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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
Commission File Number 333-64513
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)
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<S> <C>
DELAWARE 65-0822351
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
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1815 GRIFFIN ROAD, SUITE #300, DANIA, FL 33004-2252
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (954) 926-2000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) AND 12(g) OF THE ACT: NONE
TITLE OF CLASS NAME OF EXCHANGE ON WHICH REGISTERED
N/A N/A
Indicate by check mark whether each registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report(s), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
Common Stock, par value $0.01 per share: 100 shares outstanding at June
25, 1999.
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AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
FORM 10-K
TABLE OF CONTENTS
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Page
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PART I
ITEM 1 Business................................................................................... 2
ITEM 2 Properties................................................................................. 9
ITEM 3 Legal Proceedings.......................................................................... 10
ITEM 4 Submission of Matters to a Vote of Security Holders........................................ 10
PART II
ITEM 5 Market for the Company's Equity and Related
Security Holder Matters.................................................................... 10
ITEM 6 Selected Financial Data.................................................................... 11
ITEM 7 Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................. 12
ITEM 7A Quantitative and Qualitative Disclosure about Market Risk.................................. 21
ITEM 8 Financial Statements and Supplementary Data................................................ 21
ITEM 9 Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure................................................................... 21
PART III
ITEM 10 Directors and Executive Officers of the Company............................................ 21
ITEM 11 Executive Compensation..................................................................... 24
ITEM 12 Security Ownership of Certain Beneficial Owners and Management............................. 29
ITEM 13 Certain Relationships and Related Transactions............................................. 30
PART IV
ITEM 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K............................ 34
Signatures................................................................................. 36
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PART I
Aircraft Service International Group, Inc. (the "Company") was
organized in March 1998 for the purpose of acquiring beneficial ownership and
control of all the outstanding capital stock or other equity interests in
Aircraft Services International, Inc., Dispatch Service, Inc., Florida Aviation
Fueling Co., Bahamas Airport Service, Ltd., Freeport Flight Services, Ltd.,
Aircraft Service, Ltd., ASII Holding, GmbH, and ASII Aircraft Service Canada,
Ltd. (collectively the "ASIG business" or "Predecessor") from Viad Corp ("Viad")
and Viad Service Companies, Ltd. as of April 1, 1998 pursuant to a share
purchase agreement (the "Acquisition"). Prior to the Acquisition by the Company,
the ASIG business was operated under the divisional name of Aircraft Service
International Group. The Company is 100% owned by Ranger Aerospace Corporation.
The Predecessor's fiscal year ended on December 31. The Company's
fiscal year ends March 31. References herein to fiscal 1999 refer to the
Company's fiscal year ended March 31, 1999 and references to the calendar years
1997 and 1996 refer to the Predecessor's fiscal years ended December 31, 1997
and 1996.
Item 1. Business
The Company is one of the largest independent providers of aviation
fueling and aircraft ground services in the United States and believes it is the
largest independent fueler in Europe. The Company has provided quality service
to its customers for 52 years and has a well-established presence in 55 airports
in the United States, Europe and the Caribbean with an average tenure in excess
of 20 years at its current locations. In 1999, the Company provided service to
over 2.1 million commercial flights for over 200 customers, including most of
the major domestic and international airlines such as American Airlines, Inc.
("American"), British Airways ("BA"), Continental Airlines, Inc.
("Continental"), Delta Air Lines, Inc. ("Delta"), Northwest Airlines Corporation
("Northwest"), United Airlines, Inc. ("United") and US Airways, Inc. ("US
Airways"), as well as regional air carriers, airport authorities and oil
companies such as Esso U.K. ("Esso") and Shell U.K. ("Shell"). The Company also
operates fuel storage and delivery systems for airline consortia and airport
authorities at 23 airports, including Los Angeles International Airport's
LAXFUEL, which the Company believes is the largest airport fuel consortium in
the world. The Company intends to solidify its position as a leading independent
provider of aviation fueling and aircraft ground services in the United States
and Europe by leveraging its well-established operating history and
relationships with major customers to generate new business, continuing to take
advantage of outsourcing opportunities, pursuing selected acquisitions in its
fragmented industry and capitalizing on international growth opportunities. For
the fiscal years ended March 31, 1999, December 31, 1997 and December 31, 1996
the Company generated revenues of $123.4 million, $119.3 million and $121.6
million, respectively, net income (loss) of $(4.8) million (after an
extraordinary charge of $0.2 million relating to the write-off of certain
finance costs), $6.0 million and $4.2 million, respectively and EBITDA of $15.5
million, $14.6 million and $11.4 million, respectively.
The Company's business includes aviation fueling services (62% of 1999
revenues), aircraft ground services (35%) and other aviation services (3%).
Aviation fueling services are comprised primarily of into-plane fueling,
maintenance and operation of fuel storage and delivery systems and the retail
sale of fuel products. Generally, the Company has custody over, but not
ownership of, the fuel it manages and delivers. Aircraft ground services consist
primarily of ground handling, aircraft interior grooming, cargo handling,
passenger and traffic services and fixed base operations ("FBOs"). FBOs
generally include the provision of terminal services, pilot facilities,
maintenance, weather service, flight planning and hangar space to private,
executive and corporate aircraft. Within each business line, the services
provided by the Company are complementary and by expanding the number of flights
served at each location, the Company has the opportunity to leverage its
existing infrastructure to realize higher margins on incremental revenues. The
Company provides its services to customers pursuant to contractual agreements
and currently has approximately 800 contracts, which have been in place,
including extensions, for an average of 5 years each. The Company believes it
has established a reputation for providing quality service and that its
incumbency position at its current locations provides a significant competitive
advantage. In addition, the
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Company has been successful in winning new business, having won approximately
45%, 52% and 68% of the new contracts on which it placed competitive bids in
1996, 1997 and fiscal 1999 respectively.
In 1999, the Company was named "Best Aviation Fueler in the World" by
an international survey of 41 major airlines, independently conducted by the
"World Jet Fuel Report", an industry publication.
The Company believes it has a significant market share of into-plane
fueling services (based on gallons pumped) at many of its locations, handling an
estimated 50% or more of the outsourced commercial fueling requirements at 27 of
the 33 locations where it provides such services. The Company handled
approximately 9 billion gallons of aviation fuel through all of its combined
business units during the fiscal year ended March 31, 1999. In addition, the
Company's strategic position at certain of its locations is enhanced because the
Company owns or operates the only fuel storage and delivery system at the
airport. The Company believes that because it has generally made significant
capital investments and has management infrastructure in place, it has a
competitive advantage in winning new business relative to a competitor with a
small or no presence at such locations.
Company History
Prior to April 1, 1998, the Company had no operations. The ASIG
business has a long history of providing quality service in the independent
aviation services market with its two main predecessor companies, Dispatch
Services, Inc. ("DSI") and Aircraft Service International, Inc. ("ASII")
operating since 1947 and 1952, respectively. Most of the companies comprising
the ASIG business were acquired by the Greyhound Corporation (Viad's
predecessor) in the late 1960s.
Both DSI and ASII began as ground services operations and expanded into
fueling services when the large oil companies in the United States began to
divest these operations in the 1960s and 1970s. During this period, ASII also
began to expand its operations beyond its traditional home in the Southeast and
followed the expansion of Delta and other large customers to the western region
of the United States. Aircraft Service, Ltd. the Company's first European
operation, was established in the United Kingdom in 1990 to provide fueling and
ground services at the London-Heathrow airport. In 1997, the Company began
providing into-plane fueling services and operating the fuel delivery system at
the Munich airport through Omni Aircraft Service (which changed its name to
Skytanking in 1999) and also entered into an agreement with Esso pursuant to
which it began providing into-plane fueling for BA and other airlines at the
London-Gatwick airport. Through this expansion into Europe, the Company believes
it became the first independent aviation fueling service provider to operate at
each of the London-Heathrow airport, the Munich airport and the London-Gatwick
airport. On May 20, 1999, Elsinore Acquisition Corporation, a wholly-owned
subsidiary of the Company, acquired substantially all the assets of Elsinore,
L.P., including Elsinore's 23 operating units in 10 states, the U.S. Virgin
Islands and Puerto Rico, which provide a variety of aircraft fueling, ground
handling, aircraft cleaning and other aviation services to major commercial
airlines. The Company believes it is now the largest independent commercial
aircraft fueler in the United States and Europe.
The Company's 52-year operating history has allowed the Company to
establish a reputation for providing consistent, high quality customer service
and long-standing relationships with many of the world's major airlines at some
of the world's busiest airports. The following chart lists the 55 airports in
the United States, Europe and the Caribbean where the Company currently provides
services:
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OPERATING OPERATING
LOCATION SINCE LOCATION SINCE
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Miami, FL 1947 Colorado Springs, CO 1995
Tampa, FL 1957 London, England-Gatwick 1997
Ft. Lauderdale, FL 1958 Munich, Germany 1997
Los Angeles, CA 1961 Austin, TX 1999
Orlando, FL 1961 Washington, DC 1999
San Francisco, CA 1961 Aberdeen, Scotland 1999
West Palm Beach, FL 1962 Manchester, England 1999
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OPERATING OPERATING
LOCATION SINCE LOCATION SINCE
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Melbourne, FL 1963 Birmingham, England 1999
Memphis, TN 1963 Luton, England 1999
Freeport, Bahamas 1969 Billings, MT 1999
Cincinnati, OH 1969 Boise, ID 1999
Nashville, TN 1969 Bozeman, MT 1999
New Orleans, LA 1971 Kalispell, MT 1999
Sarasota, FL 1973 Great Falls, MT 1999
Pittsburgh, PA 1983 Helena, MT 1999
Fairbanks, AK 1985 Jackson, MS 1999
Albuquerque, NM 1987 Montgomery, AL 1999
Burbank, CA 1987 Missoula, MT 1999
Portland, OR 1987 Oklahoma City, OK 1999
Rochester, NY 1987 Reno, NE 1999
Seattle, WA 1987 Shreveport, LA 1999
San Diego, CA 1988 San Jose, CA 1999
London, England-Heathrow 1990 Sacramento, CA 1999
Santa Ana, CA 1991 Tucson, AZ 1999
Cleveland, OH 1992 St. Thomas, VI 1999
Denver, CO 1993 St. Croix, VI 1999
Philadelphia, PA 1993 Puerto Rico 1999
Atlanta, GA 1994
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Industry Overview
Independent aviation services include the aviation fueling and aircraft
ground services provided by the Company as well as other aviation services,
including food service, aircraft maintenance and avionics supplies. The demand
for independent aviation services depends on both the amount of airline traffic
and the extent to which airlines outsource the provision of these services.
Based on airport traffic figures, its own market experience and estimates of
revenue received for services rendered per plane, the Company believes that
approximately 90% of the total commercial aviation fueling market and
approximately 30% of the total commercial ground services market are outsourced
by airlines to independent providers such as the Company and that, as a result,
the aggregate independent markets for fueling services and ground services at
the top 100 North American airports are approximately $300 million and $1.9
billion, respectively.
According to the Air Transport Association of America, an independent
airline industry association, commercial airline traffic increased at a 2.8%
compound annual growth rate from 771.6 billion available seat miles ("ASM") in
1993 to 860.6 billion ASM in 1997. Similarly, according to the Boeing 1999
Current Market Outlook, global revenue passenger kilometers ("RPK") increased at
a 4.5% compound annual growth rate from approximately 2.2 trillion RPK in 1990
to approximately 2.9 trillion RPK in 1997. Over the next twenty years, Boeing
projects global commercial airline traffic will grow at a 4.7% annual rate, with
cargo traffic growing at 6.4% per year. During this same time frame, worldwide
economic growth is projected by Boeing to average 2.8% per year, with the world
passenger and cargo airliner fleet doubling in size to over 28,000 aircraft.
Boeing also projects that 75% of this growth will come from smaller, single
aisle aircraft.
Airline deregulation, which occurred in the United States during the
late 1970s and early 1980s, not only generated new entrants in the airline
market, but also stimulated demand for aviation services. The increased
competition resulting from deregulation led airlines to outsource many non-core
services that could be provided on a more cost-effective basis by an independent
service provider. Airline deregulation also changed the pattern of air traffic,
resulting in the creation of airport hubs. The creation of airport hubs further
contributed to the increase in outsourcing, as service providers could realize
greater economies of scale and provide more cost-effective service to large
numbers of flights arriving at and departing from an airline's major hub. The
trend towards outsourcing continued in the late 1980s and early 1990s, when as a
result of large financial losses and a series of restructurings, airlines
undertook cost-cutting efforts, which
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included the continued outsourcing of non-core aspects of the business. These
cost-cutting efforts and outsourcing measures, along with a growing economy,
allowed the airline industry to return to profitability in the mid-1990s. The
Company believes it has particularly effective positions at such major hubs as
Heathrow, Gatwick, Miami, Ft. Lauderdale, Munich, Atlanta, Philadelphia,
Pittsburgh, Cincinnati, Cleveland, Denver, Seattle, San Francisco, and Los
Angeles comprised of long standing relationships with the major carrier(s) at
those key hubs.
The independent aviation services industry is highly fragmented in both
the United States and Europe and is characterized by many operators that provide
services at a single or small number of locations. Small operators are likely to
face significant competitive pressures as large airlines increasingly deal with
fewer and larger suppliers providing a broader range of services at multiple
locations. This trend should encourage the consolidation of the industry and
enable suppliers to capitalize on economies of scale. For these reasons, the
Company believes that industry consolidation will provide opportunities for
growth in addition to the growth resulting from increases in airline traffic and
outsourcing.
Operations
Aviation Fueling Services
The Company provides fueling services at 17 of the top 50 North
American airports (as ranked by Airports Council International in terms of total
aircraft movements), including Atlanta, Los Angeles, Miami, Denver,
Philadelphia, Pittsburgh and San Francisco. Generally, the Company has custody
over, but not ownership of, the fuel it manages and delivers, and thus has
limited direct exposure to fluctuations in fuel prices. In fiscal 1999, the
Company's aviation fueling services accounted for 62% of its revenue.
Into-Plane Fueling Services. Into-plane fueling services provided $60.7
million, $53.4 million and $50.8 million of the Company's revenue in fiscal 1999
and calendar years ended 1997 and 1996, respectively. The Company provides
into-plane fueling at 33 locations, including both major hub airports as well as
smaller sites, and in fiscal 1999 delivered fuel to more than 2 million flights.
Major hub airports where the Company operates include Atlanta,
Cincinnati, London (Heathrow and Gatwick), Los Angeles, Memphis, Miami, Munich,
Orlando, Philadelphia, Pittsburgh, San Francisco and Seattle. At Atlanta
Hartsfield International Airport, the Company operates what it believes is the
single largest into-plane fueling contract in the world which involves servicing
approximately 645 Delta flights daily. At Pittsburgh International Airport, the
Company provides into-plane fueling for approximately 465 US Airways flights
daily. In 1990, the Company won the into-plane fueling contract for BA at the
London-Heathrow airport through a competitive bid process and currently supplies
fuel to more than 220 BA flights daily. In May 1997, Omni Aircraft (now named
Skytanking) won the contract to maintain and operate the Munich airport owned
fuel systems as well as one of two into-plane fuel service licenses. In June
1997, pursuant to an agreement with Esso, the Company began providing into-plane
fueling to BA and other airlines at the London-Gatwick airport.
The Company and its customers measure its into-plane fueling
performance based on timing, accuracy, staff professionalism, safety and quality
of service. The Company must meet strict criteria in all of these areas. For
airlines operating on tight flight schedules, timely refueling of aircraft is
vitally important to operating performance. The Company utilizes its extensive
scheduling experience and a workforce of cross-trained employees to ensure that
its commitments are met. Company employees are cross-trained in a variety of
functions which better enables the Company to fulfill peak demand requirements
using a flexible number of personnel.
Into-plane fueling requires delivery of exact amounts of fuel and the
maintenance of timely and accurate records. The Company delivers large
quantities of fuel (approximately 4.6 billion gallons in fiscal 1999), and at
any time can provide customers with accurate records of the contracted fuel
deliveries. The Company has developed proprietary software and MIS systems to
generate these records for customers.
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Safety is of paramount importance to the Company and to its customers.
The critical nature of fuel quality demands that extensive safety protocols be
followed and enforced. All Company personnel undergo a safety training course
upon initial employment followed by refresher courses every year and are
rigorously monitored for adherence to safety procedures.
Fuel System Maintenance and Operations. Fuel system maintenance and
operations generated revenue of $9.8 million, $8.0 million and $6.1 million in
fiscal 1999 and calendar years ended 1997 and 1996, respectively. The combined
fuel storage capacity of the fuel systems that the Company owns and operates or
contracts to maintain and operate exceeds 90 million gallons.
The most prominent example of the Company's fuel system maintenance and
operations is its management of LAXFUEL, which the Company believes is the
largest airport fuel consortium in the world. Currently comprised of 57 domestic
and international airlines, LAXFUEL is operated on a 24-hour basis, receiving
fuel from more than 17 suppliers and processing approximately 1,000 fuel
accounting transactions each day. In fiscal 1999, the Company managed monthly
volume at LAXFUEL of approximately 132 million gallons. The Company first won
this contract in 1986 and recently managed a $85 million upgrade of the fuel
system. Since the original contract award, the Company has won two additional
contracts from LAXFUEL.
The Company also maintains and operates fuel storage and delivery
systems for airline consortia, oil company consortia, individual airlines or
local airport authorities in 20 other locations, including Cincinnati, Denver,
Ft. Lauderdale, Memphis, Miami and Pittsburgh. In addition, the Company owns and
operates six fuel storage and delivery systems in Albuquerque, Melbourne, New
Orleans, Orlando, Sarasota and West Palm Beach.
As a result of its long operating history, the Company has developed
significant expertise in providing efficient systems and processes necessary for
the successful maintenance and operation of fuel storage and delivery systems.
One notable internally developed software program is the Airport Fuel Inventory
Control System ("AFICS"). Developed in 1995, AFICS increases the reporting
efficiency for the large consortium fuel inventories that the Company manages
and has been an instrumental factor in the Company's ability to secure
additional contracts to maintain and operate fuel facilities.
Other Aviation Services. In addition to the other services discussed,
at locations where the Company operates FBOs, namely Albuquerque, Freeport,
Bahamas and Orlando, the Company sells aviation fuel to retail customers.
Aircraft Ground Services
In fiscal 1999, the Company's aircraft ground services accounted for
34.8% of revenue.
Ground Handling. Ground handling services generated revenue of $18.8
million, $23.3 million and $30.9 million in fiscal 1999 and calendar years ended
1997 and 1996, respectively. The Company provides ground handling services to
over 100 domestic and international airlines at 28 locations and is capable of
servicing any size aircraft, from commuter planes to wide-body Boeing 747s. The
Company's largest ground handling operation is at Miami International Airport
where the Company and its predecessors have been providing ground handling
services since 1947. The Company has over 600 employees servicing 55 airlines
and approximately 2,400 flights per month at Miami International Airport. The
Company also operates and maintains the computerized baggage system for the
entire "B" and "F" concourses and handles the Federal Inspection Service baggage
distribution for all international carriers at the airport.
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The Company measures its ground handling operating performance based on
timing, staff professionalism, safety and quality. Airline customers closely
track the Company's ability to operate within strict timing parameters and
efficiently process such functions as baggage handling, which impact airline
customer satisfaction. Ground handling typically requires a large number of
employees and vehicles to service an aircraft and thus airlines seek suppliers
that are large enough to cost-effectively provide such employees and services.
By providing an outsourced alternative for the ground handling needs of many
airlines, the Company is able to take advantage of economies of scale and offer
customers access to quality and timely ground handling service at a substantial
discount to the cost of in-sourcing such services.
Aircraft Interior Grooming. Aircraft interior grooming generated
revenue of $15.4 million, $15.9 million and $16.6 million in fiscal 1999 and
calendar years ended 1997 and 1996, respectively. The Company provides aircraft
interior grooming services at 35 locations and has the capability to expand
these services throughout the Company's entire network.
Cargo Handling. The Company provides cargo handling services primarily
in conjunction with its ground handling operations. The Company handles both
domestic and international cargo as well as specialized cargo and hazardous
shipments.
Other Ground Services. The Company regularly provides certain airline
customers at its Ft. Lauderdale, Miami, Orlando and Tampa locations with
passenger handling services, and from time to time provides such services to
charter airline customers in Albuquerque and Pittsburgh. The Company often
fulfills its customers' particular needs by providing specialized staff who may
be multilingual or trained for specific tasks.
In addition, the Company provides certain airline customers in Miami
and Orlando with flight operations and load control, including communications,
flight dispatch, weight and balance information, flight planning, weather
service and diplomatic clearances. The Company operates limited FBOs in
Albuquerque, Freeport, Bahamas and Orlando, where it provides terminal services,
pilot facilities, line maintenance, worldwide weather service, flight planning
and hanger space for private, executive and corporate aircraft. The Company also
operates United's VIP lounge at the London-Heathrow airport.
Customers
The Company's customer base is comprised of airlines, airport
authorities and oil companies. The Company believes that it has established
strong customer relationships with most of the major domestic and international
airlines, including American, BA, Continental, Delta, Northwest, United and US
Airways, as well as many regional and smaller carriers. The Company has also
built strong relationships with many leading airport authorities and oil
companies.
In fiscal 1999, the Company's two largest customers, Delta and BA,
accounted for approximately 14.9% and 13.4% of revenue, respectively, and the
Company's top ten customers accounted for approximately 57.6% of revenue.
Sales and Marketing
The Company's sales and marketing staff is comprised of five
professionals who average over 10 years of experience with the Company. All
sales personnel are compensated through salary plus an incentive bonus based on
the Company's overall performance.
The Company formally markets its services through a combination of
customer visits, membership in trade organizations, participation in
International Air Transportation Association and National Air Transportation
Association trade shows and seminars, and sponsorship of events at annual
meetings of consortia that own major fuel storage and delivery systems.
Informational marketing also takes place on a daily basis through interaction
with the Company's customers at all levels of their respective organizations.
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These marketing activities lead to bidding opportunities that the
Company receives in the following ways: (i) airlines call and formally request a
proposal from a selected group of service providers; (ii) existing customers
request proposals for add-on services; (iii) non-solicited calls are made to
selected airlines offering services, and (iv) airlines request proposals through
a general solicitation to any interested service provider.
The Company wins the majority of its new business through the
competitive bid process and has established a strong track record in this
regard, having won approximately 68%, 52% and 45% of the new contracts on which
it placed competitive bids in fiscal 1999 and calendar years ended 1997 and
1996, respectively. The Company currently has approximately 800 contracts. In
fiscal 1999, the Company's largest contract accounted for 5% of revenue, and no
other contract accounted for more than 3.6% of revenue. The majority of the
Company's contracts have an industry standard initial length of one year,
although the Company's larger contracts generally run for initial terms of three
to five years.
Competition
The aircraft services industry is highly fragmented, consisting of a
limited number of well-capitalized companies which offer a broad range of
services, a large number of smaller, specialized companies and subsidiaries
established by major airlines to provide certain services. The Company's major
competitors include Airport Group International Inc., AMR Services Corporation
(a subsidiary of American), DSS, DynAir, Hudson General Corporation, Mercury Air
Group, Inc., Ogden Aviation Services Inc. and Signature Flight Support Corp. The
Company believes that the principal competitive factors in the aviation services
industry are quality, safety, turnaround time, overall customer service,
technical capabilities of personnel and price. The Company believes that it
competes favorably on the basis of all of the foregoing factors.
The Company continuously examines acquisition opportunities in its
competitive field, and in 1999 acquired two companies and restructured its joint
venture with Oiltanking GmbH in Germany.
Environmental
The Company is subject to compliance obligations and liabilities
imposed pursuant to federal, state, local and foreign environmental and
workplace health and safety requirements, including The Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). In
particular, the Company's aircraft fuel handling operations are subject to
liabilities and obligations relating to the aboveground and underground storage
of, and the release and cleanup of, petroleum products. The Company rigorously
monitors its environmental responsibilities and believes it was one of the first
service providers in the industry to develop extensive in-house oversight
expertise from years of operating experience. Despite such efforts, the
possibility exists that noncompliance could occur or be identified in the
future, the penalties or corrective action costs associated with which could be
material. In addition, requirements are complex, change frequently, and have
tended to become more stringent over time, and there can be no assurance that
these requirements will not change in the future in a manner that could
materially and adversely affect the Company.
The Company is currently conducting or funding, or expects to conduct
or fund, environmental investigations, monitoring and cleanups at certain of its
previously or currently operated facilities, including facilities located at the
Memphis, Miami, New Orleans, Portland, Sarasota and Seattle airports, and has
received claims or demands to pay a portion of airport-wide costs, including in
some cases under CERCLA or analogous state laws with respect to its Philadelphia
and San Francisco airport facilities. At certain facilities at which the Company
provides into-plane fueling services or maintains and operates a fuel storage
and delivery system, environmental remedial costs have been borne by the owners
of airport fueling systems rather than the Company. In addition, the Company has
in place other legal arrangements (e.g., contractual indemnities, insurance
policies, allocation agreements and state funding mechanisms for cleanup of
pollution from storage tanks) which it believes significantly mitigate the
foregoing liabilities. However, the Company cannot guarantee that the state
programs will continue to have funds available for the cleanup of tank sites. In
the event that these or other legal arrangements fail, the Company could bear
direct liability for the foregoing or any future matters and such liability
could be material. In addition, there
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can be no assurance that future environmental investigations by the Company will
not identify other environmental conditions requiring material expenditures of
funds.
From time to time, the Company receives notices of potential liability,
pursuant to CERCLA or analogous state laws, for cleanup costs associated with
offsite waste recycling or disposal facilities at which wastes associated with
its operations have allegedly come to be located. Liability under CERCLA is
strict, retroactive, and joint and several, although such liability is often
allocated among multiple responsible parties. In the past several years, such
notices have been received for the Peak Oil site in Tampa, Florida; the South
Eighth Street Landfill site in West Memphis, Arkansas; the Wingate Road site in
Ft. Lauderdale, Florida; and the Petroleum Products Corporation site in Pembroke
Pines, Florida. With respect to all such sites, the Company either has settled
its liability (Peak Oil), expects its liability to be de minimis and fully
indemnified by Viad (South Eighth Street), or has denied liability altogether
(Wingate Road and Petroleum Products). The possibility exists that the Company
will receive additional notices of CERCLA-type liability in the future. In light
of the relatively small volume of waste typically contributed by the Company,
the applicability of the CERCLA "petroleum exemption" to certain of its wastes,
the large numbers of parties typically involved in such sites, and the
availability of contractual indemnifications, although there can be no assurance
in this regard, the Company currently expects that its future liabilities for
cleanup of offsite disposal facilities will not be material.
Subject to certain time and dollar limitations, Viad has agreed to
indemnify the Company with respect to certain pre-Acquisition environmental
liabilities, including all known and unknown onsite and offsite contamination
matters. Based upon its environmental due diligence investigation, the Company
believes that such indemnification, coupled with the legal arrangements set
forth above, provide sufficient protection with respect to environmental
liabilities. In the event that Viad fails to honor this indemnification, the
Company could bear direct liability for such matters and such liability could be
material.
Employees
As of March 31, 1999, the Company employed 2,901 people. Approximately
three-fourths of the Company's employees are represented by labor unions. There
are currently approximately 33 collective bargaining contracts (among 7 separate
union entities) in place, almost all of which have terms of three years.
Contract expirations are staggered with approximately one-third coming up for
renewal each year. The Company believes that it has had good relations with the
several unions representing its employees.
Information about geographic revenues, operating profits and
identifiable assets attributable to each of the Company's geographic areas is
reported in the footnotes to the financial statements. See footnote 15 in the
Notes to Financial Statements.
Item 2. Properties
The Company's principal corporate offices are located adjacent to the
Fort Lauderdale International Airport in Broward County, Florida. The Company's
operating facilities are in:
<TABLE>
<S> <C>
Albuquerque, NM Costa Mesa, CA
Aberdeen, Scotland Denver, CO
Atlanta, GA Fairbanks, AK
Austin, TX Freeport, Bahamas
Belgrade, MT Ft. Lauderdale, FL
Billings, MT Gatwick - London, England
Birmingham, England Great Falls, MT
Boise, ID Heathrow - London, England
Burbank, CA Helena, MT
Cincinnati, OH Jackson, MS
Cleveland, OH Kalispell, MT
Colorado Springs, CO Lincoln, NE
</TABLE>
9
<PAGE> 11
<TABLE>
<S> <C>
Los Angeles, CA Reno, NV
Luton, England Rochester, NY
Manchester, England San Diego, CA
Melbourne, FL San Francisco, CA
Memphis, TN San Jose, CA
Miami, FL San Juan, PR
Missoula, MT Santa Ana, CA
Montgomery, AL Sarasota, FL
Munich, Germany Seattle, WA
Nashville, TN Shreveport, LA
New Orleans, LA St. Croix, VI
Oklahoma City, OK St. Thomas, VI
Orlando, FL Tampa, FL
Philadelphia, PA Tucson, AZ
Pittsburgh, PA Washington, DC
Pleasant Grove, CA West Palm Beach, FL
Portland, OR
</TABLE>
The Company generally considers the facilities it leases adequate and
suitable for the requirements of each of its operations. Adequate space is
available at the corporate offices to accommodate expansion needs.
Item 3. Legal Proceedings
The Company and certain of its subsidiaries and affiliates are
plaintiffs or defendants in various actions, proceedings and claims, including
environmental claims. Some of the foregoing involve or may involve compensatory
or other damages. Litigation is subject to many uncertainties and although
liability, if any, is not ascertainable, the Company believes that any resulting
liability will not materially affect the Company's financial position or the
results of its operations.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for the Company's Common Equity and Related Security Holder
Matters
The Company is 100% owned by Ranger Aerospace Corporation and
accordingly, there is no established public trading market for the company's
common stock.
Effective April 1, 1998, the Company issued $75 million of Senior
Increasing Rate Notes under a Note Purchase Agreement which were used to
consummate Ranger's acquisition of the Company from Viad.
The Senior Increasing Rate Notes were paid-off with the proceeds of an
issuance of 11% Senior Notes due 2005 (the "Old Notes"). The Old Notes were sold
by the Company on August 18, 1998 to World Markets Corp. (the "Initial
Purchaser") in a transaction not registered under the Securities Act of 1933, as
amended, (the "Securities Act") in reliance upon an exemption under the
Securities Act (the "Initial Offering"). The Initial Purchaser subsequently
placed the Old Notes with (i) qualified institutional buyers in reliance upon
Rule 144A under the Securities Act and (ii) qualified buyers outside the United
States in reliance upon Regulation S under the Securities Act.
On February 12, 1999 the Company exchanged $80,000,000 principal amount
of Series B 11% Senior Notes due 2005 (the "Notes"), registered under the
Securities Act of 1933, for $80,000,000 principal amount of the then outstanding
Old Notes.
10
<PAGE> 12
Item 6. Selected Financial Data
The selected financial data set forth below should be read in
conjunction with the financial statements of the Company and its predecessor and
related notes thereto included elsewhere in this Form 10-K and with "Item
7-Management's Discussion and Analysis of Financial Condition and Results of
Operation" included herein.
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
(CONSOLIDATED) (COMBINED)
-------------- --------------------------------------------------------------------
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, ----------------------------------------------------
1999 1998 1997 1996 1995 1994
---------- ------------ --------- --------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues $ 123,441 $ 30,156 $ 119,325 $ 121,574 $ 111,658 94,308
Costs and expenses:
Operating expenses 99,035 25,986 97,116 101,903 92,893 76,155
Selling, general and administrative 8,865 1,818 7,581 8,291 7,114 6,096
Depreciation and amortization 8,721 1,119 4,604 4,420 4,340 4,165
--------- -------- --------- --------- --------- -------
Total costs and expenses 116,621 28,923 109,301 114,614 104,347 86,416
--------- -------- --------- --------- --------- -------
Operating income 6,820 1,233 10,024 6,960 7,311 7,892
Other income (expense), net (253) (57) (71) (45) 47 (60)
Interest income 207 73 350 343 842 483
Interest and other financial expense (11,281) (170) (669) (606) (620) (158)
--------- -------- --------- --------- --------- -------
Income (loss) before income taxes (4,507) 1,079 9,634 6,652 7,580 8,157
Income taxes 50 347 3,602 2,433 2,563 2,596
--------- -------- --------- --------- --------- -------
Net income (loss) before extraordinary
Item (4,557) 732 6,032 4,219 5,017 5,561
Extraordinary loss on early
Extinguishment of debt (213) -- -- -- -- --
--------- -------- --------- --------- --------- -------
Net income (loss) $ (4,770) $ 732 $ 6,032 $ 4,219 $ 5,017 5,561
========= ======== ========= ========= ========= =======
Net loss per share - basic and diluted:
Before extraordinary item $ (45,570)
=========
Extraordinary loss $ (2,130)
=========
Net loss (47,700)
=========
Weighted average common shares
Outstanding - basic and diluted 100
=========
</TABLE>
11
<PAGE> 13
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
(CONSOLIDATED) (COMBINED)
-------------- ----------------------------------------------------------------
THREE MONTHS
YEAR ENDED ENDED YEAR ENDED DECEMBER 31,
MARCH 31, MARCH 31, --------------------------------------------------
1999 1998 1997 1996 1995 1994
-------------- ------------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF CASH FLOW DATA:
Net cash provided by operating
activities $ 6,645 $ 4,995 $ 17,139 $ 7,161 $ 5,060 $ N/A
Net cash used in investing activities (102,556) (2,666) (4,300) (9,061) (4,402) N/A
Net cash provided by (used in) financing
activities 99,222 (2,329) (13,030) 2,091 (806) N/A
OTHER DATA:
EBITDA (a) $ 15,541 $ 2,352 $ 14,628 $ 11,380 $ 11,651 $ 12,057
Capital expenditures 13,431 2,666 3,947 9,061 4,402 4,722
<CAPTION>
BALANCE SHEET DATA (AT END OF PERIOD):
SUCCESSOR PREDECESSOR
------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash $ 3,311 $ 0.1 $ -- $ 191 $ -- $ 148
Total assets 123,754 -- 41,930 38,602 43,160 47,699
Total debt 82,927 -- 91 173 247 315
Total stockholder's equity 19,350 0.1 14,557 15,433 17,692 19,697
</TABLE>
(a) EBITDA is defined herein as net income (loss) before interest,
income taxes, depreciation, amortization and other income (expense). Although
EBITDA is not a measure of performance calculated in accordance with generally
accepted accounting principles, the Company has included information concerning
EBITDA in this annual report because it is commonly used by certain investors
and analysts as a measure of a company's ability to service its debt
obligations. The Company's calculation of EBITDA may not be comparable to
similarly titled measures reported by other companies since all companies do not
calculate this non-GAAP measure in the same manner. The Company's EBITDA
calculation is not intended to represent cash used in operating activities,
since it does not include interest and taxes and changes in operating assets and
liabilities, nor is it intended to represent the net increase or decrease in
cash, since it does not include cash provided by (used in) investing and
financing activities.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion of the Company's consolidated historical
results of operations and financial condition should be read in conjunction with
the financial statements and the notes thereto which appear in Part II, Item 8
of this 10-K.
Overview
The Company's business includes aviation fueling services (62% of
fiscal 1999 revenues), aircraft ground services (35%) and other aviation
services (3%). Aviation fueling services are comprised primarily of into-plane
fueling, maintenance and operation of fuel storage and delivery systems and the
retail sale of fuel products. Generally, the Company has custody over, but not
ownership of, the fuel it manages and delivers. Aircraft ground services consist
primarily of ground handling, aircraft interior grooming, cargo handling,
passenger and traffic services and FBO's.
12
<PAGE> 14
An investor group capitalized Ranger Aerospace Corporation (the 100%
owner of the Company) with an aggregate investment of $24.1 million, all of
which was contributed as equity to the Company in return for all of its
outstanding common stock on April 1, 1998. The net proceeds from the equity
investment and the Company's issuance of $75 million of Senior Increasing Rate
Notes were used to consummate the acquisition of the ASIG business from Viad for
$95 million (subject to final adjustments). Concurrent with the acquisition of
the ASIG business (the "Acquisition"), the Company entered into a $10 million
senior credit facility which was subsequently amended in May 1999 and increased
to $15 million to consumate the purchase of Elsinore, L.P.
Revenues
Into-plane fueling service consists of providing airplanes with
specified amounts of fuel from fuel storage facilities located at or near the
airport. The Company generally records revenue from its into-plane fueling
contracts based on a fee per gallon of fuel delivered. Fuel system maintenance
and operation consists of the maintenance and operation of the fuel storage and
delivery systems at an airport. These systems are typically composed of storage
tanks, pumps, pipes and filter/separators. The Company generally records revenue
from its maintenance and operation contracts based on reimbursement of costs,
plus an additional monthly fee. In addition, the Company sells aviation fuel to
private aircraft at retail prices at locations where it has FBOs.
Ground handling services consist of the provision of ground handling
crews and all necessary ground support equipment to process airline flights
through the full range of on-the-ground services. Aircraft interior grooming
consists of the cleaning of aircraft cabins between flights and cargo handling
consists of the loading, warehousing and documentation of cargo. Passenger and
traffic services include passenger ticketing, check-in and boarding, security
clearance, special assistance and skycap services. FBOs generally include the
provision of terminal services, pilot facilities, maintenance, weather service,
flight planning and hangar space to private, executive and corporate aircraft.
For each of these aircraft ground services, other than FBOs, the Company is
generally compensated by a fixed fee for each aircraft serviced, based on the
size of the aircraft. For FBOs, the Company is generally compensated by a fixed
fee for specific services rendered.
The Company provides its services to its customers pursuant to
contractual agreements and currently has approximately 800 contracts. In fiscal
1999, the Company's largest contract accounted for 5.0% of revenue, and no other
contract accounted for more than 3.6% of revenue. The majority of the Company's
contracts have an industry standard initial length of one year, although the
Company's larger contracts generally run for initial terms of three to five
years.
Costs and Expenses
The Company's principal operating expenses are labor costs and direct
supervision at its stations along with related benefits and payroll taxes, cost
of fuel sold, workers' compensation, property and liability insurance, rent
expense, repairs and maintenance expenses and miscellaneous other direct
station-related expenses. Certain of these expenses are relatively fixed,
regardless of the extent of operations at a particular station, including the
cost of the facility, station management and related administrative expenses.
Selling, general and administrative expenses include the costs of
marketing the Company's services, general supervision provided to the stations,
and accounting, finance and personnel related expenses. These costs are
generally comprised of labor costs and related benefits and payroll taxes, legal
and other professional fees and miscellaneous expenses.
Certain amounts in the three months ended March 31, 1998 and 1997 and
the years ended December 1997 and 1996 have been reclassified to conform with
the fiscal 1999 financial statement presentation.
13
<PAGE> 15
Results of Operations
The following table summarizes the Company's results of operations for
the periods indicated (dollars in millions):
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
----------------- ---------------------------------------------------------------------
Year ended Three months ended March 31, Year ended December 31,
---------------------------- -----------------------
March 31, 1999 1998 1997 1997 1996
----------------- --------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 123.4 100.0% $ 30.2 100.0% $ 29.8 100.0% $ 119.3 100.0% $ 121.6 100.0%
Costs and expenses:
Operating expenses 99.0 80.2% 26.0 86.1% 23.7 79.5% 97.1 81.4% 101.9 83.8%
Selling, general and administrative 8.9 7.2% 1.8 6.0% 2.3 7.7% 7.6 6.4% 8.3 6.8%
Depreciation and amortization 8.7 7.1% 1.1 3.6% 1.2 4.0% 4.6 3.9% 4.4 3.6%
----------------- --------------- --------------- ---------------- ----------------
Operating income $ 6.8 5.5% $ 1.2 4.0% $ 2.6 8.7% $ 10.0 8.4% $ 7.0 5.8%
================= =============== =============== ================ ================
Net income (loss) $ (4.8) (3.9)% $ 0.7 2.3% $ 1.6 5.4% $ 6.0 5.0% $ 4.2 3.5%
================= =============== =============== ================ ================
EBITDA $ 15.5 12.6% $ 2.3 7.6% $ 3.8 12.8% $ 14.6 12.2% $ 11.4 9.4%
================= =============== =============== ================ ================
</TABLE>
Company's Fiscal Year Ended March 31, 1999 Compared to Predecessor's Year Ended
December 31, 1997
Revenues increased $4.1 million, or 3.4%, from $119.3 million in 1997
to $123.4 million in fiscal 1999. This increase was primarily attributable to,
among other things, new business, revenue enhancements and increased activity on
existing contracts totaling approximately $10 million, including a $1.5 million
increase at the London operations due to a new fueling contract with ESSO, a
$2.6 million increase at the Philadelphia airport operations due to the major
competitor leaving the airfield and the resulting increase in business and a
$1.1 million increase at the Atlanta operations primarily resulting from a new
contract with Delta Airlines. Partially offsetting these increases was a loss of
approximately $4.9 million of revenue at eleven locations where Delta ground
handling contracts were terminated and the loss of a contract with British
Airways at London's Heathrow airport that resulted in a $1 million decrease in
revenue. This lost Delta business was primarily due to a strategic decision by
the Company either to increase margins on selected low margin ground services
contracts or terminate those contracts and Delta's decision to in-source certain
ground services which had previously been outsourced to the Company.
Operating expenses increased $1.9 million, or 2.0%, from $97.1 million
during 1997 to $99.0 million during fiscal 1999. This increase was primarily
attributable to an increase in direct payroll of $3.4 million, which was mostly
related to the increase in revenues. Offsetting this increase were decreases in
workers' compensation and property and liability insurance totaling $1.0 million
and a decrease in the cost of fuel sold of $1.0 million which resulted from
lower fuel prices and a lower volume of sales. Operating expenses as a
percentage of revenues decreased from 81.4% in 1997 to 80.2% in fiscal 1999 due
to the aforementioned and to operating efficiencies at some locations.
Selling, general and administrative expenses increased $1.3 million, or
17.1%, from $7.6 million in 1997 to $8.9 million in fiscal 1999. Contributing
costs included $1 million of legal services, accounting and payroll and fringe
benefits that resulted from the new management of the Company and $0.4 million
of costs related to attempted acquisitions during the current year. Selling,
general and administrative expenses as a percentage of revenues increased from
6.4% in 1997 to 7.2% in fiscal 1999.
Depreciation and amortization expenses increased $4.1 million, or
89.1%, from $4.6 million in 1997 to $8.7 million in fiscal 1999. This increase
was primarily attributable to the revaluation of equipment to the current fair
market value and the related goodwill as a result of the acquisition of the ASIG
business. Depreciation and amortization expenses as a percentage of revenues
increased from 3.9% in 1997 to 7.1% in fiscal 1999.
14
<PAGE> 16
As a result of the above factors, operating income decreased $3.2
million, or 32.0%, from $10.0 million in 1997 to $6.8 million in fiscal 1999.
However, before depreciation and amortization charges, the operating income
margin increased from 12.2% in 1997 to 12.6% in fiscal 1999. This increase was
primarily attributable to the termination of the lower margin Delta ground
handling contracts. The increased depreciation and amortization expense
mentioned above resulted in the decrease of operating income margins from 8.4%
in 1997 to 5.5% in fiscal 1999.
Interest and other financial expense increased $10.6 million from $0.7
million in 1997 to $11.3 million in fiscal 1999. This increase relates to the
interest and finance costs on the outstanding debt of the Company which was
incurred in connection with the Acquisition. Finance cost charges totaled $2.9
million during fiscal 1999, of which, $2.6 million related to issuance of $75
million of Senior Increasing Rate Notes. Deferred finance costs relating to the
11% Senior Notes are being amortized over the seven year life of the notes.
As a result of the above factors, income taxes decreased $3.5 million
from $3.6 million for the year ended December 31, 1997, to $0.1 million for the
year ended March 31, 1999.
Accordingly, net income decreased $10.8 million from $6.0 million for
the year ended December 31, 1997, to a loss of $(4.8) million for the year ended
March 31, 1999.
The foregoing factors resulted in an increase in EBITDA of $0.9
million, or 6.2%, from $14.6 million in 1997 to $15.5 million in fiscal 1999.
EBITDA margin increased from 12.2% to 12.9% for the respective periods. EBITDA
would have been $0.4 million greater had it not been for an unusual and
non-recurring item including $361,000 of costs related to abandoned acquisition
pursuits.
Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997
Revenues increased $0.4 million, or 1.3%, from $29.8 million for the
three months ended March 31, 1997, to $30.2 million for the three months ended
March 31, 1998. This increase was attributable to, among other things, new
business principally for into-plane fueling and revenue enhancements on existing
contracts partially offset by lost business primarily related to lost Delta
ground handling business in certain locations of $1.7 million as described
above.
Operating expenses increased $2.3 million, or 9.7%, from $23.7 million
for the three months ended March 31, 1997 to $26.0 million for the three months
ended March 31, 1998. This increase was primarily attributable to increased
labor and related benefits expenses of $1.6 million, workers' compensation
expenses of $0.2 million and repairs and maintenance expenses of $0.4 million.
As a result, operating expenses as a percentage of revenues increased from 79.5%
in the three months ended March 31, 1997 to 86.1% in the three months ended
March 31, 1998.
Selling, general and administrative expenses decreased $0.5 million or
21.7% from $2.3 million for the three months ended March 31, 1997 to $1.8
million for the three months ended March 31, 1998. This decrease was the result
of reduced payroll related to management changes as part of a concerted effort
to reduce overhead expenses.
Depreciation and amortization expenses remained fairly constant,
decreasing from $1.2 million for the three months ended March 31, 1997 to $1.1
million for the three months ended March 31, 1998. Although the level of
expenses was consistent between periods, depreciation and amortization expenses
as a percentage of revenues decreased from 4.0% in the three months ended March
31, 1997 to 3.6% in the three months ended March 31, 1998 as a result of the
increased revenues.
15
<PAGE> 17
As a result of the above factors, operating income decreased $1.4
million, or 53.9%, from $2.6 million for the three months ended March 31, 1997
to $1.2 million for the three months ended March 31, 1998. Operating income
margins decreased from 8.7% in the three months ended March 31, 1997 to 4.0% in
the three months ended March 31, 1998.
As a result of the above factors, income taxes decreased $0.6 million
from $0.9 million for the three months ended March 31, 1997, to $0.3 million for
the three months ended March 31, 1998. The effective tax rates were fairly
consistent between the two periods.
Accordingly, net income decreased $0.9 million from $1.6 million for
the three months ended March 31, 1997, to $0.7 million for the three months
ended March 31, 1998. Net income margins decreased from 5.4% to 2.3% for the
respective periods.
The foregoing factors resulted in a decrease in EBITDA of $1.5 million,
or 39.5%, from $3.8 million for the three months ended March 31, 1997 to $2.3
million for the three months ended March 31, 1998. EBITDA margins decreased from
12.8% to 7.6% for the respective periods.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues decreased $2.3 million, or 1.8%, from $121.6 million in 1996
to $119.3 million in 1997. This decrease was primarily attributable to, among
other things, lost business principally related to ground handling contracts
with Delta lost or terminated of $4.5 million as described above. Partially
offsetting this decrease were new business and other activity, principally
related to into-plane fueling and fuel system maintenance and operation
contracts, and revenue enhancements on existing contracts.
Operating expenses decreased $4.8 million, or 4.7%, from $101.9 million
during 1996 to $97.1 million during 1997. This decrease was primarily
attributable to a decrease in payroll and related benefits of $4.2 million,
which were directly related to the decrease in Delta revenues and a reduction in
damage claims of $0.5 million. Offsetting these decreases were increased
workers' compensation expenses and medical insurance costs of $0.3 million.
Operating expenses as a percentage of revenues decreased from 83.8% in 1996 to
81.4% in 1997.
Selling, general and administrative expenses decreased $0.7 million, or
8.4%, from $8.3 million in 1996 to $7.6 million in 1997. This decrease was the
result of reduced payroll related to management changes along with a concerted
effort on the part of management to reduce overhead expenses. Selling, general
and administrative expenses as a percentage of revenues decreased from 6.8% in
1996 to 6.4% in 1997.
Depreciation and amortization expenses increased $0.2 million, or 4.2%,
from $4.4 million in 1996 to $4.6 million in 1997. This increase was primarily
attributable to the additional depreciation resulting from increased capital
investments in 1996 and 1997 related to the Company's ongoing fleet improvement
program and purchases of equipment to service new contracts signed during 1996
and 1997. Depreciation and amortization expenses as a percentage of revenues
increased from 3.6% in 1996 to 3.9% in 1997, primarily as a result of these
increased expenses despite reduced revenues.
As a result of the above factors, operating income increased $3.0
million, or 44.0%, from $7.0 million in 1996 to $10.0 million in 1997. The low
margin Delta contracts that were lost or terminated by the Company, together
with improved profit margins on existing and new business and management's
concerted efforts to reduce expenses resulted in the increase of operating
income margins from 5.8% in 1996 to 8.4% in 1997.
As a result of the above factors, income taxes increased $1.2 million
from $2.4 million for the year ended December 31, 1996, to $3.6 million for the
year ended December 31, 1997. The effective tax rates were consistent between
the two periods.
16
<PAGE> 18
Accordingly, net income increased $1.8 million from $4.2 million for
the year ended December 31, 1996, to $6.0 million for the year ended December
31, 1997. Net income margins increased from 3.5% to 5.1%.
The foregoing factors resulted in an increase in EBITDA of $3.2
million, or 28.5%, from $11.4 million in 1996 to $14.6 million in 1997. EBITDA
margin increased from 9.4% to 12.2% for the respective periods.
Liquidity and Capital Resources
Net cash provided by operating activities was $6.6 million for fiscal
1999, as compared to $17.1 million for 1997. The net cash provided by operating
activities decreased primarily due to a $7.8 million increase in interest
expense and a $2.9 million decrease in accrued expenses. Net cash provided by
operating activities was $7.2 million in 1996. The increase from 1996 to 1997
was primarily due to increases in net income, accounts payable and accrued
liabilities and decreases in accounts receivable.
Net cash used in investing activities was $102.6 million for fiscal
1999 as compared to $4.3 million for 1997. The increase was primarily
attributable to the Acquisition and to an increase in fiscal 1999, over the
prior year, in the investment in equipment of $9.5 million. The increase in
equipment investment was required to improve the condition of the fleet which
had deteriorated due to lack of capital provided by the Company's former owner.
Net cash used in investing activities was $9.1 million in 1996. The fluctuation
between 1996 and 1997 was primarily due to capital expenditure needs for
maintaining and upgrading the fleet. For the year ending March 31, 2000 it is
anticipated that capital expenditures will be approximately $7.8 million,
excluding the purchase price of Elsinore, L.P. of approximately $6.2 million.
Net cash provided by (used in) financing activities was $99.2 million
for fiscal 1999 and $(13.0) million for 1997. This increase is primarily due to
$24.1 million from the issuance of common stock of the Company and $72.0 million
received (after finance costs) from debt financing relating to the Acquisition.
In fiscal 1999, there was also $2.9 million drawn against the Company's senior
credit facility with Key Corporate Capital. Additionally, there was $12.9
million returned to Viad in 1997 in the form of dividends and intercompany
loans. Net cash provided by financing activities was $2.1 million in 1996. The
fluctuation between 1996 and 1997 was due primarily to changes in the due
to/from Parent account.
As of March 31, 1999, the Company had long-term indebtedness of $80.0
million in the form of the Notes, cash of approximately $3.4 million and
approximately $6.8 million of availability under its senior credit facility.
Concurrent with the consummation of the issuance of the Old Notes, the Company
expensed approximately $213,000 to write off the remaining unamortized deferred
financing costs previously incurred in connection with the Senior Increasing
Rate Notes that were repaid with the net proceeds of the issuance of the Old
Notes. The unamortized expenses related to the deferred financing costs were
accounted for as an extraordinary loss on the early extinguishment of debt.
The Company's primary sources of liquidity are from cash flow provided
by operations and borrowings under its senior credit facility. Based upon the
successful implementation of management's business and operating strategy, the
Company believes that these funds will provide it with sufficient liquidity and
capital resources to meet current and future financial obligations, including
the payment of principal and interest on the Notes, as well as to provide funds
for the Company's working capital, capital investments and other needs for the
next twelve months. The Company's future operating performance and ability to
service or refinance the Notes and to repay, extend or refinance the senior
credit facility will be subject to future economic conditions and to financial,
business and other factors, many of which are beyond the Company's control.
There can be no assurance that such sources of funds will be adequate and that
the Company will not require additional capital from borrowings or securities
offerings to satisfy such requirements. In addition, there can be no assurance
that the Company will have sufficient available capital resources to realize its
acquisition strategy. Such future acquisitions, depending on their size and the
form of consideration, may require the Company to seek additional debt or equity
financing.
17
<PAGE> 19
Recent Developments
On May 20, 1999, Elsinore Acquisition Corporation ("EAC"), a
newly-created, wholly-owned subsidiary of the Company acquired substantially all
of the assets of Elsinore, L.P., which includes Elsinore, L.P.'s 23 operating
units in 10 states, the U.S. Virgin Islands and Puerto Rico providing a variety
of ground handling, fueling, aircraft cleaning and other aviation services to
major commercial airlines. EAC will continue substantially the same business
conducted by Elsinore, L.P. The Company and its sole shareholder, Ranger
Aerospace Corporation, are guarantors of EAC's obligations under the agreement
governing the asset purchase.
The total consideration paid by EAC was approximately $6.2 million
(subject to post-closing adjustments), which amount includes $5.0 million in
cash, a promissory note in the principal amount of $0.9 million and the
assumption by EAC of approximately $0.3 million of liabilities of Elsinore, L.P.
The 8% promissory note has a term of one year from the date of purchase, and its
principal amount is subject to post-closing adjustments. The purchase price was
determined based on negotiations between the parties and represents less than a
4 time multiple of Elsinore's adjusted EBITDA. The Company borrowed the cash
portion of the purchase price pursuant to the terms of an amendment to the
Company's existing senior credit facility, which the Company in turn loaned to
EAC.
Effective December 31, 1998, Mr. F. Andrew Mitchell, the Company's
Chief Financial Officer, left the Company. Michael A. Krane, Vice
President-Finance, remains the senior accounting officer of the Company and is
serving as the interim Chief Financial Officer until Mr. Mitchell is replaced.
Mr. Krane has held several financial positions with the Company over the past 9
years.
Environmental Matters
The Company is subject to compliance obligations and liabilities
imposed pursuant to federal, state, local and foreign environmental and
workplace health and safety requirements, including CERCLA. In particular, the
Company's aviation fueling services are subject to liabilities and obligations
relating to the above ground and underground storage of, and the release and
cleanup of, petroleum products. Although the Company believes it is in material
compliance with environmental, health and safety requirements, the possibility
exists that noncompliance could occur or be identified in the future, and the
penalties or costs of corrective action associated therewith could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, requirements are complex, change frequently
and have tended to become more stringent over time, and there can be no
assurance that these requirements will not change in the future in a manner that
could materially and adversely affect the Company.
The Company is currently conducting or funding, or expects to conduct
or fund, environmental investigations, monitoring and cleanups at certain of its
previously or currently operated facilities. Also, from time to time, the
Company receives notices of potential liability for cleanup costs associated
with offsite waste recycling or disposal facilities at which wastes associated
with its operations allegedly have come to be located. In addition, airport
authorities are coming under increasing pressure to clean up previous
contamination at their facilities and are seeking financial contribution from
airport tenants and companies which operate at their airports. Although the
Company has taken steps to mitigate or remove the foregoing liabilities, the
Company could bear direct liability for the foregoing matters and such liability
could have a material adverse effect on the Company's business, operating
results and financial condition.
18
<PAGE> 20
Year 2000 Issue
Readiness
The Company has evaluated and believes it has addressed the Year 2000
issue as it relates to its internal information technology systems. The
Company's internal efforts included the upgrading of critical hardware and
software systems to become Year 2000 compliant. The Company is in the process of
surveying its customers with whom it has material relationships for Year 2000
compliance.
Costs
The costs of achieving Year 2000 compliance have not been material to
date and additional costs are not expected to be material.
Risks
Based on its investigation to date, the Company does not believe it
will experience any material adverse effects as a result of the Year 2000 issue.
However, there can be no assurance in this regard, and the Year 2000 issue could
have a material adverse effect on the Company. While the Company has undertaken
its own evaluation and testing of its information technology systems, it is
dependent to some extent on the assurance and guidance provided by suppliers of
hardware, software and programming services as to its Year 2000 readiness.
The Company's Year 2000 evaluation includes an analysis of the possible
effects on, and the state of Year 2000 compliance by its customers with whom it
has material relationships. However, the Company has limited ability to
independently verify the possible effect of Year 2000 issues on such customers
as this process is limited to such persons' public statements, responses to the
Company's inquiries and information available to the Company from other third
party sources, if any. Therefore, the Company's beliefs about the effects of its
customers' Year 2000 compliance may be inaccurate.
In addition, there can be no assurance that the Company will not
experience Year 2000 related issues despite the Company's Year 2000 efforts and
its belief that its internal systems are Year 2000 compliant. The most likely
worst case scenario with respect to Year 2000 issues is that the Company's
remediation of its information technology systems proves to be ineffective and
critical systems fail or malfunction as a result of Year 2000 problems and
disrupt its operations. The Company is currently unable to quantify the effect
of such a malfunction, however, such an event could have a material adverse
effect on the Company. Also, the Company's airline customers and airports could
suffer adverse affects, which would negatively impact the Company. The Company
has no control over these entities' remediation efforts.
Contingency Plans
The Company does not currently have any contingency plans with respect
to Year 2000 issues. If in the future the Company identifies a material problem
with a critical system, the Company will develop an appropriate contingency plan
at that time. However, circumstances may occur for which there are no
satisfactory contingency plans, such as airline flight disruptions, airport air
traffic control problems, among others.
19
<PAGE> 21
Euro Conversion Issue
On January 1, 1999, certain member countries of the European Union
established fixed conversion rates between their existing currencies and the
European Union's common currency ("Euro") and adopted the Euro as their common
legal currency. The transition period for the introduction of the Euro will be
between January 1, 1999 and January 1, 2002. The Company is currently evaluating
the effects of the Euro conversion as it relates to the conversion of
information technology systems, recalculating currency risk, strategies
concerning continuity of contracts and the impact on its operations and
financial condition, particularly as the Euro conversion relates to the
Company's European operations.
Based on its work to date, the Company believes the Euro conversion
will not have a material adverse impact on the Company's consolidated financial
statements.
Recent Accounting Pronouncements
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130),
which establishes standards for reporting and display of comprehensive income
and its components in a full set of general purpose financial statements.
Comprehensive income (loss) includes net income (loss) and other comprehensive
income, which includes, but is not limited to, unrealized gains for marketable
securities and future contracts, foreign currency translation adjustments and
minimum pension liability adjustments. The accompanying financial statements for
the Company reflect other comprehensive income (loss) consisting of net income
(loss) and foreign currency translation adjustments.
In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits-an amendment of FASB Statements No. 87, 88, and 106"
(SFAS No. 132). SFAS No. 132 revises employers' disclosures about pension and
other postretirement benefit plans. It does not change the measurement or
recognition of those plans; therefore, the adoption of SFAS No. 132 affected the
Company's disclosure information only.
In fiscal year 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), which is effective for
fiscal quarters of fiscal years beginning after June 15, 1999. This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognized all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company plans to adopt SFAS No. 133 in the
year 2000 and is currently assessing the impact this statement will have on its
consolidated financial statements.
Impact of Inflation
Although the Company cannot accurately determine the precise effect of
inflation on its operations, it does not believe that inflation has had a
material effect on its revenue or results of operations for the periods
presented herein. However, substantial increases in the Company's costs,
particularly labor or employee benefits costs, would be likely to adversely
affect the Company's revenues and operating results. In addition, because
inflation would likely materially and adversely affect the airline industry as a
whole, and the Company's business depends to a large extent on the economic
health of the airline industry, an increase in inflation would likely have a
material adverse effect on the Company's revenue and operating results.
20
<PAGE> 22
This Annual Report on Form 10-K contains forward-looking statements
which are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based on the
beliefs of the Company's management as well on assumptions made by and
information currently available to the Company at the time such statements were
made. When used in this annual report the words "anticipate," "believe,"
"estimate," "expect," "intends" and similar expressions, as they relate to the
Company are intended to identify forward-looking statements. Actual results
could differ materially from those projected in the forward-looking statements.
Important factors that could affect the Company's results include, but are not
limited to:
(1) the Company's high level of indebtedness;
(2) the restrictions imposed by the terms of the Company's
indebtedness;
(3) the sensitivity of the Company's business to general economic
conditions;
(4) the adverse affect on the Company's customers resulting from
the increase in the price or a decrease in the availability of
aviation fuel;
(5) the inability to collect all of its accounts receivables;
(6) risks related to doing business in foreign countries and with
foreign customers;
(7) the loss of one of the Company's significant customers;
(8) substantial competition in the Company's markets;
(9) the risk of losing business due to in-sourcing;
(10) the high degree of turnover amount the Company's employees;
and
(11) the adverse affect of environmental and safety regulations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to market risk from changes in interest rates and
currency exchange rates which may adversely affect our results of operations and
financial condition. We seek to minimize the risks from these interest rate and
currency exchange rate fluctuations through our regular operating and financing
activities.
Item 8. Financial Statements and Supplementary Data
The financial statements required pursuant to this item are included in
Part IV, Item 14 of this Form 10-K and are presented beginning on Page F-1.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Company
The following table sets forth certain information (ages as of June 10,
1999) with respect to the persons who are members of the Board of Directors (the
"Board"), executive officers or key employees of the Company. John Hancock
Mutual Life Insurance Company ("Hancock") and affiliates of Canadian Imperial
Bank of Commerce ("CIBC") together have the ability to appoint a majority of the
members of the Board of both Ranger and the Company pursuant to the
Securityholders Agreement. See "Item 13- Certain Relationships and Related
Transactions--Securityholders Agreement."
<TABLE>
<CAPTION>
NAME AGE POSITION AND OFFICES
---- --- --------------------
<S> <C> <C>
Stephen D. Townes..............46 President, Chief Executive Officer and Director
George B. Schwartz.............45 Chairman of the Board, Director and Assistant Secretary
George W. Watts................46 Executive Vice President and Secretary
John W. Gassett................52 Senior Vice President-ASIG North America
Paul Jefferson.................43 Senior Vice President and Managing Director-ASIG Europe
William McLendon...............38 Vice President-Eastern Operations
</TABLE>
21
<PAGE> 23
<TABLE>
<S> <C> <C>
Ronald F. Pattie...............51 Vice President-Technical Services
Michael A. Krane...............43 Vice President-Finance
James P. Ferrara...............46 Vice President-Quality and Engineering & CIO
Wesley Vedo....................60 Vice President-National Programs
Kurt A. Granger................41 Vice President-Customer Service
Robert D. Sellas, Jr...........36 Vice President-Marketing
D. Dana Donovan................42 Director
Jay R. Levine..................42 Director
Edward Levy....................34 Director
S. Mark Ray....................46 Director
</TABLE>
Stephen D. Townes founded Ranger and the Company and became President,
Chief Executive Officer and Director upon the consummation of the Acquisition.
Prior to joining Ranger and the Company, Mr. Townes had been the Vice Chairman
and a Director of Sabreliner Corporation's commercial aircraft services division
since November 1995. From July 1994 to November 1995, Mr. Townes was President
and Partner of Intertrade Ltd., and prior to joining Intertrade, Mr. Townes was
the Executive Vice President & Technical Operations Officer of Stevens Aviation.
Prior to joining Stevens Aviation in March 1990, Mr. Townes held management
positions with the Dee Howard Company and LTV Aerospace & Defense (now Vought
Aircraft). Mr. Townes received an engineering degree from West Point, an MBA
from Long Island University and completed the PMD Program at Harvard Business
School.
George B. Schwartz co-founded Ranger and the Company and became
Chairman of the Board upon the consummation of the Acquisition. Mr. Schwartz is
currently the President of Tioga Capital Corporation, a position he has held
since 1991. From 1987 to 1990, Mr. Schwartz was a Partner of The Airline Group,
L.P., an investment fund, the general partner of which was an affiliate of Bass
Brothers Enterprises. Prior to joining Airline, Mr. Schwartz was employed as a
Senior Vice President of Drexel Burnham Lambert, Inc. Mr. Schwartz also serves
as a director of Thompson Hospitality Corporation and as Chairman of the Board
of Engineered Fibres, Inc. Mr. Schwartz received his MBA from the Amos Tuck
School at Dartmouth College and a bachelors degree from Vanderbilt University.
Dr. George W. Watts joined Ranger and the Company as Executive Vice
President and Secretary upon the consummation of the Acquisition. Prior to
joining Ranger and the Company, Dr. Watts had been the President of Executive
Vision, a management consulting firm specializing in executive and
organizational development from 1985 to 1994 and 1997 to 1998. From 1994 to
1996, Dr. Watts was the Executive Vice President of PM Realty Group. Dr. Watts
has authored several books regarding corporate change management and executive
development and has consulted with numerous venture capital companies and major
corporations in the areas of executive assessment, management training, business
process re-engineering, corporate restructuring, marketing program development,
post-merger integration and accelerated growth management. Dr. Watts received a
bachelors, master's and Ph.D. degrees in psychology and education from The
College of William and Mary.
John W. Gassett joined the Company in 1967 and until 1980, served as
Station Manager of the West Palm Beach, Miami and Fort Lauderdale facilities. In
1980, Mr. Gassett was appointed a Director of Sales, in 1988 was named Vice
President--Marketing and Sales and, effective July 1998, was promoted to his
current position. Mr. Gassett attended the University of North Florida and
Pensacola Jr. College.
Paul Jefferson joined the Company in 1996 as Vice President--Europe
and, effective July 1998, was promoted to his current position. Mr. Jefferson is
responsible for all aspects of the Company's business in the United Kingdom and
continental Europe. Mr. Jefferson is also a director of Sytanking GmbH, the
Company's joint venture in Germany. From 1992 to 1996, Mr. Jefferson held the
position of Retail Services Manager in France with Eurotunnel and prior to that
Mr. Jefferson was employed with Esso U.K. for 14 years. Mr. Jefferson received a
BS degree (with Honours) in Business Studies from Queens University--Belfast.
22
<PAGE> 24
William McLendon joined the Company in July 1998 as Vice
President--Eastern Operations. Mr. McLendon is responsible for all aspects of
the Company's business in the eastern U.S. Prior to joining the Company, Mr.
McLendon was a General Manager with Stevens Aviation from 1994 to 1996, and from
1991 to 1994, was employed by ATS Aerospace, Inc., most recently as Vice
President, Operations. From 1981 to 1991 Mr. McLendon served in the United
States Air Force. Mr. McLendon received an engineering degree from the United
States Air Force Academy and bachelors and master's degrees from Oxford
University where he was a Rhodes Scholar.
Ronald F. Pattie joined the Company in 1969 as a field operations
officer, has since served as Director of Maintenance, was appointed as Director
of Technical Services and Quality Assurance in 1983 and, effective July 1998,
was promoted to his current position. Mr. Pattie received a bachelors degree in
Business Administration and Accounting from the University of South Florida.
Michael A. Krane joined the Company in 1990 as Manager of Financial
Reporting, was promoted to Assistant Controller in 1995 and Controller in 1997,
positions in which he was responsible for the Company's tax and treasury
functions, and was promoted to his current position in July 1998. From 1989 to
1990, Mr. Krane was the owner and President of an advertising service and from
1984 to 1989 he was Controller and Principal Accounting Officer of Home Fitness
Studio, a publicly held multi-state retailer of exercise equipment. From 1979 to
1984, Mr. Krane held positions with two public accounting firms, where he
specialized in taxes. Mr. Krane received a bachelors degree from the State
University of New York--Buffalo and is a Certified Public Accountant.
Peter J. Ferrara joined the Company in 1999 as the Company's Vice
President Quality and Engineering and Chief Information Officer. Mr. Ferrara's
primary responsibilities are quality control programs, ISO-9000 certification
efforts, internal operations auditing, the Company's MIS departments and
systems, and technical interface with engineering and quality managements at
airlines and airport authorities. Prior to joining the Company, Mr. Ferrara was
a senior manager and engineering veteran of Lockheed Martin and GE-Aerospace,
with extensive experience in quality systems and aerospace technologies. Mr.
Ferrara is also a licensed professional engineer and commercial airplane pilot.
Mr. Ferrara graduated from the U.S. Military Academy at West Point, New York in
1975 with honors.
Wesley R. Vedo joined the Company, in 1959 as a Ramp Agent and was
promoted to his current position in June of 1998. Mr. Vedo assists the Senior
Vice President-North America with operations and the design and implementation
of new system and initiatives. Prior to serving as Vice President-National
Programs, Mr. Vedo served as Regional Vice President of Sales and Service from
November of 1991 to June of 1998.
Kurtis A. Granger joined the Company in 1976 and was promoted to his
current position in July of 1998. Mr. Granger is primarily responsible for
managing customer relationship with major airlines. Prior to Mr. Granger's
promotion to his current position, he served as the Company's Director of Sales
and Customer Service from October 1994 to July of 1998 and as Manager of Sales
and Service from August 1991 to October 1994.
Robert D. Sellas, Jr. joined the Company in 1986 and was promoted to
his current position in 1998. Mr. Sellas is responsible for business
development, branding, promotions, and marketing initiatives. Prior to Mr.
Sellas' promotion to Vice President-Marketing, he served as the Company's
Director of Marketing and Sales from 1994 to 1998 and as a Station Manager from
1990 to 1994.
D. Dana Donovan became a Director of Ranger and the Company upon the
consummation of the Acquisition. Mr. Donovan has been a Senior Investment
Officer at John Hancock Mutual Life Insurance Company since 1990. From 1988 to
1990, Mr. Donovan was a principal with Berwick Capital. From 1985 to 1988, Mr.
Donovan was with Signal Capital's Merchant Banking Group. Mr. Donovan is a
director of Learning Curve International L.L.C. and Mobile Information Systems,
Inc. Mr. Donovan received his MBA from the Amos Tuck School at Dartmouth College
and a bachelors degree from Duke University.
23
<PAGE> 25
Jay R. Levine became a Director of Ranger and the Company upon the
consummation of the Acquisition. Since 1997, Mr. Levine has served as a
Managing Director of CIBC Corp. and manages the CIBC High Yield Merchant
Banking Funds. From 1996 to 1997, Mr. Levine was President of PPMJ, Inc., a
private consulting firm that advised its clients on private equity investments.
From 1990 to 1996, Mr. Levine was a senior executive in the Morningside and
Springfield Group, a private investment company. Mr. Levine is a director of
Consolidated Advisors Limited, L.L.C., Global Crossing, Ltd., Heating Oil
Partners, L.P. and Evercom, Inc. Mr. Levine received a bachelors degree from
Syracuse University, a JD degree from Tulane University and an LLM in taxation
from New York University.
Edward Levy became a Director of Ranger and the Company upon the
consummation of the Acquisition. Mr. Levy has been a Managing Director of an
affiliate of CIBC since 1995. Between 1991 and 1995, Mr. Levy held various
positions at The Argosy Group, L.P., culminating in the position of Managing
Director. Mr. Levy has also held positions in the Mergers and Acquisitions Group
of Drexel Burnham Lambert Incorporated and the Corporate Finance Department of
Kidder, Peabody & Co., Incorporated. Mr. Levy is also a director of Heating Oil
Partners, L.P., Norcross Safety Products, L.L.C., DSMax International, Inc. and
High Voltage Engineering Corporation. Mr. Levy is a graduate of Connecticut
College.
S. Mark Ray became a Director of Ranger and the Company upon the
consummation of the Acquisition. Mr. Ray has been a Senior Investment Officer at
John Hancock Mutual Life Insurance Company since 1991, where he manages a $2.0
billion transportation portfolio for the Bond and Corporate Finance Group.
Before joining John Hancock Mutual Life Insurance Company in 1978, Mr. Ray was a
United States Air Force pilot candidate, as well as a civilian aviator. Leaving
active duty in 1977, but continuing service with the Air Force Reserves, he
worked on the marketing and operations staff of the Kansas City Southern Railway
Company for a year in Dallas. As an inactive ready-reservist, Mr. Ray achieved
the rank of Captain and in 1987, after completing his service commitment, he
received his Honorable Discharge. Mr. Ray received a bachelors degree from Texas
Tech University in 1975.
Item 11. Executive Compensation
The following table sets forth information regarding the compensation
paid or accrued by the Company to the Chief Executive Officer and each of the
other most highly compensated executive officers of the Company in fiscal 1999
(collectively, the "Named Executive Officers") for services rendered to the
Company in all capacities during fiscal years 1999 and 1998.
24
<PAGE> 26
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------------------- ---------------------------------
AWARDS PAYOUTS
---------------------- -------
SECURITIES
OTHER RESTRICTED UNDERLYING
NAME AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL YEAR SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION
POSITION (1) ($) ($) ($) ($) ($) ($) ($)
--------- ---- ------ ----- ------------ ---------- ---------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen D. Townes..........(2) 1999 275,000 12,375(3)
Chief Executive Officer
Dr. George W. Watts.(4) 1999 212,000 11,670(5)
Executive Vice President
and Secretary
Andy Mitchell..............(6) 1999 204,027 28,867(7)
Former Chief Financial
Officer
John W. Gassett............ 1999 140,000 9,500 415 6,462(8)
Senior Vice President 1998 107,029 12,500 189,200(9)
ASIG North America
Paul Jefferson............. 1999 137,648 7,300 385 20,373(10)
Senior Vice President & 1998 101,592 14,880 57,766(11)
Managing Director ASIG
Europe
Lloyd M. Stauffer, Jr......(12) 1999 96,508 10,562(13)
Former Senior Vice 1998 119,310 15,900 112,196(14)
President Customer Service
</TABLE>
(1) 1998 compensation has been adjusted to reflect compensation paid by the
Company's predecessor from April 1, 1997 to C March 31, 1998 which is
consistent with the 1999 figures which are based on the Company's
fiscal year ending March 31, C 1999.
(2) Mr. Townes became Chief Executive Officer of the Company effective
April 2, 1998.
(3) Reflects $10,000 Company 401(k) matching contributions and $2,375 for
group term life insurance.
(4) Dr. Watts became an Executive Vice President of the Company effective
April 2, 1998.
(5) Reflects $10,000 Company 401(k) matching contributions and $1,670 for
group term life insurance.
(6) Mr. Mitchell became Chief Financial Officer of the Company effective
April 2, 1998 and left the Company effective December 31, 1998.
(7) Reflects $17,975 from a consulting agreement entered into by the
Company and Mr. Mitchell when he left the Company, $10,000 in Company
401(k) matching contributions and $892 for group term life insurance.
(8) Reflects $4,500 Company 401(k) matching contributions and $1,962 for
group term life insurance.
(9) The amount shown includes a bonus of $182,500 paid to Mr. Gassett by
Viad in connection with the Acquisition, payments made on behalf of Mr.
Gassett of $1,300 for group term life insurance and a contribution of
$5,400 made to Viad's Senior Employee Retirement Plan by Viad on behalf
of Mr. Gassett.
(10) The amount shown includes $13,765 of Company Pension (U.K.)
contributions and $6,608 for the use of a Company automobile.
(11) The amount shown includes a bonus of $41,000 paid to Mr. Jefferson in
connection with the Acquisition, $10,158 of Company Pension (U.K.)
contributions and $6,608 for the use of a Company automobile.
(12) Mr. Stauffer left the Company as an employee as of November 1998. The
Company retained Mr. Stauffer as a consultant from November 1998
through March 31, 1999.
25
<PAGE> 27
(13) Reflects $4,983 of Company 401(k) matching contributions and $5,579 for
group term life insurance
(14) The amount shown includes payments made on behalf of Mr. Stauffer of
$3,492 for group term life insurance and $12,887 for financial planning
services, and reflects a contribution of $27,002 made to Viad's Senior
Employee Retirement Plan by Viad on behalf of Mr. Stauffer. Also
includes $68,815 received by Mr. Stauffer upon the purchase and sale of
7,528 shares of common stock of Viad. Does not include any payments
made by Viad to Mr. Stauffer in connection with the Acquisition, as
such information is not available.
Option Grants and Exercises
The following tables set forth, for the Named Executive Officers,
information regarding stock options granted or exercised during, or held at the
end of, fiscal 1999. These options are options to purchase Class B Common Stock
of Ranger, the Company's parent.
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE AT
ASSUMED ANNUAL RATES OF STOCK
PRICE APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
----------------------------------------------------- -----------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES EXERCISE
GRANTED IN FISCAL PRICE EXPIRATION
NAME (#) (1) YEAR ($/SH) DATE 5%($)(2) 10%($)(2)
---- ------------ ---------- -------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stephen D. Townes ...........
Chief Executive Officer
George W. Watts .............
Executive Vice President and
Secretary
John W. Gassett ............. 415 7.3% $100 3/31/08 26,099 66,139
Senior Vice President-ASIG
North America
Paul Jefferson .............. 385 6.8% $100 3/31/08 24,213 61,357
Senior Vice President and
Managing Director-ASIG Europe
</TABLE>
(1) In order to prevent dilution or enlargement of rights under the
options, in the event of a reorganization, recapitalization, stock
split, stock dividend, or combination or other change in the Class B
Common Stock of Ranger, the type and number of shares available upon
exercise and the exercise price may be adjusted accordingly.
(2) Amounts reflect assumed rates of appreciation from the fair market
value on the date of grants as set forth in the SEC's executive
compensation disclosure rules. Actual gains, if any, on stock option
exercises depend on future appreciation of the Class B Common Stock of
Ranger Aerospace Corporation. No assurance can be made that the amounts
reflected in these columns will be achieved.
26
<PAGE> 28
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES VALUE OPTIONS/SARS AT OPTIONS/SARS AT FISCAL
ACQUIRED ON REALIZED FISCAL; YEAR END (#) YEAR END ($)
NAME EXERCISE (1) ($) (1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------ -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Stephen D. Townes ........
Chief Executive Officer
George W. Watts ..........
Executive Vice President
and Secretary
John W. Gassett .......... 83/332 $0/$0
Senior Vice President-ASIG
North America
Paul Jefferson ........... 77/308 $0/$0
Senior Vice President and
Managing Director-ASIG
Europe
</TABLE>
(1) As of the end of the fiscal year, none of the options held by the Named
Executive Officers had been exercised.
Compensation of Directors
Generally, the Directors of the Company will not be paid for their
services on the Board. Directors are reimbursed for out-of-pocket expenses
incurred in connection with attending Board meetings. The Company has entered
into an agreement with Tioga Capital Corporation ("Tioga") pursuant to which
Tioga will receive a fee during the period which Mr. Schwartz serves as Chairman
of the Board. Mr. Schwartz is the President of Tioga. See "Item 13. Certain
Relationships and Related Transactions Chairman Agreement."
Compensation Committee Interlocks and Insider Participation
The Company currently does not have a compensation committee. The
compensation of the executive officers of the Company is determined by the
Board.
Employment Agreements
Messrs. Townes and Watts have each entered into an employment agreement
(each, an "Employment Agreement") with Ranger and the Company. The Employment
Agreements provide for the employment, until March 31, 2001, unless terminated
earlier as provided in the respective Employment Agreement, of (i) Mr. Townes as
the President and Chief Executive Officer and (ii) Mr. Watts as Executive Vice
President. The Employment Agreement of Mr. Townes provides for an annual base
salary of $275,000 and the Employment Agreement of Mr. Watts provides for an
annual base salary of $212,000. In addition, each Employment Agreement provides:
(i) for the base salary to increase based on the Consumer Price Index; (ii) an
annual bonus to be determined by the Board of Directors of the Company; and
(iii) health benefits, life and disability insurance, participation in the
Company's retirement plan(s) and customary fringe benefits and vacation periods.
Each Employment Agreement may be terminated by the Company at any time
with or without Cause. Each Employment Agreement defines "Cause" to mean any of
the following acts: (i) the commission of a felony or a crime involving moral
turpitude or the commission of any other act or omission involving dishonesty,
disloyalty or fraud with respect to the Company or any of its subsidiaries or
any of their customers or suppliers; (ii) conduct tending to bring the Company
or any of its subsidiaries into substantial public disgrace or disrepute; (iii)
failure to perform duties as reasonably directed by the Board of Directors of
the Company or the Company's president; (iv) gross negligence or willful
misconduct with
27
<PAGE> 29
respect to the Company or any of its subsidiaries; or (v) any other material
breach of the Employment Agreement which is not cured within 15 days after
written notice thereof. Messrs. Townes and Watts may also choose to terminate
employment with the Company by reason of a Constructive Termination.
"Constructive Termination" means (i) a reduction of base salary or (ii) the
assigning of any duties inconsistent with duties first described in the
respective Employment Agreement. If the employment of Mr. Townes is terminated
for any reason other than (i) a termination by the Company for Cause or (ii) a
termination by Mr. Townes that is not a Constructive Termination, Mr. Townes
will receive severance compensation equal to 18 months base salary and current
health benefit coverage. If the employment of Mr. Watts is terminated for any
reason other than (i) a termination by the Company for Cause or (ii) a
termination by Mr. Watts that is not a Constructive Termination, Mr. Watts will
receive 12 months salary if such termination occurs before December 31, 1998 and
will receive 18 months salary if such termination occurs thereafter, unless such
termination is in connection with the refusal by Mr. Watts to relocate to the
Company's headquarters, in which case Mr. Watts will receive nine months salary.
1999 Stock Option Plan
The Board of Directors of Ranger has approved the Ranger Aerospace
Corporation 1999 Stock Option Plan ("1999 Option Plan"), which authorizes the
granting of stock options to acquire shares of Ranger's Class B Common Stock to
current or future executive officers and key employees of Ranger or its
subsidiaries. The 1999 Option Plan authorizes the granting of stock options up
to an aggregate of 1,000,000 shares of Ranger's Class B Common Stock, subject to
adjustment upon the occurrence of certain events to prevent any dilution or
expansion of the rights of participants that might otherwise result from the
occurrence of such events.
Options to purchase an aggregate of 5,700 shares of Ranger's Class B
Common Stock were granted (50 of which have been cancelled) during fiscal 1999.
One-third of the shares subject to such options are subject to time vesting
beginning on March 31, 1999 and ending on March 31, 2003. Two-thirds of the
shares subject to such options are subject to performance vesting beginning on
March 31, 1999 and ending on March 31, 2003. Unvested options will terminate in
the event that the optionee ceases to be employed with the Company and vested
but unexercised options will terminate immediately if the optionee is terminated
for cause or after 60 days if the optionee ceases to be employed by the Company
by reason of death, disability or retirement or after 30 days if the employee is
terminated other than for cause. Ranger and certain other significant
stockholders have the right to repurchase any shares issued or issuable in under
the employees option agreement. Unvested options will immediately vest upon a
sale of Ranger meeting certain value thresholds. All of the options granted have
an exercise price equal to the fair market value of the Class B Common Stock on
the date of grant.
Sale of Equity
In fiscal 1999, Ranger sold 820 shares of its Class B Common Stock at a
price of $100 per share and 123 shares of its Preferred Stock at a price of
$1,000 per share to a number of its key employees. Each purchaser of these
shares entered into an executive stock agreement with Ranger which, among other
things, restricts the transfer of such securities, grants Ranger and certain
significant stockholder the right to repurchase such share upon the employee's
termination and requires the employee to consent to a sale of Ranger approved by
its Board and the holders of a majority of its common stock.
401(k) Profit Sharing Plan
The Company has a 401(k) plan for the benefit of substantially all of
its non-union employees, which is qualified for tax exempt status by the
Internal Revenue Service. Employees can make contributions to the plan up to the
maximum amount allowed by federal tax code regulations.
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<PAGE> 30
Item 12. Security Ownership of Certain Beneficial Owners and Management
All of the equity of the Company is owned by Ranger. The following
table sets forth certain information regarding the beneficial ownership of the
equity securities of Ranger by: (i) each of the Directors of Ranger and the
Named Executive Officers; (ii) all Directors and executive officers as a group;
and (iii) each owner of more than 5% of any class of equity securities of Ranger
("5% Owners"). Ranger currently has 37,489 shares of Class A Common, 70,980
shares of Class B Common (including 1,130 shares subject to currently
exercisable options) and 6,123 shares of Preferred Stock issued and outstanding.
Unless otherwise noted, the address for each Director and executive officer is
c/o Ranger Aerospace Corporation, 7600 Pelham Centre, Greenville, South Carolina
29615-3170.
<TABLE>
<CAPTION>
Class A Common Class B Common Preferred
-------------- ------------------------
Stock
- -----
Name and Address of Beneficial Owner Number Percent Number Percent Number Percent
<S> <C> <C> <C> <C> <C> <C>
Directors and Named Executive Officers:
George B. Schwartz (a) 5,964.8 15.91% -- -- -- --
Stephen D. Townes (b) 2,663 7.10 -- -- -- --
George W. Watts -- -- -- -- -- --
John W. Gassett -- -- 183(c) * 15 *
Paul Jefferson -- -- 177(d) * 15 *
Edward Levy (e) 18,370 49.00 12,630 17.79% 4,650 75.94%
D. Dana Donovan (f) -- -- 56,400 79.45 -- --
S. Mark Ray (f) -- -- 56,400 79.45 -- --
Jay R. Levine (e) 18,370 49.00 12,630 17.79 4,650 75.94
All Directors and Executive Officers
as a group (16 persons) 26,997.8 72.01 70,191(g) 98.88 4,750.5 77.58
5% Owners:
John Hancock Mutual Life Insurance Company (h) -- -- 56,400 79.45 -- --
Canadian Imperial Bank of Commerce (i) 18,370 49.00 12,630 17.79 4,650 75.94
Randolph Street Partners II (j) 5,000 13.34 -- -- 750 12.25
Gregg L. Engles (k) 4,000 10.67 -- -- 600 9.80
Danielle Schwartz Trust, UAD 10/1/93 (l) 5,694.8 15.91 -- -- -- --
</TABLE>
(a) Includes 5,964.8 shares of Class A Common owned by the Danielle
Schwartz Trust, UAD 10/1/93. Mr. Schwartz does not have beneficial
ownership in, or control over, the Danielle Schwartz Trust.
(b) Includes 2,663 shares of Class A Common currently being transferred
from Mr. Townes to the Townes Family Trust. Mr. Townes does not have
beneficial ownership in, or control over, the Townes Family Trust.
(c) Includes 83 shares that may be acquired through stock options
exercisable within 60 days of March 31, 1999.
(d) Includes 77 shares that may be acquired through stock options
exercisable within 60 days of March 31, 1999.
(e) Includes 18,370 shares of Class A Common, 12,630 shares of Class B
Common and 4,650 shares of Preferred Stock beneficially owned by CIBC.
Such person disclaims beneficial ownership of all such shares. Such
person's address is c/o CIBC, 425 Lexington Avenue, New York,
New York 10017.
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<PAGE> 31
(f) Includes 56,400 shares of Class B Common beneficially owned by John
Hancock Mutual Life Insurance Company. Such person disclaims beneficial
ownership of all such shares. Such person's address is c/o John Hancock
Mutual Life Insurance Company, John Hancock Place, Box 111, Boston,
Massachusetts 02117.
(g) Includes a total of 491 shares that may be acquired through stock
options exercisable within 60 days of March 31, 1999.
(h) Such person's address is John Hancock Place, Box 111, Boston,
Massachusetts 02117.
(i) Such person's address is 161 Bay Street, 8th Floor, BCE Place; PP Box
500 MSJ 258, Toronto, Canada. Each of Messrs. Jay Bloom, Andrew Heyer
and Dean Kehler (each of whom are employees of an affiliate of CIBC)
may be viewed as sharing beneficial ownership of such shares.
(j) Such person's address is 200 East Randolph Drive, Suite 5400, Chicago,
Illinois 60601.
(k) Such person's address is 3811 Turtle Creek Road, Dallas, Texas 75219
(l) Such person's address is c/o Ranger Aerospace Corporation, 7600 Pelham
Centre, Greenville, South Carolina 29615-3170.
Item 13. Certain Relationships and Related Transactions
Securityholders Agreement
Ranger, John Hancock Mutual Life Insurance Company ("Hancock") and its
affiliates, affiliates of CIBC, the Danielle Schwartz Trust, Mr. Townes,
Randolph Street Partners II and Gregg L. Engles have entered into a
Securityholders Agreement (the "Securityholders Agreement"). The Securityholders
Agreement requires that each of the parties thereto vote all of his or its
Ranger voting securities and take all other necessary or desirable actions to
cause the size of the Board of Ranger to be established at six members and to
cause the election to the Board of Ranger of two representatives designated by
Hancock and its affiliates (the "Hancock Designees"), two representatives
designated by such affiliates of CIBC (the "CIBC Designees") and two executive
officers jointly designated by such affiliates of CIBC and Hancock and its
affiliates (the "Executive Directors"). Mr. Schwartz and Mr. Townes will each
serve as an Executive Director, so long as such person is an officer of the
Company and Ranger. Any representative on the Board of Ranger may be removed
from the Board of Ranger only at the request of the party that designated such
representative. The Board of the Company is established by the Board of Ranger,
provided that Mr. Schwartz and Mr. Townes will serve as Directors of the Company
under the same terms described herein in connection with their board membership
of Ranger. Mr. Schwartz will serve as Chairman of the Board of Ranger and the
Company. The right of Hancock and its affiliates and such affiliates of CIBC to
designate representatives to the Board of Ranger will terminate at such time as
such party owns less than 50% of the common stock, Preferred Stock and/or PIK
Notes held by such party as of the Acquisition closing date. The right of Mr.
Townes to be elected as a member of the Board of Ranger will terminate at such
time as he owns less than 50% of the shares of common stock purchased under the
Executive Stock Agreement (as defined herein), or earlier in the event he ceases
to be an officer of the Company and Ranger. The right of Mr. Schwartz to be
elected as a member of the Board of Ranger will terminate at such time as the
Danielle Schwartz Trust owns less than 50% of the shares of common stock it
purchased under the Investor Stock Agreement (as defined herein), or earlier in
the event Mr. Schwartz ceases to be Chairman of the Company and Ranger pursuant
to the Chairman Agreement (as defined herein). The provisions of the
Securityholders Agreement relating to the composition of the Board of Ranger
will terminate on the earlier to occur of (i) the tenth anniversary of the
Acquisition unless extended by holders of 75% of the voting securities subject
to the Securityholders Agreement or (ii) upon a Qualified Public Offering (as
defined herein).
In addition to the foregoing, the Securityholders Agreement (i)
requires the holders of securities of Ranger to obtain the prior written consent
of Ranger in some circumstances prior to transferring any securities of Ranger;
(ii) grants in connection with the sale of securities of Ranger certain
preemptive rights with respect to such sale, first to other holders of
securities of Ranger, then to Ranger; (iii) grants the holders of securities of
Ranger certain participation rights in connection with certain transfers made by
other holders of securities of Ranger; and (iv) requires all holders of Ranger
securities who are parties to the Securityholders Agreement to consent to and
participate in a sale of the business of Ranger to an
30
<PAGE> 32
independent third party (whether by way of a sale of stock, sale of assets,
merger, recapitalization or otherwise) if such sale is approved by such
affiliates of CIBC and Hancock and its affiliates (provided that such affiliates
of CIBC and Hancock and its affiliates each hold not less than 50% of the Ranger
securities held by such party as of the Acquisition closing date) and the Board
of Ranger. The agreements set forth in (i) to (iii) above terminate with respect
to each security of Ranger upon the earlier of the date on which such security
has been transferred in a public sale or the consummation of a public offering
of $35 million or more of Ranger's equity securities in which the per share
price of the common stock of Ranger is no less than four times its price as of
the date of the Acquisition (a "Qualified Public Offering"). The agreement set
forth in (iv) above terminates with respect to each interest in Ranger upon the
consummation of a Qualified Public Offering.
The Securityholders Agreement also provides that the Preferred Stock
and PIK Notes (as defined herein) issued under the Securities Purchase Agreement
will rank pari passu in the event of any liquidation, dissolution or winding-up
of Ranger, and that holders of PIK Notes will use their reasonable efforts to
provide the holders of Preferred Stock representation on any creditors'
committee established for the benefit of the holders of PIK Notes. A similar
provision is contained in the Share Purchase Agreement (as defined herein).
In addition, without the consent of both the CIBC Designees and the
Hancock Designees, Ranger may not: (i) issue or authorize the issuance of any
equity securities or any securities convertible into equity securities in excess
of 2,500 shares of Ranger common stock; (ii) consolidate or merge with, or sell
all of substantially all of its assets to, any other person; (iii) permit any of
its subsidiaries to issue any equity securities to any person other than Ranger
or one of Ranger's direct or indirect wholly-owned subsidiaries; (iv) acquire
any interest in any business for an aggregate consideration in excess of $1.0
million; or (v) amend any provision of Ranger's certificate of incorporation.
Rights Agreement
Ranger, Hancock and its affiliates, affiliates of CIBC, Randolph Street
Partners II, Gregg L. Engles and the Danielle Schwartz Trust have entered into a
Rights Agreement (the "Rights Agreement"). Under the Rights Agreement, the
holders of shares of Ranger common stock originally issued to Hancock and to
affiliates of CIBC have the right at any time, subject to certain conditions, to
require Ranger to register any or all of their common stock in Ranger under the
Securities Act on Form S-1 or Form S-2 (a "Long-Form Registration") on two
occasions and on Form S-3 (a "Short-Form Registration") on unlimited occasions,
and all holders of registrable securities of Ranger have the right to request
that such securities be included in any such Long-Form or Short-Form
Registration, subject to pro rata reductions if required by the managing
underwriter. In addition, all holders of registrable securities of Ranger are
entitled to request the inclusion of such securities in any registration
statement at Ranger's expense whenever Ranger proposes to register any of its
securities under the Securities Act (a "Piggyback Registration"). Ranger shall
pay all registration expenses in connection with each Long-Form, Short-Form and
Piggyback Registration. Holders of registrable securities of Ranger are
prohibited from effecting a public sale of such securities seven days prior to
and 90 days after the effective date of any Long-Form, Short-Form or
underwritten Piggyback Registration. Ranger is prohibited from effecting a
public sale of its equity securities on its own behalf during the seven days
prior to and 120 days after the effective date of any Long-Form, Short-Form or
underwritten Piggyback Registration. In connection with such registrations,
Ranger has agreed to indemnify all holders of registrable securities against
certain liabilities, including liabilities under the Securities Act.
Executive Stock Agreement
Mr. Townes has entered into an Executive Stock Agreement (the
"Executive Stock Agreement") with Ranger pursuant to which Mr. Townes purchased
2,663 shares of Class A Common at a price of $100 per share and such stock was
paid for with a promissory note. This promissory note is secured by a pledge of
all of shares of Class A Common purchased by Mr. Townes under the Executive
Stock Agreement and is recourse to Mr. Townes for 25% of the original principal
amount of and accrued interest under the promissory note. All of the stock
purchased by Mr. Townes is subject to vesting and becomes fully vested
31
<PAGE> 33
on April 3, 2001, which vesting accelerates upon: (i) a sale of Ranger; (ii) a
Qualified Public Offering; (iii) the "constructive termination" of Mr. Townes'
employment; or (iv) the termination of Mr. Townes' employment without "Cause."
In the event of a termination of Mr. Townes' employment for any reason, the
stock in Ranger held by Mr. Townes or his successors and assigns shall be
subject to repurchase by Ranger. In the event of the termination of Mr. Townes'
employment for a reason other than: (i) death or disability; (ii) a termination
by the Company for "Cause"; or (iii) a termination by Mr. Townes that is not a
"constructive termination," Mr. Townes may require Ranger to repurchase the
interests Mr. Townes holds therein. In addition, Mr. Townes may not transfer the
interests he holds in Ranger without the consent of the Board of Ranger or
pursuant to the Securityholders Agreement. See "--Securityholders Agreement."
Investors Stock Agreement
The Danielle Schwartz Trust has entered into an Investor Stock
Agreement (the "Investor Stock Agreement") with Ranger pursuant to which it
purchased Class A Common at a price of $100 per share and such stock was paid
for with a promissory note. This promissory note is secured by a pledge of all
of the shares of Class A Common purchased under the Investor Stock Agreement and
is recourse to the Danielle Schwartz Trust for 25% of the original principal
amount of and accrued interest under the promissory note. Under the Investor
Stock Agreement, in the event that Mr. Schwartz is terminated for "Cause" as
Chairman (as such terms are defined in the Chairman Agreement), Ranger shall
have the option to repurchase all of the interests in Ranger held by the
Danielle Schwartz Trust. In addition, the Danielle Schwartz Trust may not
transfer the interests it holds in Ranger without the consent of the Board of
Ranger or pursuant to the Securityholders Agreement. See "--Securityholders
Agreement."
Chairman Agreement
Tioga, Ranger, the Company and Mr. Schwartz have entered into a
Chairman Agreement (the "Chairman Agreement") pursuant to which Mr. Schwartz
will serve as the Chairman of Ranger and the Company until April 2, 2001 (such
period will be automatically extended for additional terms of one year unless
the Board of Ranger takes action to terminate such extension), unless terminated
earlier as provided in the Chairman Agreement. The Chairman Agreement provides
that Tioga will receive a $150,000 annual base fee (subject to annual increases
based on the consumer price index) and that Mr. Schwartz will receive health
benefits and life and disability insurance. In addition, Tioga will receive a
bonus of $1,350,000 if the Company satisfies certain market value and liquidity
requirements in connection with a sale of the business of Ranger or the Company
or a public offering of equity securities of Ranger. The Company believes that
the terms of the Chairman Agreement are at least as favorable to the Company as
those which could be obtained from an unrelated party.
Noncompetition provisions of the Chairman Agreement prevent Mr.
Schwartz from engaging in any business in competition with the Company for a
period of 18 months after any termination or for 12 months after termination as
director without Cause in countries where the Company conducts business as of
the date of such termination.
Mr. Schwartz may be terminated as the Chairman at any time with or
without Cause. The Chairman Agreement defines "Cause" to mean any of the
following acts: (i) the commission of a felony or a crime involving moral
turpitude (as determined by the Board of the Company in its good faith judgment)
or any indictment for a felony or crime involving moral turpitude; (ii) the
commission of any other act or omission involving dishonesty, disloyalty or
fraud with respect to Ranger or any of its subsidiaries or any of their
customers or suppliers; (iii) conduct tending to bring Ranger or any of its
subsidiaries into substantial public disgrace or disrepute; (iv) failure to
perform duties as reasonably directed by the Board of Ranger which failure is
not cured within 15 days after written notice thereof; (v) gross negligence or
willful misconduct with respect to Ranger or any of its subsidiaries; or (vi)
any other material breach of the Chairman Agreement which is not cured within 15
days after written notice thereof. If Mr. Schwartz is terminated as the Chairman
for any reason other than for Cause, Tioga will receive the base fee for one
year thereafter.
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<PAGE> 34
Fee Letter
In connection with the Acquisition, the Company paid Tioga the sum of
$850,000 pursuant to a certain fee letter in consideration for services rendered
by Tioga to the Company and Ranger. Mr. Schwartz is the president of Tioga. In
consideration for such payment, the Company and Ranger on one hand, and Tioga
and Mr. Schwartz on the other, along with certain other parties, agreed to
release each other from any claims, liabilities or obligations not arising from
gross negligence or willful misconduct with respect to the consummation of the
Acquisition.
Share Purchase Agreement
Pursuant to a Share Purchase Agreement (the "Share Purchase Agreement"), Viad
and Viad Service Companies, Limited, a United Kingdom limited liability company
(together with Viad, the "Sellers") agreed to sell all of the issued and
outstanding shares of capital stock or other equity interests of the entities
which comprised the ASIG business to Ranger. On April 1, 1998, the Company
completed the Acquisition for a purchase price of approximately $95 million in
cash; plus fees and expenses of approximately $4.1 million. The original
purchase price was subject to a purchase price adjustment in favor of the
Company for any shortfall in the net asset value, net working capital or
required cash (as such terms are defined in the purchase agreement) of the ASIG
business from the levels represented at the closing of the Acquisition. The
purchase price was also subject to adjustment in favor of Viad in an amount
equal to the amount of cash in the ASIG business at the closing of the
Acquisition in excess of the required cash. As a result of the purchase price
adjustments, the Company is due a purchase price settlement of $2.125 million
from Viad, which is shown in the Company's March 31, 1999 consolidated balance
sheet as a receivable.
The Share Purchase Agreement contained customary representations and
warranties, covenants, agreements and acknowledgments made by the parties
thereto. The Sellers also agreed to indemnify Ranger with respect to the breach
of certain representations and warranties and covenants. Such indemnification
was limited to not more than a gross aggregate amount of $10.0 million. The
indemnification obligations with respect to breaches of representations and
warranties will survive until the second anniversary of the closing of the
Acquisition and may be extended to the extent that Ranger provides notice to the
Sellers of an indemnifiable claim prior to such time. Under the terms of the
Share Purchase Agreement, the obligations of the Sellers with respect to such
indemnification terminate if Ranger fails to give notice of an indemnifiable
claim to the Seller prior to the fifth anniversary of the closing of the Share
Purchase Agreement.
Prior to the closing of the Acquisition, the Share Purchase Agreement
was amended by the Sellers and Ranger (the "Amendment"). In addition to certain
other matters addressed in the Amendment, Ranger assigned all of its rights and
obligations under the Share Purchase Agreement to the Company, with the
exception of its rights to acquire Aircraft Service, Ltd., a United Kingdom
limited liability company, which it assigned to ASIG Europe Ltd., a United
Kingdom limited liability company.
Noncompetition Agreement
The Sellers, Greyhound Dobbs Incorporated, a Delaware corporation
("Dobbs"), Ranger and the Company entered a noncompetition agreement (the
"Noncompetition Agreement"). Under the Noncompetition Agreement, each of the
Sellers and Dobbs covenanted and agreed that it would not, in any geographical
location anywhere in the world, engage directly or indirectly, in any activity
which is competitive with the Company's business as of the date of the
Acquisition. In addition, each of Ranger and the Company covenanted and agreed
that it would not, in any geographical location anywhere in the world, engage
directly or indirectly, in the business of preparing and providing food and
beverage services for airline passengers, airline crews, support personnel and
airport personnel. The noncompetition restrictions above terminate upon the
earlier of: (i) the date three years following the date of the Acquisition and
(ii) for
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<PAGE> 35
restrictions that apply to Dobbs, Ranger and the Company, upon (a) the Sellers'
sale of any of the capital shares of Dobbs resulting in a divestiture of
control, (b) the sale of Ranger, (c) the sale by Ranger of any of the capital
shares of the entities comprising the ASIG business resulting in a divestiture
of control, or (d) the sale by Ranger or Dobbs of capital shares or
substantially all of the assets of any subsidiary, in which event such
restrictions shall terminate only with respect to the subsidiary being sold.
Securities Purchase Agreement
Pursuant to the Securities Purchase Agreement, Ranger authorized the
issuance and sale of the following securities: (i) $8,460,000 in aggregate
principal amount of 10.5% payment-in-kind notes (the "PIK Notes"); (ii) 6,000
shares of Preferred Stock; (iii) 29,862 shares of Class A Common; and (iv)
66,718 shares of Class B Common. Subject to the terms of the Securities Purchase
Agreement, Ranger agreed to sell, and Hancock, affiliates of CIBC, Randolph
Street Partners II and Gregg L. Engles (collectively, the "Purchasers") agreed
to purchase, the Securities.
The Securities Purchase Agreement contained customary provisions for
such agreements, including representations and warranties and affirmative
covenants. The Securities Purchase Agreement also granted the Purchasers the
right to purchase their pro rata share of any future issuances of Ranger common
equity or convertible securities other than in connection with certain public
offerings. The Securities Purchase Agreement also provided that the PIK Notes
would have a scheduled repayment date of March 31, 2010, and that Ranger may
optionally repay the PIK Notes before this date provided that Ranger also
redeems the Preferred Stock.
Relationship With Viad
In fiscal 1996 and 1997, the Company transferred approximately $10.2
million and $12.8 million, respectively, of accounts receivable to Viad and was
charged a financing charge by Viad of approximately $0.5 million in 1996 and
$0.6 million in 1997 for the transferred receivables. In addition, prior to the
Acquisition, Viad allocated certain income and expenses to the Company. For a
description of such allocations see Note 3 in Notes to Financial Statements to
the Company's audited financial statements which appear elsewhere in this annual
report.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Index to Financial Statements
See page F-1
(a)(2) Index to Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
not required under the related instructions, are inapplicable or the
information called for thereby is otherwise included in the financial
statements and therefore have been omitted.
(a)(3) Index to Exhibits
The following exhibits are filed as part of, or incorporated by
reference into, this report:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
<S> <C>
2.1 Asset Purchase Agreement dated May 20, 1999, by and among Elsinore Acquisition Corporation and
Elsinore, L.P., and with respect to Article VIII and Section 9.8 only, Ranger Aerospace
Corporation, Aircraft Service International Group, Inc., Air/Lyon,
</TABLE>
34
<PAGE> 36
<TABLE>
<S> <C>
Inc., Air/Lyon Associates, LP, Elsinore Aerospace Services, LP and Elsinore Services Corporation,
and with respect to Section 9.8 only, General William Lyon (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on 8-K dated May 20, 1999)*
3.1 Certificate of Incorporation of the Company(1)
3.2 Bylaws of the Company(1)
4.1 Securities Purchase Agreement dated as of August 13, 1998, by and among the Company, the
Guarantors and CIBC Oppenheimer Corp.(1)
4.2 Indenture dated as of August 18, 1998, among the Company and State Street Bank and Trust
Company, as Trustee with respect to the 11% Senior Notes due 2005 (including the form of
Series B 11% Senior Notes and Guarantees)(1)
4.3 Registration Rights Agreement dated as of August 18, 1998, among the Company, the Guarantors
and CIBC Oppenheimer Corp. and State Street Bank and Trust with respect to the 11% Senior
Notes due 2005(1)
10.1 Share Purchase Agreement dated as of March 14, 1998, between Viad Corp. and Viad Service Companies
Limited and Ranger, as amended on March 31, 1998(1)*
10.2 Securities Purchase Agreement dated as of April 1, 1998, by and among Ranger, John Hancock Mutual
Life Insurance Company, CIBC Wood Gundy Ventures, Randolph Street Partners and Gregg L. Engles(1)
10.3 Securityholders Agreement, dated April 1, 1998 by and among Ranger, John Hancock Mutual Life
Insurance Company, CIBC Wood Gundy Ventures, Randolph Street Partners II and Gregg L. Engles(1)
10.4 Registration Rights Agreement, dated April 1, 1998 by and among Ranger, CIBC Wood Gundy
Ventures, Randolph Street Partners II and Gregg L. Engles(1)
10.5 Executive Stock Agreement, dated April 2, 1998 between Ranger and Stephen D. Townes(1)
10.6 Investor Stock Agreement, dated April 2, 1998 between Ranger and The Danielle Schwartz Trust(1)
10.7 Employment Agreement, dated April 2, 1998, between Ranger, the Company and Stephen D. Townes(1)
10.8 Employment Agreement, dated April 2, 1998, between Ranger, the Company and F. Andrew Mitchell(1)
10.9 Employment Agreement, dated April 2, 1998, between Ranger, the Company and George W. Watts(1)
10.10 Chairman Agreement, dated April 2, 1998, between Ranger, the Company, Tioga Capital Corporation and
George B. Schwartz(1)
10.11 Senior Credit Facility dated April 2, 1998, between the Company and Key Corporate Capital,
Inc., including the amendment thereto dated May 20, 1999.
21.1 Subsidiaries of the Company
27.1 Financial Data Schedule for the year ended March 31, 1999
</TABLE>
* The Company agrees to furnish supplementally to the Commission a copy
of any omitted schedule or exhibit to such agreement upon request by
the Commission.
(1) Incorporated by reference to the same numbered exhibit to the Company's
Registration Statement on Form S-4 (Registration No. 333-64513).
(b) Reports on Form 8-K
None
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<PAGE> 37
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
By: /s/ Stephen D. Townes
--------------------------------------
Stephen D. Townes
President and Chief Executive Officer
* * *
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed on June 29, 1999 by the following persons on behalf of the
Registrant and in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ Stephen D. Townes President and Chief Executive Officer and
- ----------------------------- Director (Principal Executive Officer)
Stephen D. Townes
/s/ Michael A. Krane Vice President-Finance (Principal Accounting
- ----------------------------- and Financial Officer)
Michael A. Krane
/s/ George B. Schwartz Chairman of the Board, Director and
- ----------------------------- Assistant Secretary
George B. Schwartz
/s/ D. Dana Donovan
- ----------------------------- Director
D. Dana Donovan
/s/ Jay R. Levine
- ----------------------------- Director
Jay R. Levine
/s/ Edward Levy
- ----------------------------- Director
Edward Levy
/s/ S. Mark Ray
- ----------------------------- Director
S. Mark Ray
36
<PAGE> 38
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Reports of Independent Certified Public Accountants F-2
Balance Sheets F-5
Statements of Operations F-6
Combined Statements of Changes in Combined Equity and Consolidated
Statement of Changes in Stockholder's Equity F-7
Statements of Cash Flows F-8
Notes to Financial Statements F-9
</TABLE>
F-1
<PAGE> 39
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholder
Aircraft Service International Group, Inc.
We have audited the accompanying consolidated balance sheets of
Aircraft Service International Group, Inc. and subsidiaries as of March 31, 1999
and 1998, and the related consolidated statements of operations, changes in
stockholder's equity and cash flows for the year ended March 31, 1999. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Aircraft Service International Group, Inc. and subsidiaries at March 31, 1999
and 1998, and the consolidated results of their operations and their cash flows
for the year ended March 31, 1999, in conformity with generally accepted
accounting principles.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Miami, Florida
June 16, 1999
F-2
<PAGE> 40
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders
Aircraft Service International Group
We have audited the accompanying combined statements of income, changes
in combined equity and cash flows of Aircraft Service International Group, a
combined group of companies affiliated by common ownership, for the three months
ended March 31, 1998 and for each of the two years in the period ended December
31, 1997. 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 did not audit the financial statements of
Aircraft Service, Ltd. ("ASL"), a company affiliated by common ownership and
included in the accompanying combined financial statements, for each of the two
years ended December 31, 1997. ASL's financial statements reflect total revenues
of $15,897,000 and $16,792,000 for the years ended December 31, 1996 and 1997,
respectively. Those statements were audited by other auditors whose report has
been furnished to us, and our opinion, insofar as it relates to data included
for ASL for each of the two years ended December 31, 1997, is based solely on
the report of the other auditors.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits, and for 1996 and 1997 the report
of other auditors, the combined financial statements referred to above present
fairly, in all material respects, the combined results of operations and cash
flows of Aircraft Service International Group for the three months ended March
31, 1998 and for each of the two years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
---------------------
ERNST & YOUNG LLP
Miami, Florida
June 16, 1999
F-3
<PAGE> 41
REPORT OF INDEPENDENT AUDITORS
TO THE DIRECTORS AND SHAREHOLDERS OF AIRCRAFT SERVICE LIMITED
We have audited the profit and loss accounts, reconciliation of movements in
shareholders' funds and cash flow statements of Aircraft Service Limited for
each of the two years in the period ended 31 December 1997 (not presented
separately herein), all expressed in pounds sterling. 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 auditing standards generally
accepted in the United Kingdom, which are similar to those generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free from 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
presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the results of the operations and cash flows of Aircraft Service
Limited for each of the two years in the period ended 31 December 1997, in
conformity with accounting principles generally accepted in the United Kingdom,
which differ in certain significant respects from generally accepted accounting
principles in the United States of America.
Deloitte & Touche
Chartered Accountants and Registered Auditors
Hill House
1 Little New Street
London EC4A 3TR
7 July 1998
F-4
<PAGE> 42
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1999 1998
--------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,311 $ 0.1
Accounts receivable, net of allowance of $567 16,421 --
Receivable from Viad 2,125 --
Prepaid expenses 650 --
Spare parts and supplies 2,095 --
--------- ---------
Total current assets 24,602 0.1
Property, plant and equipment, net of accumulated
depreciation of $6,176 46,889 --
Goodwill, net of accumulated amortization of $2,545 48,668 --
Deferred financing costs, net of accumulated
amortization of $337 3,205 --
Investments in and advances to joint venture 224 --
Other assets 166 --
--------- ---------
Total assets $ 123,754 $ 0.1
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities:
Accounts payable $ 5,082 $ --
Accrued expenses 12,850 --
Customer deposits 3,488 --
Current portion of notes payable 57 --
--------- --------
Total current liabilities 21,477 --
Notes payable 2,927 --
Long-term debt 80,000 --
--------- --------
Total liabilities 104,404 --
Commitments
Stockholder's equity:
Common stock, $0.01 par value; 1,000 shares
authorized; 100 shares issued and outstanding -- --
Paid-in capital 24,100 0.1
Accumulated deficit (4,770) --
Accumulated other comprehensive income 20 --
--------- --------
Total stockholder's equity 19,350 0.1
--------- --------
Total liabilities and stockholder's equity $ 123,754 $ 0.1
========= ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 43
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
(CONSOLIDATED) (COMBINED)
--------------- ----------------------------------------------
YEAR ENDED
YEAR ENDED THREE MONTHS ENDED DECEMBER 31,
MARCH 31, MARCH 31, ------------------------
1999 1998 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues $ 123,441 $ 30,156 $ 119,325 $ 121,574
Cost and expenses:
Operating expenses 99,035 25,986 97,116 101,903
Selling, general and administrative 8,865 1,818 7,581 8,291
Amortization 2,545 22 103 99
Depreciation 6,176 1,097 4,501 4,321
--------- -------- --------- ---------
Total cost and expenses 116,621 28,923 109,301 114,614
--------- -------- --------- ---------
Operating income 6,820 1,233 10,024 6,960
Other income (expense), net (253) (57) (71) (45)
Interest income 207 73 350 343
Interest and other financial expense (11,281) (170) (669) (606)
--------- -------- --------- ---------
Income (loss) before income taxes and
extraordinary item (4,507) 1,079 9,634 6,652
Income taxes 50 347 3,602 2,433
--------- -------- --------- ---------
Income (loss) before extraordinary item (4,557) 732 6,032 4,219
Extraordinary loss on early extinguishment of (213) -- -- --
debt
--------- -------- --------- ---------
Net income (loss) $ (4,770) $ 732 $ 6,032 $ 4,219
========= ======== ========= =========
Basic and diluted loss per share:
Before extraordinary item $ (45,570)
---------
Extraordinary loss $ (2,130)
---------
Net loss $ (47,700)
---------
Weighted average common shares basic and
diluted outstanding - 100
---------
</TABLE>
See accompanying notes.
F-6
<PAGE> 44
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
(DOLLARS IN THOUSANDS)
COMBINED STATEMENTS OF CHANGES IN COMBINED EQUITY
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Paid-in Retained Comprehensive Combined
PREDECESSOR: Stock Capital Earnings Income (Loss) Equity
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995 $ 907 $1,585 $ 15,356 $(156) $ 17,692
Dividends -- -- (6,656) -- (6,656)
Comprehensive income:
Net income -- -- 4,219 -- 4,219
Currency translation adjustment -- -- -- 178 178
--------
COMPREHENSIVE INCOME 4,397
- -------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 907 1,585 12,919 22 15,433
Dividends -- -- (6,881) -- (6,881)
Comprehensive income:
Net income -- -- 6,032 -- 6,032
Currency translation adjustment -- -- -- (27) (27)
--------
COMPREHENSIVE INCOME 6,005
- -------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1997 907 1,585 12,070 (5) 14,557
Dividends -- -- (13) -- (13)
Comprehensive income:
Net income -- -- 732 -- 732
Currency translation adjustment -- -- -- (13) (13)
--------
COMPREHENSIVE INCOME 719
- -------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1998 $ 907 $1,585 $ 12,789 $ (18) $ 15,263
========================================================================================================
</TABLE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
Accumulated
Common Other Total
Stock Common Paid-in Accumulated Comprehensive Stockholder's
SUCCESSOR: Outstanding Stock Capital Deficit Income Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1998 100 $ -- $ -- $ -- $-- $ --
Issuance of common stock -- -- 24,100 -- -- 24,100
Comprehensive loss:
Net loss -- -- -- (4,770) -- (4,770)
Currency translation adjustment -- -- -- -- 20 20
--------
COMPREHENSIVE LOSS (4,750)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 100 $ -- $24,100 $(4,770) $20 $ 19,350
=========================================================================================================================
</TABLE>
See accompanying notes.
F-7
<PAGE> 45
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC
STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
(CONSOLIDATED) (COMBINED)
-------------- ---------------------------------------
Year Three months Year ended
ended ended December 31,
March 31, March 31, ----------------------
1999 1998 1997 1996
-------- ------------ -------- -------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (4,770) $ 732 $ 6,032 $ 4,219
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Amortization of intangible assets 2,545 22 103 99
Depreciation 6,176 1,097 4,501 4,321
Amortization of deferred financing costs 2,888 -- -- --
Deferred income taxes -- (245) (136) (104)
Provision for bad debts 36 -- 245 289
Equity loss in joint venture 157 54 133 3
Changes in operating assets and
liabilities, net of acquisition:
Accounts receivable (1,069) 2,650 1,822 1,291
Prepaid expenses (523) 295 161 (337)
Spare parts and supplies (337) (18) (71) (304)
Other assets 319 (200) 63 (91)
Accounts payable 462 411 1,387 (866)
Accrued expenses (294) 1,136 2,438 (762)
Customer deposits 1,055 (939) 461 (597)
--------- ------- -------- -------
Net cash provided by operating activities 6,645 4,995 17,139 7,161
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (13,431) (2,666) (3,947) (9,061)
Purchase of ASIG business, less cash acquired of $6,513 (88,487) -- -- --
Purchase of GAH business (438) -- -- --
Advances to joint venture (200) -- (353) --
--------- ------- -------- -------
Net cash used in investing activities (102,556) (2,666) (4,300) (9,061)
FINANCING ACTIVITIES
Issuance of common stock 24,100 -- -- --
Borrowings, net 80,630 -- -- --
Deferred financing costs (5,508) -- -- --
Payments on notes payable -- -- (82) (74)
Advances from (to) Parent, net -- (2,316) (6,067) 8,821
Dividends -- (13) (6,881) (6,656)
--------- ------- -------- -------
Net cash provided by (used in) financing
activities 99,222 (2,329) (13,030) 2,091
--------- ------- -------- -------
Net increase (decrease) in cash 3,311 -- (191) 191
Cash and cash equivalent at beginning of period -- -- 191 --
--------- ------- -------- -------
Cash and cash equivalent at end of period $ 3,311 $ -- $ -- $ 191
========= ======= ======== =======
- --------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 4,392 $ -- $ -- $ --
========= ======= ======== =======
Taxes paid $ 401 $ -- $ 766 $ 1,103
========= ======= ======== =======
SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES:
Receipt of fixed assets in satisfaction of
a receivable $ 1,414 $ -- $ -- $ --
========= ======= ======== =======
</TABLE>
See accompanying notes.
F-8
<PAGE> 46
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS
BASIS OF PRESENTATION
Aircraft Service International Group, Inc. (the "Company" or "Successor") was
organized in March 1998 for the purpose of acquiring beneficial ownership and
control of all the outstanding capital stock or other equity interests in
Aircraft Service International, Inc., Dispatch Services, Inc., Florida Aviation
Fueling Co., Bahamas Airport Service, Ltd., Freeport Flight Services, Ltd.,
Aircraft Service, Ltd., ASII Holding GmbH, and ASII Aircraft Service Canada Ltd.
(collectively the "ASIG business" or "Predecessor") from Viad Corp ("Viad") and
Viad Service Companies, Limited as of April 1, 1998 pursuant to a share purchase
agreement (the "Acquisition"). Prior to the Acquisition by the Company, the ASIG
business was operated by Viad under the divisional name of Aircraft Services
International Group. The ASIG business had a December 31 year-end under Viad's
ownership. The Company's fiscal year end is March 31.
The Company's accompanying balance sheets as of March 31, 1998 and 1999 and
financial statements for the year ended March 31, 1999, are presented on a
consolidated basis. The Company is 100% owned by Ranger Aerospace Corporation
("Ranger"). Prior to April 1, 1998, the Company had no operations.
For the years ended December 31, 1996 and 1997, and for the three months ended
March 31, 1998, the accounts of the ASIG business were not previously presented
on a combined basis as those of a separate reporting entity. Accordingly, the
accounts included in the accompanying Predecessor financial statements were
carved out of Viad's historical accounting records. For all periods presented,
the financial statements of the Predecessor include the accounts of the ASIG
business. The accompanying financial statements include costs allocated by Viad
to the Predecessor for certain legal, audit, risk assessment, treasury and
financial services. The financial statement caption, which include allocated
amounts, along with a description of the functions or services and the amounts
allocated are summarized in Note 3.
On April 1, 1998, the Company completed the Acquisition for a purchase price of
approximately $95 million in cash, plus fees and expenses of approximately $4.1
million. The original purchase price was subject to a purchase price adjustment
in favor of the Company for any shortfall in the net asset value, net working
capital or required cash (as such terms are defined in the purchase agreement)
of the ASIG business from the levels represented at the closing of the
Acquisition. The purchase price was also subject to adjustment in favor of Viad
in an amount equal to the amount of cash in the ASIG business at the closing of
the Acquisition in excess of the required cash. As a result of the purchase
price adjustments, the Company is due a purchase price settlement of $2.125
million from Viad, which is shown in the accompanying consolidated balance sheet
as a receivable.
F-9
<PAGE> 47
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. BASIS OF PRESENTATION AND NATURE OF BUSINESS (CONTINUED)
The Acquisition was accounted for as a purchase and, accordingly, the purchase
price was allocated to the assets acquired and liabilities assumed based on
appraisals and other estimates of their underlying fair values. The excess of
the purchase price over the fair value of net assets acquired of approximately
$50.8 million is classified as goodwill and is being amortized over 20 years.
<TABLE>
<S> <C>
The following is a summary of the purchase price allocation:
Net working capital, including cash of $6,513 $ 4,783
Property, plant and equipment 38,149
Other assets 3,268
Goodwill 50,775
--------
$ 96,975
========
The purchase price was funded as follows:
Sale of 100 shares of common stock, $0.01 par value,
to Ranger Aerospace Corporation $ 24,100
Borrowings under Senior Increasing Rate Notes (see Note 8) 75,000
Purchase price adjustment - receivable from Viad at March 31, 1999 (2,125)
--------
$ 96,975
========
</TABLE>
The following unaudited pro forma data presents a summary of consolidated
results of operation of the Company for the year ended March 31, 1998 as if the
Acquisition had occurred on April 1, 1997:
<TABLE>
<S> <C>
Revenues $119,700
Net loss (4,010)
Net loss per share $(40,100)
Number of shares used in computation 100
</TABLE>
The unaudited pro forma results have been prepared for comparison purposes only
and include certain adjustments, such as additional depreciation and
amortization expense due to the revaluation of assets acquired and the goodwill
related to the Acquisition, additional interest expense associated with the debt
related to the Acquisition, and certain reductions in expense associated with
the restructuring of certain Company functions after the Acquisition. The
unaudited pro forma results do not purport to be indicative of the results of
operation which actually would have resulted had the Acquisition occurred on
April 1, 1997, or of future results of operation of the Company.
NATURE OF BUSINESS
The Company and its subsidiaries provide aviation fueling services, aircraft
ground services and other aviation services at various airports in the United
States, Europe and the Caribbean.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND COMBINATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. The Predecessor is a combined group of companies affiliated
through common ownership by Viad. The accompanying Predecessor combined
financial statements include the following entities: Aircraft Services
International, Inc., Dispatch Services, Inc., Florida Aviation Fueling Co.,
Bahamas Airport Services, Ltd., Freeport Flight Services, Ltd., Aircraft
Service, Ltd., ASII Holding GmbH and ASII Aircraft Service Canada Ltd. All
significant intercompany balances and transactions were eliminated.
F-10
<PAGE> 48
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SPARE PARTS AND SUPPLIES
Spare parts and supplies are valued at the lower of cost or market. Cost is
computed using the first-in first-out cost method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation is recorded using
the straight-line method over the estimated useful lives of the assets, which
range from 4 to 20 years for operating equipment, 20 to 30 years for buildings,
and 3 to 10 years for office furniture and equipment. Leasehold improvements are
amortized over the life of the lease or the related asset, whichever is shorter.
Maintenance and repairs are charged to expense when incurred. Significant
expenditures, which extend the useful lives of assets, are capitalized.
FOREIGN CURRENCY TRANSLATION
For the Company's operations where the functional currency is other than the
U.S. Dollar, balance sheet amounts are translated using the exchange rate in
effect at the balance sheet date. Income statement amounts are translated at the
average exchange rates during the year or period. Translation adjustments
resulting from the changes in exchange rates from year to year are recorded as
accumulated other comprehensive income.
INVESTMENTS IN AND ADVANCES TO JOINT VENTURE
The Company accounts for its investment in a 50% owned joint venture under the
equity method of accounting. The joint venture, Skytanking GmbH, located in
Munich, Germany, provides aviation fueling and aircraft ground services at
Munich International Airport.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company accounts for the impairment of long-lived assets under Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" (SFAS No. 121).
SFAS No. 121 requires impairment losses to be recorded on long-lived assets when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets' carrying amount. The
Company believes no impairment indicators existed at March 31, 1999.
RECLASSIFICATION
Certain amounts in the statement of operations for the three month period ended
March 31, 1998 and years ended December 31, 1997 and 1996 have been reclassified
to conform with the fiscal 1999 financial statement presentation.
F-11
<PAGE> 49
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
NET LOSS PER COMMON SHARE
In fiscal 1999, the Company adopted Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" (SFAS No. 128). SFAS No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Basic earnings per share will typically be higher
than primary earnings per share due to the exclusion of any dilutive effects of
options, warrants and convertible securities from the calculation. Diluted
earnings per share is similar to the previously reported fully diluted earnings
per share. The adoption of SFAS No. 128 had no impact on the Company.
NEW ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130), which
establishes standards for reporting and display of comprehensive income and its
components in a full set of general purpose financial statements. Comprehensive
income (loss) includes net income (loss) and other comprehensive income, which
includes, but is not limited to, unrealized gains for marketable securities and
future contracts, foreign currency translation adjustments and minimum pension
liability adjustments. The accompanying financial statements for the Company
reflect other comprehensive income (loss) consisting of net income (loss) and
foreign currency translation adjustments.
In fiscal 1999, the Company adopted Statement of Financial Accounting Standards
No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits-an amendment of FASB Statements No. 87, 88, and 106" (SFAS No. 132).
SFAS No. 132 revises employers' disclosures about pension and other
postretirement benefit plans. It does not change the measurement or recognition
of those plans; therefore, the adoption of SFAS No. 132 affected the Company's
disclosure information only.
In fiscal year 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS No. 133), which is effective for
fiscal quarters of fiscal years beginning after June 15, 1999. This statement
establishes accounting and reporting standards for derivative instruments,
including certain derivative instruments embedded in other contracts and for
hedging activities. It requires that an entity recognized all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. The Company plans to adopt SFAS No. 133 in the
year 2000 and is currently assessing the impact this statement will have on its
consolidated financial statements.
CONCENTRATION OF CREDIT RISK
The Company provides services to domestic and foreign airlines and continually
monitors its exposure for credit losses. The Company limits its exposure by
requiring prepayments or deposits from certain customers.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
F-12
<PAGE> 50
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
BUSINESS SEGMENTS
Pursuant to SFAS No. 131, "Disclosure About Segments of a Business Enterprise
and Related Information," the Company is required to report segment information.
As the Company only operates in one business segment, no additional reporting is
required, except for the geographic financial information provided in Note 15.
ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash, accounts receivable, accounts payable and accrued
expenses in the accompanying financial statements approximate their fair value
because of their short-term maturity. At March 31, 1999, the fair value of the
long-term debt, based on quoted market prices, was approximately $81.2 million.
3. RELATED-PARTY TRANSACTIONS
The Company's Chairman is the President of a company which received an $850
payment from the Company for acquisition related services in connection with the
Acquisition. In addition, the same company will receive a bonus of $1,350 if the
Company satisfies certain market value and liquidity requirements in connection
with a sale of the business of Ranger or the Company or a public offering of
equity securities of Ranger.
Viad provided certain corporate general and administrative services to the
Predecessor, including legal, audit, risk assessment, treasury and finance
services. Related allocated expenses, included in selling, general and
administrative in the accompanying statements of operations, were approximately
$173 for the three months ended March 31, 1998 and approximately $854 and $896
for the years ended December 31,1997 and 1996, respectively.
Prior to the Acquisition, the Predecessor transferred ownership of certain
accounts receivable to Viad. The Predecessor was charged a discount from Viad
for these transferred receivables based on the amount of receivables actually
sold by Viad. Allocated charges totaled $148 for the three months ended March
31, 1998 and $555 and $483 for the years ended December 31, 1997 and 1996,
respectively, and are included in interest and other financial expense in the
accompanying statements of operations.
Prior to the Acquisition, Viad managed the cash and financing requirements of
the Predecessor. The Predecessor's available cash was swept into Viad's accounts
and the Predecessor's cash requirements were paid from Viad's accounts. Interest
was credited to the Predecessor on net balances due from Viad based on the prime
lending rate less 1.5%. Interest income credited to the Predecessor totaled
approximately $55 for the three months ended March 31, 1998 and $247 and $246
for the years ended December 31, 1997 and 1996, respectively.
All allocations and estimates were based on assumptions that Viad believed were
reasonable in these circumstances. The allocated amounts are not necessarily
indicative of the costs that the Predecessor would have incurred as a
stand-alone entity.
F-13
<PAGE> 51
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consisted of the following:
<TABLE>
<CAPTION>
March 31, 1999
--------------
<S> <C>
Operating equipment $41,379
Buildings and leasehold improvements 3,545
Office furniture and equipment 1,472
Construction in progress 6,669
---------
53,065
Accumulated depreciation (6,176)
$46,889
=========
</TABLE>
5. ACCRUED EXPENSES
Accrued expenses consisted of the following:
<TABLE>
<CAPTION>
March 31, 1999
---------------
<S> <C>
Salaries and wages $ 4,161
Damage claims 1,502
Pension liability 151
Accrued interest 1,122
Other 5,914
--------
$12,850
=========
</TABLE>
F-14
<PAGE> 52
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. INCOME TAXES
The Company and the Predecessor account for income taxes under FASB Statement
No. 109, "Accounting for Income Taxes" (SFAS No. 109). Deferred income tax
assets and liabilities are determined based upon differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that are expected to be in effect when the
differences are expected to reverse.
The income before income taxes and extraordinary item consisted of the
following:
<TABLE>
<CAPTION>
<CAPTION>
SUCCESSOR PREDECESSOR
---------- ---------------------------------------------
Year ended Three months ended Year ended
March 31, March 31, December 31,
------------------
1999 1998 1997 1996
------- ------ ------ ------
<S> <C> <C> <C> <C>
United States $(4,823) $ 504 $7,910 $4,954
Non-U.S 316 575 1,724 1,698
------- ------ ------ ------
$(4,507) $1,079 $9,634 $6,652
======= ====== ====== ======
</TABLE>
The provision (benefit) for income taxes is summarized as follows:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
--------- -----------------------------------------------
Year ended Three months ended Year ended
March 31, March 31, December 31,
------------------
1999 1998 1997 1996
------- ------ ------ ------
<S> <C> <C> <C> <C>
Current:
U.S. Federal $ -- $ 298 $ 2,737 $ 1,699
State -- 57 478 224
Non-U.S 9 152 523 614
----- ------- ------- -------
9 507 3,738 2,537
Deferred:
U.S. Federal -- (126) (120) (89)
State -- (15) (14) (11)
Non-U.S 41 (19) (2) (4)
----- ------- ------- -------
41 (160) (136) (104)
----- ------- ------- -------
$ 50 $ 347 $ 3,602 $ 2,433
===== ======= ======= =======
</TABLE>
F-15
<PAGE> 53
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred income taxes are as follows:
<TABLE>
<CAPTION>
March 31, 1999
--------------
<S> <C>
Deferred tax assets:
Allowance for doubtful accounts $ 10
Accrued vacation and bonuses 65
Damage claims and other insurance liabilities 55
Amortization of deferred finance costs 34
Other 11
Net operating loss carry-forwards 2,056
--------
Deferred tax assets 2,231
Less: valuation allowance (1,786)
--------
Total deferred tax assets 445
Deferred tax liabilities:
Tax depreciation in excess of book depreciation (123)
Tax goodwill amortization in excess of book goodwill amortization (285)
Other (37)
--------
Total deferred tax liabilities (445)
--------
Total net deferred taxes $ --
========
</TABLE>
SFAS No. 109 requires a valuation allowance to reduce the deferred tax assets
reported if, based on the weight of the evidence, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. After
consideration of all evidence, both positive and negative, management has
determined that a $1,786 valuation allowance at March 31, 1999 is necessary to
reduce the deferred tax assets to the amount that will more likely than not be
realized. The change in the valuation allowance for the current year is $1,786.
At March 31, 1999, the Company has available net operating loss carry-forwards
of $5,650 which expire on March 31, 2019.
A reconciliation of income taxes to the U.S. statutory rate of 34% is as
follows:
<TABLE>
<CAPTION>
Successor Predecessor
--------- -----------------------------------
1999 1998 1997 1996
--------- ------- ------- -------
<S> <C> <C> <C> <C>
Income taxes (benefit) at U.S.
statutory rate $(1,607) $ 367 $ 3,276 $ 2,262
State income taxes ........... (113) 50 306 141
Permanent items .............. 34 14 43 57
Change in valuation allowance 1,786 -- -- --
Effect of non-U.S. operations (50) (84) (23) (27)
------- ------- ------- -------
$ 50 $ 347 $ 3,602 $ 2,433
======= ======= ======= =======
</TABLE>
F-16
<PAGE> 54
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
7. NOTES PAYABLE
On April 2, 1998, the Company entered into a revolving credit facility with Key
Corporate Capital (the "Senior Credit Facility"). The Senior Credit Facility
allows for borrowings in the aggregate of up to the lesser of $10 million or a
borrowing base, equal to 85% of eligible accounts receivable, as defined. The
revolving loans under the Senior Credit Facility mature on August 31, 2002 or
sooner as provided in the Senior Credit Facility.
Indebtedness of the Company under the Senior Credit Facility is guaranteed by
each of the Company's domestic subsidiaries and will generally be secured by:
(i) all of the Company's cash equivalents, accounts receivable, contract rights,
general intangibles, instruments and chattel paper relating thereto; (ii) all of
the Company's inventory; (iii) amounts (if any) held in a commercial deposit
account with the lending bank, and (iv) all proceeds from (i) to (iii)
inclusive.
The Company's borrowings under the Senior Credit Facility bear interest at a
floating rate and may be maintained as Prime Rate Loans or LIBOR loans.
Borrowings made pursuant to the Prime Rate Loans bear interest rates equal to
the prime rate plus the Applicable Margin (as defined in the Senior Credit
Facility) and borrowings made pursuant to the LIBOR Loans bear interest rates
equal to the LIBOR rate plus the Applicable Margin. The Applicable Margin for
Prime Rate Loans will be 0% through June 1999 and thereafter will range from 0%
to 0.50% based on the Company's Leverage Ratio (as defined in the Senior Credit
Facility). The Applicable Margin for LIBOR Loans will be 1.75% through June 1999
and thereafter will range from 1.25% to 2.25% based on the Company's Leverage
Ratio.
The Senior Credit Facility requires the Company to meet certain financial tests,
including, without limitation, minimum interest coverage and maximum leverage
ratios. The Senior Credit Facility also contains certain covenants, which among
other things, will limit the incurrence of additional indebtedness, the making
of loans or investments, the declaration of dividends, transactions with
affiliates, asset sales, acquisitions, mergers and consolidations, the
incurrence of liens and encumbrances and other matters customarily restricted in
such agreements. There was approximately $2,927 outstanding under the Senior
Credit Facility as of March 31, 1999. The amounts outstanding under the Senior
Credit Facility bear interest at 7.75%. As of March 31, 1999 there was $6,789 of
available credit under the Senior Credit Facility.
On May 20, 1999, the Senior Credit Facility was amended to add a $5 million Term
Loan (the "Term Loan"). The proceeds of the Term Loan were used as part of the
purchase price for Elsinore, L.P. (See Note 17). The Term Loan is payable in
quarterly installments in arrears at varying amounts over its five-year life.
The Company's borrowings under the Term Loan will bear interest in a manner
identical to the Senior Credit Facility except that the Applicable Margin for
Prime Rate Loans will range from 0% to 1.25% based on the Company's Leverage
Ratio and the Applicable Margin for LIBOR Loans will range from 2% to 3% based
on the Company's Leverage Ratio. Furthermore, the requirement to meet a minimum
interest coverage test is no longer applicable as of April 1, 1999. Rather, the
Company must meet a minimum EBITDA test. The term loan is secured by all of the
Company's equipment.
F-17
<PAGE> 55
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
8. LONG-TERM DEBT
On April 2, 1998, the Company issued $75 million of notes (the "Senior
Increasing Rate Notes"). The proceeds from the Senior Increasing Rate Notes were
used to consummate the Acquisition. On August 18, 1998, the Company issued $80
million of notes (the "Old Notes"). The proceeds from the Senior Notes were used
to repay the Senior Increasing Rate Notes. On February 12, 1999, the Company
exchanged the Old Notes for substantially identical Series B 11% Senior Notes
(the "Notes"). The Notes mature in August, 2005, and bear interest at 11%,
payable semiannually on each February 15 and August 15, commencing February 15,
1999. The Notes are redeemable at the option of the Company, at any time on or
after August 15, 2003, at a premium of 105.5% in 2003 and at 100% of the
principal amount in 2004 and thereafter. In addition, the Company may redeem at
its option up to 33 1/3% of the original principal amount of the Notes at any
time on or prior to August 15, 2001, at a redemption price equal to 111% of the
principal amount being redeemed, with the net proceeds of one or more public
offerings, provided that at least $53.3 million aggregate principal amount of
the Notes remain outstanding after any such redemption and that any such
redemption occurs within 90 days following the closing of such public offering.
Upon the occurrence of a Change in Control (as defined in the Indenture covering
the Notes), each holder of the Notes is entitled to require the Company to
repurchase such Notes at a premium of 101%. The Notes are fully and
unconditionally guaranteed, on an unsecured basis, by the Company's domestic
subsidiaries (see Note 18).
The Notes contain certain covenants, which among other things limit the ability
of the Company to incur additional indebtedness, issue common and preferred
stock of its subsidiaries, pay dividends, transfer and sell assets and enter
into transactions with affiliates.
The Company wrote-off $213 of unamortized deferred financing costs previously
incurred in connection with the Senior Increasing Rate Notes that were repaid
with the net proceeds of the issuance of the Old Notes. This write-off was
accounted for as an extraordinary loss on the early extinguishment of debt.
9. STOCK OPTIONS
During 1999, Ranger adopted the 1999 Stock Option Plan (the "Plan") which
provides for the granting of stock options to purchase shares of Ranger's common
stock to executives and other key employees of the Company. At March 31, 1999,
Ranger reserved 1,000,000 shares of its common stock for issuance under the
Plan. The vesting period and the terms of the stock options granted are
established by a committee appointed by Ranger's Board of Directors (the
"Committee"). The stock options expire no later than ten years from the date of
grant. Ranger has granted options to Company employees to purchase 5,650 shares
of Ranger common stock. Of the 5,650 options granted, 1,883 vest ratably over
time and the remaining 3,767 vest upon the attainment of certain performance
goals as determined by the Committee. The exercise price of these stock options
is $100 per share, which was determined by the Committee to be the fair value of
Ranger's common stock at the date of grant. As a result, no compensation cost
has been recognized under the provisions of APB Opinion No. 25. All of the
options issued by Ranger were issued to employees of the Company and accordingly
such options are reflected below.
F-18
<PAGE> 56
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. STOCK OPTIONS (CONTINUED)
Changes to the Plan for the year ending March 31, 1999 are as follows:
<TABLE>
<CAPTION>
Year ended March 31,
1999
-------------------------------------
Weighted Average
Exercise Price
Ranger Shares Per Share
--------------- ------------------
<S> <C> <C>
Outstanding at beginning of year -- $ --
Granted 5,700 100
Exercised - --
Cancelled (50) 100
------ ------
Outstanding at end of the year 5,650 $ 100
====== ======
</TABLE>
The following table summarizes information about the stock options outstanding
at March 31, 1999:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------- -------------------- -------------------- ---------------------
Weighted Number Average Remaining Weighted Average
Outstanding at Contractual Life Number Exercisable Exercise Price Per
Exercise Price March 31, 1999 at March 31, 1999 Share
- ----------------------- --------------------- -------------------- -------------------- ---------------------
<S> <C> <C> <C> <C>
$100 5,650 9 1,130 $100
</TABLE>
The weighted average per share fair value of options granted under Ranger's
stock option plan during 1999 based on the Black-Scholes option valuation model,
was $41.72 per share under option. For purposes of pro forma disclosures
required by SFAS No. 123, the estimated fair value of the options is amortized
over the options' vesting period. The Company's pro forma information for the
year ended March 31, 1999 follows:
<TABLE>
<CAPTION>
Year ended
March 31,
1999
<S> <C>
Net loss $ (4,817)
=========
Net loss per share $ (48,170)
=========
</TABLE>
The following weighted average assumptions were used as of March 31, 1999:
<TABLE>
<S> <C>
Expected life 9 years
Interest rate 6.00%
Volatility --
Dividend yield --
</TABLE>
The Black-Scholes options valuation model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
Ranger's stock options have characteristics significantly different from traded
options, and because changes in the subjective input assumptions can materially
affect the fair value estimate, the existing models, in management's opinion, do
not necessarily provide a reliable single measure of the fair value of Ranger's
stock options.
F-19
<PAGE> 57
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
10. COMMITMENTS
The Company leases operating facilities and office space pursuant to various
operating leases. The aggregate minimal rental payments under all operating
leases with initial terms of one year or more at March 31, 1999 are as follows:
2000 $ 775
2001 838
2002 856
2003 773
2004 709
Thereafter 1,323
-------
$5,274
=======
Total rent expense for all operating leases amounted to $2,947, $2,491 and
$2,516 for the years ended March 31, 1999, December 31, 1997 and December 31,
1996, respectively, and $754 for the three months ended March 31 1998.
11. EMPLOYEE BENEFIT PLANS
The Company sponsors a non-contributory defined benefit pension plan which
covers certain union employees at its Miami station. The plan provides benefits
based on the employees' years of service and qualifying final average
compensation. The Company's funding policy is to contribute amounts sufficient
to meet the minimum funding requirements of the Employee Retirement Income
Security Act of 1974, as amended, or such additional amounts as determined
appropriate to assure that assets of the plan would be adequate to provide
benefits.
During the three months ended March 31, 1998 and the years ended December 31,
1997 and 1996, the Predecessor sponsored two other non-contributory defined
benefit pension plans. These plans covered management, supervisory,
administrative and non-union hourly employees. These plans provide benefits
based on the employees' tenure and qualifying average compensation. The plans
were funded by Viad and were assumed by Viad subsequent to March 31, 1998 under
terms set forth in the April 1, 1998 purchase agreement.
The assumptions used in the calculation of the actuarial present value of the
projected benefit obligation and expected long-term return on plan assets for
the Company's defined benefit pension plan consisted of the following:
<TABLE>
<CAPTION>
March 31, 1999
--------------
<S> <C>
Weighted average discount rate 7.5%
Rate of increase in compensation levels 4.5%
Expected long-term return on assets 9.5%
</TABLE>
F-20
<PAGE> 58
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth a reconciliation of benefit obligations, plan
assets and funded status for the Company's defined benefit pension plan as of
March 31, 1999.
<TABLE>
<S> <C>
CHANGES IN BENEFIT OBLIGATION:
Benefit obligation at the beginning of the period $ 1,122
Service cost 82
Interest cost 83
Actuarial loss 50
-------
Benefit obligation at end of period $ 1,337
=======
CHANGES IN PLAN ASSETS:
Fair value of plan assets at beginning of period $ 1,006
Actual return on plan assets 98
Employer contribution 49
-------
Fair value of plan assets at end of period $ 1,153
=======
RECONCILIATION:
Funded status $ 184
Unrecognized net gain (33)
-------
Accrued benefit cost $ 151
=======
</TABLE>
The following table sets forth the net periodic pension costs of the defined
benefit pension plans:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
-------------- -------------------------------------------------
Year ended December 31,
Year ended Three months ended --------------------------
March 31, 1999 March 31, 1998 1997 1996
-------------- ------------------ -------- ------
<S> <C> <C> <C> <C>
Service cost-benefits earned during the period $ 82 $ 215 $ 715 $ 718
Interest cost on projected benefit obligation 83 213 815 731
Return on assets (140) (233) (1,765) (780)
Net amortization and deferral 58 16 1,119 270
----- ----- ------- -----
Net periodic pension expense $ 83 $ 211 $ 884 $ 939
===== ===== ======= =====
</TABLE>
The Company also sponsors a defined contribution plan pursuant to Section 401(K)
of the Internal Revenue code. Subject to certain dollar limits, employees may
contribute a percentage of their salaries to the plan and the Company will match
a portion of each employee's contribution. This plan is in effect for U.S. based
non-union employees only. The expense pertaining to this plan was approximately
$638 for the year ended March 31, 1999. The expense incurred by the Predecessor
pertaining to this plan was approximately $123 for the three month period ended
March 31, 1998 and $331 and $300 for the years ended December 31, 1997 and 1996,
respectively.
The Predecessor provided contributory health care benefits to the retirees and
their dependents of two of its entities. The Predecessor recorded a liability
equal to the unfunded accumulated benefit obligation for these benefits as
required by the provision of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions" (SFAS No. 106). SFAS
NO. 106 requires that the cost of these benefits, which are primarily for health
care and life insurance, be recognized in the financial statements throughout
the employees' active working careers.
F-21
<PAGE> 59
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
11. EMPLOYEE BENEFIT PLANS (CONTINUED)
The components of net periodic postretirement benefit cost consisted of the
following:
<TABLE>
<CAPTION>
PREDECESSOR
----------------------------------------------
Year ended December 31,
Three months ended ------------------------
March 31, 1998 1997 1996
------------------ ------ -------
<S> <C> <C> <C>
Service cost-benefits earned during the period $ 8 $ 30 $ 28
Interest cost on accumulated benefit obligation 8 33 29
Net amortization and deferral (1) (3) (5)
---- ---- ----
Net periodic postretirement expense $ 15 $ 60 $ 52
==== ==== ====
</TABLE>
12. LITIGATION
The Company is engaged in litigation arising in the normal course of business.
Management believes that the outcome of such litigation will not have a material
adverse effect on the Company's financial position or its results of operations.
13. SIGNIFICANT CUSTOMERS
One of the Company's customers accounted for 15.0% of the Company's overall
revenues for the year ended March 31, 1999. This customer also accounted for
15.2% of the Predecessor's revenue for the three months ended March 31, 1998 and
17.5% and 20.2% of revenues for the years ended December 31, 1997 and 1996,
respectively. Another customer accounted for 13.0% of the Company's revenue for
the year ended March 31, 1999, and 13.3% of the Predecessor's revenue for the
three months ended March 31, 1998 and 14.1% and 14.1% of revenues for the years
ended December 31, 1997 and 1996, respectively.
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following tables set forth selected quarterly financial information.
<TABLE>
<CAPTION>
SUCCESSOR-Quarters ending
-----------------------------------------------------------------
June 30, September 30, December 31, March 31
1998 1998 1998 1999 Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 30,249 $ 30,994 $ 31,751 $ 30,447 $123,441
Operating income 1,705 1,771 1,764 1,580 6,820
Net loss before extraordinary item (1,934) (1,445) (287) (891) (4,557)
Net loss (1,934) (1,658) (287) (891) (4,770)
Basic and diluted loss per share before
extraordinary loss $(19,340) $ (14,450) $ (2,870) $ (8,910) $(45,570)
Basic and diluted loss per share (19,340) (16,580) (2,870) (8,910) (47,700)
</TABLE>
<TABLE>
<CAPTION>
PREDECESSOR-Quarters ending
-----------------------------------------------------------------
March 31, June 30, September 30, December 31,
1997 1997 1997 1997 Total
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 29,816 $ 28,727 $ 30,227 $ 30,555 $119,325
Operating income 2,607 2,772 2,632 2,013 10,024
Net income 1,580 1,695 1,637 1,120 6,032
</TABLE>
F-22
<PAGE> 60
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. GEOGRAPHIC AREA INFORMATION
The following table includes selected financial information pertaining to the
Company's and Predecessor's geographic operations:
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
---------- ------------------------------------------------------
Year ended
Year ended Three months ended December 31,
March 31, March 31, -----------------------------
1999 1998 1997 1996
---------- ------------------ -------- ---------
<S> <C> <C> <C> <C>
Revenues
United States $102,883 $ 24,967 $ 98,853 $ 102,995
Europe 17,835 4,487 16,792 15,897
Freeport, Bahamas 2,723 702 3,680 2,682
-------- -------- -------- ---------
$123,441 $ 30,156 $119,325 $ 121,574
======== ======== ======== =========
Operating income
United States $ 5,205 $ 632 $ 8,307 $ 5,399
Europe 1,132 454 1,527 1,621
Freeport, Bahamas 483 147 190 (60)
-------- -------- -------- ---------
$ 6,820 $ 1,233 $ 10,024 $ 6,960
======== ======== ======== =========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
1999
---------
<S> <C>
Identifiable assets
United States $221,044
Europe 12,885
Freeport, Bahamas 14,143
Eliminations (124,318)
--------
$123,754
</TABLE>
16. ABANDONED ACQUISITION COSTS AND SPECIAL MANAGEMENT BONUS
During fiscal 1999, there were two notable costs that decreased earnings. First,
the Board of Directors granted an off-plan special bonus pool of $88 to a number
of managers for individual accomplishments. Second, the Company pursued several
acquisitions of airline service companies that were not consummated, which
resulted in $361 of costs charged against earnings. These two charges aggregated
$449.
F-23
<PAGE> 61
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
17. SUBSEQUENT EVENT
On May 20, 1999, Elsinore Acquisition Corporation ("EAC"), a newly-created,
wholly-owned subsidiary of the Company, acquired substantially all of the assets
of Elsinore, L.P., ("Elsinore"), which includes 23 operating units in 10 states,
the U.S. Virgin Islands and Puerto Rico. Elsinore provides a variety of ground
handling, fueling, aircraft cleaning and other aviation services to major
commercial airlines. EAC will primarily continue the same business as previously
conducted by Elsinore. The Company and its sole shareholder, Ranger, are
guarantors of EAC's obligations under the agreement governing the asset
purchase.
The total consideration paid by EAC was approximately $6.2 million (subject to
post-closing adjustments), which consists of $5 million in cash, a promissory
note for $0.9 million and the assumption by EAC of approximately $0.3 million in
liabilities of Elsinore. The promissory note has a maturity of one year from the
date of purchase, and is subject to post-closing adjustments. The Company
borrowed the cash portion of the purchase price from Key Corporate Capital
("Key") pursuant to the terms of an amendment to the Company's existing senior
credit facility, which the Company recorded on the books of EAC.
18. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS
In connection with the acquisition as discussed in Note 8, the Company offered
$80 million in aggregate principal amount of Series B 11% Senior Notes due 2005
(the "Notes"). The Notes are fully and unconditionally guaranteed on a senior
unsecured basis, jointly and severally, by the Company's domestic subsidiaries
(the "Guarantors"). The Guarantors include Aircraft Services International,
Inc., Dispatch Services, Inc., and Florida Aviation Fueling Co. The condensed
consolidating/combining financial statements of the Guarantors should be read in
connection with the consolidated/combined financial statements of the Company.
Separate financial statements of the Guarantors are not presented because the
Company believes such information is not material and that the condensed
consolidating/combining financial statements presented are more meaningful in
understanding the financial position and results of operations of the
Guarantors. Those supplemental guarantor condensed combining financial
statements that do not contain a column for elimination entries and/or a column
for ASIG, Inc. (or the Predecessor) do so because all amounts that would appear
in the column are zero.
F-24
<PAGE> 62
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
GUARANTOR NON-GUARANTOR ELIMINATION CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
- ------------------------------------------------ ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 124 $ 2,216 $ 971 $ -- $ 3,311
Accounts receivable, net -- 15,261 1,160 -- 16,421
Receivable from Viad 2,125 -- -- -- 2,125
Prepaid expenses 18 602 30 -- 650
Spare parts and supplies -- 2,067 28 -- 2,095
--------- -------- -------- --------- ---------
Total current assets 2,267 20,146 2,189 -- 24,602
Property, plant and equipment, net 78 44,186 2,625 -- 46,889
Due from affiliates 90,120 -- 21,565 (111,685) --
Notes receivable from affiliates 11,018 -- -- (11,018) --
Goodwill, net -- 48,249 419 -- 48,668
Deferred financing costs, net 3,205 -- -- -- 3,205
Investment in consolidated subsidiaries 445 1,170 -- (1,615) --
Investments in and advances in joint venture -- -- 224 -- 224
Other assets 4 156 6 -- 166
--------- -------- -------- --------- ---------
Total assets $ 107,137 $113,907 $ 27,028 $(124,318) $ 123,754
========= ======== ======== ========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ -- $ 4,602 $ 480 $ -- $ 5,082
Due from affiliates 9,099 91,933 10,653 (111,685) --
Notes payable to affiliates -- -- 11,018 (11,018) --
Accrued expenses 1,319 8,257 3,274 -- 12,850
Customer deposits -- 3,398 90 -- 3,488
Current portion of notes payable -- -- 57 -- 57
--------- -------- -------- --------- ---------
Total current liabilities 10,418 108,190 25,572 (122,703) 21,477
Notes payable 2,927 -- -- -- 2,927
Long-term debt 80,000 -- -- -- 80,000
--------- -------- -------- --------- ---------
Total liabilities 93,345 108,190 25,572 (122,703) 104,404
Stockholder's equity:
Common stock -- 4 26 (30) --
Paid-in capital 24,100 441 1,144 (1,585) 24,100
Retained earnings (accumulated deficit) (10,308) 5,272 266 -- (4,770)
Accumulated other comprehensive income -- -- 20 -- 20
--------- -------- -------- --------- ---------
Total stockholder's equity 13,792 5,717 1,456 (1,615) 19,350
--------- -------- -------- --------- ---------
Total liabilities and stockholder's equity $ 107,137 $113,907 $ 27,028 $(124,318) $ 123,754
========= ======== ======== ========= =========
</TABLE>
F-25
<PAGE> 63
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS
(SUCCESSOR)
YEAR ENDED MARCH 31, 1999
------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES TOTAL
- ----------------------------------------- ------------- --------------- ------------------ ----------------------
<S> <C> <C> <C> <C>
Revenues $ -- $ 102,883 $ 20,558 $ 123,441
Cost and expenses:
Operating expenses -- 81,878 17,157 99,035
Selling, general and administrative -- 7,657 1,208 8,865
Amortization -- 2,545 -- 2,545
Depreciation 9 5,589 578 6,176
-------- --------- -------- ---------
Total cost and expenses 9 97,669 18,943 116,621
-------- --------- -------- ---------
Operating income (loss) (9) 5,214 1,615 6,820
Other income (expense), net (5) 15 (263) (253)
Interest income 21 129 57 207
Interest and other financial expense (10,102) (86) (1,093) (11,281)
-------- --------- -------- ---------
Income (loss) before income taxes (10,095) 5,272 316 (4,507)
Income taxes -- -- 50 50
-------- --------- -------- ---------
Net income (loss) before extraordinary item (10,095) 5,272 266 (4,557)
-------- --------- -------- ---------
Extraordinary loss on early
extinguishment of debt (213) -- -- (213)
-------- --------- -------- ---------
Net income (loss) $(10,308) $ 5,272 $ 266 $ (4,770)
======== ========= ======== =========
</TABLE>
F-26
<PAGE> 64
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF OPERATIONS
(PREDECESSOR)
THREE MONTHS ENDED MARCH 31, 1998
---------------------------------------------------------
GUARANTOR NON-GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES TOTAL
- ------------------------------------------ ------------ ------------- ---------
<S> <C> <C> <C>
Revenues $ 24,967 $ 5,189 $ 30,156
Cost and expenses:
Operating expenses 21,855 4,131 25,986
Selling, general and administrative 1,561 257 1,818
Amortization 16 6 22
Depreciation 903 194 1,097
-------- ------- --------
Total cost and expenses 24,335 4,588 28,923
-------- ------- --------
Operating income 632 601 1,233
Other income (expense), net (5) (52) (57)
Interest income 47 26 73
Interest and other financial expense (170) -- (170)
-------- ------- --------
Income before income taxes 504 575 1,079
Income taxes 214 133 347
-------- ------- --------
Net income $ 290 $ 442 $ 732
======== ======= ========
</TABLE>
F-27
<PAGE> 65
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF OPERATIONS
(PRECECESSOR)
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------
GUARANTOR NON-GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES TOTAL
- ------------------------------------------ ------------ ------------- ----------
<S> <C> <C> <C>
Revenues $ 98,853 $ 20,472 $ 119,325
Cost and expenses:
Operating expenses 81,058 16,058 97,116
Selling, general and administrative 5,464 2,117 7,581
Amortization 68 35 103
Depreciation 3,956 545 4,501
-------- -------- ---------
Total cost and expenses 90,546 18,755 109,301
-------- -------- ---------
Operating income 8,307 1,717 10,024
Other income (expense), net 56 (127) (71)
Interest income 216 134 350
Interest and other financial expense (669) -- (669)
-------- -------- ---------
Income before income taxes 7,910 1,724 9,634
Income taxes 3,081 521 3,602
-------- -------- ---------
Net income $ 4,829 $ 1,203 $ 6,032
======== ======== =========
</TABLE>
F-28
<PAGE> 66
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED CONSOLIDATING/COMBINING FINANCIAL
STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF INCOME
(PREDECESSOR)
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------------------
GUARANTOR NON-GUARANTOR COMBINED
SUBSIDIARIES SUBSIDIARIES TOTAL
- ------------------------------------------ ------------ ------------- ---------
<S> <C> <C> <C>
Revenues $ 102,995 $ 18,579 $ 121,574
Cost and expenses:
Operating expenses 87,274 14,629 101,903
Selling, general and administrative 6,371 1,920 8,291
Amortization 66 33 99
Depreciation 3,885 436 4,321
--------- -------- ---------
Total cost and expenses 97,596 17,018 114,614
--------- -------- ---------
Operating income 5,399 1,561 6,960
Other income (expense), net (41) (4) (45)
Interest income 202 141 343
Interest and other financial expense (606) -- (606)
--------- -------- ---------
Income before income taxes 4,954 1,698 6,652
Income taxes 1,823 610 2,433
--------- -------- ---------
Net income $ 3,131 $ 1,088 $ 4,219
========= ======== =========
</TABLE>
F-29
<PAGE> 67
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
(SUCCESSOR)
YEAR ENDED MARCH 31, 1999
--------------------------------------------------------------------------
GUARANTOR NON-GUARANTOR CONSOLIDATED
ASIG, INC. SUBSIDIARIES SUBSIDIARIES TOTAL
---------- ------------ ------------ -----
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $(10,308) $ 5,272 $ 266 $ (4,770)
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Amortization of intangible assets -- 2,545 -- 2,545
Depreciation 9 5,589 578 6,176
Amortization of deferred financing costs 2,888 -- -- 2,888
Provision for bad debt -- 36 -- 36
Equity loss in joint venture -- -- 157 157
Changes in operating assets and
liabilities, net of acquisition:
Accounts receivable -- (843) (226) (1,069)
Due from (to) affiliates (4,410) 3,763 647 --
Prepaid expenses (18) (504) (1) (523)
Spare parts and supplies -- (350) 13 (337)
Other assets (4) 317 6 319
Accounts payable -- 431 31 462
Accrued expenses 1,319 (1,656) 43 (294)
Customer deposits -- 965 90 1,055
-------- -------- ------- ---------
Net cash provided by (used in) by operating
activities (10,524) 15,565 1,604 6,645
INVESTING ACTIVITIES
Purchases of property, plant and equipment (87) (13,349) 5 (13,431)
Purchase of ASIG business (88,487) -- -- (88,487)
Purchase of GAH business -- -- (438) (438)
Advances to joint venture -- -- (200) (200)
-------- -------- ------- ---------
Net cash used in investing activities (88,574) (13,349) (633) (102,556)
FINANCING ACTIVITIES
Issuance of common stock 24,100 -- -- 24,100
Borrowings, net 80,630 -- -- 80,630
Deferred financing costs (5,508) -- -- (5,508)
-------- -------- ------- ---------
Net cash provided by financing activities 99,222 -- -- 99,222
-------- -------- ------- ---------
Net increase in cash 124 2,216 971 3,311
Cash at the beginning of the period -- -- -- --
-------- -------- ------- ---------
Cash at the end of the period $ 124 $ 2,216 $ 971 $ 3,311
======== ======== ======= =========
Supplemental disclosure of cash
flow information:
Interest paid $ 4,345 $ 47 $ -- $ 4,392
======== ======== ======= =========
Taxes paid $ -- $ 21 $ 380 $ 401
======== ======== ======= =========
SUPPLEMENTAL SCHEDULE OF NON-CASH
ACTIVITIES:
Receipt of fixed assets in
satisfaction of a receivable $ -- $ 1,414 $ -- $ --
======== ======== ======= =========
</TABLE>
F-30
<PAGE> 68
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED COMBINING FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF CASH FLOWS
(PREDECESSOR)
THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------------------
COMBINATION
GUARANTOR NON-GUARANTOR AND ELIMINATION COMBINED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- --------------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 290 $ 442 $ -- $ 732
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Amortization of intangible assets 16 6 -- 22
Depreciation 903 194 -- 1,097
Deferred income taxes (226) (19) -- (245)
Equity loss in joint venture -- 54 -- 54
Changes in operating assets and liabilities:
Accounts receivable 2,221 429 -- 2,650
Due from (to) affiliates 1,064 (581) (483) --
Prepaid expenses 264 31 -- 295
Spare parts and supplies (11) (7) -- (18)
Other assets (179) 5 (26) (200)
Accounts payable 34 (173) 550 411
Accrued expenses 1,119 17 -- 1,136
Customer deposits (385) (554) -- (939)
------- ----- ----- -------
Net cash provided by (used in) by operating
activities 5,110 (156) 41 4,995
INVESTING ACTIVITIES
Purchases of property, plant and equipment (2,228) (438) -- (2,666)
------- ----- ----- -------
Net cash used in investing activities (2,228) (438) -- (2,666)
FINANCING ACTIVITIES
Advances from (to) Parent, net (2,869) 553 -- (2,316)
Dividends (13) -- -- (13)
------- ----- ----- -------
Net cash provided by (used in) financing
activities (2,882) 553 -- (2,329)
------- ----- ----- -------
Net increase (decrease) in cash -- (41) 41 --
Cash at beginning of period -- 550 (550) --
------- ----- ----- -------
Cash at end of period $ -- $ 509 $(509) $ --
======= ===== ===== =======
</TABLE>
F-31
<PAGE> 69
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED COMBINING FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF CASH FLOWS
(PREDECESSOR)
YEAR ENDED DECEMBER 31, 1997
--------------------------------------------------------------------
COMBINATION
GUARANTOR NON-GUARANTOR AND ELIMINATION COMBINED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- --------------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,829 $ 1,203 $ -- $ 6,032
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization 4,005 599 -- 4,604
Deferred income taxes (135) (1) -- (136)
Equity loss in joint venture -- 133 -- 133
Changes in operating assets and liabilities:
Accounts receivable 2,163 (96) -- 2,067
Due from (to) affiliates (644) 644 -- --
Prepaid expenses 191 (30) -- 161
Spare parts and supplies (69) (2) -- (71)
Other assets 55 8 -- 63
Accounts payable 695 259 433 1,387
Accrued expenses 1,772 666 -- 2,438
Customer deposits (41) 502 -- 461
-------- ------- ----- --------
Net cash provided by operating
activities 12,821 3,885 433 17,139
INVESTING ACTIVITIES
Purchases of property, plant and
equipment (2,877) (1,070) -- (3,947)
Advances to joint venture -- (353) -- (353)
-------- ------- ----- --------
Net cash used in investing activities (2,877) (1,423) -- (4,300)
FINANCING ACTIVITIES
Payments on notes payable (82) -- -- (82)
Advances from (to) Parent, net (4,689) (1,378) -- (6,067)
Dividends (5,173) (1,708) -- (6,881)
-------- ------- ----- --------
Net cash used in financing activities (9,944) (3,086) -- (13,030)
-------- ------- ----- --------
Net increase (decrease) in cash -- (624) 433 (191)
Cash at beginning of year -- 1,174 (983) 191
-------- ------- ----- --------
Cash at end of year $ -- $ 550 $(550) $ --
======== ======= ===== ========
</TABLE>
F-32
<PAGE> 70
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
18. SUPPLEMENTAL GUARANTOR CONDENSED COMBINING FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
COMBINED STATEMENT OF CASH FLOWS
(PREDECESSOR)
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------
COMBINATION
GUARANTOR NON-GUARANTOR AND ELIMINATION COMBINED
SUBSIDIARIES SUBSIDIARIES ENTRIES TOTAL
------------ ------------- --------------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,131 $ 1,088 $ -- $ 4,219
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation and amortization 3,951 469 -- 4,420
Deferred income taxes (102) (2) -- (104)
Equity loss in joint venture -- 3 -- 3
Changes in operating assets and
liabilities:
Accounts receivable 1,598 (18) -- 1,580
Due from (to) affiliates 399 (399) -- --
Prepaid expenses (328) (9) -- (337)
Spare parts and supplies (293) (11) -- (304)
Other assets (80) (11) -- (91)
Accounts payable (673) 111 (304) (866)
Accrued expenses (664) (98) -- (762)
Customer deposits (593) (4) -- (597)
------- ------- ----- -------
Net cash provided by operating activities 6,346 1,119 (304) 7,161
INVESTING ACTIVITIES
Purchases of property, plant and equipment (8,500) (561) -- (9,061)
------- ------- ----- -------
Net cash used in investing activities (8,500) (561) -- (9,061)
FINANCING ACTIVITIES
Payments on notes payable (74) -- -- (74)
Advances from (to) Parent, net 7,130 1,691 -- 8,821
Dividends (4,902) (1,754) -- (6,656)
------- ------- ----- -------
Net cash provided by (used in) financing
activities 2,154 (63) -- 2,091
------- ------- ----- -------
Net increase (decrease) in cash -- 495 (304) 191
Cash at beginning of period -- 679 (679) --
------- ------- ----- -------
Cash at end of period $ -- $ 1,174 $(983) $ 191
======= ======= ===== =======
</TABLE>
F-33
<PAGE> 71
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholder
Aircraft Service International Group, Inc.
We have audited the consolidated financial statements of Aircraft Service
International Group, Inc. and subsidiaries as of March 31, 1999 and 1998, and
for the year ended March 31, 1999, and have issued our report thereon dated June
16, 1999 (included elsewhere in this Form 10-K). Our audits also included the
financial statement schedule listed in Item 14 (a) of this Form 10-K. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion on the schedule based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Miami, Florida
June 16, 1999
<PAGE> 72
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Stockholders
Aircraft Service International Group
We have audited the combined statements of income, changes in combined equity
and cash flows of Aircraft Service International Group, a combined group of
companies affiliated by common ownership, for the three months ended March 31,
1998 and for each of the two years in the period ended December 31, 1997, and
have issued our report thereon dated June 16, 1999 (included elsewhere in this
Form 10-K). Our audits also included the financial statement schedule listed in
Item 14(a) of this Form 10-K. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on the
schedule based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ ERNST & YOUNG LLP
Miami, Florida
June 16, 1999
<PAGE> 73
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC.
MARCH 31, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END OF
DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS PERIOD
- ----------- --------- -------- ---------- ------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996 (Predecessor)
Deducted from asset accounts
Allowance for doubtful accounts ........... $ 691 $ 289 $(296) (1)(2) $1,276
====== ====== ===== ======
Year Ended December 31, 1997 (Predecessor)
Deducted from asset accounts
Allowance for doubtful accounts ........... $1,276 $ 245 $ 899 (1) $ 622
====== ====== ===== ======
Three Months Ended March 31, 1998 (Predecessor)
Deducted from asset accounts
Allowance for doubtful accounts ........... $ 622 $ -- $ 77 (1) $ 546
====== ====== ===== ======
- -------------------------------------------------------------------------------------------------------------------------
Year Ended March 31, 1999 (Successor)
Deducted from asset accounts
Allowance for doubtful accounts ........... $ 546 $ 36 $ (15) (1) $ 567
Deferred tax asset valuation .............. -- 1,786 -- 1,786
------ ------ ----- ------
Total ......................................... $ 546 $1,822 $ (15) $2,353
====== ====== ===== ======
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Represents offset of customer deposits against allowance.
S-1
<PAGE> 1
EXHIBIT 10.11
EXECUTION COPY
C R E D I T A N D S E C U R I T Y A G R E E M E N T
This Credit and Security Agreement (as it may from time to time be
amended, restated or otherwise modified, the "Agreement") is made effective as
of the 2nd day of April, 1998, between AIRCRAFT SERVICE INTERNATIONAL GROUP,
INC., a Delaware corporation, 8240 N.W. 52 Terrace, #200, Miami, Florida
33166-7766 ("Borrower"), and KEY CORPORATE CAPITAL INC., an affiliate of KeyBank
National Association, 127 Public Square, Cleveland, Ohio 44114-1306 ("Lender").
WITNESSETH:
WHEREAS, Borrower and Lender desire to contract for the establishment
of credits in the aggregate principal amounts hereinafter set forth, to be made
available to Borrower upon the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, it is mutually agreed as follows:
ARTICLE I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
"Account" shall mean (a) any right to payment now or hereafter owing to
a Company (including but not limited to any such right to payment by reason of
any lease, sale, manufacture, repair, processing or fabrication of personal
property formerly, now or hereafter owned or otherwise held by such Company, by
reason of any services formerly, now or hereafter rendered by or on behalf of
such Company or by reason of any former, existing or future contract for any
such lease, sale, manufacture, repair, processing, fabrication and/or services),
whether such right to payment be classified by law as an instrument, chattel
paper, contract right, account, document, general intangible or otherwise; (b)
the security, if any, for such right to payment; (c) a Company's right, title
and interest (including, without limitation, all of such Company's rights as an
unpaid vendor, and any applicable right of stoppage in transit) in or to the
personal property, if any, which is the subject of such rights to payment; (d)
all books and records pertaining to such rights to payment; and (e) all proceeds
of any of the foregoing, irrespective of the form or kind thereof.
"Account Debtor" shall mean any Person obligated to pay all or any part
of any Account in any manner and includes (without limitation) any Guarantor
thereof.
"Acquisition" shall mean the acquisition of all of the shares of stock
of the "Companies" (as defined in the Share Purchase Agreement) by Borrower and
ASIG Europe Limited pursuant to the terms of the Share Purchase Agreement.
<PAGE> 2
"Applicable Margin" shall mean:
(a) for the period from the Closing Date through the
fiscal quarter ending June 30, 1999, one hundred seventy-five (175)
basis points for LIBOR Rate Loans and zero (0) basis points for Prime
Rate Loans; and
(b) commencing with the financial statements for the
fiscal quarter ending March 31, 1999, the number of basis points
(depending upon whether Loans are LIBOR Loans or Prime Rate Loans) set
forth in the following matrix based on the result of the computation of
the Leverage Ratio for the most recently completed fiscal quarter shall
be used to establish the number of basis points that will go into
effect on July 1, 1999 and thereafter:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
LEVERAGE RATIO APPLICABLE BASIS APPLICABLE BASIS
POINTS FOR LIBOR POINTS FOR PRIME
LOANS RATE LOANS
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Greater than 6.00 to 1.00 225 50
- ---------------------------------------------------------------------------------------------------------------
Greater than or equal to 5.50 to 1.00 but less than 6.00 to 1.00 200 25
- ---------------------------------------------------------------------------------------------------------------
Greater than or equal to 5.00 to 1.00 but less than 5.50 to 1.00 175 0
- ---------------------------------------------------------------------------------------------------------------
Greater than or equal to 4.50 to 1.00 but less than 5.00 to 1.00 150 0
- ---------------------------------------------------------------------------------------------------------------
Less than 4.50 to 1.00 125 0
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Changes to the Applicable Margin shall be effective on the first day of
each fiscal quarter following the date upon which Lender received, or, if
earlier, Lender should have received, pursuant to Section 5.3(a) hereof, the
financial statements of the Companies for Borrower's fiscal quarters. The above
matrix does not modify or waive, in any respect, the requirements of Section 5.7
hereof, the rights of Lender to charge the Default Rate, or the rights and
remedies of Lender pursuant to Articles VIII and IX hereof.
"Asset Acquisition" shall mean (a) an Investment by a Company or any
Group Member in any other Person pursuant to which such Person shall become a
Group Member or shall be merged with or into a Company or any Group Member or
(b) the acquisition by a Company or any Group Member of the assets of any Person
(other than a Group Member) which constitute all or substantially all of the
assets of such Person or any other properties or assets of such Person other
than in the ordinary course of business.
"Asset Sale" shall mean the sale, transfer or other disposition
(including any sale and leaseback transaction), other than to Borrower or any of
its Wholly-Owned Subsidiaries, in any single transaction or series of related
transactions having a fair market value in excess of Two Hundred Thousand
Dollars ($200,000), of (a) any Capital Stock of or other equity interest in any
Group Member, or (b) any other property or assets of Borrower or of any Group
Member thereof;
<PAGE> 3
provided that Asset Sales shall not include (i) sales, leases, conveyances,
transfers or other dispositions to Borrower or to a Wholly-Owned Subsidiary or
to any other Person if after giving effect to such sale, lease, conveyance,
transfer or other disposition such other Person becomes a Wholly-Owned
Subsidiary; (ii) the contribution or other transfer of any assets or property to
a joint venture, partnership or other Person (which may be a Subsidiary) in
which Borrower has a direct or indirect interest; or (iii) the sale, transfer or
other disposition of all or substantially all of the assets of Borrower or any
of its Wholly-Owned Subsidiaries as permitted under Section 5.12.
"Borrower's Certificate" shall mean a certificate detailing the
calculation of the Borrowing Base, in form and substance satisfactory to Lender.
"Borrowing Base" shall mean an amount not in excess of the sum of
eighty-five percent (85%) of the amount due and owing on Eligible Accounts
Receivable and zero percent (0%) on Inventory; provided, however, that anything
herein to the contrary notwithstanding, Lender shall at all times have the right
to modify or reduce such percentages from time to time, in its reasonable
discretion.
"Business Day" shall mean a day of the year (excluding Saturdays and
Sundays) on which banks are not required or authorized to close in Cleveland,
Ohio, or Miami, Florida, and, if the applicable Business Day relates to any
LIBOR Loan, on which dealings are carried on in the London interbank eurodollar
market.
"Capital Distribution" shall mean a payment made, liability incurred or
other consideration given for the purchase, acquisition, redemption or
retirement of any capital stock of any Company or as a dividend, return of
capital or other distribution (other than any stock dividend or stock split
payable only in capital stock of the Company in question) in respect of any
Company's capital stock.
"Capital Expenditures" shall mean, for any period, the amount of
capital expenditures as determined on a Consolidated basis and in accordance
with GAAP.
"Capital Stock" shall mean, with respect to any Person, any and all
shares or other equivalents (however designated and whether or not voting) of
capital stock, partnership interests or any other participation, right or other
interest in the nature of an equity interest in such Person or any option,
warrant or other security convertible into or exercisable for any of the
foregoing.
"Capitalized Lease Obligations" shall mean Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Collateral Account" shall mean a commercial Deposit Account
designated "cash collateral account" and maintained by Borrower with KeyBank,
without liability by KeyBank or Lender to pay interest thereon, from which
account Lender shall have the exclusive right to withdraw funds until all of the
Debt is paid in full.
<PAGE> 4
"Cash Equivalents" shall mean (i) marketable direct obligations of the
United States of America or any agency thereof, or obligations guaranteed or
insured by the United States of America; provided that in each case such
obligations mature within one year from the date of acquisition thereof, (ii)
certificates of deposit maturing within one year from the date of creation
thereof issued by any U.S. national or state banking institution having capital,
surplus and undivided profits aggregating at least Two Hundred Fifty Million
Dollars ($250,000,000) and at the time of investment rated at least A-1 by S&P
and P-1 by Moody's, (iii) commercial paper with a maturity of one hundred eighty
(180) days or less issued by a corporation (except an affiliate of Borrower)
organized under the laws of any state of the United States of America or the
District of Columbia and at the time of investment rated at least A-1 by S&P or
at least P-1 by Moody's, (iv) repurchase agreements and reverse repurchase
agreements relating to marketable direct obligations issued or unconditionally
guaranteed by the United States of America or issued by an agency thereof and
backed by the full faith and credit of the United States of America, in each
case maturing within one year from the date of acquisition; provided that the
terms of such agreements comply with the guidelines set forth in the Federal
Financial Agreements of Depository Institutions with Securities Dealers and
Others, as adopted by the Comptroller of the Currency, and (v) tax-exempt
auction rate securities and municipal preferred stock, in each case, subject to
reset no more than thirty-five (35) days after the date of acquisition and
having a rating of at least AA by S&P or Aa by Moody's at the time of
investment.
"Cash Security" shall mean all cash, instruments, Deposit Accounts, and
other cash equivalents, whether matured or unmatured, whether collected or in
the process of collection, upon which Borrower presently has or may hereafter
have any claim, wherever located, including but not limited to any of the
foregoing that are presently or may hereafter be existing or maintained with,
issued by, drawn upon, or in the possession of KeyBank or Lender, in each case
only to the extent relating to the Collateral.
"Closing Date" shall mean the effective date of this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended,
together with the rules and regulations promulgated thereunder.
"Collateral" shall mean (a) all of Borrower's existing and future
Accounts, accounts receivable, contract rights, General Intangibles, instruments
and chattel paper in each case relating to the Accounts; (b) all of Borrower's
Inventory, whether now owned or hereafter acquired by Borrower; (c) all funds
now or hereafter on deposit in the Cash Collateral Account, if any; (d) all of
Borrower's existing and future Cash Security; and (e) all of the Proceeds,
products, profits, and rents of any of (a) through (d) above, in each case to
the extent set forth in the applicable Loan Documents. The definition of
Collateral shall exclude any items which are not assignable pursuant to the
terms of any agreement or require the consent of any other party or are
prohibited by law.
"Commitment" shall mean the obligation hereunder of Lender to make
Loans, and to issue Letters of Credit, pursuant to the Revolving Credit
Commitment up to an aggregate principal amount outstanding at any one time of
Ten Million Dollars ($10,000,000), or such lesser amount as shall be determined
pursuant to Section 2.5 hereof.
<PAGE> 5
"Commitment Period" shall mean the period from the Closing Date to
August 31, 2002, or such earlier date on which the Commitment shall have been
terminated pursuant to Article IX hereof.
"Company" shall mean Borrower or a Subsidiary.
"Companies" shall mean Borrower and all Subsidiaries.
"Compliance Certificate" shall mean a certificate, substantially in the
form of the attached Exhibit C.
"Computer System" shall mean a computer system and all related
peripherals, including, but not limited to, hardware, software, devices and
systems.
"Consolidated" shall mean the resultant consolidation of the financial
statements of Borrower, its Subsidiaries and Restricted Joint Ventures in
accordance with GAAP.
"Consolidated EBITDA" shall mean, for any period, for any Person on a
Consolidated basis and in accordance with GAAP, an amount equal to (a) the sum
of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period (but only including Redeemable
Dividends in the calculation of such Consolidated Interest Expense to the extent
that such Redeemable Dividends have not been excluded in the calculation of
Consolidated Net Income), plus (iv) depreciation for such period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net
Income for such period, minus (b) all non-cash items increasing Consolidated Net
Income for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP, except that with respect to Borrower each of the foregoing
items shall be determined on a consolidated basis with respect to Borrower and
its Group Members only; provided, however, that, for purposes of calculating
Consolidated EBITDA during any fiscal quarter, cash income from a particular
Investment (other than in a Subsidiary which under GAAP is consolidated or a
Restricted Joint Venture) of such Person shall be included only (x) to the
extent cash income has been received by such Person with respect to such
Investment, or (y) if the cash income derived from such Investment is
attributable to Temporary Cash Investments. In connection with any material
Asset Acquisition contemplated by a Company, Lender hereby agrees to give fair
consideration to, and to negotiate in good faith with respect to, an adjustment
to the calculation of Consolidated EBITDA for the purposes of calculating the
Applicable Margin and the Leverage Ratio to give effect on a pro forma basis to
such Asset Acquisition as if such Asset Acquisition had occurred on the first
day of the relevant test period.
"Consolidated Interest Expense" shall mean, with respect to any Person,
for any period, the aggregate amount of interest which, in conformity with GAAP
(without taking into account interest incurred by Permitted Joint Ventures),
would be set forth opposite the caption "interest
<PAGE> 6
expense" or any like caption on an income statement for such Person and its
Group Members on a consolidated basis (including, but not limited to, (i)
imputed interest included in Capitalized Lease Obligations, (ii) all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, (iii) the net costs associated with
hedging obligations, (iv) amortization of other financing fees and expenses, (v)
the interest portion of any deferred payment obligation, (vi) amortization of
discount or premium, if any, and (vii) all other non-cash interest expense
(including PIK Interest) (other than interest amortized to cost of sales)) plus,
without duplication, all net capitalized interest for such period and all
interest paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus the amount
of all dividends or distributions paid on Disqualified Capital Stock (other than
dividends paid or payable in shares of Capital Stock of a Company), less the
amortization of deferred financing costs and excluding, however, any amount of
such interest of any Group Member if the net income of such Group Member is
excluded in the calculation of Consolidated Net Income pursuant to clause (a) or
(f) of the definition thereof (but only in the same proportion as the net income
of such Group Member is excluded from the calculation of Consolidated Net Income
pursuant to clause (a) or (f) of the definition thereof).
"Consolidated Net Income" shall mean, with respect to any Person, for
any period, the aggregate amount of the Net Income of such Person and its Group
Members for such period, on a consolidated basis, determined in accordance with
GAAP; provided, however, that (a) the Net Income of (i) any Person (the "other
Person") in which the Person in question or any of its Group Members has less
than a one hundred percent (100%) interest (which interest does not cause the
Net Income of such other Person to be consolidated into the net income of the
Person in question in accordance with GAAP) or (ii) any Permitted Joint Venture
shall be included only to the extent of the amount of dividends or distributions
paid to the Person in question or the Group Member, (b) the Net Income of any
Group Member of the Person in question that is subject to any restriction or
limitation (including without limitation as a result of the failure of such
dividend or distribution to be irrevocably authorized by other members of a
Restricted Joint Venture where such other members' authorization is necessary
for such dividend or distribution or such other members otherwise have the
ability to restrict or limit such dividend or distribution) on the payment of
dividends or the making of other distributions (other than pursuant to the
Notes, this Agreement, any other Loan Document or the Note Purchase Agreement or
the notes issued in connection therewith) shall be excluded to the extent of
such restriction or limitation, (c)(i) the Net Income of any Person acquired in
a pooling of interests transaction for any period prior to the date of such
acquisition and (ii) any net gain or loss resulting from an Asset Sale by the
Person in question or any of its Group Members other than in the ordinary course
of business shall be excluded, (d) extraordinary gains and losses shall be
excluded, (e) income or loss attributable to discontinued operations (including
without limitation operations disposed of during such period whether or not such
operations were classified as discontinued) shall be excluded, and (f) to the
extent not otherwise excluded in accordance with GAAP, the Net Income of any
Group Member in an amount that corresponds to the percentage ownership interest
in the income of such Group Member not owned on the last day of such period,
directly or indirectly, by such Person shall be excluded.
"Consolidated Net Worth" shall mean, with respect to any Person at any
date, the Consolidated stockholder's equity of such Person less the amount of
such stockholder's equity
<PAGE> 7
attributable to Disqualified Capital Stock of such Person and its Subsidiaries,
as determined in accordance with GAAP.
"Controlled Group" shall mean a Company and each "person" (as therein
defined) required to be aggregated with a Company and treated as a single
employer under Code Section 414(b), (c), (m) or (o).
"Debt" shall mean, collectively, (a) all Indebtedness incurred by
Borrower to Lender pursuant to this Agreement and includes the principal of and
interest on all Notes; (b) each extension, renewal or refinancing thereof with
Lender in whole or in part; (c) the commitment and other fees, and any
prepayment premium payable hereunder; (d) every other liability, now or
hereafter owing to KeyBank or Lender by Borrower, and includes, without
limitation, every liability, whether owing by only Borrower or by Borrower with
one or more others in a several, joint or joint and several capacity, whether
owing absolutely or contingently, whether created by note, overdraft, guaranty
of payment or other contract or by quasi-contract, tort, statute or other
operation of law, whether incurred directly to KeyBank or Lender or acquired by
KeyBank or Lender by purchase, pledge or otherwise and whether participated to
or from KeyBank or Lender in whole or in part; and (e) all Related Expenses.
"Default Rate" shall mean a rate per annum which shall be two percent
(2%) in excess of the Derived LIBOR Rate or Derived Prime Rate, as the case may
be, from time to time in effect. "Deposit Account" shall mean (a) any deposit
account, and (b) any demand, time, savings, passbook, or a similar account
maintained with a bank, savings and loan association, credit union, or similar
organization.
"Derived LIBOR Rate" shall mean a rate per annum which shall be the sum
of the Applicable Margin plus the LIBOR Rate.
"Derived Prime Rate" shall mean a rate per annum which shall be the sum
of the Applicable Margin plus the Prime Rate.
"Disqualified Capital Stock" shall mean any Capital Stock of a Person
which, by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable at the option of the holder), or
upon the happening of any event, matures or is mandatorily redeemable, pursuant
to a sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the maturity date of the
Notes, for cash or securities constituting Indebtedness. Without limitation of
the foregoing, Disqualified Capital Stock shall be deemed to include any
Preferred Stock of Borrower with respect to which, under the terms of such
Preferred Stock, by agreement or otherwise, Borrower is obligated to pay current
dividends or distributions in cash during the period prior to the maturity date
of the Notes; provided, however, that Preferred Stock of Borrower that is issued
with the benefit of provisions requiring a change of control offer to be made
for such Preferred Stock in the event of a change of control of Borrower, shall
not be deemed to be Disqualified Capital Stock solely by virtue of such
provisions.
"Eligible Account Receivable" shall mean an Account of a Company to the
extent arising
<PAGE> 8
out of completed sales or services performed by such Company in accordance with
the terms and conditions of all purchase orders, contracts and other documents
relating thereto, which, at all times until it is collected in full,
continuously meets the following requirements: (a) is not subject to any claim
for credit, allowance, or adjustment by the Account Debtor or any set off or
counter claim; provided, however, that such Account shall only be excluded to
the extent of such claim for credit, allowance or adjustment or such setoff or
counterclaim; (b) arose in the ordinary course of such Company's business from
the performance (fully completed) of services or bona fide sale of goods which
have been shipped to the Account Debtor, and not more than ninety (90) days have
elapsed since the performance (fully completed) of services or the sale of goods
for or to the Account Debtor; (c) is not due from any Account Debtor with
respect to which such Company has received any notice or has any knowledge of
insolvency, bankruptcy or financial impairment; (d) is not subject to an
assignment, pledge, claim, mortgage, lien, or security interest of any type
except that granted to or in favor of Lender; (e) does not relate to any goods
rejected or returned, or acceptance of which has been revoked or refused; (f) is
not the subject of any instrument or chattel paper offered in payment thereof;
(g) has not been determined by Lender, in its reasonable discretion, to be
unsatisfactory in any respect; (h) is not a Government Account Receivable,
unless Lender's security interest in such Government Account Receivable is filed
in accordance with the Federal Assignment of Claims Act; (i) is not an account
receivable due from any affiliate, shareholder or employee of such Company; (j)
is not a Foreign Account Receivable; (k) is not evidenced by a promissory note
or any other negotiable instrument; (l) is not an account receivable owed to
such Company by an Account Debtor which has failed to pay more than twenty-five
percent (25%) of its currently outstanding accounts receivable within ninety
(90) days of service or sale of goods; and (m) Lender has a valid and
enforceable first security interest in the Account subject to Permitted Liens.
"Environmental Laws" shall mean, to the extent legally binding, all
provisions of law, statutes, ordinances, rules, regulations, permits, licenses,
judgments, writs, injunctions, decrees, orders, awards and standards promulgated
by the government of the United States of America or by any state or
municipality thereof or by any court, agency, instrumentality, regulatory
authority or commission of any of the foregoing concerning health, safety and
protection of, or regulation of the discharge of substances into, the
environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated pursuant thereto.
"ERISA Event" shall mean: (a) the existence of any condition or event
with respect to an ERISA Plan which presents a risk of the imposition of an
excise tax or any other liability on a Company or of the imposition of a Lien on
the assets of a Company; (b) a Controlled Group member has engaged in a
non-exempt "prohibited transaction" (as defined under ERISA Section 406 or Code
Section 4975) or a breach of a fiduciary duty under ERISA which could result in
liability to a Company; (c) a Controlled Group member has applied for a waiver
from the minimum funding requirements of Code Section 412 or ERISA Section 302
or a Controlled Group member is required to provide security under Code Section
401(a)(29) or ERISA Section 307; (d) a Reportable Event has occurred with
respect to any Pension Plan as to which notice is required to be provided to the
PBGC; (e) a Controlled Group member has withdrawn from a Multiemployer Plan in a
"complete withdrawal" or a "partial withdrawal" (as such terms are
<PAGE> 9
defined in ERISA Sections 4203 and 4205, respectively); (f) a Multiemployer Plan
is in reorganization under ERISA Section 4241; (g) an ERISA Plan (and any
related trust) which is intended to be qualified under Code Sections 401 and 501
fails to be so qualified or any "cash or deferred arrangement" under any such
ERISA Plan fails to meet the requirements of Code Section 401(k); (h) the PBGC
takes any steps to terminate a Pension Plan or appoint a trustee to administer a
Pension Plan, or a Controlled Group member takes steps to terminate a Pension
Plan; (i) a Controlled Group member or an ERISA Plan fails to satisfy any
requirements of law applicable to an ERISA Plan; (j) a claim, action, suit,
audit or investigation is pending or threatened with respect to an ERISA Plan,
other than a routine claim for benefits; or (k) a Controlled Group member incurs
or is expected to incur any material liability for post-retirement benefits
under any Welfare Plan, other than as required by ERISA Section 601, et. seq. or
Code Section 4980B.
"ERISA Plan" shall mean an "employee benefit plan" (within the meaning
of ERISA Section 3(3)) that a Controlled Group member at any time sponsors,
maintains, contributes to, has liability with respect to or has an obligation to
contribute to such plan.
"Eurocurrency Reserve Percentage" shall mean, for any Interest Period
in respect of any LIBOR Loan, as of any date of determination, the aggregate of
the then stated maximum reserve percentages (including any marginal, special,
emergency or supplemental reserves), expressed as a decimal, applicable to such
Interest Period (if more than one such percentage is applicable, the daily
average of such percentages for those days in such Interest Period during which
any such percentage shall be so applicable) by the Board of Governors of the
Federal Reserve System, any successor thereto, or any other banking authority,
domestic or foreign, to which Lender may be subject in respect to eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
the Federal Reserve Board) or in respect of any other category of liabilities
including deposits by reference to which the interest rate on LIBOR Loans is
determined or any category of extension of credit or other assets that include
the LIBOR Loans. For purposes hereof, such reserve requirements shall include,
without limitation, those imposed under Regulation D of the Federal Reserve
Board and the LIBOR Loans shall be deemed to constitute Eurocurrency Liabilities
subject to such reserve requirements without benefit of credits for proration,
exceptions or offsets which may be available from time to time to any Lender
under said Regulation D.
"Event of Default" shall mean an event or condition which constitutes
an event of default as defined in Article VIII hereof.
"Financial Officer" shall mean any of the following officers: chief
executive officer, president, chief financial officer or treasurer.
"Foreign Account Receivable" shall mean any Account which arises out of
contracts with or orders from an Account Debtor which is not a resident of the
United States.
"Funded Indebtedness" shall mean all Indebtedness that is funded,
including, but not limited to, long-term and Subordinated Indebtedness, if any,
and the current portions of each of the foregoing.
<PAGE> 10
"GAAP" shall mean generally accepted accounting principles as then in
effect, which shall include the official interpretations thereof by the
Financial Accounting Standards Board, applied on a basis consistent with the
past accounting practices and procedures of Borrower.
"General Intangibles" shall mean the following general intangibles
which relate in any manner to the Accounts or any Proceeds, whether now or
hereafter acquired by a Company: choses in action, causes of action, all
customer lists, corporate or other business records, and all rights to
indemnification, in each case to the extent relating to the Accounts, and all
proceeds of any of the foregoing, irrespective of the form or kind thereof.
"Government Account Receivable" shall mean any Account which arises out
of contracts with or orders from the United States or any of its departments,
agencies or instrumentalities.
"Group Members" shall mean, collectively, each Subsidiary of a Company,
each Restricted Joint Venture and each Subsidiary of a Restricted Joint Venture.
"Guarantor" shall mean a Person which pledges its credit or property in
any manner for the payment or other performance of the indebtedness, contract or
other obligation of another and includes (without limitation) any guarantor
(whether of payment or of collection), surety, co-maker, endorser or Person
which agrees conditionally or otherwise to make any purchase, loan or investment
in order thereby to enable another to prevent or correct a default of any kind.
"Guarantor of Payment" shall mean any one of the entities set forth on
Schedule 1 attached hereto and made a part hereof which are each executing and
delivering a Guaranty of Payment, or any other Person which shall deliver a
Guaranty of Payment to Lender subsequent to the Closing Date.
"Guaranty of Payment" shall mean each of the guaranties of payment of
the Debt executed and delivered on or after the Closing Date in connection
herewith by the Guarantors of Payment, as the same may be from time to time
amended, restated or otherwise modified.
"Guarantor Security Agreement" shall mean a Security Agreement executed
and delivered by a Guarantor of Payment to Lender in connection with this
Agreement, as the same may be from time to time amended, supplemented or
otherwise modified.
"Indebtedness" shall mean, for any Company (excluding in all cases
accounts payable or trade payables in the ordinary course of business, any
obligations to other members of a "consortium" or similar group of aircraft
service providers arising from the fact that such Company holds cash on behalf
of such other consortium members in the ordinary course of business, and other
accrued liabilities arising in the ordinary course of business), without
duplication, (a) all obligations to repay borrowed money, direct or indirect,
incurred, assumed, or guaranteed, (b) all obligations for the deferred purchase
price of capital assets, (c) all obligations under conditional sales or other
title retention agreements, (d) all reimbursement obligations (contingent or
otherwise) under any letter of credit (provided that in the case of any such
letters of credit, the items for which such letters of credit provide credit
support are those of other
<PAGE> 11
Persons which would be included within this definition for such other Persons),
banker's acceptance, currency swap agreement, interest rate swap, cap, collar or
floor agreement or other interest rate management device (if and to the extent
such hedging agreement obligations would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP), (e) all lease
obligations which have been or should be capitalized on the books of such
Company in accordance with GAAP, and (f) any other transaction (including
forward sale or purchase agreements) having the commercial effect of a borrowing
of money entered into by such Company to finance its operations or capital
requirements.
"Interest Adjustment Date" shall mean the last day of each Interest
Period.
"Interest Period" shall mean, with respect to any LIBOR Loan, the
period commencing on the date such LIBOR Loan is made and ending on the last day
of such period, as selected by Borrower pursuant to the provisions hereof, and,
thereafter, each subsequent period commencing on the last day of the immediately
preceding Interest Period and ending on the last day of such period, as selected
by Borrower pursuant to the provisions hereof. The duration of each Interest
Period for any LIBOR Loan shall be one (1) month, two (2) months, three (3)
months or six (6) months, in each case as Borrower may select upon notice, as
set forth in Section 2.2 hereof, provided that (a) if Borrower fails to so
select the duration of any Interest Period, Borrower shall be deemed to have
converted such LIBOR Loan to a Prime Rate Loan at the end of the then current
Interest Period; and (b) Borrower may not select any Interest Period for a LIBOR
Loan which ends after the end of the Commitment Period.
"Inventory" shall mean (a) all inventory as defined in Chapter 1309 of
the Ohio Revised Code; (b) all goods that are raw materials; (c) all goods that
are work in process; (d) all goods that are materials used or consumed in the
ordinary course of a Company's business; (e) all goods that are, in the ordinary
course of a Company's business, held for sale or lease or furnished or to be
furnished under contracts of service; and (f) all substitutes and replacements
for, and parts, accessories, additions, attachments, or accessions to (a)
through (e) above.
"Investments" shall mean, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business or acquired as part of the assets acquired by a Company in connection
with an acquisition of assets which is not prohibited by the terms of this
Agreement), loan or capital contribution to (by means of transfers of property
to others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices and (ii) the repurchase of securities of any Person by such Person.
"KeyBank" shall mean KeyBank National Association, its affiliates and
their respective successors and assigns.
<PAGE> 12
"Letter of Credit" shall mean any standby letter of credit which shall
be issued by Lender or KeyBank for the benefit of Borrower or a Guarantor of
Payment, including amendments thereto, if any, and shall have an expiration date
no later than the earlier of (a) one (1) year after its date of issuance, or (b)
thirty (30) days prior to the last day of the Commitment Period.
"Leverage Ratio" shall mean, for the time period in question and on a
Consolidated basis and in accordance with GAAP, the ratio for the Companies of
all Funded Indebtedness to Consolidated EBITDA as of the end of such period.
"LIBOR Loan" shall mean a Loan described in Section 2.1 hereof on which
Borrower shall pay interest at a rate based on the LIBOR Rate.
"LIBOR Rate" shall mean, for any Interest Period with respect to a
LIBOR Loan, the quotient (rounded upwards, if necessary, to the nearest one
sixteenth of one percent (1/16th of 1%)) of: (a) the per annum rate of interest,
determined by Lender in accordance with its usual procedures (which
determination shall be conclusive absent manifest error) as of approximately
11:00 A.M. (London time) two (2) Business Days prior to the beginning of such
Interest Period pertaining to such LIBOR Loan, as provided by Telerate Service,
Bloomberg's or Reuters (or any other similar company or service that provides
rate quotations comparable to those currently provided by such companies as the
rate in the London interbank market) for dollar deposits in immediately
available funds with a maturity comparable to such Interest Period, divided by
(b) a number equal to 1.00 minus the Eurocurrency Reserve Percentage. In the
event that such rate quotation is not available for any reason, then the rate
(for purposes of clause (a) hereof) shall be the rate, determined by Lender as
of approximately 11:00 A.M. (London time) two (2) Business Days prior to the
beginning of such Interest Period pertaining to such LIBOR Loan, to be the
average (rounded upwards, if necessary, to the nearest one sixteenth of one
percent (1/16th of 1%)) of the per annum rates at which dollar deposits in
immediately available funds in an amount comparable to such LIBOR Loan and with
a maturity comparable to such Interest Period are offered to the prime banks by
leading banks in the London interbank market. The LIBOR Rate shall be adjusted
automatically on and as of the effective date of any change in the Eurocurrency
Reserve Percentage.
"Lien" shall mean any mortgage, security interest, lien, charge,
encumbrance on, pledge or deposit of, or conditional sale or other title
retention agreement with respect to any property (real or personal) or asset.
"Loan" or "Loans" shall mean the credit granted to Borrower in
accordance with Section 2.1A hereof.
"Loan Documents" shall mean this Agreement, each of the Notes, each of
the Guaranties of Payment, each of the Guarantor Security Agreements, all
documentation relating to each Letter of Credit, each U.C.C. financing statement
executed in connection herewith, and any other documents delivered pursuant
thereto, as any of the foregoing may from time to time be amended, restated or
otherwise modified or replaced.
"Maintenance Capital Expenditures" shall mean the lesser of (a) fifty
percent (50%) of Capital Expenditures for the period in question, or (b) Three
Million Dollars ($3,000,000).
<PAGE> 13
"Material Adverse Effect" shall mean (a) a material adverse effect on
the business, assets, condition (financial or otherwise), results of operations
or properties of the Companies, taken as a whole, or (b) a material adverse
effect on the legality, validity, binding effect or enforceability of the Loan
Documents or the rights of Lender thereunder.
"Multiemployer Plan" shall mean a Pension Plan that is subject to the
requirements of Subtitle E of Title IV of ERISA.
"Net Income" shall mean, with respect to any Person for any period, the
net income (loss) of such Person determined in accordance with GAAP.
"Note" shall mean the Revolving Credit Note or any other note delivered
pursuant to this Agreement.
"Note Purchase Agreement" shall mean that certain Note Purchase
Agreement, dated as of April 2, 1998, among Borrower, Ranger Aerospace and CIBC
Oppenheimer Corp., as amended, modified and supplemented from time to time,
including any agreements refinancing, replacing, refunding or otherwise
restructuring all or a portion of the Indebtedness under such agreement or any
successor or replacement agreement and whether by the same lenders or purchasers
or any others. The definition of Note Purchase Agreement shall include the notes
issued thereunder and all replacements thereof and guarantees rendered in
connection therewith.
"Notice of Loan" shall mean a Notice of Loan in the form of the
attached Exhibit B.
"Obligor" shall mean a Person whose credit or any of whose property is
pledged to the payment of the Debt and includes, without limitation, Borrower
and any Guarantor of Payment.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or its
successor.
"Pension Plan" shall mean an ERISA Plan that is a "pension plan"
(within the meaning of ERISA Section 3(2)).
"Permitted Joint Venture" shall mean any joint venture arrangement
(which may be structured as a corporation, partnership, trust, limited liability
company or any other Person) constituting a "Permitted Joint Venture" as defined
in the Note Purchase Agreement.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, corporation, limited
liability company, institution, trust, estate, government or other agency or
political subdivision thereof or any other entity.
"PIK Interest" shall mean, with respect to any Indebtedness, any
interest thereon paid or payable in the form of additional Indebtedness,
including, without limitation, the obligations represented by additional notes
issued in payment of interest due on such notes.
<PAGE> 14
"Preferred Stock" shall mean any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Prime Rate" shall mean the interest rate established from time to time
by Lender as Lender's prime rate, whether or not such rate is publicly
announced; the Prime Rate may not be the lowest interest rate charged by Lender
for commercial or other extensions of credit. Each change in the Prime Rate
shall be effective immediately from and after such change.
"Prime Rate Loan" shall mean a Loan described in Section 2.1 hereof on
which Borrower shall pay interest at a rate based on the Prime Rate.
"Proceeds" shall mean (a) any proceeds, and (b) whatever is received
upon the sale, exchange, collection, or other disposition of Collateral or
proceeds, whether cash or non-cash. Cash proceeds includes, without limitation,
monies, checks, and Deposit Accounts. Proceeds includes, without limitation, any
Account arising when the right to payment is earned under a contract right, any
insurance payable by reason of loss or damage to the Collateral, and any return
or unearned premium upon any cancellation of insurance. Except as expressly
authorized in this Agreement, Lender's right to Proceeds specifically set forth
herein or indicated in any financing statement shall never constitute an express
or implied authorization on the part of Lender to Borrower's sale, exchange,
collection, or other disposition of any or all of the Collateral.
"Proviso" shall mean that for Borrower's fiscal quarters ending prior
to the fiscal quarter ending on or about March 31, 1999, Consolidated EBITDA, as
referred to in Sections 5.7(a) and (b) hereof, shall be calculated as follows:
(a) for the fiscal quarter ending on or about June 30, 1998, Consolidated EBITDA
shall be annualized by multiplying the Consolidated EBITDA for that fiscal
quarter by four (4), (b) for the fiscal quarter ending on or about September 30,
1998, Consolidated EBITDA shall be annualized by multiplying the Consolidated
EBITDA for that fiscal quarter and the previous fiscal quarter by two (2), and
(c) for the fiscal quarter ending on or about December 31, 1998, Consolidated
EBITDA shall be annualized by multiplying the Consolidated EBITDA for that
fiscal quarter and the two (2) previous fiscal quarters by one and one-third
(1.333).
"Ranger Aerospace" shall mean Ranger Aerospace Corporation, a Delaware
corporation, and its successors and assigns.
"Redeemable Dividend" shall mean, for any dividend or distribution with
regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one (1) and the maximum statutory
federal income tax rate (expressed as a decimal number between one (1) and zero
(0)) then applicable to the issuer of such Disqualified Capital Stock.
"Related Expenses" shall mean any and all reasonable costs,
liabilities, and reasonable expenses (including, without limitation, losses,
damages, penalties, claims, actions, reasonable attorneys' fees, legal expenses,
judgments, suits, and disbursements) incurred by, imposed upon, or asserted
against, Lender in any attempt by Lender: (a) to obtain, preserve, perfect, or
enforce
<PAGE> 15
any security interest evidenced by this Agreement or any Related Writing; (b) to
obtain payment, performance, and observance of any and all of the Debt; (c) to
maintain, insure, audit, collect, preserve, repossess, and dispose of any of the
Collateral securing the Debt or any thereof, including, without limitation,
costs and expenses for appraisals, assessments, and audits of Borrower or any
such collateral; or (d) incidental or related to (a) through (c) above,
including, without limitation, interest thereupon from the date incurred,
imposed, or asserted until paid at the Default Rate.
"Related Writing" shall mean the Loan Documents and any other
assignment, mortgage, security agreement, guaranty agreement, subordination
agreement, pledge agreement, financial statement, audit report or other writing
furnished by Borrower, any Subsidiary or any Obligor, or any of their respective
officers, to Lender pursuant to or otherwise in connection with this Agreement.
"Reportable Event" shall mean a reportable event as that term is
defined in Title IV of ERISA, except actions of general applicability by the
Secretary of Labor under Section 110 of such Act.
"Restricted Joint Venture" shall mean a Permitted Joint Venture that
has been designated by the Board of Directors of Borrower as a Restricted Joint
Venture based on its good faith determination, evidenced by a board resolution,
that Borrower has, directly or indirectly, the requisite control over such
Permitted Joint Venture to prevent it from incurring Indebtedness, or taking any
other action at any time, in contravention of any of the provisions of this
Agreement that are applicable to Restricted Joint Ventures; provided that,
immediately after giving effect to such designation, (i) the Indebtedness and
liens of such Permitted Joint Venture outstanding immediately after such
designation would, if incurred at such time, have been permitted to be incurred
for all purposes of this Agreement, and (ii) no Unmatured Event of Default or
Event of Default shall have occurred and be continuing. Borrower shall deliver
an officers' certificate to Lender upon designating any Permitted Joint Venture
as a Restricted Joint Venture.
"Revolving Credit Commitment" shall mean the obligation hereunder of
Lender, during the Commitment Period, to make Revolving Loans and to issue
Letters of Credit, up to an aggregate principal amount outstanding at any time
equal to the lesser of (a)Ten Million Dollars ($10,000,000), or (b) the
Borrowing Base.
"Revolving Credit Note" shall mean the Revolving Credit Note executed
and delivered pursuant to Section 2.1A hereof.
"Revolving Loan" shall mean a Loan granted to Borrower by Lender in
accordance with Section 2.1A hereof.
"Share Purchase Agreement" shall mean that certain Share Purchase
Agreement, dated as of March 14, 1998, between VIAD Corp., VIAD Service
Companies Limited and Ranger Aerospace, as amended to the date hereof and as
further amended, modified and supplemented from time to time.
<PAGE> 16
"Subordinated", as applied to Indebtedness, shall mean that the
Indebtedness has been subordinated (by written terms or written agreement being,
in either case, in form and substance satisfactory to Lender) in favor of the
prior payment in full of the Debt.
"Subsidiary" of Borrower or any of its Subsidiaries shall mean (a) a
corporation more than fifty percent (50%) of the Voting Power or capital stock
of which is owned, directly or indirectly, by Borrower or by one or more other
subsidiaries of Borrower or by Borrower and one or more subsidiaries of
Borrower, (b) a partnership or limited liability company of which Borrower, one
or more other subsidiaries of Borrower or Borrower and one or more subsidiaries
of Borrower, directly or indirectly, is a general partner or managing member, as
the case may be, or otherwise has the power to direct the policies, management
and affairs thereof, or (c) any other Person (other than a corporation) in which
Borrower, one or more other subsidiaries of Borrower or such Person, directly or
indirectly, has at least a majority ownership interest or the power to direct
the policies, management and affairs thereof.
"Temporary Cash Investments" shall mean (i) Investments in marketable
direct obligations issued or guaranteed by the United States of America, or of
any governmental agency or political subdivision thereof, maturing within three
hundred sixty five (365) days of the date of purchase, (ii) Investments in
certificates of deposit issued by a bank organized under the laws of the United
States of America or any state thereof or the District of Columbia, in each case
having capital, surplus and undivided profits at the time of investment totaling
more than Five Hundred Million Dollars ($500,000,000) and rated at the time of
investment at least A by S&P and A-2 by Moody's maturing within three hundred
sixty-five (365) days of purchase, or (iii) Investments not exceeding three
hundred sixty-five (365) days in duration in money market funds that invest
substantially all of such funds' assets in the Investments described in the
preceding clauses (i) and (ii).
"Termination Fee" shall mean an amount equal to (a) the Commitment,
times (b) one-half of one percent (1/2%).
"Unmatured Event of Default" shall mean an event or condition which
constitutes, or which with the lapse of any applicable grace period or the
giving of notice or both would constitute, an Event of Default, and which has
not been waived by Lender in writing.
"Voting Power" shall mean, with respect to any Person, the exclusive
ability to control, through the ownership of shares of capital stock,
partnership interests, membership interests or otherwise, the election of
members of the board of directors or other similar governing body of such
Person, and the holding of a designated percentage of Voting Power of a Person
means the ownership of shares of capital stock, partnership interests,
membership interests or other interests of such Person sufficient to control
exclusively the election of that percentage of the members of the board of
directors or similar governing body of such Person.
"Welfare Plan" shall mean an ERISA Plan that is a "welfare plan" within
the meaning of ERISA Section 3 (l).
<PAGE> 17
"Wholly-Owned Subsidiary" shall mean, with respect to any Person, any
corporation, limited liability company or other entity all (other than, in
respect of foreign Subsidiaries, directors' qualifying shares or immaterial
amounts of shares held by foreign nationals to the extent mandated by or
advantageous under applicable law) of the securities or other ownership
interest, of which having ordinary Voting Power to elect a majority of the board
of directors or other persons performing similar functions are at the time
directly or indirectly owned by such Person.
"Year 2000 Compliant" shall mean that all Computer Systems will operate
accurately, without interruption and with no negative change in performance due
to the change of the millennium.
Any accounting term not specifically defined in this Article I shall
have the meaning ascribed thereto by GAAP. Unless otherwise defined in this
Article I, terms which are defined in Chapter 1309 of the Ohio Revised Code in
effect on the Closing Date are used herein as so defined.
The foregoing definitions shall be applicable to the singular and
plurals of the foregoing defined terms.
ARTICLE II. AMOUNT AND TERMS OF CREDIT
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms and
conditions of this Agreement, Lender shall make Loans to Borrower, and Lender
shall, or shall cause KeyBank to, issue Letters of Credit at the request of
Borrower, in such aggregate amount as Borrower shall request pursuant to the
Revolving Credit Commitment; provided, however, that in no event shall the
aggregate principal amount of all Loans and Letters of Credit outstanding under
this Agreement during the Commitment Period be in excess of the Commitment.
The Loans may be made as Revolving Loans, and Letters of Credit may be
issued, as follows:
A. Revolving Loans. Subject to the terms and conditions of this
Agreement, during the Commitment Period, Lender shall make a Revolving Loan or
Revolving Loans to Borrower in such amount or amounts as Borrower may from time
to time request, but not exceeding in aggregate principal amount at any one time
outstanding hereunder the Revolving Credit Commitment, when such Revolving Loans
are combined with the aggregate undrawn face amount of all issued and
outstanding Letters of Credit. Borrower shall have the option, subject to the
terms and conditions set forth herein, to borrow Revolving Loans, maturing on
the last day of the Commitment Period, up to the amount of the Revolving Credit
Commitment by means of any combination of (a) Prime Rate Loans, bearing interest
at a rate per annum which shall be the Derived Prime Rate from time to time in
effect, or (b) LIBOR Loans, bearing interest at a rate per annum which shall be
the Derived LIBOR Rate, fixed in advance of each Interest Period but subject to
changes in the Applicable Margin as herein provided for each such Interest
Period.
<PAGE> 18
Borrower shall pay interest, in arrears, on the unpaid principal amount
of Prime Rate Loans outstanding from time to time from the date thereof until
paid, on the first day of each month, and at the maturity thereof, commencing
May 1, 1998. Borrower shall pay interest at a fixed rate for each Interest
Period but subject to changes in the Applicable Margin on the unpaid principal
amount of each LIBOR Loan outstanding from time to time from the date thereof
until paid, payable on each Interest Adjustment Date with respect to an Interest
Period (provided that if an Interest Period exceeds three (3) months, the
interest must be paid every three (3) months, commencing three (3) months from
the beginning of such Interest Period).
At the request of Borrower, provided no Event of Default exists
hereunder, Lender shall convert Prime Rate Loans to LIBOR Loans at any time,
subject to the notice and other provisions of Section 2.2 hereof, and shall
convert LIBOR Loans to Prime Rate Loans on any Business Day, provided that any
such prepayment of a LIBOR Loan pursuant to this sentence shall be subject to
the prepayment fees set forth in Section 2.4 hereof.
The obligation of Borrower to repay the Prime Rate Loans and the LIBOR
Loans made by Lender and to pay interest thereon shall be evidenced by a
Revolving Credit Note of Borrower substantially in the form of Exhibit A hereto,
dated the Closing Date and payable to the order of Lender in the principal
amount of the Revolving Credit Commitment, or, if less, the aggregate unpaid
principal amount of Revolving Loans made hereunder. Subject to the provisions of
this Agreement, Borrower shall be entitled under this Section 2.1A to borrow
funds, repay the same in whole or in part and re-borrow hereunder at any time
and from time to time during the Commitment Period.
B. Letters of Credit. Subject to the terms and conditions of this
Agreement, during the Commitment Period, Lender shall issue such Letters of
Credit for the account of Borrower or any Guarantor of Payment, as Borrower may
from time to time request. Borrower shall not request any Letter of Credit (and
Lender shall not be obligated to issue any Letter of Credit) if, after giving
effect thereto, (a) the aggregate undrawn face amount of all issued and
outstanding Letters of Credit would exceed Two Million Dollars ($2,000,000) or
(b) the sum of (i) the aggregate outstanding principal amount of all Revolving
Loans, plus (ii) the aggregate undrawn face amount of all issued and outstanding
Letters of Credit would exceed the Revolving Credit Commitment.
Each request for a Letter of Credit shall be delivered to Lender not
later than 11:00 A.M. (Cleveland, Ohio time) three (3) Business Days prior to
the day upon which the Letter of Credit is to be issued. Each such request shall
be in a form acceptable to Lender and specify the face amount thereof, the
account party, the beneficiary, the intended date of issuance, the expiry date
thereof, and the nature of the transaction to be supported thereby. Concurrently
with each such request, Borrower, and any Guarantor of Payment for whose benefit
the Letter of Credit is to be issued, shall execute and deliver to Lender an
appropriate application and agreement, being in the standard form of Lender for
such letters of credit, as amended to conform to the provisions of this
Agreement if required by Lender. The provisions of this Agreement shall control
any conflict or inconsistency with such application.
<PAGE> 19
In respect of each Letter of Credit and the drafts thereunder, if any,
whether issued for the account of Borrower or a Guarantor of Payment, Borrower
agrees (a) to pay to Lender a non-refundable commission based upon the face
amount of the Letter of Credit, which shall be paid quarterly in arrears, at the
rate of the Applicable Margin for LIBOR Loans (as adjusted from time to time)
times the face amount of the Letter of Credit; and (b) to pay to Lender, such
other issuance, amendment, negotiation, draw, acceptance, telex, courier,
postage and similar transactional fees as are generally charged by Lender to its
other customers under its fee schedule as in effect from time to time.
Whenever a Letter of Credit is drawn, unless the amount drawn is
immediately reimbursed by Borrower, the amount outstanding thereunder shall be
deemed to be a Revolving Loan to Borrower subject to the provisions of Section
2.1A and shall be evidenced by the Revolving Credit Note but without regard to
Section 2.2 hereof. Each such Revolving Loan shall be deemed to be a Prime Rate
Loan unless otherwise requested by and available to Borrower hereunder. Lender
is hereby authorized to record on its records relating to the Revolving Credit
Note the amounts paid and not reimbursed on the Letters of Credit.
SECTION 2.2. CONDITIONS TO LOANS AND LETTERS OF CREDIT. The obligation
of Lender to make, convert or continue any Loan and to issue any Letter of
Credit hereunder is conditioned, in the case of each borrowing, conversion,
continuation or issuance hereunder, upon:
(a) with respect to the initial borrowings, all
conditions precedent as listed in Article IV hereof shall have been
satisfied;
(b) with respect to Loans, receipt by Lender of a Notice
of Loan, such notice to be received by 1:00 P.M. (Cleveland, Ohio time)
on the proposed date of borrowing with respect to a Prime Rate Loan
and, with respect to a LIBOR Loan, by 1:00 P.M. (Cleveland, Ohio time)
three (3) Business Days prior to the proposed date of borrowing; or,
with respect to Letters of Credit, satisfaction of the notice
provisions set forth in Section 2.1B hereof.
(c) Borrower's request for a Prime Rate Loan shall be in
an amount of not less than One Hundred Thousand Dollars ($100,000), and
Borrower's request for a LIBOR Loan shall be in an amount of not less
than Five Hundred Thousand ($500,000), increased by increments of One
Hundred Thousand Dollars ($100,000);
(d) the fact that no Unmatured Event of Default or Event
of Default shall then exist or immediately after the making, conversion
or continuation of the Loan or issuance of the Letter of Credit would
exist; and
(e) the fact that each of the representations and
warranties contained in Article VII hereof shall be true and correct
with the same force and effect as if made on and as of the date of the
making, conversion or continuation of such Loan, or the issuance of the
Letter of Credit, except to the extent that any thereof expressly
relate to an earlier date.
<PAGE> 20
At no time shall Borrower request that LIBOR Loans be outstanding for
more than six (6) different Interest Periods at any one (1) time, and, if Prime
Rate Loans are outstanding, then LIBOR Loans shall be limited to five (5)
different Interest Periods at any one (1) time.
Each request by Borrower for the making, conversion or continuation of
a Loan, or for the issuance of a Letter of Credit hereunder shall be deemed to
be a representation and warranty by Borrower as of the date of such request as
to the facts specified in (d) and (e) above.
Subject to the provisions of Sections 3.3 and 3.5 hereof, each request
for a LIBOR Loan shall be irrevocable and binding on Borrower and Borrower shall
indemnify Lender against any loss or expense incurred by Lender as a result of
any failure by Borrower to consummate such transaction including, without
limitation, any loss (excluding loss of anticipated profits) or expense incurred
by reason of liquidation or re-employment of deposits or other funds acquired by
Lender to fund such LIBOR Loan. A certificate as to the amount of such loss or
expense submitted by Lender to Borrower shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 2.3. PAYMENT ON NOTES, ETC. All payments of principal, interest
and commitment and other fees shall be made to Lender in immediately available
funds. Lender shall record (a) any principal, interest or other payment, and (b)
the principal amount of the Prime Rate Loans and the LIBOR Loans and all
prepayments thereof and the applicable dates with respect thereto, by such
method as Lender may generally employ; provided, however, that failure to make
any such entry shall in no way detract from Borrower's obligations under each
such Note. The aggregate unpaid amount of Prime Rate Loans and LIBOR Loans set
forth on the records of Lender shall be rebuttably presumptive evidence of the
principal and interest owing and unpaid on each Note. Whenever any payment to be
made hereunder, including, without limitation, any payment to be made on any
Note, shall be stated to be due on a day which is not a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall in each case be included in the computation of the interest payable
on each Note; provided, however, that with respect to any LIBOR Loan, if the
next succeeding Business Day falls in the succeeding calendar month, such
payment shall be made on the preceding Business Day and the relevant Interest
Period shall be adjusted accordingly.
SECTION 2.4. PREPAYMENT. Borrower shall have the right at any time or
from time to time to prepay all or any part of the principal amount of the Notes
then outstanding as designated by Borrower. Borrower shall give Lender notice of
prepayment of any Prime Rate Loan by not later than 1:00 P.M. (Cleveland, Ohio
time) on the Business Day such prepayment is to be made and written notice of
the prepayment of any LIBOR Loan prior to the end of the applicable Interest
Period not later than 1:00 P.M. (Cleveland, Ohio time) three (3) Business Days
before the Business Day on which such prepayment is to be made. Prepayments of
Prime Rate Loans shall be without any premium or penalty. Prepayment of LIBOR
Loans at the end of the applicable Interest Period shall be without any premium
or penalty.
In any case of prepayment of any LIBOR Loan prior to the end of the
applicable Interest Period related thereto, Borrower agrees that if the LIBOR
Rate as determined as of 11:00 A.M. (London time), three (3) Business Days prior
to the date of prepayment of such LIBOR Loan (hereinafter, "Prepayment LIBOR")
shall be lower than the last LIBOR Rate previously
<PAGE> 21
determined for such LIBOR Loan with respect to which prepayment is intended to
be made (hereinafter, "Last LIBOR"), then Borrower shall, upon written notice by
Lender, promptly pay to Lender in immediately available funds, a prepayment fee
equal to the product of (a) a rate per annum (the "Prepayment Rate") which shall
be equal to the difference between the Last LIBOR and the Prepayment LIBOR,
times (b) all or such part of the principal amounts of the Notes as relate to
the LIBOR Loan to be prepaid, times (c) the quotient of (i) the number of days
in the period commencing with the date on which such prepayment is to be made to
that date which coincides with the last day of the Interest Period previously
established when the LIBOR Loan, which is to be prepaid, was made, divided by
(ii) three hundred sixty (360). In addition, Borrower shall promptly pay
directly to Lender, the amount claimed as additional costs or expenses
(including, without limitation, cost of telex, wires, or cables) incurred in
connection with the prepayment, upon Borrower's receipt of a written statement
from Lender. Each prepayment of a LIBOR Loan shall be in the aggregate principal
sum of not less than Five Hundred Thousand Dollars ($500,000).
SECTION 2.5. COMMITMENT AND OTHER FEES; TERMINATION OR REDUCTION OF
COMMITMENTS.
(a) Borrower agrees to pay to Lender, as a consideration
for its Commitment hereunder, a commitment fee from the Closing Date to
and including the last day of the Commitment Period, equal to (i)
one-half percent (1/2%) per annum, times (ii) (A) the Commitment less
(B) the average daily outstanding principal amount of the Revolving
Loans, less (C) the average daily amount of all issued and outstanding
Letters of Credit. The commitment fee shall be payable monthly, in
arrears, on May 1, 1998 and on the first day of each month thereafter
and on the last day of the Commitment Period.
(b) Borrower shall pay to Lender an account
administration fee in the amount of Ten Thousand Dollars ($10,000) per
year, payable on the Closing Date and each anniversary date thereof,
during the Commitment Period.
(c) Borrower may at any time or from time to time
terminate in part the Commitment to an amount not less than the
aggregate principal amount of the Loans and Letters of Credit then
outstanding, by giving Lender not fewer than five (5) Business Days'
notice, provided that any such partial termination shall be in an
amount of One Million Dollars ($1,000,000) or any integral multiple
thereof. Each partial termination shall require the payment of a fee to
Lender in an amount equal to the amount of such partial termination,
times one-half of one percent (1/2%). After each such partial
termination, the commitment fees payable hereunder shall be calculated
upon the Commitment as so reduced. Any partial reduction in the
Commitment shall be effective during the remainder of the Commitment
Period.
(d) Borrower may at any time terminate in whole the
Commitment by (i) giving Lender no fewer than five (5) Business Days'
notice, and (ii) payment of the Termination Fee. On the effective date
of such termination (Borrower having prepaid in full the unpaid
principal balance (if any) of the Notes outstanding, together with all
interest (if any) and commitment and other fees accrued and unpaid and
provided that no
<PAGE> 22
issued and outstanding Letters of Credit shall exist), after payment of
the Termination Fee, Lender shall mark all of the Notes outstanding
"Canceled" and deliver such Notes to Borrower.
SECTION 2.6. COMPUTATION OF INTEREST AND FEES; DEFAULT RATE. Interest
on Loans, Related Expenses and commitment and other fees and charges hereunder
shall be computed on the basis of a year having three hundred sixty (360) days
and calculated for the actual number of days elapsed. Anything herein to the
contrary notwithstanding, if an Event of Default shall occur hereunder, (a) the
principal of each Note and the unpaid interest thereon shall bear interest,
until paid, at the Default Rate; and (b) the fee for the aggregate undrawn face
amount of all issued and outstanding Letters of Credit shall be increased from
the fee then in effect to two percent (2%). In no event shall the rate of
interest hereunder exceed the rate allowable by law.
SECTION 2.7. MANDATORY PAYMENTS.
(a) If the sum of (a) the aggregate principal amount of
all Loans outstanding and (b) the undrawn face amount of all issued and
outstanding Letters of Credit at any time exceeds the Commitment,
Borrower shall, as promptly as practicable, but in no event to be later
than the next Business Day, prepay an aggregate principal amount of the
Loans sufficient to bring the aggregate outstanding principal amount of
all Loans and the undrawn face amount of all issued and outstanding
Letters of Credit within the Commitment.
(b) Any prepayment of a LIBOR Loan pursuant to this
Section 2.7 shall be subject to the prepayment fees set forth in
Section 2.4 hereof.
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO LIBOR LOANS
SECTION 3.1. RESERVES OR DEPOSIT REQUIREMENTS, ETC. If, at any time,
any law, treaty or regulation (including, without limitation, Regulation D of
the Board of Governors of the Federal Reserve System) or the interpretation
thereof by any governmental authority charged with the administration thereof or
any central Lender or other fiscal, monetary or other authority shall impose
(whether or not having the force of law), modify or deem applicable any reserve
and/or special deposit requirement (other than reserves included in the
Eurocurrency Reserve Percentage, the effect of which is reflected in the
interest rate(s) of the LIBOR Loan(s) in question) against assets held by, or
deposits in or for the amount of any LIBOR Loan by, Lender, and the result of
the foregoing is to increase the cost (whether by incurring a cost or adding to
a cost) to Lender of making or maintaining hereunder such LIBOR Loan or to
reduce the amount of principal or interest received by Lender with respect to
such LIBOR Loan, then, upon demand by Lender, Borrower shall promptly pay to
Lender from time to time on Interest Adjustment Dates with respect to such LIBOR
Loan, as additional consideration hereunder, additional amounts sufficient to
fully compensate and indemnify Lender for such increased cost or reduced amount,
assuming (which assumption Lender need not corroborate) such additional cost or
reduced amount was allocable to such LIBOR Loan. Lender
<PAGE> 23
shall designate a different lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the
judgment of Lender, be otherwise disadvantageous to Lender. A certificate as to
the increased cost or reduced amount as a result of any event mentioned in this
Section 3.1, setting forth the calculations therefor in reasonable detail, shall
be promptly submitted by Lender to Borrower and shall, in the absence of
manifest error, be conclusive and binding as to the amount thereof.
Notwithstanding any other provision of this Agreement, after any such demand for
compensation by Lender, Borrower, upon at least three (3) Business Days' prior
written notice to Lender, may prepay any affected LIBOR Loan in full or convert
such LIBOR Loan to a Prime Rate Loan regardless of the Interest Period of any
thereof. Any such prepayment or conversion shall be subject to the prepayment
fees set forth in Section 2.4 hereof. Lender shall notify Borrower as promptly
as practicable of the existence of any event which will likely require the
payment by Borrower of any such additional amount under this Section.
SECTION 3.2. TAX LAW, ETC. In the event that by reason of any law,
regulation or requirement adopted after the date hereof or in the interpretation
thereof by an official authority, or the imposition of any requirement of any
central Lender whether or not having the force of law, Lender shall, with
respect to this Agreement or any transaction under this Agreement, be subjected
to any tax, levy, impost, charge, fee, duty, deduction or withholding of any
kind whatsoever (other than any tax imposed upon or measured by the total net
income or profits of Lender or KeyBank) and if any such measures or any other
similar measure shall result in an increase in the cost to Lender of making or
maintaining any LIBOR Loan or in a reduction in the amount of principal,
interest or commitment fee receivable by Lender in respect thereof, then Lender
shall promptly notify Borrower stating the reasons therefor. Borrower shall
thereafter pay to Lender, upon demand from time to time on Interest Adjustment
Dates with respect to such LIBOR Loan, as additional consideration hereunder,
such additional amounts as shall fully compensate Lender for such increased cost
or reduced amount. Lender shall designate a different lending office if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the judgment of Lender, be otherwise disadvantageous to Lender.
A certificate as to any such increased cost or reduced amount, setting forth the
calculations therefor in reasonable detail, shall be submitted by Lender to
Borrower and shall, in the absence of manifest error, be conclusive and binding
as to the amount thereof.
If Lender receives such additional consideration from Borrower pursuant
to this Section 3.2, Lender shall use reasonable efforts to obtain the benefits
of any refund, deduction or credit for any taxes or other amounts on account of
which such additional consideration has been paid and shall reimburse Borrower
to the extent, but only to the extent, that Lender shall receive a refund of
such taxes or other amounts together with any interest thereon or an effective
net reduction in taxes or other governmental charges (including any taxes
imposed on or measured by the total net income or profits of Lender or KeyBank)
of the United States or any state or subdivision thereof by virtue of any such
deduction or credit, after first giving effect to all other deductions and
credits otherwise available to Lender. If, at the time any audit of Lender's
income tax return is completed, Lender determines, based on such audit, that it
was not entitled to the full amount of any refund reimbursed to Borrower as
aforesaid or that its net income taxes are not reduced by a credit or deduction
for the full amount of taxes reimbursed to Borrower as aforesaid, Borrower, upon
demand of Lender, shall promptly pay to Lender the amount so
<PAGE> 24
refunded to which Lender was not so entitled, or the amount by which the net
income taxes of Lender were not so reduced, as the case may be.
Notwithstanding any other provision of this Agreement, after any such
demand for compensation by Lender, Borrower, upon at least three (3) Business
Days' prior written notice to Lender, may prepay any affected LIBOR Loan in full
or convert such LIBOR Loan to a Prime Rate Loan regardless of the Interest
Period of any thereof. Any such prepayment or conversion shall be subject to the
prepayment fees set forth in Section 2.4 hereof.
SECTION 3.3. EURODOLLAR DEPOSITS UNAVAILABLE OR INTEREST RATE
UNASCERTAINABLE. In respect of any LIBOR Loan, in the event that Lender shall
have determined that dollar deposits of the relevant amount for the relevant
Interest Period for such LIBOR Loan is not available to the Lender in the
applicable eurodollar market or that, by reason of circumstances affecting such
market, adequate and reasonable means do not exist for ascertaining the LIBOR
Rate applicable to such Interest Period, as the case may be, Lender shall
promptly give notice of such determination to Borrower and (a) any notice of a
new LIBOR Loan (or conversion of an existing Loan to a LIBOR Loan) previously
given by Borrower and not yet borrowed (or converted, as the case may be) shall
be deemed a notice to make a Prime Rate Loan, and (b) Borrower shall be
obligated either to prepay, or to convert to a Prime Rate Loan, any outstanding
LIBOR Loan on the last day of the then current Interest Period with respect
thereto. Lender shall designate a different lending office if such designation
will solve the problem described in this Section 3.3 and will not, in the
judgment of Lender, be otherwise disadvantageous to Lender.
SECTION 3.4. INDEMNITY. Without prejudice to any other provisions of
this Article III, Borrower hereby agrees to indemnify Lender against any loss or
expense (excluding loss of profit) which Lender may sustain or incur as a
consequence of any default by Borrower in payment when due of any amount
hereunder in respect of any LIBOR Loan, including, but not limited to, any
penalty or premium incurred by Lender in respect of funds borrowed by it for the
purpose of making or maintaining such LIBOR Loan, as determined by Lender in the
exercise of its sole but reasonable discretion. A certificate as to any such
loss or expense shall be promptly submitted by Lender to Borrower, with
reasonable detail of such loss or expense, and shall, in the absence of manifest
error, be conclusive and binding as to the amount thereof.
SECTION 3.5. CHANGES IN LAW RENDERING LIBOR LOANS UNLAWFUL. If at any
time any new law, treaty or regulation, or any change in any existing law,
treaty or regulation, or any interpretation thereof by any governmental or other
regulatory authority charged with the administration thereof, shall make it
unlawful for Lender to fund any LIBOR Loan which it is committed to make
hereunder with monies obtained in the eurodollar market, the commitment of
Lender to fund such LIBOR Loan shall, upon the happening of such event forthwith
be suspended for the duration of such illegality, and Lender shall by written
notice to Borrower declare that its commitment with respect to such LIBOR Loan
has been so suspended and, if and when such illegality ceases to exist, such
suspension shall cease and Lender shall similarly notify Borrower. If any such
change shall make it unlawful for Lender to continue in effect the funding in
the applicable eurodollar market of any LIBOR Loan previously made by it
hereunder, Lender shall, upon the happening of such event, notify Borrower
thereof in writing
<PAGE> 25
stating the reasons therefor, and Borrower shall, on the earlier of (a) the last
day of the then current Interest Period or (b) if required by such law,
regulation or interpretation, on such date as shall be specified in such notice,
either convert such LIBOR Loan to a Prime Rate Loan or prepay such LIBOR Loan in
full. Lender shall designate a different lending office if such designation will
solve the problem described in this Section 3.5 and will not, in the judgment of
Lender, be otherwise disadvantageous to Lender. Any such prepayment or
conversion shall be subject to the prepayment fees described in Section 2.4
hereof.
SECTION 3.6. FUNDING. Lender may, but shall not be required to, make
LIBOR Loans hereunder with funds obtained outside the United States.
ARTICLE IV. CONDITIONS PRECEDENT
The obligation of Lender to make its first Loan or, if earlier, to
issue the first Letter of Credit hereunder is subject to Borrower satisfying
each of the following conditions:
SECTION 4.1. NOTES. Borrower shall have executed and delivered to
Lender the Revolving Credit Note.
SECTION 4.2. GUARANTIES OF PAYMENT OF DEBT; GUARANTOR SECURITY
AGREEMENTS. A Guaranty of Payment executed and delivered by each Guarantor of
Payment, in form and substance satisfactory to Lender, shall have been delivered
to Lender. In addition, a Guarantor Security Agreement executed and delivered by
each Guarantor of Payment (except Ranger Aerospace), in form and substance
satisfactory to Lender, shall have been delivered to Lender.
SECTION 4.3. OFFICER'S CERTIFICATE, RESOLUTIONS, ORGANIZATIONAL
DOCUMENTS. Borrower and each Guarantor of Payment shall have delivered to Lender
an officer's certificate certifying the names of the officers of Borrower or
such Guarantor of Payment authorized to sign the Loan Documents, together with
the true signatures of such officers and certified copies of (a) the resolutions
of the board of directors of Borrower and each Guarantor of Payment evidencing
approval of the execution and delivery of the Loan Documents and the execution
of other Related Writings to which Borrower or such Guarantor of Payment, as the
case may be, is a party, and (b) the Articles (or Certificate) of Incorporation,
Bylaws (or Regulations) and all amendments thereto of Borrower and each
Guarantor of Payment.
SECTION 4.4. LEGAL OPINION. An opinion of counsel for Borrower and each
Guarantor of Payment, in form and substance satisfactory to Lender shall have
been delivered to Lender. In addition, Lender shall be permitted to rely on the
legal opinion delivered by the seller's legal counsel in connection with the
Share Purchase Agreement.
SECTION 4.5. GOOD STANDING CERTIFICATES. A good standing certificate
for Borrower and each Guarantor of Payment, issued on or about the Closing Date
by the Secretary of State in the state(s) where Borrower or such Guarantor of
Payment is incorporated or qualified as a foreign corporation shall have been
delivered to Lender.
<PAGE> 26
SECTION 4.6. CLOSING FEE/LEGAL FEES. A closing fee of one percent (1%)
of the Commitment shall have been paid on the Closing Date to Lender, and all
reasonable legal fees and expenses of Lender in connection with the preparation
and negotiation of the Loan Documents shall also have been paid.
SECTION 4.7. FINANCING STATEMENTS AND LIEN SEARCHES. With respect to
the property owned or leased by Borrower and each Guarantor of Payment and any
other property securing the Debt, Borrower shall have caused to be delivered to
Lender: (a) U.C.C. financing statements satisfactory to Lender; (b) the results
of U.C.C. lien searches, satisfactory to Lender; (c) the results of federal and
state tax lien and judicial lien searches, satisfactory to Lender; and (d)
U.C.C. termination statements reflecting termination of all financing statements
previously filed by any other party having a security interest in any part of
the Collateral or any other property securing the Debt.
SECTION 4.8. ACQUISITION. The Acquisition shall have been consummated
on the terms set forth in the Share Purchase Agreement, and Borrower shall
deliver a copy of the executed Share Purchase Agreement to Lender.
SECTION 4.9. EQUITY AND DEBT. All infusions of equity and debt into
Borrower and Ranger Aerospace shall have been completed on terms satisfactory to
Lender, and Borrower shall deliver to Lender copies of all of the executed
equity and debt documents, including but not limited to the Note Purchase
Agreement.
SECTION 4.10. BANK ACCOUNTS. Such bank accounts as may be required by
Lender to fund the Loans shall have been established.
SECTION 4.11. INSURANCE CERTIFICATE. Evidence of insurance on ACORD 27
form, and otherwise satisfactory to Lender, of adequate personal property and
liability insurance of the Companies, with Lender listed as loss payee and
additional insured shall have been delivered to Lender.
SECTION 4.12. NO MATERIAL ADVERSE CHANGE. No material adverse change,
in the opinion of Lender, shall have occurred in the financial condition,
operations or prospects of the Companies.
SECTION 4.13. MISCELLANEOUS. Borrower shall have provided such other
items and conditions as may be reasonably required by Lender.
ARTICLE V. COVENANTS
Borrower agrees that so long as the Commitment remains in effect and
thereafter until the principal of and interest on all Notes and all other
payments and fees due hereunder shall have been paid in full, Borrower shall
perform and observe, and shall cause each Subsidiary to perform and observe,
each of the following provisions:
<PAGE> 27
SECTION 5.1. INSURANCE. Each Company shall at all times maintain
insurance upon its Inventory, equipment and other personal and real property in
such amounts, for such period, and against such risks as is adequate for the
conduct of its business and value of its properties, as reasonably determined by
Borrower, with provisions satisfactory to Lender for payment of all losses on
Collateral thereunder to Lender and such Company as their interests may appear
(loss payable endorsement in favor of Lender). Any such policies of insurance
shall provide for no fewer than thirty (30) days prior written notice of
cancellation to Lender. Any sums received by Lender in payment of insurance
losses, returns, or unearned premiums under the policies covering the Collateral
shall, during the continuance of an Event of Default, be applied upon any Debt
whether or not the same is then due and payable, and at all other times shall be
delivered to Borrower for the purpose of replacing, repairing, or restoring the
insured property. Lender is hereby authorized to act as attorney-in-fact for
Borrower in obtaining, adjusting, settling and canceling such insurance and
endorsing any drafts. In the event of failure to provide such insurance as
herein provided, Lender may, at its option, provide such insurance and Borrower
shall pay to Lender, upon demand, the cost thereof. Should Borrower fail to pay
such sum to Lender upon demand, interest shall accrue thereon, from the date of
demand until paid in full, at the Default Rate. Within ten (10) days of Lender's
written request, Borrower shall furnish to Lender such information about
Borrower's insurance as Lender may from time to time reasonably request, which
information shall be prepared in form and detail reasonably satisfactory to
Lender and certified by a Financial Officer of Borrower.
SECTION 5.2. MONEY OBLIGATIONS. Each Company shall pay in full (a)
prior in each case to the date when penalties would attach, all material taxes,
assessments and governmental charges and levies (except only those so long as
and to the extent that the same shall be contested in good faith by appropriate
and timely proceedings and for which adequate reserves have been established in
accordance with GAAP) for which it may be or become liable or to which any or
all of its properties may be or become subject, except where the failure to pay
such taxes is not reasonably likely to cause or result in a Material Adverse
Effect; (b) all of its wage obligations to its employees in compliance with the
Fair Labor Standards Act (29 U.S.C. 206-207) or any comparable provisions, which
if unpaid would be reasonably likely to cause or result in a Material Adverse
Effect; and (c) all of its other obligations calling for the payment of money
(except only those so long as and to the extent that the same shall be contested
in good faith and for which adequate reserves have been established in
accordance with GAAP) before such payment becomes overdue, which if unpaid would
be reasonably likely to cause or result in a Material Adverse Effect.
SECTION 5.3. FINANCIAL STATEMENTS. Borrower shall furnish to Lender:
(a) within thirty (30) days after the end of each month
(other than the last month of each fiscal quarter), and within
forty-five (45) days after the end of each of the first three (3)
fiscal quarters, internal balance sheets of Borrower and its
Subsidiaries as of the end of such period and statements of income
(loss), and cash flow for the month or quarter, as appropriate, and
fiscal year to date periods, all prepared on a Consolidated (and, with
respect to the quarterly financial statements, a consolidating basis),
in accordance with GAAP, and in form and detail satisfactory to Lender
and certified by a
<PAGE> 28
Financial Officer of Borrower, together with a certificate of such
officer setting forth the Unmatured Events of Default and Events of
Default coming to such Financial Officer's attention or, if none, a
statement to that effect;
(b) within one hundred twenty (120) days after the end of
each fiscal year of Borrower, an annual audit report of Borrower and
its Subsidiaries for that year prepared on a Consolidated and
consolidating basis, in accordance with GAAP and certified in the case
of Consolidated statements by any "Big 6" accounting firm or an
independent public accountant reasonably satisfactory to Lender, which
report shall include balance sheets and statements of income (loss),
stockholders' equity and cash-flow for that period, so long as not
contrary to the then current recommendations of the American Institute
of Certified Public Accountants, together with a certificate by the
accountant setting forth the Unmatured Events of Default and Events of
Default coming to its attention during the course of its audit or, if
none, a statement to that effect;
(c) within thirty (30) days after the end of each of its
fiscal years, annual pro-forma projections for the then current fiscal
year, to be in form reasonably acceptable to Lender;
(d) with the delivery of the monthly, quarterly and
annual financial statements in (a) and (b) above, a Compliance
Certificate and a copy of any management report, letter or similar
writing furnished to the Companies by the accountants in respect of the
Companies' systems, operations, financial condition or properties;
(e) within thirty (30) days after the end of each month
(or more frequently as reasonably required by Lender), a Borrower's
Certificate prepared by a Financial Officer of Borrower;
(f) as soon as available, copies of all reports,
definitive proxy or other statements and other documents sent by a
Company to its shareholders generally, to the holders of any of its
notes, debentures or bonds or the trustee of any indenture securing the
same or pursuant to which they are issued, or sent by such Company (in
final form) to any securities exchange or over the counter authority or
system, or to the Securities and Exchange Commission or any similar
federal agency having regulatory jurisdiction over the issuance of such
Company's securities; and
(g) upon Lender's request, such other information about
the financial condition, properties and operations of any Company as
Lender may from time to time reasonably request, which information
shall be submitted in form and detail reasonably satisfactory to Lender
and certified by a Financial Officer of the Company or Companies in
question.
SECTION 5.4. FINANCIAL RECORDS. Each Company shall at all times
maintain true and complete records and books of account including, without
limiting the generality of the foregoing, appropriate reserves for possible
losses and liabilities, all in accordance with GAAP, and at all reasonable times
(during normal business hours and upon reasonable advance notice to
<PAGE> 29
such Company) permit Lender to examine that Company's books and records and to
make excerpts therefrom and transcripts thereof.
SECTION 5.5. [Intentionally Omitted]
SECTION 5.6. ERISA COMPLIANCE. No Company shall incur any material
accumulated funding deficiency within the meaning of ERISA, or any material
liability to the PBGC, established thereunder in connection with any ERISA Plan.
Borrower shall furnish to Lender (a) as soon as possible and in any event within
thirty (30) days after any Company knows or has reason to know that any
Reportable Event with respect to any ERISA Plan has occurred, a statement of a
Financial Officer of such Company, setting forth details as to such Reportable
Event and the action which such Company proposes to take with respect thereto,
together with a copy of the notice of such Reportable Event given to the PBGC if
a copy of such notice is available to such Company, and (b) promptly after
receipt thereof, a copy of any notice such Company, or any member of the
Controlled Group may receive from the PBGC or the Internal Revenue Service with
respect to any ERISA Plan administered by such Company; provided, that this
latter clause shall not apply to notices of general application promulgated by
the PBGC or the Internal Revenue Service. Borrower shall promptly notify Lender
of any material taxes assessed, proposed to be assessed or which Borrower has
reason to believe may be assessed against a Company by the Internal Revenue
Service with respect to any ERISA Plan. As used in this Section "material" means
the measure of a matter of significance which shall be determined as being an
amount equal to five percent (5%) of the Consolidated Net Worth of Borrower. As
soon as practicable, and in any event within twenty (20) days, after any Company
becomes aware that an ERISA Event has occurred, such Company shall provide
Lender with notice of such ERISA Event with a certificate by a Financial Officer
of such Company setting forth the details of the event and the action such
Company or another Controlled Group member proposes to take with respect
thereto. Borrower shall, at the request of Lender, deliver or cause to be
delivered to Lender true and correct copies of any document relating to the
ERISA Plan of any Company.
SECTION 5.7. FINANCIAL COVENANTS.
(a) DEBT SERVICE. Borrower shall maintain at the end of
each fiscal quarter a ratio of (i) Consolidated EBITDA minus
Maintenance Capital Expenditures to (ii) scheduled payments of
Indebtedness, plus Consolidated Interest Expense payable in cash during
such period, plus cash expenditures for income taxes of no less than:
(A) 1.10 to 1.00 on the Closing Date through March 30, 1999, (B) 1.20
to 1.00 on March 31, 1999, through March 30, 2000, and (C) 1.30 on
March 31, 2000, and thereafter, based upon the financial statements of
the Companies for the most recently completed four (4) fiscal quarters,
subject to the Proviso.
(b) LEVERAGE. Borrower shall not suffer or permit the
Leverage Ratio to exceed 8.00 to 1.00, based upon the financial
statements of the Companies for the most recently completed four (4)
fiscal quarters, subject to the Proviso.
SECTION 5.8. BORROWING. No Company shall create, incur or have
outstanding any obligation for borrowed money or any Indebtedness of any kind;
provided, that this Section
<PAGE> 30
shall not apply to the Note Purchase Agreement or prohibit any other borrowing
so long as at the time of any such incurrence (a) no Unmatured Event of Default
or Event of Default shall then exist or immediately thereafter shall begin to
exist, and (b) no "Default" under the Note Purchase Agreement shall then exist
or immediately thereafter shall begin to exist.
SECTION 5.9. LIENS. No Company shall create, assume or suffer to exist
any Lien upon any of its property or assets, whether now owned or hereafter
acquired; provided that this Section shall not apply to the following: (i) Liens
on property or assets of, or any shares of stock of or secured debt of, any
corporation existing at the time such corporation becomes a Subsidiary of a
Company or at the time such corporation is merged into a Company or any of its
Subsidiaries; provided that such Liens are not incurred in connection with, or
in contemplation of, such corporation becoming a Subsidiary of a Company or
merging into a Company or any of its Subsidiaries, (ii) Liens securing
refinancing Indebtedness; provided that any such Lien does not extend to or
cover any property, shares or debt other than the property, shares or debt
securing the Indebtedness so refunded, refinanced or extended, (iii) Liens in
favor of a Company or any of its Group Members, (iv) Liens securing industrial
revenue bonds, (v) Liens to secure purchase money indebtedness and Capitalized
Lease Obligations; provided that (a) with respect to any purchase money
indebtedness, any such Lien is created solely for the purpose of securing
Indebtedness representing, or incurred to finance, refinance or refund, the cost
(including sales and excise taxes, installation and delivery charges and other
direct costs of, and other direct expenses paid or charged in connection with,
such purchase or construction) of such property, (b) with respect to any
purchase money indebtedness, the principal amount of the Indebtedness secured by
such Lien does not exceed one hundred percent (100%) of such costs, and (c) such
Lien does not extend to or cover any property other than the item of property
that is the subject of such purchase money indebtedness or Capitalized Lease
Obligation, as the case may be, and any improvements on such item, (vi)
statutory liens or landlords', carriers', warehousemen's, mechanics',
suppliers', materialmen's, repairmen's or other like Liens arising in the
ordinary course of business which do not secure any Indebtedness and with
respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor, (vii)
Liens for taxes, assessments or governmental charges that are being contested in
good faith by appropriate proceedings, (viii) Liens securing Debt under the Loan
Documents, (ix) Liens existing on the date of this Agreement (other than Liens
related to Indebtedness being released on or about the Closing Date), (x) any
extensions, substitutions, replacements or renewals of the foregoing, (xi) Liens
incurred in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other forms of government insurance or
benefits, or to secure the performance of letters of credit, bids, tenders,
statutory obligations, surety and appeal bonds, leases, government contracts and
other similar obligations (other than obligations for borrowed money) entered
into in the ordinary course of business, (xii) any attachment or judgment Lien
not constituting an Event of Default under this Agreement that is being
contested in good faith by appropriate proceedings and for which adequate
reserves have been established in accordance with GAAP (if so required), (xiii)
Liens arising from the filing, for notice purposes only, of financing statements
in respect of operating leases, (xiv) Liens arising by operation of law in favor
of depositary banks and collecting banks, incurred in the ordinary course of
business, (xv) Liens consisting of restrictions on the transfer of securities
pursuant to applicable federal and state securities laws, (xvi) interests of
lessors and
<PAGE> 31
licensors under leases and licenses to which a Company or any of its Group
Members is a party, (xvii) with respect to any real property occupied by a
Company or any of its Group Members, all easements, rights of way, licenses and
similar encumbrances on or defects of title that do not materially impair the
use of such property for its intended purposes, (xviii) Liens securing
Indebtedness of a foreign Subsidiary of a Company to the extent permitted under
the Note Purchase Agreement, and (xix) Liens securing Indebtedness or other
obligations in an aggregate amount not to exceed Two Hundred Fifty Thousand
Dollars ($250,000) at any one time outstanding.
SECTION 5.10. REGULATIONS U and X. No Company shall take any action
that would result in any non-compliance of the Loans with Regulations U and X of
the Board of Governors of the Federal Reserve System.
SECTION 5.11. INVESTMENTS AND LOANS. No Company shall (a) acquire any
Subsidiary, (b) make or hold any investment in any stocks, bonds or securities
of any kind, (c) be or become a party to any joint venture or other partnership,
or (d) make or keep outstanding any advance or loan to any Person; provided,
that this Section shall not prohibit such investments so long as (i) no
Unmatured Event of Default or Event of Default shall then exist or immediately
thereafter shall begin to exist, and (ii) no "Default" under the Note Purchase
Agreement shall then exist or immediately thereafter shall begin to exist.
SECTION 5.12. MERGER AND SALE OF ASSETS. No Company shall merge or
consolidate with any other Person, or sell, lease or transfer or otherwise
dispose of any Collateral or all or substantially all of its assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions) to any Person other than in the ordinary course of
business, except that if no Unmatured Event of Default or Event of Default shall
then exist or immediately thereafter shall begin to exist:
(a) any Subsidiary may merge with (i) Borrower (provided
that Borrower shall be the continuing or surviving Person) or (ii) any
one or more Subsidiaries, provided that either (A) the continuing or
surviving Person shall be a Wholly-Owned Subsidiary which is a
Guarantor of Payment to the extent one such Subsidiary is a Guarantor
of Payment, or (B) after giving effect to any merger pursuant to this
sub-clause (ii), Borrower and/or one or more Wholly-Owned Subsidiaries
which are Guarantors of Payment shall own not less than the same
percentage of the outstanding Voting Power of the continuing or
surviving Person as Borrower and/or one or more Wholly-Owned
Subsidiaries (which are Guarantors of Payment) owned of the merged
Subsidiary immediately prior to such merger;
(b) in addition to the items permitted pursuant to
Section 5.11 hereof, any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets to (i) Borrower, or (ii) any
Subsidiary, which is a Guarantor of Payment; or
(c) (i) Borrower or such Guarantor of Payment, as the
case may be, shall be the continuing Person, or the Person (if other
than Borrower or any Guarantor of Payment) formed by such consolidation
or into which Borrower or any such Guarantor of
<PAGE> 32
Payment, as the case may be, is merged or to which the properties and
assets of Borrower or any such Guarantor of Payment, as the case may
be, are transferred shall be a corporation (or in the case of Borrower,
a corporation, limited liability company or a limited partnership)
organized and existing under the laws of the United States or any State
thereof or the District of Columbia and shall expressly assume in
writing all of the obligations of Borrower or such Guarantor of
Payment, as the case may be, under the Notes and this Agreement, and
the obligations under this Agreement shall remain in full force and
effect; (ii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis the Consolidated Net Worth
of Borrower or the surviving entity as the case may be is at least
equal to the Consolidated Net Worth of Borrower immediately before such
transaction or series of transactions; and (iii) immediately after
giving effect to such transaction on a pro forma basis Borrower or such
Person could incur at least $1.00 of additional Indebtedness (other
than Permitted Indebtedness) pursuant to Section 6.7 of the Note
Purchase Agreement.
SECTION 5.13. ACQUISITIONS. No Company shall acquire the assets or
stock of any other Person; provided, however, Borrower or any of its
Subsidiaries may acquire the stock or assets of another Person so long as (a)
(i) no Unmatured Event of Default or Event of Default shall then exist or
immediately thereafter shall begin to exist and (ii) no "Default" under the Note
Purchase Agreement shall then exist or immediately thereafter shall begin to
exist, and (b) in connection with all such acquisitions during the Commitment
Period Borrower does not incur in the aggregate more than Two Million Dollars
($2,000,000) of Revolving Loans hereunder to fund all or a portion of the
aggregate purchase prices thereof without the prior written consent of Lender
(which consent shall not be unreasonably withheld). For purposes of this Section
5.13, Revolving Loans to fund all or a portion of the aggregate purchase prices
for such acquisitions shall be deemed to include the proceeds of any Revolving
Loans not used for such acquisitions but which were incurred with the intent to
avoid the provisions of this Section 5.13.
SECTION 5.14. NOTICE. Borrower shall cause a Financial Officer of
Borrower to promptly notify Lender whenever any Unmatured Event of Default or
Event of Default occurs hereunder.
SECTION 5.15. ENVIRONMENTAL COMPLIANCE. Each Company shall comply in
all respects with any and all Environmental Laws including, without limitation,
all applicable Environmental Laws in jurisdictions in which any Company owns or
operates a facility or site, arranges for disposal or treatment of hazardous
substances, solid waste or other wastes, accepts for transport any hazardous
substances, solid waste or other wastes or holds any interest in real property
or otherwise, except to the extent that the failure to comply therewith would
not reasonably be likely to cause or result in a Material Adverse Effect.
Borrower shall furnish to Lender, promptly after receipt thereof, a copy of any
written notice any Company may receive from any governmental authority or
private Person or otherwise that any material litigation or proceeding
pertaining to any environmental, health or safety matter has been filed or is
threatened against such Company, with respect to any real property in which such
Company holds any interest or any past or present operation of such Company. No
Company shall allow the release or disposal of hazardous waste, solid waste or
other wastes on, under or to any real property in which any Company holds any
interest or performs any of its operations, in violation
<PAGE> 33
of any Environmental Law, except to the extent that the failure to comply
therewith would not reasonably be likely to cause or result in a Material
Adverse Effect. As used in this Section, "litigation or proceeding" means any
demand, claim, notice, suit, suit in equity action, administrative action,
investigation or inquiry whether brought by any governmental authority or
private Person or otherwise. Borrower shall defend, indemnify and hold Lender
harmless against all costs, expenses, claims, damages, penalties and liabilities
of every kind or nature whatsoever (including attorneys fees) arising out of or
resulting from the noncompliance of any Company with any Environmental Law;
provided that Lender shall not have the right to be indemnified under this
Section 5.15 for its own gross negligence or willful misconduct as determined by
a court of competent jurisdiction.
SECTION 5.16. AFFILIATE TRANSACTIONS. No Company shall, or shall permit
any Subsidiary to, directly or indirectly, enter into or permit to exist any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate of
a Company, except for (i) a transaction between or among a Company and/or its
Wholly-Owned Subsidiaries, (ii) a transaction the terms of which are at least as
favorable as the terms which could be obtained by a Company in a comparable
transaction made on an arm's-length basis between unaffiliated parties, (iii)
any Capital Distribution that is not prohibited by Section 5.19 hereof, (iv) any
transaction pursuant to an agreement, arrangement or understanding existing on
the date hereof and described in Schedule 5.16 hereto, (v) any transaction,
approved by the Board of Directors of Borrower, with an officer or director of
Borrower or of any Subsidiary in his or her capacity as officer or director
entered into in the ordinary course of business, (vi) transactions permitted by
Section 5.12 hereof, (vii) any "Restricted Payment" as defined in and as
permitted under the Note Purchase Agreement or (viii) the payment of customary
and reasonable directors' fees to directors who are not employees of a Company
or any Affiliate of a Company. For purposes of this provision, "Affiliate" shall
mean any Person, directly or indirectly, controlling, controlled by or under
common control with a Company and" control" (including the correlative meanings,
the terms "controlling", "controlled by" and "under common control with") means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Company, whether through the
ownership of voting securities, by contract or otherwise.
SECTION 5.17. USE OF PROCEEDS. Borrower's use of the proceeds of the
Revolving Credit Notes shall be solely for working capital and other general
corporate purposes of Borrower and its Subsidiaries, including acquisitions to
the extent permitted hereunder.
SECTION 5.18. CORPORATE NAMES AND LOCATION OF COLLATERAL. No Obligor
shall change its corporate name, unless, in each case, such Obligor shall
provide Lender with at least thirty (30) days prior written notice thereof. No
Obligor shall use trade names, assumed names or fictitious names without giving
Lender at least thirty (30) days prior written notice thereof. Borrower shall
also provide Lender with at least fifteen (15) days prior written notification
of: (a) any change in any location where any material portion of an Obligor's
Inventory is maintained, and any new locations where any Obligor's Inventory is
to be maintained; (b) any change in the location of the office where any
Obligor's records pertaining to its Accounts are kept; (c) the location of any
new places of business and the changing or closing of any of its existing places
of business; and (d) any change in any Obligor's chief executive
<PAGE> 34
office. In the event of any of the foregoing, Borrower shall promptly execute
and deliver to Lender (and Borrower agrees that Lender may execute and deliver
the same as Borrower's irrevocable attorney-in-fact) new U.C.C. financing
statements describing the Collateral and otherwise in form and substance
sufficient for recordation wherever necessary or appropriate, as determined in
Lender's sole discretion, to perfect or continue perfected Lender's security
interest in the Collateral, based upon such new places of business or names, and
Borrower shall pay all filing and recording fees and taxes in connection with
the filing or recordation of such financing statements and shall immediately
reimburse Lender therefor if Lender pays the same. Such amounts shall be Related
Expenses hereunder.
SECTION 5.19. CAPITAL DISTRIBUTIONS. Borrower shall not pay or commit
itself to pay any Capital Distributions at any time; provided, however, this
Section 5.19 shall not prohibit: (i) the payment of any distribution within
sixty (60) days after the date of declaration thereof, if at such date of
declaration such payment would comply with the provisions of this Agreement;
(ii) the repurchase, redemption or other acquisition or retirement of any shares
of Capital Stock of a Company or, by conversion into, or by or in exchange for,
shares of Capital Stock (other than Disqualified Capital Stock), or out of, the
net proceeds of the substantially concurrent sale (other than to a Subsidiary of
a Company or a Restricted Joint Venture) of other shares of Capital Stock of a
Company (other than Disqualified Capital Stock); (iii) the retirement of any
shares of Disqualified Capital Stock of a Company by conversion into, or by
exchange for, shares of Disqualified Capital Stock of a Company, or out of the
net proceeds of the substantially concurrent sale (other than to a Subsidiary of
a Company or a Restricted Joint Venture) of other shares of Disqualified Capital
Stock of a Company that (A) is subordinated to the Notes to at least the same
extent as the Disqualified Capital Stock being retired, (B) is scheduled to be
mandatorily redeemed, if at all, either (I) no earlier than the Disqualified
Capital Stock being retired, or (II) after the maturity date of the Notes, (C)
the portion, if any, of which Disqualified Capital Stock that is scheduled to be
mandatorily redeemed on or prior to the maturity date of the Notes has a
weighted average life to mandatory redemption at the time such Disqualified
Capital Stock is issued that is equal to or greater than the weighted average
life to mandatory redemption of the portion of the Disqualified Capital Stock
being retired that is scheduled to be mandatorily redeemed on or prior to the
maturity date of the Notes, and has an aggregate liquidation preference that is
equal to or less than the sum of (a) the aggregate liquidation preference then
outstanding of the Disqualified Capital Stock being retired, (b) the amount of
accrued and unpaid dividends, if any, and premiums owed, if any, not in excess
of preexisting redemption provisions on such Disqualified Capital Stock being
retired and (c) the amount of customary fees, expenses and costs related to the
issuance of such Disqualified Capital Stock; (iv) payments to CIBC Oppenheimer
Corp., Tioga Capital Corporation or their respective Affiliates representing
customary investment banking fees for services rendered; (v) payments to John
Hancock Mutual Life Insurance Company representing insurance premiums not in
excess of prevailing market rates; (vi) payments to Tioga Capital Corporation of
a chairman's fee pursuant to the investment agreement in effect on the date
hereof; (vii) the payment of distributions to Ranger Aerospace solely for the
purpose of enabling Ranger Aerospace to pay its reasonable, ordinary course
operating and administrative expenses, the amount of which in any fiscal year
shall not exceed Two Hundred Thousand Dollars ($200,000), and to pay its taxes;
and (viii) so long as no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such payment,
the payment or distributions to Ranger
<PAGE> 35
Aerospace for the sole purpose of purchasing, redeeming or otherwise acquiring
for value shares of Capital Stock of Ranger Aerospace (other than Disqualified
Capital Stock) or options on such shares held by Ranger Aerospace's, Borrower's
or its Subsidiaries' officers or employees or former officers or employees (or
their estates or beneficiaries under their estates) upon the death, disability,
retirement or termination of employment of such current or former officers or
employees pursuant to the terms of an employee benefit plan or any other
agreement pursuant to which such shares of Capital Stock or options were issued
or pursuant to a severance, buy-sell or right of first refusal agreement with
such current or former officer or employee; provided that the aggregate cash
consideration paid, or cash distributions or payments made, pursuant to this
clause (viii) shall not exceed Two Hundred Fifty Thousand Dollars ($250,000) in
any fiscal year; provided, further, that a Company may carry over and make for
one fiscal year, the amount of such distributions permitted to have been made,
but not made, in the immediately preceding fiscal year; provided, further, that
such distributions in any fiscal year of Borrower shall be deemed made first
from the aforementioned permitted amount for such fiscal year and then from any
amount carried over into such fiscal year in accordance with this proviso.
SECTION 5.20. SUBSIDIARY GUARANTIES. Each United States domestic
Subsidiary of a Company created, acquired or held subsequent to the Closing
Date, shall immediately execute and deliver to Lender a Guaranty of Payment of
all of the Debt, and, if requested by Lender, a security agreement covering all
Collateral of such Guarantor, as security for the Debt, such agreements to be in
form and substance substantially similar to the existing Loan Documents, along
with such corporate governance and authorization documents and an opinion of
counsel as may be deemed necessary or advisable by Lender.
SECTION 5.21. COLLATERAL. Borrower shall:
(a) at all reasonable times (during normal business hours
and with reasonable advance notice) allow Lender by or through any of
its officers, agents, employees, attorneys, or accountants to (i)
examine, inspect, and make extracts from Borrower's books and other
records, including, without limitation, the tax returns of Borrower;
(ii) arrange for verification of Borrower's Accounts, under reasonable
procedures, directly with Account Debtors or by other methods after
consultation with Borrower; and (iii) examine, inspect or perform
audits or appraisals of Borrower's Collateral, wherever located;
(b) promptly furnish to Lender upon request (i)
additional statements and information with respect to the Collateral,
and all writings and information relating to or evidencing any of
Borrower's Accounts (including, without limitation, computer printouts
or typewritten reports listing the mailing addresses of all present
Account Debtors), and (ii) any other writings and information as Lender
may reasonably request;
(c) notify Lender in writing promptly upon the creation
of any material amount of Accounts with respect to which the Account
Debtor is the United States of America or any state, city, county or
other governmental authority or any department, agency or
instrumentality of any of them, or any foreign government or
instrumentality thereof or any business which is located in a foreign
country;
<PAGE> 36
(d) at the request of Lender, mark its books and records
of Accounts to indicate the security interest granted to Lender
hereunder;
(e) promptly notify Lender in writing of any information
which Borrower has or may receive with respect to the Collateral which
might in any manner materially and adversely affect the value thereof
or the rights of Lender with respect thereto; and
(f) upon request of Lender, promptly take such action and
promptly make, execute, and deliver all such additional and further
items, deeds, assurances, and instruments as Lender may require,
including, without limitation, U.C.C. financing statements, so as to
completely vest in and ensure to Lender its rights hereunder and in or
to the Collateral.
A carbon, photographic, or other reproduction of this Agreement may, at
the option of Lender, be used as a financing statement. If certificates of title
or applications for title are issued or outstanding with respect to any of
Borrower's Inventory, Borrower shall deliver such certificate or application to
Lender and cause the interest of Lender to be properly noted thereon. Borrower
hereby authorizes Lender or Lender's designated agent (but without obligation by
Lender to do so) to incur Related Expenses (whether prior to, upon, or
subsequent to any Unmatured Event of Default or Event of Default), and Borrower
shall promptly repay, reimburse, and indemnify Lender for any and all Related
Expenses. All Related Expenses are payable to Lender promptly after demand
therefor; if such Related Expenses are not paid promptly, Lender may, at its
option, debit Related Expenses directly to the Revolving Credit Note or any
other Note.
SECTION 5.22. BANKING RELATIONSHIP. Commencing within a reasonable time
period after the Closing Date, Borrower shall consider maintaining its primary
banking and depository relationship with Lender or KeyBank.
ARTICLE VI. SECURITY
SECTION 6.1. SECURITY INTEREST IN COLLATERAL. In consideration of and
as security for the full and complete payment of all of the Debt, Borrower does
hereby grant to Lender a security interest in and an assignment of the
Collateral.
SECTION 6.2. COLLECTIONS AND RECEIPT OF PROCEEDS BY BORROWER. During
the continuance of an Event of Default and upon written notice to Borrower from
Lender, a Cash Collateral Account shall be opened by Borrower at the main office
of Lender and all such lawful collections of Borrower's Accounts and such
Proceeds of Borrower's Accounts and Inventory shall be remitted daily by
Borrower to Lender in the form in which they are received by Borrower, either by
mailing or by delivering such collections and Proceeds to Lender, appropriately
endorsed for deposit in the Cash Collateral Account. In the event that such
notice is given to Borrower from Lender, during the continuance of an Event of
Default, Borrower shall not commingle such collections or Proceeds with any of
Borrower's other funds or property, but
<PAGE> 37
shall hold such collections and Proceeds separate and apart therefrom upon an
express trust for Lender. In such case, Lender may, in its sole discretion, at
any time and from time to time during the continuance of an Event of Default,
apply all or any portion of the account balance in the Cash Collateral Account
as a credit against (i) the outstanding principal or interest of any Note or
Notes, or (ii) any other Debt. If any remittance shall be dishonored, or if,
upon final payment, any claim with respect thereto shall be made against Lender
on its warranties of collection, Lender may charge the amount of such item
against the Cash Collateral Account or any other Deposit Account maintained by
Borrower with Lender, and, in any event, retain the same and Borrower's interest
therein as additional security for the Debt. Lender may, in its sole discretion,
at any time and from time to time during the continuance of an Event of Default,
release funds from the Cash Collateral Account to Borrower for use in Borrower's
business and Lender shall release such funds to Borrower at all times when no
Event of Default shall exist. The balance in the Cash Collateral Account may be
withdrawn by Borrower upon termination of this Agreement and payment in full of
all of the Debt or at any time that no Event of Default is in existence. At
Lender's request, during the continuance of an Event of Default, Borrower shall
cause all remittances representing collections and Proceeds of Collateral to be
mailed to a lock box to which Lender shall have access for the processing of
such items in accordance with the provisions, terms, and conditions of Lender's
customary lock box agreement. The provisions of this Section 6.2 shall only
apply during the continuance of any Event of Default.
Lender, or Lender's designated agent, is hereby constituted and
appointed Borrower's attorney-in-fact with authority and power to endorse any
and all instruments, documents, and chattel paper upon Borrower's failure to do
so. Such authority and power, being coupled with an interest, shall be (A)
irrevocable until all of the Debt is paid, (B) exercisable by Lender at any time
during the continuance of an Event of Default and without any request upon
Borrower by Lender to so endorse, and (C) exercisable during the continuance of
an Event of Default in Lender's name or Borrower's name. Borrower hereby waives
presentment, demand, notice of dishonor, protest, notice of protest, and any and
all other similar notices with respect thereto, regardless of the form of any
endorsement thereof. Lender shall not be bound or obligated to take any action
to preserve any rights therein against prior parties thereto.
SECTION 6.3. COLLECTIONS AND RECEIPT OF PROCEEDS BY LENDER. Borrower
hereby constitutes and appoints Lender, or Lender's designated agent, as
Borrower's attorney-in-fact to exercise, at any time during the continuance of
an Event of Default, all or any of the following powers which, being coupled
with an interest, shall be irrevocable until the complete and full payment of
all of the Debt:
(a) to receive, retain, acquire, take, endorse, assign,
deliver, accept, and deposit, in Lender's name or Borrower's name, any
and all of Borrower's cash, instruments, chattel paper, documents,
Proceeds of Accounts, Proceeds of Inventory, collection of Accounts,
and any other writings in each case to the extent relating to any of
the Collateral;
(b) to transmit to Account Debtors, on any or all of
Borrower's Accounts, notice of assignment to Lender thereof and
Lender's security interest therein and to request from such Account
Debtors at any time, in Lender's name or in Borrower's name,
<PAGE> 38
information concerning Borrower's Accounts and the amounts owing
thereon;
(c) to transmit to purchasers of any or all of Borrower's
Inventory, notice of Lender's security interest therein, and to request
from such purchasers at any time, in Lender's name or in Borrower's
name, information concerning Borrower's Inventory and the amounts owing
thereon by such purchasers;
(d) to notify and require Account Debtors on Borrower's
Accounts and purchasers of Borrower's Inventory to make payment of
their indebtedness directly to Lender;
(e) to take or bring, in Lender's name or Borrower's
name, all steps, actions, suits, or proceedings deemed by Lender
necessary or desirable to effect the receipt, enforcement, and
collection of the Collateral; and
(f) to accept all collections in any form relating to the
Collateral, including remittances which may reflect deductions, and to
deposit the same into Borrower's Cash Collateral Account or, at the
option of Lender, to apply them as a payment against any Note or Notes
or any other Debt.
SECTION 6.4. USE OF INVENTORY. Until any Event of Default shall occur
and be continuing, Borrower may: (a) retain possession of and use its Inventory
in any lawful manner not inconsistent with this Agreement or with the terms,
conditions, or provisions of any policy of insurance thereon; (b) sell or lease
its Inventory in the ordinary course of business; provided, however, that a sale
or lease in the ordinary course of business does not include a transfer in
partial or total satisfaction of an Indebtedness, except for transfers in
satisfaction of partial or total purchase money prepayments by a buyer in the
ordinary course of Borrower's business; and (c) use and consume any raw
materials or supplies, the use and consumption of which are necessary in order
to carry on Borrower's business.
ARTICLE VII. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that the statements set forth in this
Article VII are true, correct and complete.
SECTION 7.1. CORPORATE EXISTENCE; SUBSIDIARIES; FOREIGN QUALIFICATION.
Each Company is a corporation duly organized, validly existing, and in good
standing under the laws of its state of incorporation and is duly qualified and
authorized to do business and is in good standing as a foreign corporation in
all of the states or jurisdictions where the character of its property or its
business activities makes such qualification necessary, except where the failure
to so qualify is not reasonably likely to cause or result in a Material Adverse
Effect. As of the date hereof, Schedule 7.1 sets forth each Subsidiary and each
Person which is an owner of Borrower's stock, its state of incorporation, its
relationship to Borrower, including the percentage of each class of stock owned
by a Company or the percentage of stock of Borrower owned by it, the location of
its chief executive offices and its principal place of business.
<PAGE> 39
SECTION 7.2. CORPORATE AUTHORITY. Borrower has the right and power and
is duly authorized and empowered to enter into, execute and deliver the Loan
Documents to which it is a party and to perform and observe the provisions of
the Loan Documents. The Loan Documents to which Borrower is a party have been
duly authorized and approved by Borrower's Board of Directors and are the valid
and binding obligations of Borrower, enforceable against Borrower in accordance
with their respective terms except (i) that the enforcement hereof may be
subject to bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally, and to general principles of equity and the
discretion of the court before which any proceeding therefor may be brought and
(ii) as any rights to indemnity hereunder may be limited by applicable law. The
execution, delivery and performance of the Loan Documents will not conflict with
nor result in any breach in any of the provisions of, or constitute a default
under, or result in the creation of any Lien (other than Liens permitted under
Section 5.9 of this Agreement) upon any assets or property of Borrower under the
provisions of Borrower's Articles (or Certificate) of Incorporation, Bylaws (or
Regulations) or any material agreement binding upon Borrower.
SECTION 7.3. COMPLIANCE WITH LAWS. Each Company:
(a) holds permits, certificates, licenses, orders,
registrations, franchises, authorizations, and other approvals from
federal, state, local, and foreign governmental and regulatory bodies
necessary for the conduct of its business and is in compliance with all
applicable laws relating thereto, except to the extent that the failure
to hold any such permit, certificate, license, order, registration,
franchise, authorization or approval is not reasonably likely to cause
or result in a Material Adverse Effect or as disclosed on Schedule 7.3;
and
(b) is in compliance with all federal, state, local, or
foreign applicable statutes, rules, regulations, and orders including,
without limitation, those relating to equal employment practices,
except to the extent the failure to so comply is not reasonably likely
to cause or result in a Material Adverse Effect or as disclosed on
Schedule 7.3.
SECTION 7.4. LITIGATION AND ADMINISTRATIVE PROCEEDINGS. Except as to
any of the following matters, any such matter which, if determined adversely, is
not reasonably likely to cause or result in a Material Adverse Effect, there are
(a) no lawsuits, actions, investigations, or other proceedings pending or
threatened against Borrower or any of its Subsidiaries, or in respect of which
Borrower or any of its Subsidiaries may have any liability, in any court or
before any governmental authority, arbitration board, or other tribunal, (b) no
orders, writs, injunctions, judgments, or decrees of any court or government
agency or instrumentality to which any Company is a party or by which the
property or assets of any Company are bound, and (c) no grievances, disputes, or
controversies outstanding with any union or other organization of the employees
of any Company, or threats of work stoppage, strike, or pending demands for
collective bargaining.
<PAGE> 40
SECTION 7.5. LOCATIONS. As of the date hereof, the chief executive
office of each Obligor is set forth on Schedule 7.5 attached hereto and made a
part hereof. As of the date hereof, the office where each Obligor keeps its
records concerning its Accounts is set forth on Schedule 7.5. As of the date
hereof, the Companies have places of business or maintain their Inventory at the
locations set forth on Schedule 7.5.
SECTION 7.6. TITLE TO ASSETS. Each Obligor has good title to and
ownership of all material property it purports to own, which property is free
and clear of all Liens, except those permitted under Section 5.9 hereto.
SECTION 7.7. LIENS AND SECURITY INTERESTS. On and after the Closing
Date, except for Liens permitted pursuant to Section 5.9 hereof, (a) there is no
financing statement outstanding covering any personal property of any Company,
other than a financing statement in favor of Lender, if any, and in connection
with the Indebtedness being released on the Closing Date which will be filed
shortly thereafter; (b) there is no mortgage outstanding covering any real
property of any Company, other than a mortgage in favor of Lender, if any; and
(c) no real or personal property of any Company is subject to any security
interest or Lien of any kind other than any security interest or Lien which may
be granted to Lender. Upon the filing of the appropriate financing statements,
Lender has a valid and enforceable first security interest in the Collateral,
subject to Liens permitted under Section 5.9 hereof. On and after the Closing
Date, neither Borrower nor any Subsidiary has entered into any contract or
agreement which would prohibit Lender from acquiring a security interest,
mortgage or other Lien on, or a collateral assignment of, any of the property or
assets of Borrower and/or any of its Subsidiaries except for (i) the Note
Purchase Agreement, (ii) any contract or agreement in connection with any
Capitalized Lease Obligation or purchase money indebtedness or (iii) any
contract or agreement in connection with any financing provided to a foreign
Subsidiary of Borrower.
SECTION 7.8. TAX RETURNS. All federal, state and local tax returns and
other material reports required by law to be filed in respect of the income,
business, properties and employees of each Company have been filed and all
taxes, assessments, fees and other governmental charges which are due and
payable have been paid, except as otherwise permitted herein or the failure to
do so does not and is not reasonably likely to cause or result in a Material
Adverse Effect. The provision for taxes on the books of Borrower is adequate for
all years not closed by applicable statutes and for the current fiscal year.
SECTION 7.9. ENVIRONMENTAL LAWS. Each Company is in compliance with any
and all Environmental Laws including, without limitation, all Environmental Laws
in all jurisdictions in which any Company owns or operates, or has owned or
operated, a facility or site, arranges or has arranged for disposal or treatment
of hazardous substances, solid waste or other wastes, accepts or has accepted
for transport any hazardous substances, solid waste or other wastes or holds or
has held any interest in real property or otherwise, except to the extent that
the failure to so comply is not reasonably likely to cause or result in a
Material Adverse Effect. Except as set forth in Schedule 7.9, no litigation or
proceeding arising under, relating to or in connection with any Environmental
Law is pending or, to the best knowledge of each Company, threatened against any
Company, with respect to any real property in which any Company holds or has
held an interest or any past or present operation of any Company, except to the
extent that any such litigation or proceeding is not reasonably likely to cause
or result in a Material Adverse
<PAGE> 41
Effect. No release, threatened release or disposal of hazardous waste, solid
waste or other wastes is occurring, or has occurred (other than those that are
currently being cleaned up in accordance with Environmental Laws), on, under or
to any real property in which any Company holds any interest or performs any of
its operations, in violation of any Environmental Law, except to the extent that
such violation is not reasonably likely to cause or result in a Material Adverse
Effect. As used in this Section, "litigation or proceeding" means any demand,
claim, notice, suit, suit in equity, action, administrative action,
investigation or inquiry whether brought by any governmental authority or
private Person or otherwise.
SECTION 7.10. CONTINUED BUSINESS. There exists no actual, pending, or,
to Borrower's knowledge, any threatened termination, cancellation or limitation
of, or any adverse modification or change in the business relationship of any
Company and any customer or supplier, or any group of customers or suppliers,
whose purchases or supplies, individually or in the aggregate, are material to
the business of the Companies taken as a whole, and if terminated would be
reasonably likely to cause or result in a Material Adverse Effect, and as of the
Closing Date, to the knowledge of Borrower, there exists no present condition or
state of facts or circumstances which would materially affect adversely any
Company in any respect or prevent a Company from conducting such business or the
transactions contemplated by this Agreement in substantially the same manner
which it was theretofore conducted.
SECTION 7.11. EMPLOYEE BENEFITS PLANS. No ERISA Event has occurred or
is expected to occur with respect to an ERISA Plan. Full payment has been made
of all amounts which a Controlled Group member is required, under applicable law
or under the governing documents, to have been paid as a contribution to or a
benefit under each ERISA Plan. The liability of each Controlled Group member
with respect to each ERISA Plan has been fully funded based upon reasonable and
proper actuarial assumptions, has been fully insured, or has been fully reserved
for on its financial statements. No changes have occurred or are expected to
occur that would cause a material increase in the cost of providing benefits
under the ERISA Plan. With respect to each ERISA Plan that is intended to be
qualified under Code Section 401(a): (a) the ERISA Plan and any associated trust
operationally comply with the applicable requirements of Code Section 401(a),
(b) the ERISA Plan and any associated trust have been amended to comply with all
such requirements as currently in effect, other than those requirements for
which a retroactive amendment can be made within the "remedial amendment period"
available under Code Section 401(b) (as extended under Treasury Regulations and
other Treasury pronouncements upon which taxpayers may rely), (c) the ERISA Plan
and any associated trust have received a favorable determination letter from the
Internal Revenue Service stating that the ERISA Plan qualifies under Code
Section 401(a), that the associated trust qualifies under Code Section 501(a)
and, if applicable, that any cash or deferred arrangement under the ERISA Plan
qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at
a time for which the above-described "remedial amendment period" has not yet
expired, (d) the ERISA Plan currently satisfies the requirements of Code Section
410(b), without regard to any retroactive amendment that may be made within the
above-described "remedial amendment period," and (e) no contribution made to the
ERISA Plan is subject to an excise tax under Code Section 4972. With respect to
any Pension Plan, the "accumulated benefit obligation" of Controlled Group
members with respect to the Pension Plan (as determined in accordance with
Statement of Accounting Standards No. 87, "Employers' Accounting for
<PAGE> 42
Pensions") does not exceed the fair market value of Pension Plan assets by an
amount more than Two Hundred Fifty Thousand Dollars ($250,000). The aggregate
potential amount of liability that would result if all Controlled Group members
withdrew from all Multiemployer Plans in a "complete withdrawal" (within the
meaning of ERISA Section 4203) would not be reasonably likely to cause or result
in a Material Adverse Effect.
SECTION 7.12. CONSENTS OR APPROVALS. Except for filings in connection
with the security interests and Liens in favor of Lender and except as disclosed
on Schedule 7.12 and ordinary course permits, licenses and approvals for
operations, no consent, approval or authorization of, or filing, registration or
qualification with, any governmental authority or any other Person is required
to be obtained or completed by Borrower in connection with the execution,
delivery or performance of any of the Loan Documents, which has not already been
obtained or completed.
SECTION 7.13. SOLVENCY. Borrower has received consideration which is
the reasonable equivalent value of the obligations and liabilities that Borrower
has incurred to Lender. Borrower is not insolvent as defined in any applicable
state or federal statute, nor will Borrower be rendered insolvent by the
execution and delivery of the Loan Documents to Lender. Borrower is not engaged
or about to engage in any business or transaction for which the assets retained
by it will be an unreasonably small amount of capital, taking into consideration
the obligations to Lender incurred hereunder. Borrower does not intend to, nor
does it believe that it will, incur debts beyond its ability to pay such debts
as they mature.
SECTION 7.14. NO MATERIAL ADVERSE CHANGE. Since December 31, 1997,
there has been no Material Adverse Change (other than the Acquisition, the
issuance of the notes under the Note Purchase Agreement and the transactions
contemplated by the Loan Documents) nor any change in any Company's accounting
procedures.
SECTION 7.15. REGULATIONS. Borrower is not engaged principally or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System of the
United States of America). Neither the granting of any Loan (or any conversion
thereof) nor the use of the proceeds of any Loan will violate, or be
inconsistent with, the provisions of Regulation U or X of said Board of
Governors.
SECTION 7.16. [Intentionally Omitted]
SECTION 7.17. INTELLECTUAL PROPERTY. Each Company owns, possesses, or
has the right to use all of the material patents, patent applications,
trademarks, service marks, copyrights, licenses and material rights with respect
to the foregoing necessary for the conduct of its business without any known
conflict with the rights of others, except to the extent that the failure to
own, possess or have the right to use such items would not be reasonably likely
to cause or result in a Material Adverse Effect.
SECTION 7.18. INSURANCE. Each Company maintains with financially sound
and reputable insurers insurance with coverage and limits as required by law and
as is adequate for the conduct of its business and the value of its properties.
<PAGE> 43
SECTION 7.19. ACCURATE AND COMPLETE STATEMENTS. Neither the Loan
Documents nor any written statement made by any Company in connection with any
of the Loan Documents (other than budgets and projections except as provided in
the last sentence of this Section 7.19) contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or in the Loan Documents not misleading at the time made in
light of all of the circumstances in which made. After due inquiry by Borrower,
there is no known fact which any Company has not disclosed to Lender which is
reasonably likely to cause or result in a Material Adverse Effect. The financial
projections furnished by Borrower to Lender (copies of which are attached hereto
as Schedule 7.19) were prepared in good faith on the basis of information and
assumptions that Borrower believed to be reasonable at the time made and as of
the Closing Date, in light of all of the circumstances existing at such times,
it being understood that projections are not to be viewed as facts or
representations as to future performance and that actual results may differ from
such projections and that such differences may be material.
SECTION 7.20. YEAR 2000 COMPLIANCE. Each Company's Computer Systems
are, or have been or will be modified to be, Year 2000 Compliant, except to the
extent that noncompliance is not reasonably likely to cause or result in a
Material Adverse Effect.
SECTION 7.21. DEFAULTS. No Unmatured Event of Default or Event of
Default exists hereunder, nor will any begin to exist immediately after the
execution and delivery hereof.
ARTICLE VIII. EVENTS OF DEFAULT
Each of the following shall constitute an Event of Default hereunder:
SECTION 8.1. PAYMENTS. If the principal of or interest on any Note or
any commitment or other fee shall not be paid in full punctually when due and
payable or within one (1) Business Day thereof.
SECTION 8.2. SPECIAL COVENANTS. If any Company or any Obligor shall
fail or omit to perform and observe Sections 5.7, 5.8, 5.9, 5.11, 5.12, 5.13 or
5.19 hereof.
SECTION 8.3. OTHER COVENANTS. If any Company or any Obligor shall fail
or omit to perform and observe any agreement or other provision (other than
those referred to in Sections 8.1 or 8.2 hereof) contained or referred to in
this Agreement or any Related Writing that is on such Company's or such
Obligor's part, as the case may be, to be complied with, and that Unmatured
Event of Default shall not have been fully corrected within thirty (30) days
after the giving of written notice thereof to Borrower by Lender that the
specified Unmatured Event of Default is to be remedied.
SECTION 8.4. REPRESENTATIONS AND WARRANTIES. If any representation,
warranty or statement made in or pursuant to this Agreement or any Related
Writing or any other
<PAGE> 44
material information furnished by any Company or any Obligor to Lender or any
other holder of any Note pursuant to the terms of any Loan Document or Related
Writing, shall be false or erroneous in any material respect as of the date
made.
SECTION 8.5. CROSS DEFAULT. If any Company or any Obligor shall default
in the payment of principal or interest due and owing upon any other obligation
for borrowed money in excess of One Million Dollars ($1,000,000) beyond any
period of grace provided with respect thereto or in the performance or
observance of any other agreement, term or condition contained in any agreement
under which such obligation is created, if the effect of such default is to
allow the acceleration of the maturity of such Indebtedness or to permit the
holder thereof to cause such Indebtedness to become due prior to its stated
maturity.
SECTION 8.6. ERISA DEFAULT. The occurrence of one or more ERISA Events
which (a) are reasonably likely to cause or result in a Material Adverse Effect,
or (b) result in a material Lien on any of the assets of any Company.
SECTION 8.7. CHANGE IN OWNERSHIP/CONTROL. If (a) Ranger Aerospace shall
cease to own one hundred percent (100%) of the outstanding stock of Borrower
(other than in connection with a merger permitted by Section 5.12 or among
Ranger Aerospace and Borrower), or (b) a "Change of Control" (as defined in the
Note Purchase Agreement) shall have occurred.
SECTION 8.8. MONEY JUDGMENT. A final judgment or order for the payment
of money in excess of One Million Dollars ($1,000,000) (to the extent not
covered by insurance) shall be rendered against any Company or any Obligor by a
court of competent jurisdiction, which remains unpaid or unstayed and
undischarged for a period (during which execution shall not be effectively
stayed) of sixty (60) days after the date on which the right to appeal has
expired.
SECTION 8.9. [Intentionally Omitted]
SECTION 8.10. VALIDITY OF LOAN DOCUMENTS. (a) Any material provision,
in the sole opinion of Lender, of any Loan Document shall at any time for any
reason cease to be valid, binding and enforceable against Borrower or any
Guarantor of Payment; (b) the validity, binding effect or enforceability of any
Loan Document against Borrower or any Guarantor of Payment shall be contested by
any Company or any other Obligor; (c) Borrower or any Guarantor of Payment shall
deny that it has any or further liability or obligation thereunder except in the
case of payment; or (d) any Loan Document shall be terminated other than in
accordance with its terms, invalidated or set aside, or be declared ineffective
or inoperative or in any way cease to give or provide to Lender the material
benefits purported to be created thereby.
SECTION 8.11. SOLVENCY. If Borrower shall discontinue business or any
Company or any Obligor shall (a) generally not pay its debts as such debts
become due, (b) make a general assignment for the benefit of creditors, (c)
apply for or consent to the appointment of a receiver, a custodian, a trustee,
an interim trustee or liquidator of all or substantially all of its assets, (d)
be adjudicated a debtor or have entered against it an order for relief under
Title 11 of the United States Code, as the same may be amended from time to
time, and permit such to continue
<PAGE> 45
unstayed and in effect for sixty (60) consecutive days, (e) file a voluntary
petition in bankruptcy or file a petition or an answer seeking reorganization or
an arrangement with creditors or seeking to take advantage of any other law
(whether federal or state) relating to relief of debtors, or admit (by answer,
by default or otherwise) the material allegations of a petition filed against it
in any bankruptcy, reorganization, insolvency or other proceeding (whether
federal or state) relating to relief of debtors, (f) suffer or permit to
continue unstayed and in effect for sixty (60) consecutive days any judgment,
decree or order entered by a court of competent jurisdiction, which approves a
petition seeking its reorganization or appoints a receiver, custodian, trustee,
interim trustee or liquidator of all or substantially all of its assets, or (g)
take, or omit to take, any action in order thereby to effect any of the
foregoing.
ARTICLE IX. REMEDIES UPON DEFAULT
Notwithstanding any contrary provision or inference herein or
elsewhere,
SECTION 9.1. OPTIONAL DEFAULTS. If any Event of Default referred to in
Section 8.1, 8.2., 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9 or 8.10 hereof shall occur
and be continuing, Lender shall have the right, in its discretion, to give
written notice to Borrower, to:
(a) terminate the Commitment and the credits hereby
established, if not theretofore terminated, and, immediately upon such
election, the obligation of Lender to make any further Loan or Loans
and the obligation of Lender to issue any Letter of Credit hereunder
immediately shall be terminated, and/or
(b) accelerate the maturity of all of the Debt (if it be
not already due and payable), whereupon all of the Debt shall become
and thereafter be immediately due and payable in full without any
presentment or demand and without any further or other notice of any
kind, all of which are hereby waived by Borrower.
SECTION 9.2. AUTOMATIC DEFAULTS. If any Event of Default referred to in
Section 8.11 hereof shall occur:
(a) all of the Commitment and the credits hereby
established shall automatically and immediately terminate, if not
theretofore terminated, and Lender thereafter shall not be under any
obligation to grant any further Loan or Loans hereunder, nor shall
Lender be obligated to issue any Letter of Credit hereunder, and
(b) the principal of and interest then outstanding on any
Notes, and all of the Debt, shall thereupon become and thereafter be
immediately due and payable in full (if it be not already due and
payable), all without any presentment, demand or notice of any kind,
which are hereby waived by Borrower.
SECTION 9.3. LETTERS OF CREDIT. If the maturity of the Notes is
accelerated pursuant to Sections 9.1 or 9.2 hereof, Borrower shall immediately
deposit with Lender, as security for Borrower's and any Guarantor of Payment's
obligations to reimburse Lender for any
<PAGE> 46
then outstanding Letters of Credit, cash equal to the sum of the aggregate
undrawn balance of any then outstanding Letters of Credit. Lender is hereby
authorized, at its option, to deduct any and all such amounts from any deposit
balances then owing by Lender to or for the credit or account of Borrower and
its Subsidiaries or any thereof, as security for Borrower's and any Guarantor of
Payment's obligations to reimburse Lender for any then outstanding Letters of
Credit.
SECTION 9.4. OFFSETS. If there shall exist any Event of Default
referred to in Section 8.11 hereof or if the maturity of the Notes is
accelerated pursuant to Section 9.1 or 9.2 hereof, Lender shall have the right
at any time to set off against, and to appropriate and apply toward the payment
of, any and all Debt then owing by Borrower to Lender, whether or not the same
shall then have matured, any and all deposit balances and all other indebtedness
then held or owing by Lender or by KeyBank to or for the credit or account of
Borrower, all without notice to or demand upon Borrower or any other Person, all
such notices and demands being hereby expressly waived by Borrower.
SECTION 9.5. COLLATERAL. Upon the occurrence of any Event of Default
and at all times during the continuance thereof, Lender shall have the rights
and remedies of a secured party under the Ohio Revised Code, in addition to the
rights and remedies of a secured party provided elsewhere within this Agreement,
in any other writing executed by Borrower or otherwise provided by law. Lender
may require Borrower to assemble the Collateral, which Borrower agrees to do,
and make it available to Lender at a reasonably convenient place to be
designated by Lender. Lender may, with or without notice to or demand upon
Borrower and with or without the aid of legal process, make use of such force as
may be necessary to enter any premises where the Collateral, or any thereof, may
be found and to take possession thereof (including anything found in or on the
Collateral that is not specifically described in this Agreement, each of which
findings shall be considered to be an accession to and a part of the Collateral)
and for that purpose may pursue the Collateral wherever the same may be found,
without liability for trespass or damage caused thereby to Borrower. After any
delivery or taking of possession of the Collateral, or any thereof, pursuant to
this Agreement, then, with or without resort to Borrower personally or any other
Person or property, all of which Borrower hereby waives, and upon such terms and
in such manner as Lender may deem advisable, Lender, in its discretion, may
sell, assign, transfer and deliver any of the Collateral at any time, or from
time to time. No prior notice need be given to Borrower or to any other Person
in the case of any sale of Collateral which Lender determines to be perishable
or to be declining speedily in value or which is customarily sold in any
recognized market, but in any other case Lender shall give Borrower not fewer
than ten (10) days' prior notice of either the time and place of any public sale
of the Collateral or of the time of any private sale or other intended
disposition thereof is to be made. Borrower waives advertisement of any such
sale and (except to the extent specifically required by the preceding sentence)
waives notice of any kind in respect of any such sale. At any such public sale,
Lender may purchase the Collateral, or any part thereof, free from any right of
redemption, all of which rights Borrower hereby waives and releases. After
deducting all Related Expenses, and after paying all claims, if any, secured by
Liens having precedence over this Agreement, Lender shall apply the net proceeds
of each such sale to or toward the payment of the Debt, whether or not then due,
in such order and by such division as Lender, in its sole discretion, may deem
advisable. Any excess, to the extent permitted by law, shall be paid to
<PAGE> 47
Borrower, and Borrower shall remain liable for any deficiency. In addition,
Lender shall at all times have the right to obtain new appraisals of Borrower or
the Collateral, the reasonable cost of which shall be paid by Borrower.
ARTICLE X. MISCELLANEOUS
SECTION 10.1. NO WAIVER; CUMULATIVE REMEDIES; RELATIONSHIP OF PARTIES.
No omission or course of dealing on the part of Lender, KeyBank or the holder of
any Note in exercising any right, power or remedy hereunder or under any of the
Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder or under any of the Loan Documents. The remedies herein provided are
cumulative and in addition to any other rights, powers or privileges held under
any of the Loan Documents or by operation of law, by contract or otherwise.
Nothing contained in this Agreement and no action taken by Lender or KeyBank
pursuant hereto shall be deemed to constitute Borrower and Lender or KeyBank a
partnership, association, joint venture or other entity. The relationship
between (a) Borrower and (b) Lender or KeyBank with respect to the Loan
Documents and the Related Writings is and shall be solely that of debtor and
creditor, respectively, and neither Lender nor KeyBank shall have any fiduciary
obligation toward Borrower with respect to any such documents or the
transactions contemplated thereby.
SECTION 10.2. AMENDMENTS, CONSENTS. No amendment, modification,
termination, or waiver of any provision of any Loan Document nor consent to any
variance therefrom, shall be effective unless the same shall be in writing and
signed by Lender and Borrower and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
SECTION 10.3. NOTICES. All notices, requests, demands and other
communications provided for hereunder shall be in writing and, if to Borrower,
mailed or delivered to it, addressed to it at the address specified on the
signature pages of this Agreement, or if to Lender, mailed or delivered to it,
addressed to the address of Lender specified on the signature pages of this
Agreement. All notices, statements, requests, demands and other communications
provided for hereunder shall be deemed to be given or made when delivered or
forty-eight (48) hours after being deposited in the mails with postage prepaid
by registered or certified mail, addressed as aforesaid, or sent by facsimile
with telephonic confirmation of receipt, except that notices from Borrower to
Lender pursuant to any of the provisions hereof shall not be effective until
received by Lender.
SECTION 10.4. COSTS, EXPENSES AND TAXES. Borrower agrees to promptly
pay after demand all reasonable costs and expenses of Lender and KeyBank, and
all Related Expenses, including but not limited to (a) travel and reasonable
out-of-pocket expenses, including but not limited to reasonable attorneys' fees
and expenses, of Lender and KeyBank in connection with the preparation,
negotiation and closing of the Loan Documents, the collection and disbursement
of all funds hereunder and the other instruments and documents to be delivered
hereunder, (b) extraordinary expenses of Lender and KeyBank in connection with
the
<PAGE> 48
administration of this Agreement, the Notes and the other instruments and
documents to be delivered hereunder, (c) the reasonable fees and out-of-pocket
expenses of special counsel for Lender and KeyBank, with respect to the
foregoing, and of local counsel, if any, who may be retained by said special
counsel with respect thereto, and (d) all costs and expenses, including
reasonable attorneys' fees, in connection with the restructuring or enforcement
of the Debt, this Agreement or any Related Writing. In addition, Borrower shall
pay any and all stamp and other similar taxes (but not including any tax on the
overall net income or profits of Lender or KeyBank) and fees payable or
determined to be payable in connection with the execution and delivery of any
Loan Document, and the other instruments and documents to be delivered
hereunder, and agrees to hold Lender and KeyBank harmless from and against any
and all liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes or fees.
SECTION 10.5. INDEMNIFICATION. Borrower agrees to defend, indemnify and
hold harmless Lender and KeyBank from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including reasonable attorneys' fees), or disbursements of any kind or
nature whatsoever (but not including any tax on the overall net income or
profits of Lender or KeyBank) which may be imposed on, incurred by or asserted
against Lender or KeyBank in connection with any investigative, administrative
or judicial proceeding (whether or not Lender or KeyBank shall be designated a
party thereto) or any other claim by any Person relating to or arising out of
the Loan Documents or any actual or proposed use of proceeds of the Loans or any
of the Debt, or any activities of any Company or any Obligor or any of their
respective affiliates; provided that neither Lender nor KeyBank shall have the
right to be indemnified under this Section 10.5 for their own gross negligence
or willful misconduct as determined by a court of competent jurisdiction. All
obligations provided for in this Section 10.5 shall survive any termination of
this Agreement.
SECTION 10.6. CAPITAL ADEQUACY. To the extent not covered by Article
III hereof, if Lender shall have determined, after the Closing Date, that the
adoption of any applicable law, rule, regulation or guideline regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any governmental authority, central Lender or
comparable agency charged with the interpretation or administration thereof, or
compliance by Lender (or its lending office) with any request or directive
regarding capital adequacy (whether or not having the force of law) of any such
authority, central Lender or comparable agency, has or would have the effect of
reducing the rate of return on Lender's capital (or the capital of its holding
company) as a consequence of its obligations hereunder to a level below that
which Lender (or its holding company) could have achieved but for such adoption,
change or compliance (taking into consideration Lender's policies or the
policies of its holding company with respect to capital adequacy) by an amount
deemed by Lender to be material, then from time to time, within fifteen (15)
days after demand by Lender, Borrower shall pay to Lender such additional amount
or amounts as will compensate Lender (or its holding company) for such
reduction. Lender shall designate a different lending office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of Lender, be otherwise disadvantageous to Lender. A
certificate of Lender claiming compensation under this Section and setting forth
the additional amount or amounts to be paid to it hereunder shall be conclusive
in the absence of manifest error. In determining such amount,
<PAGE> 49
Lender may use any reasonable averaging and attribution methods. Failure on the
part of Lender to demand compensation for any reduction in return on capital
with respect to any period shall not constitute a waiver of Lender's rights to
demand compensation for any reduction in return on capital in such period or in
any other period. The protection of this Section shall be available to Lender
regardless of any possible contention of the invalidity or inapplicability of
the law, regulation or other condition which shall have been imposed.
SECTION 10.7. BINDING EFFECT; ASSIGNMENT. This Agreement shall become
effective when it shall have been executed by Borrower and Lender and thereafter
shall be binding upon and inure to the benefit of Borrower and Lender and their
respective successors and assigns, except that neither Borrower nor Lender shall
have the right to assign its rights hereunder or any interest herein without the
prior written consent of the other (except that if an Event of Default exists,
then the consent of Borrower to an assignment by Lender shall not be required).
No Person, other than Lender, shall have or acquire any obligation to grant
Borrower any Loans.
SECTION 10.8. GOVERNING LAW; SUBMISSION TO JURISDICTION. This
Agreement, each of the Notes and any Related Writing shall be governed by and
construed in accordance with the laws of the State of Ohio and the respective
rights and obligations of Borrower and Lender shall be governed by Ohio law,
without regard to principles of conflict of laws. Borrower hereby irrevocably
submits to the non-exclusive jurisdiction of any Ohio state or federal court
sitting in Cleveland, Ohio, over any action or proceeding arising out of or
relating to this Agreement, the Debt, any Loan Document or any Related Writing,
and Borrower hereby irrevocably agrees that all claims in respect of such action
or proceeding may be heard and determined in such Ohio state or federal court.
Borrower, on behalf of itself and its Subsidiaries, hereby irrevocably waives,
to the fullest extent permitted by law, any objection it may now or hereafter
have to the laying of venue in any action or proceeding in any such court as
well as any right it may now or hereafter have to remove such action or
proceeding, once commenced, to another court on the grounds of FORUM NON
CONVENIENS or otherwise. Borrower agrees that a final, nonappealable judgment in
any such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
SECTION 10.9. SEVERABILITY OF PROVISIONS; CAPTIONS. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction. The several captions to sections herein are inserted for
convenience only and shall be ignored in interpreting the provisions of this
Agreement.
SECTION 10.10. ENTIRE AGREEMENT. This Agreement, any Note, any Related
Writing and any other agreement, document or instrument attached hereto or
referred to herein or executed on or as of the Closing Date integrate all the
terms and conditions mentioned herein or incidental hereto and supersede all
oral representations and negotiations and prior writings with respect to the
subject matter hereof.
<PAGE> 50
SECTION 10.11. RULE OF CONSTRUCTION. The Loan Documents were negotiated
by the parties with the benefit of legal representation and any rule of
construction or interpretation otherwise requiring this Agreement or any other
Loan Document to be construed or interpreted against any party shall not apply
to any construction or interpretation hereof or thereof.
<PAGE> 51
SECTION 10.12. JURY TRIAL WAIVER. BORROWER AND LENDER WAIVE ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, BETWEEN BORROWER AND LENDER, ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR
MODIFY LENDER'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY PROVISION CONTAINED
IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT BETWEEN BORROWER AND
LENDER.
Address: 8420 N.W. 52 Terrace, #200 AIRCRAFT SERVICE INTERNATIONAL
Miami, Florida 33166-7766 GROUP, INC.
Attention: President
By:
Address: Key Center KEY CORPORATE CAPITAL INC.
127 Public Square
Cleveland, Ohio 44114-1306
Attention: Structured Finance By:
<PAGE> 52
EXHIBIT A
REVOLVING CREDIT NOTE
$10,000,000 New York, New York
April 2, 1998
FOR VALUE RECEIVED, the undersigned, AIRCRAFT SERVICE INTERNATIONAL
GROUP, INC. ("Borrower"), promises to pay, on the last day of the Commitment
Period, as defined in the Credit and Security Agreement (as hereinafter
defined), to the order of KEY CORPORATE CAPITAL INC. ("Lender") at its Main
Office at 127 Public Square, Cleveland, Ohio 44114-1306, or at such other place
as Lender shall designate, the principal sum of
TEN MILLION and 00/100 DOLLARS
or the aggregate unpaid principal amount of all Revolving Loans made by Lender
to Borrower pursuant to Section 2.1A of the Credit and Security Agreement,
whichever is less, in lawful money of the United States of America. As used
herein, "Credit and Security Agreement" means the Credit and Security Agreement
dated as of April 2, 1998, between Borrower and Lender, as the same may from
time to time be amended, restated or otherwise modified. Capitalized terms used
herein shall have the meanings ascribed to them in the Credit and Security
Agreement.
Borrower also promises to pay interest on the unpaid principal amount
of each Revolving Loan from time to time outstanding, from the date of such Loan
until the payment in full thereof, at the rates per annum which shall be
determined in accordance with the provisions of Section 2.1A of the Credit and
Security Agreement. Such interest shall be payable on each date provided for in
Section 2.1A; provided, however, that interest on any principal portion which is
not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Prime Rate Loans and LIBOR Loans, and payments of principal of any thereof,
shall be shown on the records of Lender by such method as Lender may generally
employ; provided, however, that failure to make any such entry shall in no way
detract from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit and Security Agreement, the
principal hereof and the unpaid interest thereon shall bear interest, until
paid, at a rate per annum which shall be the Default Rate. All payments of
principal of and interest on this Note shall be made in immediately available
funds.
This Note is the Revolving Credit Note referred to in the Credit and
Security Agreement. Reference is made to the Credit and Security Agreement for a
description of the right of the
<PAGE> 53
undersigned to anticipate payments hereof, the right of the holder hereof to
declare this Note due prior to its stated maturity, and other terms and
conditions upon which this Note is issued.
Except as expressly provided in the Credit and Security Agreement,
Borrower expressly waives presentment, demand, protest and notice of any kind.
JURY TRIAL WAIVER. BORROWER WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, BETWEEN
BORROWER AND LENDER, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THE
CREDIT AND SECURITY AGREEMENT OR THIS NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR
MODIFY LENDER'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY PROVISION CONTAINED
IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT BETWEEN BORROWER AND
LENDER.
AIRCRAFT SERVICE INTERNATIONAL
GROUP, INC.
By:
Title:
Date:_______________________, 19____
<PAGE> 54
EXHIBIT B
NOTICE OF LOAN
Key Corporate Capital Inc.
127 Public Square
Cleveland, Ohio 44114-1306
Attention: _________________
Ladies and Gentlemen:
The undersigned, __________________, on behalf of AIRCRAFT SERVICE
INTERNATIONAL GROUP, INC. ("Borrower") refers to the Credit and Security
Agreement, dated as of April 2, 1998 ("Credit and Security Agreement", the terms
defined therein being used herein as therein defined), between Borrower and Key
Corporate Capital Inc., and hereby gives you notice, pursuant to Section 2.2 of
the Credit and Security Agreement that Borrower hereby requests a Loan under the
Credit and Security Agreement, and in connection therewith sets forth below the
information relating to the Loan (the "Proposed Loan") as required by Section
2.2 of the Credit and Security Agreement:
(a) The Business Day of the Proposed Loan is __________,
19__.
(b) The amount of the Proposed Loan is $_______________
(c) The Proposed Loan is to be a Prime Rate Loan ____
/LIBOR Loan ___. (Check one.)
(d) If the Proposed Loan is a LIBOR Loan, the Interest
Period requested is one month ___, two months ___, three months ___,
six months ___. (Check one.)
The undersigned hereby certifies that the following statements are true
on the date hereof, and will be true on the date of the Proposed Loan:
(i) the representations and warranties contained in each
Loan Document are correct in all material respects, before and after
giving effect to the Proposed Loan and the application of the proceeds
therefrom, as though made on and as of such date except to the extent
that such representations or warranties relate to an earlier date;
(ii) no event has occurred and is continuing, or would
result from such Proposed Loan, or the application of proceeds
therefrom, which constitutes an Unmatured Event of Default or Event of
Default; and
<PAGE> 55
(iii) the conditions set forth in Section 2.2 of the Credit
and Security Agreement have been satisfied.
Very truly yours,
AIRCRAFT SERVICE INTERNATIONAL
GROUP, INC.
By:
Name:
Title:
<PAGE> 56
EXHIBIT C
COMPLIANCE CERTIFICATE
For Fiscal Quarter ended _______________
THE UNDERSIGNED HEREBY CERTIFY THAT:
(1) I am the duly elected President or Chief Financial Officer of
AIRCRAFT SERVICE INTERNATIONAL GROUP, INC., a Delaware corporation ("Borrower");
(2) I am familiar with the terms of that certain Credit and
Security Agreement dated as of April 2, 1998, between Borrower and Key Corporate
Capital Inc. ("Lender") (as the same may from time to time be amended, restated
or otherwise modified, the "Credit Agreement", the terms defined therein and not
otherwise defined in this Certificate being used herein as therein defined), and
the terms of the other Loan Documents, and we have made, or have caused to be
made under our supervision, a review in reasonable detail of the transactions
and condition of Borrower and its Subsidiaries during the accounting period
covered by the attached financial statements;
(3) The review described in paragraph (2) above did not disclose,
and I have no knowledge of, the existence of any condition or event which
constitutes or constituted an Unmatured Event of Default or Event of Default, at
the end of the accounting period covered by the attached financial statements or
as of the date of this Certificate, or, to the extent I am aware, the nature of
such Event of Default; and
(4) Set forth on Attachment I hereto are calculations of the
financial covenants set forth in Sections 5.7 of the Credit Agreement, which
calculations show compliance with the terms thereof or, to the extent I am
aware, the nature of such Event of Default.
IN WITNESS WHEREOF, I have signed this certificate the ___ day of
_________, 19___.
AIRCRAFT SERVICE INTERNATIONAL
GROUP, INC.
By:
Title:
<PAGE> 57
CREDIT AND SECURITY AGREEMENT
FIRST AMENDMENT AGREEMENT
This First Amendment Agreement is made as of the ___ day of May, 1999,
by and between AIRCRAFT SERVICE INTERNATIONAL GROUP, INC., a Delaware
corporation ("Borrower"), and KEY CORPORATE CAPITAL INC. ("Lender").
WHEREAS, Borrower and Lender are parties to a certain Credit and
Security Agreement dated as of April 2, 1998, as it may from time to time be
amended, restated or otherwise modified, which provides, among other things, for
a Revolving Loan facility, upon certain terms and conditions (the "Credit and
Security Agreement");
WHEREAS, Borrower and Lender desire to amend the Credit and Security
Agreement to add a Term Loan facility and to modify certain other provisions
thereof; and
WHEREAS, each term used herein shall be defined in accordance with the
Credit and Security Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein and for other valuable considerations, Borrower and Lender
agree as follows:
1. Article I of the Credit and Security Agreement is hereby
amended to delete the definitions of "Applicable Margin", "Borrowing Base",
"Commitment", "Loan", "Note", "Proceeds", "Proviso", and "Related Expenses" in
their entirety and to insert in place thereof the following:
"Applicable Margin" shall mean :
(a) for the period from the Closing Date through the fiscal
quarter ending June 30, 1999, (i) for Revolving Loans, one hundred
seventy-five (175) basis points for LIBOR Loans and zero (0) basis
points for Prime Rate Loans, and (ii) for the Term Loan, two hundred
fifty (250) basis points for LIBOR Loans and seventy-five (75) basis
points for Prime Rate Loans;
(b) commencing on July 1, 1999 and initially based upon
financial statements for the fiscal quarter ended March 31, 1999, the
number of basis points (depending upon whether Loans are LIBOR Loans or
Prime Rate Loans) set forth in the following matrix, based on the
result of the computation of the Leverage Ratio for the most recently
completed fiscal quarter, shall be used to establish the
[SIGNATURE PAGE]
<PAGE> 58
number of basis points that will go into effect on July 1, 1999 and
thereafter:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
APPLICABLE APPLICABLE APPLICABLE APPLICABLE
LEVERAGE RATIO BASIS POINTS BASIS POINTS BASIS POINTS BASIS POINTS
FOR REVOLVING FOR TERM FOR REVOLVING FOR TERM
LOANS LIBOR LOAN LIBOR LOANS PRIME LOAN PRIME
LOANS LOANS RATE LOANS RATE LOANS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Greater than or equal 225 300 50 125
to 6.00 to 1.00
- ------------------------------------------------------------------------------------------------------------
Greater than or equal 200 275 25 100
to 5.50 to 1.00 but less
than 6.00 to 1.00
- ------------------------------------------------------------------------------------------------------------
Greater than or equal 175 250 0 75
to 5.00 to 1.00 but less
than 5.50 to 1.00
- ------------------------------------------------------------------------------------------------------------
Greater than or equal 150 225 0 50
to 4.50 to 1.00 but less
than 5.00 to 1.00
- ------------------------------------------------------------------------------------------------------------
Less than 4.50 to 1.00 125 200 0 0
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Changes to the Applicable Margin shall be effective on the
first day of each fiscal quarter following the date upon which Lender
received, or, if earlier, Lender should have received, pursuant to
Section 5.3(a) hereof, the financial statements of the Companies for
Borrower's fiscal quarters. The above matrix does not modify or waive,
in any respect, the requirements of Section 5.7 hereof, the rights of
Lender to charge the Default Rate, or the rights and remedies of Lender
pursuant to Articles VIII and IX hereof.
"Borrowing Base" shall mean an amount not in excess of the sum
of (a) (i) eighty-five percent (85%) of the amount due and owing on
Eligible Accounts Receivable and (ii) zero percent (0%) on Inventory
minus (b) the Elsinore Seller Note Reserve; provided notwithstanding
anything herein to the contrary, Lender shall at all times have the
right to modify or reduce the percentages from time to time, in its
reasonable discretion.
"Commitment" shall mean the obligation hereunder of Lender to
make Loans, and to issue Letters of Credit, pursuant to the Revolving
Credit Commitment and Term Loan Commitment, up to an aggregate
principal amount outstanding at any one time of Fifteen Million Dollars
($15,000,000), or such lesser amount as shall be determined pursuant to
Section 2.5 hereof.
"Loan" or "Loans" shall mean the credit granted to Borrower in
accordance with Section 2.1A and Section 2.1C hereof.
[SIGNATURE PAGE]
<PAGE> 59
"Note" or "Notes" shall mean the Revolving Credit Note, Term
Note or any other note delivered pursuant to this Agreement.
"Proceeds" shall mean (a) any proceeds, and (b) whatever is
received upon the sale, exchange, collection, or other disposition of
Collateral, Term Loan Collateral or proceeds, whether cash or non-cash.
Cash proceeds includes, without limitation, moneys, checks, and Deposit
Accounts. Proceeds includes, without limitation, any Account arising
when the right to payment is earned under a contract right, any
insurance payable by reason of loss or damage to the Collateral or Term
Loan Collateral, and any return or unearned premium upon any
cancellation of insurance. Except as expressly authorized in this
Agreement, Lender's right to Proceeds specifically set forth herein or
indicated in any financing statement shall never constitute an express
or implied authorization on the part of Lender to Borrower's sale,
exchange, collection, or other disposition of any or all of the
Collateral or Term Loan Collateral.
"Proviso" shall mean that for Borrower's fiscal quarters
ending prior to the fiscal quarter ending March 31, 2000, Consolidated
EBITDA, as referred to in Section 5.7(b) hereof, shall be calculated as
follows: (a) for the fiscal quarter ending June 30, 1999, Consolidated
EBITDA shall be annualized by multiplying the Consolidated EBITDA for
that fiscal quarter by four (4); (b) for the fiscal quarter ending
September 30, 1999, Consolidated EBITDA shall be annualized by
multiplying the Consolidated EBITDA for that fiscal quarter and the
previous fiscal quarter by two (2); and (c) for the fiscal quarter
ending December 31, 1999, Consolidated EBITDA shall be annualized by
multiplying the Consolidated EBITDA for that fiscal quarter and the two
(2) previous fiscal quarters by one and one-third (1 1/3).
"Related Expenses" shall mean any and all costs, liabilities,
and expenses (including, without limitation, losses, damages,
penalties, claims, actions, reasonable attorneys' fees, legal expenses,
judgments, suits, and disbursements) incurred by, imposed upon, or
asserted against, Lender in any attempt by Lender: (a) to obtain,
preserve, perfect, or enforce any security interest evidenced by this
Agreement or any Related Writing; (b) to obtain payment, performance,
and observance of any and all of the Debt; (c) to maintain, insure,
audit, collect, preserve, repossess, and dispose of any of the
Collateral, Term Loan Collateral or any thereof, including, without
limitation, costs and expenses for appraisals, assessments, and audits
of Borrower or any such Collateral or Term Loan Collateral; or (d)
incidental or related to (a) through (c) above, including, without
limitation, interest thereupon from the date incurred, imposed, or
asserted until paid at the Default Rate.
2. Article I of the Credit and Security Agreement is hereby
amended to add the following new definitions thereto:
"EAC" shall mean the Elsinore Acquisition Corporation.
[SIGNATURE PAGE]
<PAGE> 60
"Elsinore Acquisition" shall mean the acquisition of the
assets of Elsinore L.P. ("Elsinore"), pursuant to the Elsinore Asset
Purchase Agreement.
"Elsinore Acquisition Documents" shall mean the Elsinore Asset
Purchase Agreement and the following documents as defined in the
Elsinore Asset Purchase Agreement: The Ranger/ASIG Guaranty, the Parent
Guaranty, the Lyon Guaranty and the Purchaser Note.
"Elsinore Asset Purchase Agreement" shall mean the Asset
Purchase Agreement among Borrower, Ranger Aerospace, EAC, Elsinore,
Air/Lyon, Inc., Air/Lyon Associates, L.P., Elsinore Aerospace Services,
L.P., Elsinore Services Corporation and General William Lyon providing
for the purchase of substantially all of the assets of, and the
assumption of certain liabilities of Elsinore by EAC.
"Elsinore Assets" shall mean the assets acquired by Borrower
pursuant to the Elsinore Acquisition.
"Elsinore Seller Note" shall mean the Purchaser Note as
defined in the Elsinore Asset Purchase Agreement.
"Elsinore Seller Note Reserve" shall mean an amount determined
by Lender, in its sole discretion, as a reserve against collateral
values, not to exceed an amount equal to the outstanding balance of the
Elsinore Seller Note, including all principal, interest and related
costs and charges in connection with the Elsinore Seller Note.
"Equipment" shall mean (a) all equipment as defined in Chapter
1309 of the Ohio Revised Code, including without limitation, machinery,
motor vehicles, trade fixtures, office and other furniture and
furnishings, tools, dies, jigs, and molds; and (b) all substitutes or
replacements for, and all parts, accessories, additions, attachments,
or accessions to (a) above.
"Term Loan" shall mean the term loan granted to Borrower by
Lender in accordance with Section 2.1C hereof.
"Term Loan Cash Collateral Account" shall mean a commercial
Deposit Account designated "term loan cash collateral account" and
maintained by Borrower with KeyBank, without liability by KeyBank or
Lender to pay interest thereon, from which account Lender shall have
the exclusive right to withdraw funds until all of the Debt is paid in
full.
"Term Loan Cash Security" shall mean all cash, instruments,
Deposit Accounts, and other cash equivalents, whether matured or
unmatured, whether collected or in the process of collection, upon
which Borrower presently has or may hereafter have any claim, wherever
located, including but not limited to any of the foregoing that are
presently or may hereafter be existing or maintained with, issued by,
drawn upon, or in
[SIGNATURE PAGE]
<PAGE> 61
the possession of KeyBank or Lender, in each case only to the extent
relating to the Term Loan Collateral.
"Term Loan Commitment" shall mean the obligation hereunder of
Lender to make the Term Loan in the original principal amount of Five
Million Dollars ($5,000,000).
"Term Loan Collateral" shall mean (a) all of Borrower's
Equipment, whether now owned or hereafter acquired by Borrower; (b) all
funds now or hereafter on deposit in the Term Loan Cash Collateral
Account, if any; (c) all of Borrower's existing and future Term Loan
Cash Security; and (d) all of the Proceeds, products, profits, and
rents of any of (a) through (c) above, in each case to the extent set
forth in the applicable Loan Documents. The definition of Term Loan
Collateral shall exclude any items which are not assignable pursuant to
the terms of any agreement or require the consent of any other party or
are prohibited by law.
"Term Note" shall mean any Term Note executed and delivered
pursuant to Section 2.1C hereof.
3. Article I of the Credit and Security Agreement is hereby
amended to delete the definitions of "Maintenance Capital Expenditures" and
"Consolidated Interest Expense" in their entirety.
4. The Credit and Security Agreement is hereby amended to delete
the first and second paragraphs in Section 2.1 therefrom, with the following
being inserted in place thereof:
SECTION 2.1. AMOUNT AND NATURE OF CREDIT. Subject to the terms
and conditions of this Agreement, Lender shall make Loans to Borrower,
and Lender shall, or shall cause KeyBank to, issue Letters of Credit at
the request of Borrower, in such aggregate amount as Borrower shall
request pursuant to the Revolving Credit Commitment and Term Loan
Commitment; provided, however, that in no event shall the aggregate
principal amount of all Loans and Letters of Credit outstanding under
this Agreement be in excess of the Commitment.
The Loans may be made as Revolving Loans and a Term Loan, and
Letters of Credit may be issued, as follows:
5. Section 2.1 of the Credit and Security Agreement is hereby
amended to add the following new Subsection 2.1(C)thereto:
C. Term Loan.
Subject to the terms and conditions of this Agreement, Lender
shall make a Term Loan to Borrower in such amount, if any, as Borrower
may request on May ___, 1999, but not exceeding the Term Loan
Commitment. To evidence the
[SIGNATURE PAGE]
<PAGE> 62
Term Loan, Borrower shall execute and deliver to Lender a Term Note,
dated the date of this First Amendment Agreement, and in the form of
Exhibit A-1 hereto. The Term Loan shall be payable in twenty-three (23)
consecutive quarter-annual installments, commencing August 1, 1999 and
continuing on the first day of each succeeding November, February, May
and August thereafter as follows: (i) for the period from August 1,
1999 through May 1, 2001, One Hundred Twenty-Five Thousand Dollars
($125,000), (ii) for the period from August 1, 2001 through May 1,
2003, One Hundred Eighty-Seven Thousand Five Hundred Dollars
($187,500), (iii) for the period from August 1, 2003 through May 1,
2004, Two Hundred Seventy-Five Thousand Dollars ($275,000), and (iv)
for the period from August 1, 2004 through February 1, 2005, Three
Hundred Fifty Thousand Dollars ($350,000), with the balance thereof
payable in full on May 1, 2005. Borrower shall notify Lender at the
time of the request whether the Term Loan will be a Prime Rate Loan or
a LIBOR Loan. The Term Loan may be a mixture of a Prime Rate Loan and
LIBOR Loans. Lender, at the request of Borrower, subject to the
applicable notice and other provisions of Section 2.2 hereof, may
convert a Prime Rate Loan to a LIBOR Loan at any time and may convert a
LIBOR Loan to a Prime Rate Loan on any Interest Adjustment Date.
If the Term Loan is a Prime Rate Loan, Borrower shall pay
interest on the unpaid principal amount thereof outstanding from time
to time from the date thereof until paid, commencing August 1, 1999,
and continuing on the first day of each succeeding November, February,
May and August of each year and at the maturity thereof, at the Derived
Prime Rate from time to time in effect.
If the Term Loan is a LIBOR Loan, Borrower shall pay interest
on the unpaid principal amount of each LIBOR Loan outstanding from time
to time from the date thereof until paid, fixed in advance for each
Interest Period (but subject to changes in the Applicable Margin) as
herein provided for each such Interest Period. Interest on such LIBOR
Loans shall be at the Derived LIBOR Rate, payable on each Interest
Adjustment Date with respect to an Interest Period (provided that if an
Interest Period exceeds three (3) months, the interest must be paid
every three (3) months, commencing three (3) months from the beginning
of such Interest Period).
6. Section 2.4 of the Credit and Security Agreement is hereby
amended to add the following third paragraph to the end of Section 2.4 thereto:
Each prepayment of the Term Loan shall be applied to the
principal installments thereof in the inverse order of their respective
maturities.
7. The Credit and Security Agreement is hereby amended by
deleting Section 2.5 in its entirety, with the following being inserted in place
thereof:
(a) Borrower agrees to pay to Lender, as consideration
for its Revolving Credit Commitment hereunder, a commitment fee from
the Closing
[SIGNATURE PAGE]
<PAGE> 63
Date to and including the last day of the Commitment Period, equal to
(i) one-half of one percent (1/2%) per annum, times (ii) (A) the
Revolving Credit Commitment less (B) the average daily outstanding
principal amount of the Revolving Loans, less (C) the average daily
amount of all issued and outstanding Letters of Credit. The commitment
fee shall be payable monthly, in arrears, on May 1, 1998 and on the
first day of each month thereafter and on the last day of the
Commitment Period.
(b) Borrower shall pay to Lender an account
administration fee in the amount of Ten Thousand Dollars ($10,000) per
year, payable on the Closing Date and each anniversary date thereof,
during the Commitment Period.
(c) Borrower may at any time or from time to time
terminate in part the Revolving Credit Commitment to an amount not less
than the aggregate principal amount of the Revolving Loans and Letters
of Credit then outstanding, by giving Lender not fewer than five (5)
Business Days' notice, provided that any such partial termination shall
be in an amount of One Million Dollars ($1,000,000) or any integral
multiple thereof; and further provided, that no partial termination
shall occur, without Lender's written consent, if any portion of the
Term Loan, including all principal and interest, is then outstanding.
Each partial termination shall require the payment of a fee to Lender
in an amount equal to the amount of such partial termination,
multiplied by one-half of one percent (1/2%). After each such partial
termination, the commitment fees payable hereunder shall be calculated
upon the Revolving Credit Commitment as so reduced. Any partial
reduction in the Revolving Credit Commitment shall be effective during
the remainder of the Commitment Period.
(d) Borrower may at any time terminate in whole the
Revolving Credit Commitment by (i) giving Lender no fewer than five (5)
Business Days' notice, and (ii) payment of the Termination Fee;
provided, that no termination shall occur, without Lender's written
consent, if any portion of the Term Loan, including all principal and
interest, is outstanding. On the effective date of such termination
(Borrower having prepaid in full the unpaid principal balance (if any)
of the Revolving Credit Notes outstanding, together with all interest
(if any) and commitment and other fees accrued and unpaid and provided
that no issued and outstanding Letters of Credit shall exist), after
payment of the Termination Fee, Lender shall mark all of the Revolving
Credit Notes outstanding "Canceled" and deliver such Revolving Credit
Notes to Borrower.
8. The Credit and Security Agreement is hereby amended by
inserting the following new Subsection 2.7(c):
(c) In the event that the Revolving Credit Commitment is
terminated, Borrower shall immediately prepay to Lender the outstanding
balance of the Term Loan, including all principal and interest.
[SIGNATURE PAGE]
<PAGE> 64
9. The Credit and Security Agreement is hereby amended by
deleting Section 5.1 in its entirety, with the following being inserted in place
thereof:
SECTION 5.1. INSURANCE. Each Company shall at all times
maintain insurance upon its Inventory, Equipment and other personal and
real property in such amounts, for such period, and against such risks
as is adequate for the conduct of its business and value of its
properties, as reasonably determined by Borrower, with provisions
satisfactory to Lender for payment of all losses on Collateral and Term
Loan Collateral thereunder to Lender and such Company as their
interests may appear (loss payable endorsement in favor of Lender). Any
such policies of insurance shall provide for no fewer than thirty (30)
days prior written notice of cancellation to Lender. Any sums received
by Lender in payment of insurance losses, returns, or unearned premiums
under the policies covering the Collateral or Term Loan Collateral
shall, during the continuance of an Event of Default, be applied upon
any Debt whether or not the same is then due and payable, and at all
other times shall be delivered to Borrower for the purpose of
replacing, repairing, or restoring the insured property. Lender is
hereby authorized to act as attorney-in-fact for Borrower in obtaining,
adjusting, settling and canceling such insurance and indorsing any
drafts. In the event of failure to provide such insurance as herein
provided, Lender may, at its option, provide such insurance and
Borrower shall pay to Lender, upon demand, the cost thereof. Should
Borrower fail to pay such sum to Lender upon demand, interest shall
accrue thereon, from the date of demand until paid in full, at the
Default Rate. Within ten (10) days of Lender's written request,
Borrower shall furnish to Lender such information about Borrower's
insurance as Lender may from time to time reasonably request, which
information shall be prepared in form and detail satisfactory to Lender
and certified by a Financial Officer of Borrower.
10. The Credit and Security Agreement is hereby amended by
deleting Section 5.7 in its entirety, with the following being inserted in place
thereof:
(a) MINIMUM EBITDA. Borrower shall not suffer or permit
Consolidated EBITDA at the end of the applicable period to be less than
the following: (A) (i) for the period from April 1, 1999 through June
30, 1999, Three Million Two Hundred Thousand Dollars ($3,200,000); (ii)
for the period from April 1, 1999 through September 30, 1999, Six
Million Eight Hundred Thousand Dollars ($6,800,000); (iii) for the
period from April 1, 1999 through December 31, 1999, Ten Million Six
Hundred Thousand Dollars ($10,600,000), based upon the financial
statements of Borrower for the applicable fiscal quarters; and (B) for
the fiscal quarter ending March 31, 2000, and thereafter, Fourteen
Million Six Hundred Thousand Dollars ($14,600,000), based upon the
financial statements of Borrower for the most recently completed fiscal
quarter and the three (3) previous fiscal quarters (on a rolling four
(4) quarter basis).
(b) LEVERAGE. Borrower shall not suffer or permit the
Leverage Ratio to exceed (i) 7.00 to 1.00 on June 30, 1999; (ii) 6.75
to 1.00 on September
[SIGNATURE PAGE]
<PAGE> 65
30, 1999; (iii) 6.50 to 1.00 on December 31, 1999; and 6.25 to 1.00 on
March 31, 2000 and thereafter, based upon the financial statements of
Borrower for the most recently completed fiscal quarter and the three
(3) previous fiscal quarters (on a rolling four (4) quarter basis),
subject to the Proviso.
11. The Credit and Security Agreement is hereby amended by
inserting the following new Subsection 5.9(xx):
(xx) Liens securing Indebtedness or other obligations incurred
in connection with the Elsinore Acquisition in an aggregate amount not
to exceed One Hundred Thousand Dollars ($100,000).
12. The Credit and Security Agreement is hereby amended by
deleting the first sentence in Section 5.12 in its entirety, with the following
being inserted in place thereof:
No Company shall merge or consolidate with any other Person, or sell,
lease or transfer or otherwise dispose of any Collateral, Term Loan
Collateral or all or substantially all of its assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions) to any Person other than in the ordinary course of
business, except that if no Unmatured Event of Default or Event of
Default shall then exist or immediately thereafter shall begin to
exist:
13. The Credit and Security Agreement is hereby amended by
inserting the following sentence at the end of Section 5.13:
Notwithstanding anything to the contrary contained in this
Section 5.13, Lender acknowledges and consents to the Elsinore
Acquisition.
14. The Credit and Security Agreement is hereby amended by
deleting Section 5.18 in its entirety, with the following being inserted in
place thereof:
SECTION 5.18. CORPORATE NAMES AND LOCATION OF COLLATERAL
OR TERM LOAN COLLATERAL. No Obligor shall change its corporate name,
unless, in each case, such Obligor shall provide Lender with at least
thirty (30) days prior written notice thereof. No Obligor shall use
trade names, assumed names or fictitious names without giving Lender at
least thirty (30) days prior written notice thereof. Borrower shall
also provide Lender with at least thirty (30) days prior written
notification: (a) upon any material portion of an Obligor's Inventory
or Equipment being maintained or to be to be maintained at a location
other than those listed in Schedule 7.5; (b) of any change in the
location of the office where any Obligor's records pertaining to its
Accounts are kept; (c) of the location of any new places of business
and the changing or closing of any of its existing places of business;
and (d) of any change in any Obligor's chief executive office. In the
event of any of the foregoing, Borrower shall promptly execute and
deliver to Lender (and Borrower agrees that Lender may execute and
deliver the same as Borrower's irrevocable attorney-in-fact) new U.C.C.
financing
[SIGNATURE PAGE]
<PAGE> 66
statements describing the Collateral and/or Term Loan Collateral and
otherwise in form and substance sufficient for recordation wherever
necessary or appropriate, as determined in Lender's sole discretion, to
perfect or to continue the perfection of Lender's security interest in
the Collateral and/or Term Loan Collateral, based upon such new places
of business or names, and Borrower shall pay all filing and recording
fees and taxes in connection with the filing or recordation of such
financing statements and shall immediately reimburse Lender therefor if
Lender pays the same. Such amounts shall be Related Expenses hereunder.
15. The Credit and Security Agreement is hereby amended by
deleting Section 5.20 in its entirety, with the following being inserted in
place thereof:
SECTION 5.20. SUBSIDIARY GUARANTIES. Each United States
domestic Subsidiary of a Company created, acquired or held subsequent
to the Closing Date, shall immediately execute and deliver to Lender a
Guaranty of Payment of all of the Debt, and, if requested by Lender, a
security agreement covering all Collateral and Term Loan Collateral of
such Guarantor, as security for the Debt, such agreements to be in form
and substance substantially similar to the existing Loan Documents,
along with such corporate governance and authorization documents and an
opinion of counsel as may be deemed necessary or advisable by Lender.
16. The Credit and Security Agreement is hereby amended by
deleting Section 5.21 in its entirety, with the following being inserted in
place thereof:
SECTION 5.21. COLLATERAL; TERM LOAN COLLATERAL. Borrower
shall:
(a) at all reasonable times (during normal business hours and
with reasonable advance notice) allow Lender by or through any of its
officers, agents, employees, attorneys, or accountants to (i) examine,
inspect, and make extracts from Borrower's books and other records,
including, without limitation, the tax returns of Borrower; (ii)
arrange for verification of Borrower's Accounts, under reasonable
procedures, directly with Account Debtors or by other methods after
consultation with Borrower; and (iii) examine, inspect or perform
audits or appraisals of Borrower's Collateral and/or Term Loan
Collateral, wherever located; provided so long as no Unmatured Event of
Default or Event of Default then exists, Lender shall be limited to two
(2) audits or appraisals of the Term Loan Collateral in any calender
year;
(b) promptly furnish to Lender upon request (i) additional
statements and information with respect to the Collateral and/or Term
Loan Collateral, and all writings and information relating to or
evidencing any of Borrower's Accounts (including, without limitation,
computer printouts or typewritten reports listing the mailing addresses
of all present Account Debtors), and (ii) any other writings and
information as Lender may request;
[SIGNATURE PAGE]
<PAGE> 67
(c) notify Lender in writing promptly upon the creation of any
material amount of Accounts with respect to which the Account Debtor is
the United States of America or any state, city, county or other
governmental authority or any department, agency or instrumentality of
any of them, or any foreign government or instrumentality thereof or
any business which is located in a foreign country;
(d) at the request of Lender, mark its books and records of
Accounts to indicate the security interest granted to Lender hereunder;
(e) promptly notify Lender in writing of any information which
Borrower has or may receive with respect to the Collateral or Term Loan
Collateral which might in any manner materially and adversely affect
the value thereof or the rights of Lender with respect thereto;
(f) maintain the Equipment in operating condition and repair,
ordinary wear and tear and damage by casualty (provided such casualty
is covered by insurance pursuant to Section 5.1 hereof) excepted,
making all necessary replacements thereof so that the value and
operating efficiency thereof shall at all times be maintained and
preserved, and promptly inform Lender of any additions to or deletions
from the Equipment other than in the ordinary course; and
(g) upon request of Lender, promptly take such action and
promptly make, execute, and deliver all such additional and further
items, deeds, assurances, and instruments as Lender may require,
including, without limitation, financing statements, so as to
completely vest in and ensure to Lender its rights hereunder and in or
to the Collateral and/or Term Loan Collateral.
A carbon, photographic, or other reproduction of this
Agreement may, at the option of Lender, be used as a financing
statement. If certificates of title or applications for title are
issued or outstanding with respect to any of Borrower's Inventory or
Equipment, upon Lender's request, Borrower shall deliver such
certificate or application to Lender and cause the interest of Lender
to be properly noted thereon. Borrower hereby authorizes Lender or
Lender's designated agent (but without obligation by Lender to do so)
to incur Related Expenses (whether prior to, upon, or subsequent to any
Unmatured Event of Default or Event of Default), and Borrower shall
promptly repay, reimburse, and indemnify Lender for any and all Related
Expenses. If Borrower fails to keep and maintain an item of Equipment
which is necessary to the business of Borrower in operating condition,
Lender may (but shall not be required to) so maintain or repair all or
any part of such Equipment and the cost thereof shall be a Related
Expense. All Related Expenses are payable to Lender upon demand
therefor; Lender may, at its option, debit Related Expenses directly to
the Revolving Credit Note.
17. The Credit and Security Agreement is hereby amended by
deleting Section 6.1 in its entirety, with the following being inserted in place
thereof:
[SIGNATURE PAGE]
<PAGE> 68
SECTION 6.1. SECURITY INTEREST IN COLLATERAL OR TERM LOAN
COLLATERAL.
(a) In consideration of and as security for the full and
complete payment of all of the Debt (except for any portion of the Debt
incurred in connection with the Term Loan), Borrower does hereby grant
to Lender a security interest in and an assignment of the Collateral.
(b) In consideration of and as security for the full and
complete payment of all of the Debt (except for any portion of the Debt
incurred in connection with the Revolving Loans or Letters of Credit),
Borrower does hereby grant to Lender a security interest in and an
assignment of the Term Loan Collateral.
18. The Credit and Security Agreement is hereby amended by
deleting the first paragraph of Section 6.2 in its entirety, with the following
being inserted in place thereof:
SECTION 6.2. COLLECTIONS AND RECEIPT OF PROCEEDS BY
BORROWER. During the continuance of an Event of Default and upon
written notice to Borrower from Lender, (a) a Cash Collateral Account
shall be opened by Borrower at the main office of Lender and all such
lawful collections of Borrower's Accounts and such Proceeds of
Borrower's Accounts and Inventory shall be remitted daily by Borrower
to Lender in the form in which they are received by Borrower, either by
mailing or by delivering such collections and Proceeds to Lender,
appropriately endorsed for deposit in the Cash Collateral Account and
(b) a Term Loan Cash Collateral Account shall be opened by Borrower at
the main office of Lender and such Proceeds of Borrower's Term Loan
Collateral shall be remitted daily by Borrower to Lender in the form in
which they are received by Borrower, either by mailing or by delivering
such Proceeds to Lender, appropriately endorsed for deposit in the Term
Loan Cash Collateral Account. In the event that such notice is given to
Borrower from Lender, during the continuance of an Event of Default,
Borrower shall not commingle such collections or Proceeds with any of
Borrower's other funds or property, but shall hold such collections and
Proceeds separate and apart therefrom upon an express trust for Lender.
In such case, Lender may, in its sole discretion, at any time and from
time to time during the continuance of an Event of Default, apply all
or any portion of (i) the account balance in the Cash Collateral
Account as a credit against (A) the outstanding principal or interest
of any Revolving Credit Note or Revolving Credit Notes, or (B) any
other Debt (except for any portion of the Debt incurred in connection
with the Term Loan), or (ii) the account balance in the Term Loan Cash
Collateral Account as a credit against (A) the outstanding principal or
interest of any Term Note or Term Notes, or (B) any other Debt (except
for any portion of the Debt incurred in connection with the Revolving
Loans or Letters of Credit) If any remittance shall be dishonored, or
if, upon final payment, any claim with respect thereto shall be
[SIGNATURE PAGE]
<PAGE> 69
made against Lender on its warranties of collection, Lender may charge
the amount of such item against the Cash Collateral Account, the Term
Loan Cash Collateral Account or any other Deposit Account maintained by
Borrower with Lender, and, in any event, retain the same and Borrower's
interest therein as additional security for the Debt. Lender may, in
its sole discretion, at any time and from time to time during the
continuance of an Event of Default, release funds from the Cash
Collateral Account or Term Loan Cash Collateral Account to Borrower for
use in Borrower's business and Lender shall release such funds to
Borrower at all times when no Event of Default shall exist. The balance
in the Cash Collateral Account or Term Loan Cash Collateral Account may
be withdrawn by Borrower upon termination of this Agreement and payment
in full of all of the Debt or at any time that no Event of Default is
in existence. At Lender's request, during the continuance of an Event
of Default, Borrower shall cause all remittances representing
collections and Proceeds of Collateral and/or Term Loan Collateral to
be mailed to a lock box to which Lender shall have access for the
processing of such items in accordance with the provisions, terms, and
conditions of Lender's customary lock box agreement. The provisions of
this Section 6.2 shall only apply during the continuance of any Event
of Default.
19. The Credit and Security Agreement is hereby amended by
deleting Section 6.3 in its entirety, with the following being inserted in place
thereof:
SECTION 6.3. COLLECTIONS AND RECEIPT OF PROCEEDS BY
LENDER. Borrower hereby constitutes and appoints Lender, or Lender's
designated agent, as Borrower's attorney-in-fact to exercise, at any
time during the continuance of an Event of Default, all or any of the
following powers which, being coupled with an interest, shall be
irrevocable until the complete and full payment of all of the Debt:
(a) to receive, retain, acquire, take, endorse, assign,
deliver, accept, and deposit, in Lender's name or Borrower's name, any
and all of Borrower's cash, instruments, chattel paper, documents,
Proceeds of Accounts, Proceeds of Inventory, collection of Accounts,
and any other writings in each case to the extent relating to any of
the Collateral or Term Loan Collateral;
(b) to transmit to Account Debtors, on any or all of
Borrower's Accounts, notice of assignment to Lender thereof and
Lender's security interest therein and to request from such Account
Debtors at any time, in Lender's name or in Borrower's name,
information concerning Borrower's Accounts and the amounts owing
thereon;
(c) to transmit to purchasers of any or all of Borrower's
Inventory, notice of Lender's security interest therein, and to request
from such purchasers at any time, in Lender's name or in Borrower's
name, information concerning Borrower's Inventory and the amounts owing
thereon by such purchasers;
[SIGNATURE PAGE]
<PAGE> 70
(d) to notify and require Account Debtors on Borrower's
Accounts and purchasers of Borrower's Inventory to make payment of
their indebtedness directly to Lender;
(e) to take or bring, in Lender's name or Borrower's
name, all steps, actions, suits, or proceedings deemed by Lender
necessary or desirable to effect the receipt, enforcement, and
collection of the Collateral and Term Loan Collateral; and
(f) to accept all collections in any form relating to (i)
the Collateral, including remittances which may reflect deductions, and
to deposit the same, into Borrower's Cash Collateral Account or, at the
option of Lender, to apply them as a payment against any Revolving
Credit Note or Revolving Credit Notes or any other Debt (except for any
portion of the Debt incurred in connection with the Term Loan), or (ii)
the Term Loan Collateral, including remittances which may reflect
deductions, and to deposit the same, into Borrower's Term Loan Cash
Collateral Account or, at the option of Lender, to apply them as a
payment against any Term Note or Term Notes or any other Debt (except
for any portion of the Debt incurred in connection with the Revolving
Loans or Letters of Credit).
20. Section 7.5 of the Credit and Security agreement is hereby
amended by deleting the last sentence in Section 7.5 in its entirety, with the
following being inserted in place thereof:
As of the date hereof, the Companies have places of business or
maintain their Inventory or Equipment at the locations set forth on
Schedule 7.5.
21. The Credit and Security Agreement is hereby amended by
deleting Section 7.7 in its entirety, with the following being inserted in place
thereof:
SECTION 7.7. LIENS AND SECURITY INTERESTS. On and after
the Closing Date, except for Liens permitted pursuant to Section 5.9
hereof, (a) there is no financing statement outstanding covering any
personal property of any Company, other than a financing statement in
favor of Lender, if any; (b) there is no mortgage outstanding covering
any real property of any Company, other than a mortgage in favor of
Lender, if any; and (c) no real or personal property of any Company is
subject to any security interest or Lien of any kind other than any
security interest or Lien which may be granted to Lender. Upon the
filing of the appropriate financing statements, Lender has a valid and
enforceable first security interest in the Collateral and Term Loan
Collateral, subject to Liens permitted under Section 5.9 hereof. On and
after the Closing Date, neither Borrower nor any Subsidiary has entered
into any contract or agreement which would prohibit Lender from
acquiring a security interest, mortgage or other Lien on, or a
collateral assignment of, any of the property or assets of Borrower
and/or any of its Subsidiaries except for (i) the Note Purchase
Agreement, (ii) any contract or agreement in connection with any
Capitalized Lease Obligation or purchase money indebtedness or (iii)
any contract or agreement in connection with any financing provided to
a foreign Subsidiary of Borrower.
[SIGNATURE PAGE]
<PAGE> 71
22. The Credit and Security Agreement is hereby amended by
deleting Section 9.5 in its entirety, with the following being inserted in place
thereof:
SECTION 9.5. COLLATERAL; TERM LOAN COLLATERAL. Upon the
occurrence of any Event of Default, and at all times during the
continuance thereof, Lender shall have the rights and remedies of a
secured party under the Ohio Revised Code, in addition to the rights
and remedies of a secured party provided elsewhere within this
Agreement, in any other writing executed by Borrower or otherwise
provided by law. Lender may require Borrower to assemble the Collateral
and/or Term Loan Collateral, which Borrower agrees to do, and make it
available to Lender at a reasonably convenient place to be designated
by Lender. Lender may, with or without notice to or demand upon
Borrower and with or without the aid of legal process, make use of such
force as may be necessary to enter any premises where the Collateral,
Term Loan Collateral, or any thereof, may be found and to take
possession thereof (including anything found in or on the Collateral
and/or Term Loan Collateral that is not specifically described in this
Agreement, each of which findings shall be considered to be an
accession to and a part of the Collateral and/or Term Loan Collateral)
and for that purpose may pursue the Collateral and/or Term Loan
Collateral wherever the same may be found, without liability for
trespass or damage caused thereby to Borrower. After any delivery or
taking of possession of the Collateral, Term Loan Collateral, or any
thereof, pursuant to this Agreement, then, with or without resort to
Borrower personally or any other Person or property, all of which
Borrower hereby waives, and upon such terms and in such manner as
Lender may deem advisable, Lender, in its discretion, may sell, assign,
transfer and deliver any of the Collateral or Term Loan Collateral at
any time, or from time to time. No prior notice need be given to
Borrower or to any other Person in the case of any sale of Collateral
or Term Loan Collateral which Lender determines to be perishable or to
be declining speedily in value or which is customarily sold in any
recognized market, but in any other case Lender shall give Borrower not
fewer than ten (10) days' prior notice of either the time and place of
any public sale of the Collateral or Term Loan Collateral or of the
time after which any private sale or other intended disposition thereof
is to be made. Borrower waives advertisement of any such sale and
(except to the extent specifically required by the preceding sentence)
waives notice of any kind in respect of any such sale. At any such
public sale, Lender may purchase the Collateral, Term Loan Collateral,
or any part thereof, free from any right of redemption, all of which
rights Borrower hereby waives and releases. After deducting all Related
Expenses, and after paying all claims, if any, secured by Liens having
precedence over this Agreement, Lender shall apply the net proceeds of
each such sale to or toward the payment of the Debt, whether or not
then due, in such order and by such division as Lender, in its sole
discretion, may deem advisable. Any excess, to the extent permitted by
law, shall be paid to Borrower, and Borrower shall remain liable for
any deficiency. In addition, Lender shall at
[SIGNATURE PAGE]
<PAGE> 72
all times have the right to obtain new appraisals of Borrower, the
Collateral or Term Loan Collateral, the reasonable cost of which shall
be paid by Borrower.
23. The Credit and Security Agreement is hereby amended by adding
Exhibit A-1 in the form of Exhibit 1 attached hereto.
24. As a condition precedent to the effectiveness of this First
Amendment Agreement, Borrower shall:
(a) execute and deliver to Lender a Term Note dated of even date
herewith, and such Term Note shall be in the form and substance of Exhibit 1
attached hereto;
(b) cause each Guarantor of Payment to consent, agree to and
acknowledge the terms of this First Amendment Agreement, and such Guarantor
Acknowledgment shall be in the form and substance of Exhibit 2 attached hereto;
(c) (i) cause each Guarantor of Payment, other than EAC, to
execute and deliver to Lender an amended and restated security agreement, in
form and substance satisfactory to Lender ("Amended and Restated Security
Agreement) and (ii) cause EAC to execute and deliver to Lender a guaranty of
payment of debt ("EAC Guaranty") and security agreement ("EAC Security
Agreement");
(d) execute and deliver, and cause each Guarantor of Payment to
execute and deliver, to Lender, Uniform Commercial Code financing statements
and/or amendments to Uniform Commercial Code financing statements, in form and
substance satisfactory to Lender;
(e) pay to Lender, on the date hereof, an amendment fee in an
amount equal to Twenty-Five Thousand Dollars ($25,000);
(f) deliver evidence to Lender, in form and substance reasonably
satisfactory to Lender, that the Elsinore Acquisition has been completed and
that all necessary documents or instruments have been filed with all appropriate
governmental offices;
(g) deliver to Lender copies of the Elsinore Acquisition
Documents, including all legal opinions delivered in connection therewith, and,
whereby, each of which shall allow Lender to rely on such legal opinion, in form
and substance reasonably satisfactory to Lender;
(h) deliver to Lender a good standing certificate for Borrower and
each Guarantor of Payment, issued on or about the date hereof by the Secretary
of State in the state(s) where Borrower or such Guarantor of Payment is
incorporated and, as to EAC, qualified as a foreign corporation;
(i) deliver to Lender a pay-off letter and Uniform Commercial Code
termination statements from any current holder of a Lien on the Elsinore Assets,
if any, other than the Liens permitted pursuant to Section 5.9 hereof;
[SIGNATURE PAGE]
<PAGE> 73
(j) deliver to Lender evidence of any necessary consent by CIBC
Oppenheimer Corp. to the Elsinore Acquisition;
(k) deliver to Lender an officer's certificate (i) certifying the
names of the officers of Borrower authorized to sign this First Amendment and
any Loan Document or other Related Writings to which it is a party, together
with the true signatures of such officers, and (ii) certified copies of the
resolutions of the board of directors of Borrower evidencing approval of the
execution and delivery of this First Amendment and any Loan Document or other
Related Writings to which it is a party;
(l) cause to be delivered to Lender an officer's certificate (i)
certifying the names of the officers of each Subsidiary authorized to sign, as
applicable, the Guarantor Acknowledgment, the Amended and Restated Security
Agreement, the Elsinore Guaranty, the EAC Security Agreement and any Loan
Document or other Related Writings to which it is a party, together with the
true signatures of such officers, and (ii) certified copies of the resolutions
of the board of directors of each Subsidiary evidencing approval of the
execution and delivery, as applicable, of the Guarantor Acknowledgment, the
Amended and Restated Security Agreement, the Elsinore Guaranty, the EAC Security
Agreement and any Loan Document or other Related Writings to which it is a
party;
(m) deliver to Lender a landlord's waiver, in form and substance
satisfactory to Lender, for Borrower's location at Ft. Lauderdale International
Airport, 1815 Griffin Road, Suite 300, Dania, Florida 33004;
(n) deliver to Lender revised schedules to the Credit and Security
Agreement, as necessary, in form and substance reasonably satisfactory to
Lender;
(o) deliver to Lender evidence of insurance on ACORD 27 form, and
otherwise reasonably satisfactory to Lender, of adequate personal property and
liability insurance of Borrower and each Guarantor of Payment, with Lender
listed as loss payee and additional insured;
(p) deliver to Lender evidence satisfactory to Lender that
Borrower has a minimum of Two Million Dollars ($2,000,000) available under the
Revolving Credit Commitment for unborrowed Revolving Loans or Letters of Credit
on the date hereof;
(q) deliver to Lender an opinion of counsel for Borrower, in form
and substance reasonably satisfactory to Lender, including an opinion that no
consent or waiver is required to execute this First Amendment pursuant to the
Indenture, dated as of August 18, 1998 (the "Indenture"), by and among Borrower,
certain Guarantors (as defined in the Indenture) and State Street Bank and Trust
Company, as Trustee; and
(r) pay all reasonable legal fees and expenses of Lender incurred
in connection with this First Amendment Agreement.
[SIGNATURE PAGE]
<PAGE> 74
25. Borrower hereby represents and warrants to Lender that (a)
Borrower has the legal power and authority to execute and deliver this First
Amendment Agreement; (b) the officers executing this First Amendment Agreement
have been duly authorized to execute and deliver the same and bind Borrower with
respect to the provisions hereof; (c) the execution and delivery hereof by
Borrower and the performance and observance by Borrower of the provisions hereof
do not violate or conflict with the organizational agreements of Borrower or any
law applicable to Borrower or result in a breach of any provision of or
constitute a default under any other agreement, instrument or document binding
upon or enforceable against Borrower; (d) no Unmatured Event of Default or Event
of Default exists under the Credit and Security Agreement, nor will any occur
immediately after the execution and delivery of this First Amendment Agreement
or by the performance or observance of any provision hereof; (e) Borrower is not
aware of any claim or offset against, or defense or counterclaim to, any of
Borrower's obligations or liabilities under the Credit and Security Agreement or
any Related Writing; (f) Borrower is in full compliance under the Note Purchase
Agreement and will remain in full compliance immediately after the execution and
delivery of this First Amendment Agreement, the Elsinore Acquisition or by the
performance or observance of any provision hereof; (g) the representations and
warranties set forth in Article VII of the Credit and Security Agreement are
true and correct on and as of the date hereof; and (h) this First Amendment
Agreement constitutes a valid and binding obligation of Borrower in every
respect, enforceable in accordance with its terms, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency or other similar
laws affecting creditors' rights generally.
26. In consideration of this First Amendment Agreement, Borrower
hereby waives and releases Lender and its respective directors, officers,
employees, attorneys, affiliates and subsidiaries from any and all such claims,
offsets, defenses and counterclaims of which Borrower is aware, such waiver and
release being with full knowledge and understanding of the circumstances and
effect thereof and after having consulted legal counsel with respect thereto.
27. Each reference that is made in the Credit and Security
Agreement or any other writing to the Credit and Security Agreement shall
hereafter be construed as a reference to the Credit and Security Agreement as
amended hereby. Except as herein otherwise specifically provided, all provisions
of the Credit and Security Agreement shall remain in full force and effect and
be unaffected hereby. This First Amendment Agreement is a Related Writing as
defined in the Credit and Security Agreement.
28. This First Amendment Agreement may be executed in any number
of counterparts, by different parties hereto in separate counterparts and by
facsimile signature, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute but
one and the same agreement.
29. The rights and obligations of all parties hereto shall be
governed by the laws of the State of Ohio, without regard to principles of
conflicts of laws.
[The remainder of this page is intentionally left blank.]
[SIGNATURE PAGE]
<PAGE> 75
30. JURY TRIAL WAIVER. BORROWER AND LENDER WAIVE ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE, BETWEEN BORROWER AND LENDER ARISING OUT OF, IN CONNECTION WITH,
RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR
MODIFY LENDER'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY PROVISION CONTAINED
IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT BETWEEN BORROWER AND
LENDER.
Address: 1815 Griffin Road, Suite 300 AIRCRAFT SERVICE INTERNATIONAL
Ft. Lauderdale International Airport GROUP, INC.
Dania, Florida 33004-2252
Attention: President By:
Print Name:
Title
Address: 127 Public Square KEY CORPORATE CAPITAL INC.
Cleveland, Ohio 44114-1306
Attention: Manager of Structured By:
Finance Group Print Name:
Title:
EXHIBIT 1
EXHIBIT A-1
TERM NOTE
$5,000,000 Dania, Florida
May ___, 1999
FOR VALUE RECEIVED, the undersigned, AIRCRAFT SERVICE INTERNATIONAL
GROUP, INC. ("Borrower") promises to pay to the order of KEY CORPORATE CAPITAL
INC. ("Lender") at its Main Office at 127 Public Square, Cleveland, Ohio
44114-1306, or such other place as Lender shall designate, the principal sum of
FIVE MILLION DOLLARS
in lawful money of the United States of America in twenty-three (23) consecutive
quarter-annual installments, commencing August 1, 1999 and continuing on the
first day of each succeeding November, February, May and August thereafter as
follows: (i) for the period from August 1,
<PAGE> 76
1999 through May 1, 2001, One Hundred Twenty-Five Thousand Dollars ($125,000),
(ii) for the period from August 1, 2001 through May 1, 2003, One Hundred
Eighty-Seven Thousand Five Hundred Dollars ($187,500), (iii) for the period from
August 1, 2003 through May 1, 2004, Two Hundred Seventy-Five Thousand Dollars
($275,000), and (iv) for the period from August 1, 2004 through February 1,
2005, Three Hundred Fifty Thousand Dollars ($350,000), with the balance thereof
payable in full on May 1, 2005. As used herein, "Credit and Security Agreement"
means the Credit and Security Agreement dated as of April 2, 1998, between
Borrower and Lender, as amended and as the same may from time to time be further
amended, restated or otherwise modified. Capitalized terms used herein shall
have the meanings ascribed to them in the Credit and Security Agreement.
Borrower also promises to pay interest on the unpaid principal amount
of the Term Loan from time to time outstanding, from the date of the Term Loan
until the payment in full thereof, at the rates per annum which shall be
determined in accordance with the provisions of Section 2.1C of the Credit and
Security Agreement. Such interest shall be payable on each date provided for in
such Section 2.1C; provided, however, that interest on any principal portion
which is not paid when due shall be payable on demand.
The portions of the principal sum hereof from time to time representing
Prime Rate Loans and LIBOR Loans, and payments of principal of either thereof,
shall be shown on the records of Lender by such method as Lender may generally
employ; provided, however, that failure to make any such entry shall in no way
detract from Borrower's obligations under this Note.
If this Note shall not be paid at maturity, whether such maturity
occurs by reason of lapse of time or by operation of any provision for
acceleration of maturity contained in the Credit and Security Agreement, the
principal hereof and the unpaid interest thereon shall bear interest, until
paid, at a rate per annum equal to the Default Rate. All payments of principal
of and interest on this Note shall be made in immediately available funds.
This Note is the Term Note referred to in the Credit and Security
Agreement. Reference is made to the Credit and Security Agreement for a
description of the right of the undersigned to anticipate payments hereof, the
right of the holder hereof to declare this Note due prior to its stated
maturity, and other terms and conditions upon which this Note is issued.
Except as expressly provided in the Credit and Security Agreement,
Borrower expressly waives presentment, demand, protest and notice of any kind.
JURY TRIAL WAIVER. BORROWER WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE
IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE,
BETWEEN BORROWER AND LENDER, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS
AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS
WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND
<PAGE> 77
OR MODIFY LENDER'S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY PROVISION
CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT BETWEEN
BORROWER AND LENDER.
AIRCRAFT SERVICE INTERNATIONAL
GROUP, INC.
By:
Print Name:
Title:
<PAGE> 78
EXHIBIT 2
GUARANTOR ACKNOWLEDGMENT
The undersigned acknowledge and agree (a) to remain bound by the terms
and conditions of the Guaranty of Payment of Debt to which it is a party, and
(b) that the liability of the undersigned pursuant to such Guaranty of Payment
of Debt shall continue and remain in full force and effect. The undersigned
hereby consent to Borrower's execution of the First Amendment Agreement and
further agree that Lender may rely on this acknowledgment in entering into the
First Amendment Agreement.
IN WITNESS WHEREOF, the foregoing acknowledgment has been executed and
delivered as of May ___, 1999.
AIRCRAFT SERVICE INTERNATIONAL, INC.
By:
Print Name:
Title:
FLORIDA AVIATION FUELING CO.,LTD.
By:
Print Name:
Title:
DISPATCH SERVICES, INC.
By:
Print Name:
Title:
<PAGE> 1
EXHIBIT 21.1
Aircraft Service International Group, Inc. Subsidiaries:
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION OF NAMES UNDER WHICH SUCH
NAME OF SUBSIDIARY INCORPORATION OR ORGANIZATION SUBSIDIARY DOES BUSINESS
- -------------------------------------- -------------------------------- -----------------------------------------
<S> <C> <C>
Aircraft Service International, Inc. Delaware Aircraft Service International, Inc.
Dispatch Services, Inc. Florida Dispatch Services, Inc.
Florida Aviation Fueling Company, Inc. Florida Florida Aviation Fueling Company, Inc.
Elsinore Acquisition Corporation Delaware Elsinore Acquisition Corporation
Bahamas Airport Services, Ltd. Bahamas Islands Bahamas Airport Services, Ltd.
Freeport Flight Services, Ltd. Bahamas Islands Freeport Flight Services, Ltd.
Aircraft Service, Ltd. United Kingdom Aircraft Service, Ltd.
ASIG U.K., Ltd. United Kingdom ASIG U.K., Ltd.
ASIG Europe, Ltd. United Kingdom ASIG Europe, Ltd.
ASII (Aircraft Service Canada), Ltd. Canada ASII (Aircraft Service Canada), Ltd.
ASII Holding GmbH Germany ASII Holding GmbH
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF AIRCRAFT SERVICE INTERNATIONAL GROUP, INC. FOR THE
TWELVE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,311
<SECURITIES> 0
<RECEIVABLES> 16,988
<ALLOWANCES> 567
<INVENTORY> 2,095
<CURRENT-ASSETS> 24,602
<PP&E> 53,065
<DEPRECIATION> 6,176
<TOTAL-ASSETS> 123,754
<CURRENT-LIABILITIES> 21,477
<BONDS> 82,927
0
0
<COMMON> 0
<OTHER-SE> 19,350
<TOTAL-LIABILITY-AND-EQUITY> 123,754
<SALES> 123,441
<TOTAL-REVENUES> 123,441
<CGS> 99,035
<TOTAL-COSTS> 116,621
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 36
<INTEREST-EXPENSE> 11,281
<INCOME-PRETAX> (4,507)
<INCOME-TAX> 50
<INCOME-CONTINUING> (4,557)
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<EXTRAORDINARY> (213)
<CHANGES> 0
<NET-INCOME> (4,770)
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<EPS-DILUTED> 47,700
</TABLE>
