to Section
12.13) in full and the Commitments terminated, unless consent has been obtained
in the manner set forth in Section 12.9 hereof, AHL and its Subsidiaries on a
Consolidated basis will not:
SECTION 8.1. Funded Debt to EBITDA. As of any fiscal quarter end,
permit the ratio of (a) Consolidated Funded Indebtedness of AHL and its
Subsidiaries as of such date to (b) Consolidated EBITDA of AHL and its
Subsidiaries for the period of four (4) consecutive fiscal quarters ending on
or immediately prior to such date to exceed 3.25 to 1.0.
SECTION 8.2. Interest Coverage Ratio. As of any fiscal quarter end,
permit the ratio of (a) (i) Net Income of AHL and its Subsidiaries for the
period of four (4) consecutive fiscal quarters ending on or immediately prior
to such date, plus (ii) income and franchise taxes paid in cash during such
period, plus (iii) Interest Expense paid in cash during such period, plus (iv)
for the fiscal quarters ending on each of June 30, September 30, and December
31, 1997 and March 31 and June 30, 1998, the Special Accruals, plus (v) the
Reserve Increase during the period to (b) Interest Expense for such period, to
be less than 2.5 to 1.
SECTION 8.3. Current Ratio. As of any fiscal quarter end, permit the
ratio of Current Assets to Current Liabilities to be less than 1.5 to 1.
SECTION 8.4. Capitalization Ratio. At any date, permit the ratio of
Funded Indebtedness to Total Capitalization to be more than .5 to 1.
ARTICLE IX.
NEGATIVE COVENANTS
Until all of the Obligations have been paid and satisfied in full
(other than Obligations that survive termination of this Agreement pursuant to
Section 12.13) and the Commitments terminated, unless consent has been obtained
in the manner set forth in Section 12.9 hereof, AHL will not and will not
permit any of its Subsidiaries to:
SECTION 9.1. Limitations on Debt. Create, incur, assume or suffer to
exist any Debt except (a) the Obligations, (b) Debt incurred in connection with
a Hedging Agreement with a counterparty
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and upon terms and conditions reasonably satisfactory to the Administrative
Agent, (c) existing Debt set forth on Schedule 9.1, (d) Debt consisting of
Contingent Obligations permitted by Section 9.2, (e) Debt of any Borrower to
any other Borrower, but only if such Debt is subordinated to the Obligations
pursuant to the terms and conditions of the Intercompany Subordination
Agreement, (f) Debt constituting trade payables and accruals arising in the
ordinary course of business of AHL and its Subsidiaries, (g) Debt for which any
Person acquired by AHL in a transaction permitted by Section 9.4(g) is
obligated, but only if such Debt has as its sole obligor such acquired Person,
(h) purchase money Debt of up to $5,000,000 in the aggregate at any time
outstanding and incurred in connection with a purchase or acquisition permitted
by Section 9.4(g), and (i) purchase money Debt and Capital Leases secured only
by an interest in the property being acquired, but only (x) if the amount of
such purchase money Debt and the amount of such Capital Leases attributable to
principal, when aggregated with all other purchase money Debt incurred and the
principal amounts of Capital Leases entered into by AHL or any of its
Subsidiaries pursuant to this subsection 9.1(i) during the current Fiscal Year,
does not exceed $1,500,000 in total, and (y) if the amount of such Capital
Leases attributable to principal, when aggregated with all principal amounts of
Capital Leases entered into by AHL or any of its Subsidiaries pursuant to this
subsection 9.1(i) during the current Fiscal Year, does not exceed $ 1,000,000
in total.
SECTION 9.2. Limitations on Contingent Obligations. Create, incur,
assume or suffer to exist any Contingent Obligations except for (i) Contingent
Obligations comprised of guaranties or other support of or for Debt, leases,
obligations, and undertakings permitted to any Borrower or any Subsidiary by
this Agreement and (ii) Contingent Obligations in favor of the Administrative
Agent for the benefit of the Administrative Agent and the Lenders.
SECTION 9.3. Limitations on Liens. Create, incur, assume or suffer to
exist, any Lien on or with respect to any of its assets or properties
(including shares of capital stock), real or personal, whether now owned or
hereafter acquired, except Permitted Liens.
SECTION 9.4. Limitations on Loans, Advances, Investments and
Acquisitions. Purchase, own, invest in or otherwise acquire, directly or
indirectly, any capital stock, interests in any partnership or joint venture,
evidence of Debt or other obligation or security, substantially all or a
material portion of the business or assets of any other Person or any other
investment or interest whatsoever in any other Person; or make or permit to
exist, directly or indirectly, any loans, advances or extensions of credit to,
or any investment in cash or by delivery of property in, any Person; or enter
into, directly or indirectly, any commitment or option in respect of the
foregoing except:
(a) investments in Wholly-Owned Subsidiaries, joint ventures or
minority interests existing on the Closing Date and the other existing loans,
advances and investments described on Schedule 9.4;
(b) investments in (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency
thereof maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than 120 days from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., (iii) certificates of
deposit maturing no more than
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120 days from the date of creation thereof issued by commercial banks
incorporated under the laws of the United States of America, each having
combined capital, surplus and undivided profits of not less than $500,000,000
and having a rating of "A" or better by a nationally recognized rating agency;
provided, that the aggregate amount invested in such certificates of deposit
shall not at any time exceed $5,000,000 for any one such certificate of deposit
and $10,000,000 for any one such bank, (iv) time deposits maturing no more than
30 days from the date of creation thereof with commercial banks or savings
banks or savings and loan associations each having membership either in the
Federal Deposit Insurance Corporation ("FDIC") or the deposits of which are
insured by the FDIC and in amounts not exceeding the maximum amounts of
insurance thereunder, or (v) money market mutual funds.
(c) capital contributions to and investments in Wholly-owned
Subsidiaries created or acquired after the Closing Date; provided, that such
Wholly-Owned Subsidiaries become Borrowers hereunder pursuant to the
requirements of Section 7.12 hereof;
(d) loans and advances to employees for reasonable and necessary
business and travel expenses in the ordinary course of business of AHL and its
Subsidiaries;
(e) deposits for utilities, security deposits, leases and similar
prepaid expenses incurred in the ordinary course of business;
(f) trade accounts created in the ordinary course of business;
(g) investments by AHL or any Subsidiary in the form of acquisitions
of all or substantially all of the business or a line of business (whether by
the acquisition of capital stock, assets or any combination thereof) of any
other Person so long as (i) the acquisition is of a company, business or
property in substantially the same fields of business as AHL or any Subsidiary
of AHL, (ii) no Default or Event of Default is in existence at the time of such
acquisition or would be created as a consequence of such acquisition, (iii) the
aggregate consideration for the acquisition does not exceed $5,000,000 and (iv)
the aggregate consideration paid by AHL and its Subsidiaries for all such
acquisitions during the Fiscal Year of the subject acquisition, together with
aggregate consideration for the acquisition, does not exceed $15,000,000; and
(h) such other investments by AHL or any Subsidiary in the form of
acquisitions of all or substantially all of the business or a line of business
(whether by the acquisition of capital stock, assets or any combination
thereof) of any other Person if approved by the Required Lenders, in their sole
and absolute discretion, in writing prior to such consummation.
SECTION 9.5. Limitations on Mergers and Liquidation. Merge,
consolidate or enter into any similar combination with any other Person or
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution) except (a) any Wholly-Owned Subsidiary of AHL may merge with AHL
or any other Wholly-Owned Subsidiary of AHL and (b) AHL or any Wholly-Owned
Subsidiary may merge with or into any other Person for the purpose of
consummating any acquisition permitted by Section 9.4 as long as AHL, in the
case of a merger by AHL, or, in the case of a merger by a Wholly-Owned
Subsidiary that is a Material Subsidiary, such Wholly-Owned Subsidiary is the
surviving
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Person or the surviving Person becomes a party to the Loan Documents as a
Borrower, and no Default or Event of Default shall have occurred before and
after giving effect to such merger.
SECTION 9.6 Limitations on Sale of Assets. Except for Contributed Real
Estate, convey, sell, lease, assign, transfer or otherwise dispose of any of its
property, business or assets (including, without limitation, the sale of any
receivables and leasehold interests and any sale-leaseback or similar
transaction), whether now owned or hereafter acquired except:
(a) the sale of inventory in the ordinary course of business;
(b) the sale of obsolete assets no longer used or usable in the
business of AHL or any of its Subsidiaries;
(c) the sale or discount without recourse of accounts receivable
arising in the ordinary course of business in connection with the compromise or
collection thereof;
(d) the transfer by any Subsidiary of any of its property to any
Borrower, or the transfer by AHL of any of its intellectual property to any
Borrower; or
(e) sales of assets in the ordinary course of business (i) in the
aggregate not producing in excess of $500,000 in Net Cash Proceeds in any Fiscal
Year and (iii) all of whose Net Cash Proceeds are applied towards replacement
property similar to the assets sold within one hundred and eighty (180) days
after consummation of the sale.
SECTION 9.7 Limitations on Dividends and Distributions. Declare or pay
any dividends upon any of its capital stock; purchase, redeem, retire or
otherwise acquire, directly or indirectly, any shares of its capital stock, or
make any distribution of cash, property or assets among the holders of shares of
its capital stock; or make any material change in its capital structure that
could reasonably be expected to have a Material Adverse Effect; provided that
(a) AHL or any Subsidiary may pay dividends in shares of its own capital stock,
(b) any Subsidiary of a Borrower may pay dividends or make other distributions
in respect of its capital stock to such Borrower, (c) any Subsidiary of a
Borrower may make payments on any Debt or other obligation owed to such Borrower
which Debt or other obligation is permitted hereunder and (d) AHL may purchase
restricted securities (as defined in Rule 144(a)(3) promulgated under the
Securities Act of 1933, as amended) issued by AHL in connection with
acquisitions consummated prior to the Closing Date or in connection with
acquisitions consummated in compliance with Section 9.4(g), in an aggregate
amount not to exceed $500,000 in any fiscal year; and (d) AHL may repurchase
shares of its capital stock for an employee benefit plan sponsored by AHL or one
of its subsidiaries so long as the total consideration paid in such repurchases
does not exceed $500,000 in any Fiscal Year.
SECTION 9.8 Transactions with Affiliates. Directly or indirectly: (a)
make any loan or advance to, or purchase or assume any note or other obligation
to or from, any of its officers, directors, shareholders or other Affiliates, or
to or from any member of the immediate family of any of its officers, directors,
shareholders or other Affiliates, or subcontract any operations to any of its
Affiliates, or (b) enter into, or be a party to, any transaction with any of its
Affiliates, except pursuant
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to the reasonable requirements of its business and upon fair and reasonable
terms that are no less favorable to it than it would obtain in a comparable
arm's length transaction with a Person not its Affiliate.
SECTION 9.9 Certain Accounting Changes. Change its Fiscal Year end, or
make any material change in its accounting treatment and reporting practices
except as required by GAAP.
SECTION 9.10 Licenses. Terminate any material Governmental Approval or
any Material Contract without the prior written consent of the Required Lenders
if such termination would have a Material Adverse Effect.
SECTION 9.11 Restrictive Agreements. Enter into (a) any agreement
providing for Debt of AHL or its Subsidiaries which contains any negative pledge
on assets (other than negative pledges on assets securing Capital Leases or
Purchase Money Debt permitted under Section 9) or any covenants materially more
restrictive than the provisions of Articles VII, VIII and IX hereof, or which
restricts, limits or otherwise encumbers its ability to incur Liens on or with
respect to any of its assets or properties other than the assets or properties
securing such Debt or (b) any agreement which shall restrict, limit or otherwise
encumber (by covenant or otherwise) the ability to make any payment to AHL or
any of its Subsidiaries, in the form of dividends, intercompany advances or
otherwise.
ARTICLE X
DEFAULT AND REMEDIES
SECTION 10.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
Governmental Authority or otherwise:
(a) Default in Payment of Principal of Loans. Any Borrower shall
default in any payment of principal of any Loan or Note when and as due (whether
at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. Any Borrower shall default for more than ten
(10) days past the due date (whether at maturity, by reason of acceleration or
otherwise) in the payment of interest on any Loan or Note or the payment of any
other Obligation.
(c) Misrepresentation. Any representation or warranty made or deemed to
be made by any Borrower or any of its Subsidiaries under this Agreement, any
Loan Document or any amendment hereto or thereto, shall at any time prove to
have been incorrect or misleading in any material respect when made or deemed
made, except to the extent that (i) an event or condition has occurred that
would cause a representation or warranty to be incorrect or misleading, (ii) the
occurrence of such event or condition and the representation or warranty to
which it relates has been previously disclosed in writing to the Administrative
Agent and the Lenders and (iii) the occurrence
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of such event or condition did not and will not have, and is not reasonably
expected to have, a Material Adverse Effect with respect to AHL or any of its
Subsidiaries.
(d) Default in Performance of Certain Covenants. Any Borrower shall
default in the performance or observance of any covenant or agreement contained
in Articles VIII or IX of this Agreement.
(e) Default in Performance of Other Covenants and Conditions. Any
Borrower or Subsidiary thereof shall default in the performance or observance of
any term, covenant, condition or agreement contained in this Agreement (other
than as specifically provided for otherwise in this Section 10.1) or any other
Loan Document and such default shall continue for a period of fifteen (15) days
after written notice thereof has been given to such Borrower or Subsidiary by
the Administrative Agent or knowledge thereof is gained by any officer of any
Borrower..
(f) Debt Cross-Default. AHL or any of its Subsidiaries other than a
Foreign Subsidiary shall (i) default in the payment of any Debt in an amount
exceeding $1,000,000 (or equivalent thereof in another currency) beyond the
period of grace, if any, provided in the instrument or agreement under which
such Debt was created; or (ii) default in the observance or performance of any
other agreement or condition relating to any Debt in an amount exceeding
$1,000,000 (or equivalent thereof in another currency) or contained in any
instrument or agreement evidencing, securing or relating thereto or any other
event shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such Debt (or a
trustee or agent on behalf of such holder or holders) to cause, with the giving
of notice if required, any such Debt to become due prior to its stated maturity
(any applicable grace period having expired).
(g) Change in Control. A Change in Control shall occur.
(h) Voluntary Bankruptcy Proceeding. AHL or any Subsidiary thereof
shall (i) commence a voluntary case under the federal bankruptcy laws (as now or
hereafter in effect); (ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts; (iii) consent
to or fail to contest within sixty (60) days of the filing thereof any petition
filed against it in an involuntary case under such bankruptcy laws or other
laws; (iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by, a
receiver, custodian, trustee, or liquidator of itself or of a substantial part
of its property; (v) admit in writing its inability to pay its debts as they
become due; (vi) make a general assignment for the benefit of creditors; or
(vii) take any corporate action for the purpose of authorizing any of the
foregoing.
(i) Involuntary Bankruptcy Proceeding. A case or other proceeding shall
be commenced against AHL or any Subsidiary thereof in any court of competent
jurisdiction seeking (i) relief under the federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts; or
(ii) the appointment of a trustee, receiver, custodian, liquidator or the like
for AHL or any Subsidiary thereof or for all or any substantial part of their
respective assets, and such case or proceeding shall continue undismissed or
unstayed for a period of sixty (60) consecutive calendar days, or an order
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granting the relief requested in such case or proceeding (including, but not
limited to, an order for relief under such federal bankruptcy laws) shall be
entered.
(j) Failure of Agreements. Any material provision of any other Loan
Document shall for any reason cease to be valid and binding on any Borrower or
Subsidiary thereof party thereto or any such Person shall so state in writing or
the Loan Documents shall for any reason cease to create a valid and perfected
first priority Lien on, or security interest in, any of the Collateral purported
to be covered thereby, in each case other than in accordance with the express
terms hereof or thereof.
(k) Termination Event. The occurrence of any of the following events:
(i) any Borrower or any ERISA Affiliate fails to make full payment when due of
all amounts which, under the provisions of any Pension Plan or Section 412 of
the Code, such Borrower or ERISA Affiliate is required to pay as contributions
thereto; (ii) an accumulated funding deficiency in excess of $250,000 or
equivalent thereof in another currency occurs or exists, whether or not waived,
with respect to any Pension Plan; (iii) a Termination Event; or (iv) any
Borrower or any ERISA Affiliate as employers under one or more Multiemployer
Plan makes a complete or partial withdrawal from any such Multiemployer Plan and
the plan sponsor of such Multiemployer Plan notifies such withdrawing employer
that such employer has incurred a withdrawal liability requiring payments in an
amount exceeding $250,000 or equivalent thereof in another currency.
(l) Judgment. A judgment or order for the payment of money which
exceeds in amount the Material Judgment Amount shall be entered against AHL or
any of its Subsidiaries by any court and such judgment or order shall continue
undischarged or unstayed for a period of thirty (30) days.
(m) Attachment. A warrant or writ of attachment or execution or similar
process shall be issued against any property of AHL or any Subsidiary thereof
which exceeds in value the Material Judgment Amount and such warrant or process
shall continue undischarged or unstayed for a period of thirty (30) days.
SECTION 10.2 Remedies. Upon the occurrence and during the continuance
of an Event of Default, the Administrative Agent shall, upon the request and
direction of the Required Lenders, by notice to the Borrowers:
(a) Acceleration: Termination of Facilities. Declare the principal of
and interest on the Loans and the Notes at the time outstanding, and all other
amounts owed to the Lenders, the European Facility Lender, and to the
Administrative Agent under this Agreement or any of the other Loan Documents and
all other Obligations, to be forthwith due and payable, whereupon the same shall
immediately become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or the other Loan Documents to the contrary notwithstanding, and
terminate the Credit Facilities and the Commitments and any right of the
Borrowers to request borrowings thereunder; provided, that upon the occurrence
of an Event of Default specified in Section 10.1(j) or (k), the Credit
Facilities and the Commitments shall be automatically terminated and all
Obligations shall automatically become due and payable.
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(b) Rights of Collection. Exercise on behalf of the Lenders all of
their other rights and remedies under this Agreement, the other Loan Documents
and Applicable Law, in order to satisfy all of the Borrowers' Obligations.
SECTION 10.3 Rights and Remedies Cumulative; Non-Waiver; etc. The
enumeration of the rights and remedies of the Administrative Agent and the
Lenders set forth in this Agreement is not intended to be exhaustive and the
exercise by the Administrative Agent and the Lenders of any right or remedy
shall not preclude the exercise of any other rights or remedies, all of which
shall be cumulative, and shall be in addition to any other right or remedy given
hereunder or under the Loan Documents or that may now or hereafter exist in law
or in equity or by suit or otherwise. No delay or failure to take action on the
part of the Administrative Agent or any Lender in exercising any right, power or
privilege shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be construed to be a waiver of any Event of Default. No course of dealing
between the Borrowers, the Administrative Agent and the Lenders or their
respective agents or employees shall be effective to change, modify or discharge
any provision of this Agreement or any of the other Loan Documents or to
constitute a waiver of any Event of Default. Notwithstanding anything to the
contrary set forth herein or in any other Loan Document, neither the
Administrative Agent nor any Lender shall exercise at any time during which no
Event of Default shall have occurred and be continuing any right or remedy with
respect to any of the Collateral, including, but not limited to, any right
granted in any Security Document to collect accounts receivable or to notify
account debtors.
SECTION 10.4 Set-off. Except to the extent prohibited by law, in
addition to any rights now or hereafter granted under Applicable Law and not by
way of limitation of any such rights, upon and after the occurrence of any Event
of Default and during the continuance thereof, the Lenders and any assignee or
participant of a Lender in accordance with Section 12.9 are hereby authorized by
the Borrowers at any time or from time to time, without notice to the Borrowers
or to any other Person, any such notice being hereby expressly waived, to set
off and to appropriate and to apply any and all deposits (general or special,
time or demand, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured, excluding government
securities required by Applicable Law to be held as security for worker's
compensation and similar claims and of whatever currency exchanged, if
necessary, at the Spot Rate to the currency of the Obligations) and any other
indebtedness at any time held or owing by the Lenders, or any such assignee or
participant to or for the credit or the account of the Borrowers against and on
account of the Obligations then due and payable.
SECTION 10.5 Adjustments. If any Lender (a "Benefitted Lender") shall
at any time receive any payment of all or part of its Loans, or interest
thereon, or if any Lender shall at any time receive any Collateral in respect to
its Loans (whether voluntarily or involuntarily, by set-off or otherwise) in a
greater proportion than any such payment to and Collateral received by any other
Lender, if any, in respect of such other Lender's Loans, or interest thereon,
such Benefitted Lender shall, to the extent permitted by Applicable Law,
purchase for cash from the other Lenders such portion of each such other
Lender's Loans, or shall provide such other Lenders with the benefits of any
such Collat eral, or the proceeds thereof, as shall be necessary to cause such
Benefitted Lender to share the excess payment or benefits of such Collateral or
proceeds ratably with each of the Lenders; provided,
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that if all or any portion of such excess payment or benefits is thereafter
recovered from such Benefitted Lender, such purchase shall be rescinded, and the
purchase price and benefits returned to the extent of such recovery, but without
interest. The Borrowers agree that each Lender so purchasing a portion of
another Lender's Loans may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as fully as if such
Lender were the direct holder of such portion.
SECTION 10.6 Consents. The Borrowers acknowledge that certain
transactions contemplated by this Agreement and the other Loan Documents and
certain actions which may be taken by the Administrative Agent or the Lenders in
the exercise of their respective rights under this Agreement and the other Loan
Documents may require the consent of a Governmental Authority. If counsel to the
Administrative Agent reasonably determines that the consent of a Governmental
Authority is required in connection with the execution, delivery and performance
of any of the aforesaid documents or any documents delivered to the
Administrative Agent or the Lenders in connection therewith or as a result of
any action which may be taken pursuant thereto, then the Borrowers, at their
sole cost and expense, agree to use their reasonable best efforts to secure such
consent and to cooperate with the Administrative Agent and the Lenders in any
action commenced by the Administrative Agent or any Lender to secure such
consent.
ARTICLE XI
THE ADMINISTRATIVE AGENT
SECTION 11.1 Appointment. Each Lender hereby irrevocably appoints and
authorizes First Union to act as Administrative Agent hereunder and under the
other Loan Documents and to take such actions as agent on its behalf hereunder
and under the other Loan Documents, and to exercise such powers and to perform
such duties, as are specifically delegated to the Administrative Agent by the
terms hereof or thereof, together with such other powers and duties as are
reasonably incidental thereto.
SECTION 11.2 Nature of Duties. The Administrative Agent shall have no
duties or responsibilities other than those expressly set forth in this
Agreement and the other Loan Documents. The Administrative Agent shall not have,
by reason of this Agreement or any other Loan Document, a fiduciary relationship
in respect of any Lender; and nothing in this Agreement or any other Loan
Document, express or implied, is intended to or shall be so construed as to
impose upon the Administrative Agent any obligations or liabilities in respect
of this Agreement or any other Loan Document except as expressly set forth
herein or therein. The Administrative Agent may execute any of its duties under
this Agreement or any other Loan Document by or through agents or
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact that it selects with reasonable care. The
Administrative Agent shall be entitled to consult with legal counsel,
independent public accountants and other experts selected by it with respect to
all matters pertaining to this Agreement and the other Loan Documents and its
duties hereunder and thereunder and shall not be liable for any action taken or
omitted to be taken in good faith by it in accordance with the advice of such
counsel, accountants or experts. The Lenders hereby acknowledge that the
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Administrative Agent shall not be under any duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders).
SECTION 11.3 Exculpatory Provisions. Neither the Administrative Agent
nor any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action taken or omitted to be taken by it
or such Person under or in connection with the Loan Documents, except for its or
such Person's own gross negligence or willful misconduct, (ii) responsible in
any manner to any Lender for any recitals, statements, information,
representations or warranties herein or in any other Loan Document or in any
document, instrument, certificate, report or other writing delivered in
connection herewith or therewith, for the execution, effectiveness, genuineness,
validity, enforceability or sufficiency of this Agreement or any other Loan
Document, or for the financial condition of Borrowers or any of their
Subsidiaries or any other Person, or (iii) required to ascertain or make any
inquiry concerning the performance or observance of any of the terms, provisions
or conditions of this Agreement or any other Loan Document or the existence or
possible existence of any Default or Event of Default, or to inspect the
properties, books or records of the Borrowers or any of their Subsidiaries.
SECTION 11.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
notice, statement, consent or other communication (including, without
limitation, any thereof by telephone, telecopy, telex, telegram or cable)
believed by it in good faith to be genuine and correct and to have been signed,
sent or made by the proper Person or Persons. The Administrative Agent may deem
and treat each Lender as the owner of its interest hereunder for all purposes
hereof unless and until a written notice of the assignment, negotiation or
transfer thereof shall have been given to the Administrative Agent in accordance
with the provisions of this Agreement. The Administrative Agent shall be
entitled to refrain from taking or omitting to take any action in connection
with this Agreement or any other Loan Document (i) if such action or omission
would, in the reasonable opinion of the Administrative Agent, violate any
applicable law or any provision of this Agreement or any other Loan Document or
(ii) unless and until it shall have received such advice or concurrence of the
Required Lenders (or, where a higher percentage of the Lenders is expressly
required hereunder, such Lenders) as it deems appropriate or it shall first have
been indemnified to its satisfaction by the Lenders against any and all
liability and expense (other than liability and expense arising from its own
gross negligence or willful misconduct) that may be incurred by it by reason of
taking, continuing to take or omitting to take any such action. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against the
Administrative Agent as a result of the Administrative Agent's acting or
refraining from acting hereunder or under any other Loan Document in accordance
with the instructions of the Required Lenders (or, where a higher percentage of
the Lenders is expressly required hereunder, such Lenders), and such
instructions and any action taken or failure to act pursuant thereto shall be
binding upon all of the Lenders (including all subsequent Lenders).
SECTION 11.5 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor any
of its officers, directors, employees, agents, attorneys-in-fact or Affiliates
has made any representation or warranty to it and
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that no act by the Administrative Agent or any such Person hereafter taken,
including any review of the affairs of AHL and its Subsidiaries, shall be deemed
to constitute any representation or warranty by the Administrative Agent to any
Lender. Each Lender represents to the Administrative Agent that (i) it has,
independently and without reliance upon the Administrative Agent or any other
Lender and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, properties, financial and other condition and creditworthiness of
AHL and its Subsidiaries and made its own decision to enter into this Agreement
and extend credit to the Borrowers hereunder, and (ii) it will, independently
and without reliance upon the Administrative Agent or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action hereunder and under the other Loan Documents and to make such
investigation as it deems necessary to inform itself as to the business,
prospects, operations, properties, financial and other condition and
creditworthiness of AHL and its Subsidiaries. Except as expressly provided in
this Agreement and the other Loan Documents, the Administrative Agent shall have
no duty or responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information concerning the business,
prospects, operations, properties, financial or other condition or
creditworthiness of AHL or its Subsidiaries or any other Person that may at any
time come into the possession of the Administrative Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
SECTION 11.6 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default unless the Administrative Agent shall have received written notice from
Borrowers or a Lender referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default." In the
event that the Administrative Agent receives such a notice, the Administrative
Agent will give notice thereof to the Lenders as soon as reasonably practicable;
provided, however, that if any such notice has also been furnished to the
Lenders, the Administrative Agent shall have no obligation to notify the Lenders
with respect thereto. The Administrative Agent shall (subject to Sections 11.4
and 12.10) take such action with respect to such Default or Event of Default as
shall reasonably be directed by the Required Lenders; provided that, unless and
until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
SECTION 11.7 Indemnification. To the extent the Administrative Agent is
not reimbursed by or on behalf of Borrowers, and without limiting the joint and
several obligations of Borrowers to do so, the Lenders (i) shall and do hereby
indemnify the Administrative Agent and its officers, directors, employees,
agents, attorneys-in-fact and Affiliates, ratably in proportion to their
respective percentages as used in determining the Required Lenders as of the
date of determination, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses
(including, without limitation, attorneys' fees and expenses) or disbursements
of any kind or nature whatsoever that may at any time (including at any time
following the repayment in full of the Loans and the termination of the
Commitments) be imposed on, incurred by or asserted against the Administrative
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any documents contemplated by or referred to herein or the
transactions contemplated
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hereby or thereby or any action taken or omitted by the Administrative Agent
under or in connection with any of the foregoing, and (ii) shall reimburse the
Administrative Agent upon demand, ratably in proportion to their respective
percentages as used in determining the Required Lenders as of the date of
determination, for any expenses incurred by the Administrative Agent in
connection with the preparation, negotiation, execution, delivery,
administration, amendment, modification, waiver or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, this Agreement or any of the other Loan
Documents (including, without limitation, reasonable attorneys' fees and
expenses and compensation of agents and employees paid for services rendered on
behalf of the Lenders); provided, however, that no Lender shall be liable for
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements to the extent
resulting from the gross negligence or willful misconduct of the party to be
indemnified.
SECTION 11.8 The Administrative Agent in its Individual Capacity. With
respect to its Commitment, the Loans made by it and the Note or Notes issued to
it, the Administrative Agent in its individual capacity and not as
Administrative Agent shall have the same rights and powers under the Loan
Documents as any other Lender and may exercise the same as though it were not
performing the agency duties specified herein; and the terms "Lenders,"
"Required Lenders," "holders of Notes" and any similar terms shall, unless the
context clearly otherwise indicates, include the Administrative Agent in its
individual capacity. The Administrative Agent and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of banking, trust,
financial advisory or other business with the Borrowers, any of their
Subsidiaries or any of their respective Affiliates as if the Administrative
Agent were not performing the agency duties specified herein, and may accept
fees and other consideration from any of them for services in connection with
this Agreement and otherwise without having to account for the same to the
Lenders.
SECTION 11.9 Successor Administrative Agent. The Administrative Agent
may resign at any time by giving thirty (30) days' prior written notice to the
Borrowers and the Lenders. Upon any such notice of resignation, the Required
Lenders will, with the prior written consent of the Borrowers (which consent
shall not be unreasonably withheld), appoint from among the Lenders a successor
to the Administrative Agent (provided that the Borrowers' consent shall not be
required in the event a Default or Event of Default shall have occurred and be
continuing). If no successor to the Administrative Agent shall have been so
appointed by the Required Lenders and shall have accepted such appointment
within such thirty-day period, then the retiring Administrative Agent may, on
behalf of the Lenders and after consulting with the Lenders and the Borrowers,
appoint a successor Administrative Agent from among the Lenders. Upon the
acceptance of any appointment as Administrative Agent by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations hereunder and under the
other Loan Documents. After any retiring Administrative Agent's resignation as
Administrative Agent, the provisions of this Article XI shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent. If no successor to the Administrative Agent has accepted
appointment as Administrative Agent by the thirtieth (30th) day following a
retiring Administrative Agent's notice of resignation, the retiring
Administrative Agent's resignation shall nevertheless thereupon become
effective, and the
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Lenders shall thereafter perform all of the duties of the Administrative Agent
hereunder and under the other Loan Documents until such time, if any, as the
Required Lenders appoint a successor Administrative Agent as provided for
hereinabove.
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 Notices.
(a) Method of Communication. Except as otherwise provided in this
Agreement, all notices and communications hereunder shall be in writing, or by
telephone subsequently confirmed in writing. Any notice shall be effective if
delivered by hand delivery or sent via telecopy, recognized overnight courier
service or certified mail, return receipt requested, and shall be presumed to be
received by a party hereto (i) on the date of delivery if delivered by hand or
sent by telecopy, (ii) on the next Business Day if sent by recognized overnight
courier service and (iii) on the third Business Day following the date sent by
certified mail, return receipt requested. A telephonic notice to any Agent as
understood by such Agent will be deemed to be the controlling and proper notice
in the event of a discrepancy with or failure to receive a confirming written
notice.
(b) Addresses for Notices. Notices to any party shall be sent to it at
the following addresses, or any other address as to which all the other parties
are notified in writing.
If to any Borrower: AHL Services, Inc.
3353 Peachtree Road, N.E.
Suite 1120, North Tower
Atlanta, Georgia 30326
Attention: David L. Gamsey
Chief Financial Officer
Telephone No.:(404) 267-2222 Ext. 207
Telecopy No.: (404) 267-2230
If to First Union,
as Administrative Agent: First Union National Bank of Georgia
4570 Ashford Dunwoody Road, Second Floor
Atlanta, Georgia 30346
Attention: William Grasty
Telephone No.: (404) 865-2562
Telecopy No.: (404) 865-2388
and
First Union National Bank of Georgia
999 Peachtree Street, N.E.
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Atlanta, Georgia 30309
Attention: James R. Mortimer
Telephone No.: (404) 827-7344
Telecopy No.: (404) 827-7199
[and
First Union National Bank of North Carolina
301 South College Street, TW-10
Charlotte, North Carolina 28288-0608
Attention: Syndication Agency Services
Telephone No.: (704) 383-0281
Telecopy No.: (704) 383-0288]
If to any Lender: The Address set forth on Schedule 1.1
If to the European
Facility Lender: First Union National Bank - London Branch
3 Bishopsgate
London EC2N 3AB
England
Attention: Thomas Quigley
Telephone No.: 44 171 621-1477
Telecopy No.: 44 171 929-4644
(c) Administrative Agent's Office. With respect to the Revolver, o long
as First Union is the sole Lender, the Loan Office for the Administrative Agent
shall be its office at 999 Peachtree Street, N.E. Atlanta, Georgia 30309, but
after any other party becomes a Lender hereunder, the Loan Office for the
Administrative Agent shall be its office at One First Union Center, TW-10,
Charlotte, North Carolina 28288-0608, or any subsequent office which shall have
been specified for such purpose by written notice to the Borrowers and Lenders,
as the Administrative Agent's office referred to herein.
SECTION 12.2 Expenses. The Borrowers will pay all out-of-pocket
expenses of the Administrative Agent in connection with: (a) the preparation,
execution and delivery of this Agreement and each of the other Loan Documents,
whenever the same shall be executed and delivered, including all syndication and
due diligence expenses, appraiser's fees, search fees, recording fees, taxes and
reasonable fees and disbursements of counsel for the Administrative Agent; (b)
the preparation, execution and delivery of any waiver, amendment or consent by
the Administrative Agent or the Lenders relating to this Agreement or any of the
other Loan Documents including reasonable fees and disbursements of counsel for
the Administrative Agent, search fees, appraiser's fees, recording fees and
taxes imposed in connection therewith; and (c) after the occurrence and during
the continuance of an Event of Default consulting with one or more Persons,
including
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appraisers, accountants, engineers and attorneys, concerning or related to the
nature, scope or value of any right or remedy of the Administrative Agent or any
of the Lenders hereunder or under any of the other Loan Documents, including any
review of factual matters in connection therewith, which expenses shall include
the reasonable fees and disbursements of such Persons. In addition, the
Borrowers will pay all out-of-pocket expenses of the Administrative Agent and
each Lender in connection with prosecuting or defending any claim in any way
arising out of, related to, connected with, or enforcing any provision of, this
Agreement or any of the other Loan Documents, which expenses shall include the
reasonable fees and disbursements of counsel and of experts and other
consultants retained by the Administrative Agent or any of the Lenders.
SECTION 12.3 Governing Law. This Agreement, the Notes and the other
Loan Documents, unless otherwise expressly set forth therein, shall be governed
by, construed and enforced in accor dance with the laws of the State of Georgia,
without reference to the conflicts or choice of law principles thereof.
SECTION 12.4 Consent to Jurisdiction. The Borrowers hereby irrevocably
consent to the personal jurisdiction of the state and federal courts located in
Fulton County, Georgia, in any action, claim or other proceeding arising out of
any dispute in connection with this Agreement, the Notes and the other Loan
Documents, any rights or obligations hereunder or thereunder, or the performance
of such rights and obligations. The Borrowers hereby irrevocably consent to the
service of a summons and compliant and other process in any action, claim or
proceeding brought by any Agent or Lender in connection with this Agreement, the
Notes or the other Loan Documents, any rights or obligations hereunder or
thereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner specified in Section 12.1. Nothing in this
Section 12.4 shall affect the right of the Administrative Agent or any Lender to
serve legal process in any other manner permitted by Applicable Law or to bring
any action or proceeding against any Borrower or its properties in the courts of
any other jurisdictions.
SECTION 12.5 Arbitration.
(a) Binding Arbitration. Upon demand of any party, whether made before
or after institution of any judicial proceeding, any dispute, claim or
controversy arising out of, connected with or relating to the Notes or any other
Loan Documents ("Disputes"), between or among parties to the Notes or any other
Loan Document shall be resolved by binding arbitration as provided herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort claims, counterclaims, claims brought as class actions, claims arising from
Loan Documents executed in the future, or claims concerning any aspect of the
past, present or future relationships arising out of or connected with the Loan
Documents. Arbitration shall be conducted under and governed by the Commercial
Financial Disputes Arbitration Rules (the "Arbitration Rules") of the American
Arbitration Association (the "AAA") and Title 9 of the U.S. Code. All
arbitration hearings shall be conducted in Atlanta, Georgia. The expedited
procedures set forth in Rule 51, et seq. of the Arbitration Rules shall be
applicable to claims of less than $1,000,000. All applicable statutes of
limitation shall apply to any Dispute. A judgment upon the award may be entered
in any court having jurisdiction. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys. The single arbitrator
selected for
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expedited procedure shall be a retired judge from the highest court of general
jurisdiction, state or federal, of the state where the hearing will be
conducted. The arbitrators shall be appointed as provided in the Arbitration
Rules.
(b) Preservation of Certain Remedies. Notwithstanding the preceding
binding arbitration provisions, the Administrative Agent and the Lenders
preserve, without diminution, certain remedies that the Administrative Agent and
the Lenders may employ or exercise freely, either alone, in conjunction with or
during a Dispute. The Administrative Agent and the Lenders shall have and hereby
reserve the right to proceed in any court of proper jurisdiction or by self help
to exercise or prosecute the following remedies: (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale granted in the Loan Documents or under applicable law or by judicial
foreclosure and sale, (ii) all rights of self help including peaceful occupation
of property and collection of rents, set off, and peaceful possession of
property, (iii) when applicable, a judgement by confession of judgement and (iv)
obtaining provisional or ancillary remedies including injunctive relief,
sequestration, garnishment, attachment, appointment of receiver and in filing an
involuntary bankruptcy proceeding. Preservation of these remedies does not limit
the power of an arbitrator to grant similar remedies that may be requested by a
party in a Dispute.
SECTION 12.6 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY
APPLICABLE LAW, THE ADMINISTRATIVE AGENT, EACH LENDER AND EACH BORROWER HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH RESPECT TO ANY
ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, THE NOTES OR THE OTHER LOAN DOCUMENTS, ANY RIGHTS OR OBLIGATIONS
HEREUNDER OR THEREUNDER, OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
SECTION 12.7 Reversal of Payment. To the extent any Borrower makes a
payment or payments to the Administrative Agent for the ratable benefit of the
Lenders or the Administrative Agent receives any payment or proceeds of the
Collateral which payments or proceeds or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause, then, to
the extent of such payment or proceeds repaid, the Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and effect
as if such payment or proceeds had not been received by the Administrative
Agent.
SECTION 12.8 Successors and Assigns; Participations.
(a) Assignment by Lenders. Each Lender may assign to one or more other
Eligible Assignees (each, an "Assignee") all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the outstanding Loans made by it and the Note or
Notes held by it), and such assignment may be allocated among the assigning
Lender's Revolver Loans and the related Commitment of the assigning Lender on
other than a pro-rata basis; provided, however, that (i) any such assignment
(other than an assignment to a Lender or an Affiliate of a Lender) shall not be
made without the prior written consent of the
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Administrative Agent and the Borrowers (to be evidenced by their
counterexecution of the relevant Assignment and Acceptance), which consent shall
not be unreasonably withheld, (ii) except in the case of an assignment to a
Lender or an Affiliate of a Lender, the amount of the Commitment of the
assigning Lender being assigned pursuant to each such assignment (determined as
of the date of the Assignment and Acceptance with respect to each such
assignment) shall in no event be less than the lesser of (y) the entire
Commitment of such Lender immediately prior to such assignment or (z)
$5,000,000, and (iii) the parties to each such assignment will execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Acceptance (an "Assignment and Acceptance") in the
form of Exhibit E attached hereto, together with any Note or Notes subject to
such assignment, and will pay a nonrefundable processing fee of $3,000 to the
Administrative Agent for its own account. Upon such execution, delivery,
acceptance and recording of the Assignment and Acceptance, from and after the
effective date specified therein, which effective date shall be at least five
Business Days after the execution thereof (unless the Administrative Agent shall
otherwise agree), (A) the Assignee thereunder shall be a party hereto and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, shall have the rights and
obligations of the assigning Lender hereunder with respect thereto and (B) the
assigning Lender shall, to the extent that rights and obligations hereunder have
been assigned by it pursuant to such Assignment and Acceptance, relinquish its
rights (other than rights under the provisions of this Agreement and the other
Loan Documents relating to indemnification or payment of fees, costs and
expenses, to the extent such rights relate to the time prior to the effective
date of such Assignment and Acceptance) and be released from its obligations
under this Agreement (and, in the case of an Assignment and Acceptance covering
all or the remaining portion of such assigning Lender's rights and obligations
under this Agreement, such Lender shall cease to be a party hereto). The terms
and provisions of each Assignment and Acceptance shall, upon the effectiveness
thereof, be incorporated into and made a part of this Agreement, and the
covenants, agreements and obligations of each Lender set forth therein shall be
deemed made to and for the benefit of the Administrative Agent and the other
parties hereto as if set forth at length herein.
(b) Maintenance of the Register. The Administrative Agent will maintain
at its address for notices referred to herein a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lenders and the Commitments of, and principal
amount of the Loans owing to, each Lender from time to time (the "Register").
The entries in the Register shall be conclusive and binding for all purposes,
absent manifest error, and the Borrowers, the Administrative Agent and the
Lenders may treat each Person whose name is recorded in the Register as a Lender
hereunder for all purposes of this Agreement. The Register shall be available
for inspection by Borrowers and each Lender at any reasonable time and from time
to time upon reasonable prior notice.
(c) Acceptance of Assignment; Replacement Notes. Upon its receipt of a
duly completed Assignment and Acceptance executed by an assigning Lender and an
Assignee and counterexecuted by the Borrowers (if required), together with any
Note or Notes subject to such assignment and the processing fee referred to in
subsection (a) above, the Administrative Agent will (i) accept such Assignment
and Acceptance, (ii) on the effective date thereof, record the information
contained therein in the Register and (iii) give notice thereof to the Borrowers
and the Lenders. Within five (5)
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Business Days after its receipt of such notice, the Borrowers, at their own
expense, will execute and deliver to the Administrative Agent in exchange for
the surrendered Note or Notes a new Note or Notes to the order of such Assignee
in an aggregate principal amount equal to the principal amount of the Commitment
(or, if the Commitments have been terminated, the principal amount of the Loans)
assumed by it pursuant to such Assignment and Acceptance and, to the extent the
assigning Lender has retained its Loans and/or Commitment hereunder, a new Note
or Notes to the order of the assigning Lender in an aggregate principal amount
equal to the principal amount of the Commitment (or, if the Commitments have
been terminated, the principal amount of the Loans) retained by it hereunder.
Such new Note or Notes shall be dated the date of the replaced Note or Notes and
shall otherwise be in substantially the forms of the Notes attached hereto as
Exhibits A-1 and A-2. The Administrative Agent will return canceled Notes to the
Borrowers.
(d) Participations. Each Lender may, without the consent of the
Borrowers, the Administrative Agent or any other Lender, sell to one or more
other Persons (each, a "Participant") participations in any portion comprising
less than all of its rights and obligations under this Agreement (including,
without limitation, a portion of its Commitment, the outstanding Loans made by
it and the Note or Notes held by it); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged and such Lender shall
remain solely responsible for the performance of such obligations, (ii) any such
participation shall be in an amount of not less than $5,000,000, but no Lender
shall sell any participation that, when taken together with all other
participations, if any, sold by such Lender, covers more than fifty percent of
the beneficial interests in all of such Lender's rights and obligations under
this Agreement, (iii) the Borrowers, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
no Lender shall permit any Participant to have any voting rights or any right to
control the vote of such Lender with respect to any amendment, modification,
waiver, consent or other action hereunder or under any other Loan Document
(except as to actions that would (w) reduce or forgive the principal amount of,
or rate of interest (other than interest accruing as provided in Section 3.1(f))
on, any Loan, or reduce or forgive any fees or other Obligations, (x) extend any
date (including without limitation, the Revolver Facility Termination Date)
fixed for the payment of any principal of or interest on any Loan, any fees or
any other Obligations, (y) release any material portion of Collateral securing
the Obligations (other than (1) upon termination of the Commitments and payment
and satisfaction of all Obligations (other than any Obligations that survive the
termination of this Agreement pursuant to Section 12.13), (2) Collateral
constituting property being sold or disposed of if Borrowers certify to the
Administrative Agent that the sale or disposition is made in compliance with the
provisions of this Agreement and the Security Documents, upon which
certification the Administrative Agent may conclusively rely in good faith,
without further inquiry, or (3) otherwise in accordance with the terms of this
Agreement and the Security Documents), or (z) increase any Commitment of any
Lender), and (iv) no Participant shall have any rights under this Agreement or
any of the other Loan Documents, each Participant's rights against the granting
Lender in respect of any participation to be those set forth in the
participation agreement, and all amounts payable by the Borrowers hereunder
shall be determined as if such Lender had not granted such participation. Each
Participant may be entitled, pursuant to the terms of its participation
agreement, to compensation calculated in accordance with the provisions of
Sections 3.7, 3.8, 3.9 and 3.10 and to rights of setoff in accordance with
Section 10.4, in each case to the extent that First Union would be entitled to
such benefits if the participation had not been made;
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provided that nothing contained herein shall cause the Participant to be deemed
to be a Lender or to otherwise be granted any rights under this Agreement.
(e) Other Assignments. Nothing in this Agreement shall be construed to
prohibit any Lender from pledging or assigning all or any portion of its rights
and interest hereunder or under any Note to any Federal Reserve Bank as security
for borrowings therefrom; provided, however, that no such pledge or assignment
shall release a Lender from any of its obligations hereunder.
(f) Disclosure of Information; Confidentiality. The Administrative
Agent and the Lenders shall treat as confidential all non-public information,
including, without limitation, all financial projections, obtained pursuant to
the Loan Documents and shall disclose such information outside their
organizations only as may be deemed appropriate by any of the Administrative
Agent or the Lenders in the exercise of its or their rights under the Loan
Documents or as compelled by judicial or administrative process or by other
requirements of Applicable Law. The Administrative Agent and any Lender may, in
connection with any assignment, proposed assignment, participation or proposed
participation pursuant to this Section 12.9, disclose to the assignee,
participant, proposed assignee or proposed participant, any information relating
to the Borrowers furnished to the Administrative Agent or such Lender.
SECTION 12.9 Amendments, Waivers and Consents: Renewal. Except as set
forth below, any term, covenant, agreement or condition of this Agreement or any
of the other Loan Documents may be amended or waived by the Lenders, and any
consent given by the Lenders, if, but only if, such amendment, waiver or consent
is in writing signed by the Required Lenders (or by the Administrative Agent
with the consent of the Required Lenders) and delivered to the Administrative
Agent and, in the case of an amendment, signed by the Borrowers; provided, that
no amendment, waiver or consent shall (a) increase the amount or extend the time
of the obligation of the Lenders to make Loans, (b) extend the originally
scheduled time or times of payment of the principal of any Loan or the time or
times of payment of interest on any Loan, (c) reduce the rate of interest or
fees payable on any Loan (other than interest accruing as provided in Section
3.1(f)), (d) permit any subordination of the principal or interest on any Loan,
(e) release any material portion of the Collateral or Security Document (other
than (i) upon termination of the Commitments and payment and satisfaction of all
Obligations (other than any Obligations that survive the termination of this
Agreement pursuant to Section 12.13), (ii) Collateral constituting property
being sold or disposed of if Borrowers certify to the Administrative Agent that
the sale or disposition is made in compliance with the provisions of this
Agreement and the Security Documents, upon which certification the
Administrative Agent may conclusively rely in good faith, without further
inquiry, or (iii) as specifically permitted in this Agreement or the applicable
Security Document) or (f) amend the provisions of this Section 12.9 or the
definition of Required Lenders, without the prior written consent of each
Lender. In addition, no amendment, waiver or consent to the provisions of
Article XI shall be made without the written consent of the Administrative
Agent.
SECTION 12.10 Performance of Duties. The Borrowers' obligations under
this Agreement and each of the Loan Documents shall be performed at the joint
and several sole cost and expense of the Borrowers.
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SECTION 12.11 Indemnification. The Borrowers agree to reimburse the
Administrative Agent and the Lenders for all reasonable costs and expenses,
including reasonable counsel, appraisal, or other expert or consultant fees and
disbursements incurred, and the Borrowers hereby indemnify and hold the
Administrative Agent and the Lenders harmless from and against all losses
suffered by the Administrative Agent and the Lenders in connection with (a) the
exercise by the Administrative Agent or the Lenders of any right or remedy
granted to them under this Agreement or any of the other Loan Documents, (b) any
claim, and the prosecution or defense thereof, arising out of or in any way
connected with this Agreement or any of the other Loan Documents and (c) the
collection or enforcement of the Obligations or any of them; provided, that the
indemnity contained herein shall not apply to the extent that such losses,
claims, damages, liabilities or other expenses result from the gross negligence
or willful misconduct of such indemnified person.
SECTION 12.12 All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Lenders, the Administrative Agent and
any Persons designated by the Administrative Agent or such Lenders pursuant to
any provisions of this Agreement or any of the other Loan Documents shall be
deemed coupled with an interest and shall be irrevocable so long as any of the
Obligations remain unpaid or unsatisfied or the Credit Facilities have not been
terminated.
SECTION 12.13 Survival of Indemnities. Notwithstanding any termination
of this Agreement, the indemnities to which the Administrative Agent and the
Lenders are entitled under the provisions of this Article XII and any other
provision of this Agreement and the Loan Documents shall continue in full force
and effect and shall protect the Administrative Agent and the Lenders against
events arising after such termination as well as before.
SECTION 12.14 Provision of Loan Documents. Upon request by AHL, the
Administrative Agent shall use its best efforts to provide to AHL, or to cause
to be provided to AHL, a copy of the final forms of this Agreement and the other
Loan Documents on a diskette or other machine readable format.
SECTION 12.15 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and neither
limit nor amplify the provisions of this Agreement.
SECTION 12.16 Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 12.17 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
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SECTION 12.18 AHL as Agent for Other Borrowers. Each Borrower hereby
irrevocably appoints and authorizes AHL (a) to provide the Administrative Agent
with all notices with respect to Loans for the benefit of any other Borrower and
all other notices and instructions under this Agreement and (b) to take, on
behalf of Borrowers, all actions, including, without limitation, the provision
of consents, as are required or permitted to be taken by any or all of the
Borrowers pursuant to this Agreement.
SECTION 12.19 Term of Agreement. This Agreement shall remain in effect
from the Closing Date through and including the date upon which all Obligations
shall have been paid and satisfied in full (other than any Obligations that
survive the termination of this Agreement pursuant to Section 12.13) and the
Commitments have been terminated. No termination of this Agreement shall affect
the rights and obligations of the parties hereto arising prior to such
termination.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, all as of the day and year first
written above.
AHL SERVICES, INC.
Signed, sealed, and ("BORROWER")
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address: 3353 Peachtree Road, N.E.
Atlanta, Georgia 30326
Telecopier:
-----------------------------
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ARGENBRIGHT SECURITY, INC.
Signed, sealed, and ("BORROWER")
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address: 3353 Peachtree Road, N.E.
Atlanta, Georgia 30326
Telecopier:
-----------------------------
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ARGENBRIGHT, INC.
Signed, sealed, and ("BORROWER")
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address: 3353 Peachtree Road, N.E.
Atlanta, Georgia 30326
Telecopier:
-----------------------------
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ADI U.K. LIMITED
Signed, sealed, and ("BORROWER")
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address:
-------------------------------
-------------------------------
-------------------------------
Telecopier:
-----------------------------
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AVIATION DEFENCE INTERNATIONAL
Signed, sealed, and GERMANY LIMITED
delivered in the presence of: ("BORROWER")
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address:
-------------------------------
-------------------------------
-------------------------------
Telecopier:
-----------------------------
-82-
<PAGE> 88
ARGENBRIGHT HOLDINGS LIMITED
Signed, sealed, and ("BORROWER")
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address: 3353 Peachtree Road, N.E.
Atlanta, Georgia 30326
Telecopier:
-----------------------------
-83-
<PAGE> 89
THE ADI GROUP LIMITED
Signed, sealed, and ("BORROWER")
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address:
-------------------------------
-------------------------------
-------------------------------
Telecopier:
-----------------------------
-84-
<PAGE> 90
INTERSEC, INC.
Signed, sealed, and ("BORROWER")
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address:
-------------------------------
-------------------------------
-------------------------------
Telecopier:
-----------------------------
-85-
<PAGE> 91
FIRST UNION NATIONAL BANK OF GEORGIA
Signed, sealed, and ("ADMINISTRATIVE AGENT")
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address:
-------------------------------
-------------------------------
-------------------------------
Telecopier:
-----------------------------
-86-
<PAGE> 92
FIRST UNION NATIONAL BANK,
LONDON BRANCH ("EUROPEAN FACILITY LENDER")
Signed, sealed, and
delivered in the presence of:
By:
- ---------------------------------- -------------------------------------
Notary Public Title:
----------------------------------
- ----------------------------------
Unofficial Witness
Attest:
- ---------------------------------- ---------------------------------
Notary Public Title:
----------------------------------
[CORPORATE SEAL]
- ----------------------------------
Unofficial Witness
Address:
-------------------------------
-------------------------------
-------------------------------
Telecopier:
-----------------------------
-87-
<PAGE> 93
SCHEDULE 1.1: LENDERS AND COMMITMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Revolver Loan
Lender Revolver Commitment
------ Commitment Percentage
---------- -------------
- --------------------------------------------------------------------------------
<S> <C> <C>
First Union National $35,000,000 100%
Bank of Georgia
- --------------------------------------------------------------------------------
</TABLE>
<PAGE> 1
EXHIBIT 11.1
AHL SERVICES, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------ --------------------------
1996 1996 1997
------ ------ ------
<S> <C> <C> <C>
Income Applicable to Common Stock
Income before extraordinary items $2,171 $ 849 $2,105
Extraordinary items, net of taxes - - (385)
------ ------ ------
Net income $2,171 $ 849 $1,720
====== ====== ======
Weighted Average Shares
Common shares 8,353 8,353 9,679
Common share equivalents applicable to
stock options and warrants outstanding 204 204 216
------ ------ ------
Weighted average common and common
equivalent shares outstanding during
the period 8,557 8,557 9,895
====== ====== ======
Per Share Amount
Income before extraordinary items $ 0.25 $ .10 $ .21
Extraordinary items, net of taxes - - (.04)
------ ------ ------
Net income $ 0.25 $ .10 $ .17
====== ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 21.1
AHL SERVICES, INC.
LIST OF SUBSIDIARIES
Subsidiaries Jurisdiction
- ------------ ------------
Argenbright Holdings Limited Georgia
Argenbright, Inc. Georgia
Argenbright Security, Inc. Georgia
IPS Training Institute, Inc. Georgia
Argenbright Substance Abuse, Inc. Georgia
Argenbright Motor Coach, Inc. Georgia
Intersec, Inc. Georgia
The ADI Group Limited United Kingdom
Aviation Defence International France Limited France
ADI Overseas Limited United Kingdom
Aviation Defence International Italia SRL United Kingdom
ADI Aviation Defence Limited United Kingdom
ADI UK Limited United Kingdom
Aviation Defence International Germany Limited Germany
ADI Investments Limited United Kingdom
BAGS SA United Kingdom
Executive Aircraft Services Limited United Kingdom
<PAGE> 1
EXHIBIT 23.2
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
-------------------------------
Arthur Andersen LLP
Atlanta, Georgia
October 6, 1997
