<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
MAY 31, 1996
---------------------------------------------------
Date of Report (Date of earliest event reported)
HUDSON GENERAL CORPORATION
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(Exact Name of Registrant as Specified in Charter)
<TABLE>
<S> <C> <C>
DELAWARE 1-5896 13-1947395
---------------------------- ------------------------ --------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
</TABLE>
111 GREAT NECK ROAD, GREAT NECK, NEW YORK 11021
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(Address of Principal Executive Office) (Zip Code)
(516) 487-8610
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(Registrant's telephone number, including area code)
Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Item 2. Acquisition or Disposition of Assets
On May 31, 1996, Hudson General Corporation (the "Registrant")
consummated the transaction in which Lufthansa Airport and Ground Services GmbH
("LAGS"), in accordance with the terms of a Unit Purchase and Option Agreement
dated February 27, 1996 between the Registrant and LAGS (the "Purchase
Agreement"), acquired a 26% interest in Hudson General LLC ("Hudson LLC"), a
newly-formed subsidiary of the Registrant which, effective June 1, 1996, is
conducting the Registrant's aviation services business (the "Aviation Services
Business"). LAGS is a wholly-owned subsidiary of Deutsche Lufthansa AG.
Effective June 1, 1996, (i) the Registrant transferred substantially
all of the assets of the Aviation Services Business to Hudson LLC, and (ii)
Hudson LLC assumed certain obligations of the Aviation Services Business and
also assumed, as co-obligor with the Registrant, all of the Registrant's
obligations on the entire $28.9 million outstanding balance of the Registrant's
7% Convertible Subordinated Debentures due 2011(the "Debentures").
The Registrant owns a 74% interest in Hudson LLC. LAGS acquired its
26% interest in Hudson LLC for a price, after giving effect to certain
adjustments, of approximately $15.85 million paid in cash at the closing, plus
approximately $7.84 million, which is subject to potential downward adjustment
based on the earnings of the Aviation Services Business, payable in three
annual installments in September 1996, 1997 and 1998.
Pursuant to the Purchase Agreement, LAGS has an option, exercisable on
October 1 of each year from 1996 through 2000, effective as of the preceding
July 1, to increase its interest in Hudson LLC from 26% to a maximum of 49%.
The option may be exercised on no more than two occasions, and the first
exercise must be for at least an additional 12% interest in Hudson LLC. The
option price is based on a formula related to the average earnings of the
Aviation Services Business over the preceding four fiscal years, subject to
certain minimum and maximum amounts.
The Aviation Services Business constituted approximately 70% of the
Registrant's assets and virtually all of its revenues. The Registrant will
continue to manage the Aviation Services Business conducted by Hudson LLC.
The transaction was approved by the holders of a majority of the
Registrant's outstanding shares of stock at a Special Meeting of Stockholders
held on May 23, 1996 (the "Special Meeting").
The Purchase Agreement was filed as Exhibit 99.1 to the Registrant's
Current Report on Form 8-K, dated March 6, 1996, and is incorporated herein by
reference. The description herein of the Purchase Agreement and the
transactions provided for therein does not purport to be complete and is
qualified in its entirety by reference to the Purchase Agreement.
On May 31, 1996, the Registrant, LAGS and Hudson LLC entered into a
Limited Liability Company Agreement, effective as of June 1, 1996, which is
filed as an exhibit to this report and is incorporated herein by reference.
The press releases issued by the Registrant on May 23, 1996 and May
31, 1996 in connection with the foregoing transaction are filed as exhibits to
this report and are incorporated herein by reference.
2
<PAGE> 3
Item 5. Other Events
On June 3, 1996, the Registrant called for redemption $15,825,000
aggregate principal amount of the Debentures. The redemption date is July 22,
1996. The redemption price is 100% of the principal amount of the Debentures,
together with accrued and unpaid interest thereon of $1.36 per $1,000 principal
amount of Debentures from July 15, 1996 to the July 22, 1996 redemption date,
for a total redemption price of $1,001.36 for each $1,000 principal amount of
Debentures.
The Debentures called for redemption are convertible until the close
of business on July 22, 1996 into shares of the Registrant's Common Stock at
the conversion price of $32.75 per share (equivalent to a conversion rate of
approximately 30.53 shares of Common Stock for each $1,000 principal amount of
Debentures).
The press release issued by the Registrant on June 3, 1996 in
connection with the redemption of Debentures as described above is filed as an
exhibit to this report and is incorporated herein by reference.
3
<PAGE> 4
Item 7. Financial Statements and Exhibits
(b) Pro Forma Financial Information
As described in Item 2 above, effective June 1, 1996 LAGS acquired a
26% interest in Hudson LLC, which will conduct the Aviation Services Business.
Effective as of the above date, Hudson LLC has: (i) assumed, as co-obligor with
the Registrant, the approximately $28.9 million outstanding principal amount of
the Debentures; (ii) a pro forma consolidated stockholders' equity which
reflects a consolidated ratio of stockholders' equity to total assets at
December 31, 1995 of at least 27% after adding back capital contribution
receivable of $7,838,000 to pro forma stockholders' equity; and (iii) agreed to
pay the Registrant overhead fees which for the period through and including
June 30, 1997 will be in an amount equal to 3% of total revenues from U.S.
operations, plus 1% of total revenues from Canadian operations.
The following pro forma condensed consolidated balance sheets as of
March 31, 1996 and pro forma condensed consolidated statements of earnings for
the year ended June 30, 1995 and the nine months ended March 31, 1996
(collectively, the "Pro Forma Statements") assume that the transaction for
which pro forma effects are shown was completed as of March 31, 1996 for the
pro forma condensed consolidated balance sheets, and as of July 1, 1994 for the
pro forma condensed consolidated statements of earnings. The Pro Forma
Statements are for illustrative purposes only and are not necessarily
indicative of what the Registrant's and Hudson LLC's results of operations or
balance sheets would actually have been if the transaction had been concluded
as of the assumed dates, nor are they necessarily indicative of future
financial performance or results of operations.
The Pro Forma Statements and accompanying notes thereto should be read
in conjunction with: (i) the Consolidated Financial Statements of the
Registrant and notes thereto appearing in the Registrant's definitive proxy
statement dated April 25, 1996 furnished to the Registrant's stockholders in
connection with the Special Meeting and filed with the Securities and Exchange
Commission, and (ii) the Registrant's financial statements and notes thereto
appearing in the Registrant's Quarterly Report on Form 10-Q dated May 6, 1996
for the quarterly period ended March 31, 1996.
4
<PAGE> 5
HUDSON GENERAL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED, AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Transfer To Pro Forma
Historical Hudson LLC(1) Adjustments Pro Forma
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents . . . . . . . . . . $15,770 (3,771) (1,500)(2) $10,499
Accounts and notes receivable - net . . . . . 24,431 (11,999) 12,432
Deferred income taxes . . . . . . . . . . . . 4,602 (1,300) 3,302
Prepaid expenses and other assets . . . . . . 1,996 (1,961) 35
--------------------------------------------------------------------
Total current assets . . . . . . . . . . . . . 46,799 (19,031) (1,500) 26,268
Property, equipment and leasehold rights - net . . 38,573 (38,239) 334
Investment in Hawaii joint venture - net . . . . . 15,304 0 15,304
Investment in Hudson LLC . . . . . . . . . . . . . 0 0 7,885(3) 7,885
Other assets - net . . . . . . . . . . . . . . . . 3,660 (2,930) 730
--------------------------------------------------------------------
$104,336 (60,200) 6,385 $50,521
====================================================================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable . . . . . . . . . . . . . . . $15,368 (15,267) $101
Accrued expenses and other liabilities . . . . 27,953 (21,138) 6,815
--------------------------------------------------------------------
Total current liabilities . . . . . . . . . 43,321 (36,405) 0 6,916
--------------------------------------------------------------------
Long-term debt, subordinated . . . . . . . . . . . 28,990 (28,990) 0
Deferred income taxes . . . . . . . . . . . . . . . 1,857 0 1,857
--------------------------------------------------------------------
Total noncurrent liabilities . . . . . . . . 30,847 (28,990) 0 1,857
--------------------------------------------------------------------
Stockholders' Equity:
Serial preferred stock . . . . . . . . . . . . 0 0 0
Common stock . . . . . . . . . . . . . . . . . 1,268 0 1,268
Paid in capital . . . . . . . . . . . . . . . 6,974 3,777 6,385 (2,3) 17,136
Retained earnings . . . . . . . . . . . . . . 25,354 0 25,354
Equity adjustments from foreign currency
translation . . . . . . . . . . . . . . . . (1,418) 1,418 0
Treasury stock . . . . . . . . . . . . . . . . (2,010) 0 (2,010)
--------------------------------------------------------------------
Total stockholders' equity . . . . . . . . . 30,168 5,195 6,385 41,748
--------------------------------------------------------------------
$104,336 (60,200) 6,385 $50,521
====================================================================
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
5
<PAGE> 6
HUDSON LLC
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1996
(UNAUDITED, AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Transfer From Pro Forma
Historical Parent Company(1) Adjustments Pro Forma
---------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents . . . . . . . $0 3,771 25(2) $3,796
Accounts and notes receivable - net . . 0 11,999 11,999
Deferred income taxes . . . . . . . . . 0 1,300 1,300
Prepaid expenses and other assets . . . 0 1,961 1,961
------------------------------------------------------------------------
Total current assets . . . . . . . . . 0 19,031 25 19,056
Property, equipment and leasehold rights - net 0 38,239 38,239
Other assets - net . . . . . . . . . . . . . 0 2,930 2,930
------------------------------------------------------------------------
$0 60,200 25 $60,225
========================================================================
Liabilities and Equity
Current Liabilities:
Accounts payable . . . . . . . . . . . . $0 15,267 $15,267
Accrued expenses and other liabilities . 0 21,138 21,138
------------------------------------------------------------------------
Total current liabilities. . . . . . . 0 36,405 0 36,405
------------------------------------------------------------------------
Long-term debt, subordinated . . . . . . . . 0 28,990 (15,825) (2) 13,165
------------------------------------------------------------------------
Total noncurrent liabilities . . . . 0 28,990 (15,825) 13,165
------------------------------------------------------------------------
Equity:
Contributed capital . . . . . . . . . . 0 (3,777) 15,850 (2) 12,073
Equity adjustments from foreign currency
translation . . . . . . . . . . . . . 0 (1,418) (1,418)
------------------------------------------------------------------------
Total equity 0 (5,195) 15,850 10,655
------------------------------------------------------------------------
$0 60,200 25 $60,225
========================================================================
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial
Statements.
6
<PAGE> 7
HUDSON GENERAL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FISCAL YEAR ENDED JUNE 30, 1995
(UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Transfer To Pro Forma
Historical Hudson LLC(1) Adjustments Pro Forma
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . $135,453 (135,355) $ 98
---------------------------------------------------------------------
Costs and expenses
Operating . . . . . . . . . . . . . . . . . . . . . . 106,070 (106,070) 0
Depreciation and amortization . . . . . . . . . . . . 7,528 (7,450) 78
Selling, general and administrative . . . . . . . . . 14,306 (11,130) 3,176
Interest -- net . . . . . . . . . . . . . . . . . . . 559 (2,030) (1,471)
---------------------------------------------------------------------
Total costs and expenses . . . . . . . . . . . . . . . . . 128,463 (126,680) 0 1,783
---------------------------------------------------------------------
Earnings before equity in earnings (loss) of
investees and provision (benefit) for income taxes. . . 6,990 (8,675) 0 (1,685)
Equity in loss of joint venture . . . . . . . . . . . . . (2,747) 0 (2,747)
Equity in earnings of Hudson LLC . . . . . . . . . . . . . 0 0 9,063 (4) 9,063
---------------------------------------------------------------------
Earnings before provision (benefit) for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . 4,243 (8,675) 9,063 4,631
Provision (benefit) for income taxes . . . . . . . . . . . (350) 1,300 (5) 82 (5) 1,032
---------------------------------------------------------------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $ 4,593 (9,975) 8,981 $ 3,599
=====================================================================
Earnings per share, primary . . . . . . . . . . . . . . . $ 3.69 $ 2.89
======== ========
Earnings per share, fully diluted . . . . . . . . . . . . $ 2.67 $ 2.38
======== ========
Weighted average common and common
equivalent shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . 1,245 1,245
Fully diluted . . . . . . . . . . . . . . . . . . . 2,145 (483) (6) 1,662
===== ===== =====
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
7
<PAGE> 8
HUDSON LLC
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
FISCAL YEAR ENDED JUNE 30, 1995
(UNAUDITED, AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Transfer From Pro Forma
Historical Parent Company(1) Adjustments Pro Forma
---------- ----------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $0 135,355 862(7) $136,217
-------------------------------------------------------------------------
Costs and expenses
Operating . . . . . . . . . . . . . . . 0 106,070 106,070
Depreciation and amortization . . . . . 0 7,450 7,450
Selling, general and administrative . . 0 11,130 11,130
Interest . . . . . . . . . . . . . . . . 0 2,030 (1,108) (8) 922
-------------------------------------------------------------------------
Total costs and expenses . . . . . . . . . . 0 126,680 (1,108) 125,572
-------------------------------------------------------------------------
Earnings before benefit for income taxes . . 0 8,675 1,970 10,645
Benefit for income taxes . . . . . . . . . . 0 (1,300) (5) (1,300)
-------------------------------------------------------------------------
Net earnings . . . . . . . . . . . . . . . . $0 9,975 1,970 $11,945
=========================================================================
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
8
<PAGE> 9
HUDSON GENERAL CORPORATION
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED MARCH 31, 1996
(UNAUDITED, AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Transfer To Pro Forma
Historical Hudson LLC(1) Adjustments Pro Forma
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $131,755 (131,530) $ 225
-------------------------------------------------------------------
Costs and expenses
Operating . . . . . . . . . . . . . . . . . . . . . . 95,786 (95,786) 0
Depreciation and amortization . . . . . . . . . . . . 5,707 (5,645) 62
Selling, general and administrative . . . . . . . . . 12,486 (9,295) 3,191
Interest -- net . . . . . . . . . . . . . . . . . . . 327 (1,529) (1,202)
-------------------------------------------------------------------
Total costs and expenses . . . . . . . . . . . . . . . . . 114,306 (112,255) 0 2,051
-------------------------------------------------------------------
Earnings before equity in earnings (loss) of
investees and provision (benefit) for income taxes . . . 17,449 (19,275) 0 (1,826)
Equity in loss of joint venture . . . . . . . . . . . . . (2,060) 0 (2,060)
Equity in earnings of Hudson LLC . . . . . . . . . . . . . 0 0 14,241(4) 14,241
-------------------------------------------------------------------
Earnings before provision (benefit) for income
taxes . . . . . . . . . . . . . . . . . . . . . . . . . 15,389 (19,275) 14,241 10,355
Provision (benefit) for income taxes . . . . . . . . . . . 6,455 (1,632) (5) (591)(5) 4,232
-------------------------------------------------------------------
Net earnings . . . . . . . . . . . . . . . . . . . . . . . $ 8,934 (17,643) 14,832 $ 6,123
===================================================================
Earnings per share, primary . . . . . . . . . . . . . . . $ 7.60 $ 5.21
======== ========
Earnings per share, fully diluted . . . . . . . . . . . . $ 4.72 $ 4.22
======== ========
Weighted average common and common
equivalent shares outstanding:
Primary . . . . . . . . . . . . . . . . . . . . . . . 1,175 1,175
Fully diluted . . . . . . . . . . . . . . . . . . . 2,072 (565) (6) 1,507
==================================================================
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
9
<PAGE> 10
HUDSON GENERAL LLC
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF EARNINGS
NINE MONTHS ENDED MARCH 31, 1996
(UNAUDITED, AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Transfer From Pro Forma
Historical Parent Company (1) Adjustments Pro Forma
---------- --------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues $ 0 131,530 501 (7) $132,031
------------------------------------------------------------------------------
Costs and expenses
Operating . . . . . . . . . . . . . . . 0 95,786 95,786
Depreciation and amortization . . . . . 0 5,645 5,645
Selling, general and administrative . . 0 9,295 9,295
Interest . . . . . . . . . . . . . . . . . . 0 1,529 (924)(8) 605
------------------------------------------------------------------------------
Total costs and expenses . . . . . . . . . . 0 112,255 924 111,331
------------------------------------------------------------------------------
Earnings before provision for income taxes . 0 19,275 1,425 20,700
Provision for income taxes . . . . . . . . . 0 1,632 (5) 1,632
------------------------------------------------------------------------------
Net earnings . . . . . . . . . . . . . . . . $ 0 17,643 1,425 $ 19,068
==============================================================================
</TABLE>
See Accompanying Notes to Pro Forma Condensed Consolidated Financial Statements.
10
<PAGE> 11
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) To record and eliminate the estimated results of operations and certain
assets and liabilities of the Aviation Services Business on Hudson LLC
and the Registrant, respectively. Certain Aviation Services Business
accounts receivable will be retained by the Registrant in connection with
Hudson LLC's required equity to asset ratio.
(2) To record cash proceeds of $15,850,000 paid at closing, assumed
$15,825,000 redemption of the Debentures from such proceeds, capital
contribution receivable of $7,838,000 for the unpaid balance of the
purchase price and estimated transaction fees of $1,500,000 to be paid by
the Registrant.
(3) To record the Registrant's 74% interest in Hudson LLC under the equity
method of accounting.
(4) To record the Registrant's 74% share of Hudson LLC's estimated results
including an amount equal to the interest payment due on the balance of
the unpaid purchase price calculated at 11% per annum.
(5) To record the U.S. tax effects of the pro forma adjustments at an
estimated combined effective federal and state tax rate of 48% for the
Registrant. Aviation services in Canada will be provided through a
subsidiary of Hudson LLC which will be subject to Canadian income taxes.
Accordingly, provision (benefit) for foreign income taxes is reflected in
Hudson LLC's Pro Forma Condensed Consolidated Statements of Earnings.
(6) Reflects estimated elimination of shares issuable on conversion of
Debentures at a conversion price of $32.75 per share associated with the
assumed redemption(s) of the Debentures from proceeds of the transaction.
(7) To record interest income on the balance of the unpaid purchase price
calculated at 11% per annum.
(8) Reflects estimated elimination of interest expense associated with the
assumed redemption(s) of the Debentures from proceeds of the transaction.
11
<PAGE> 12
(c) Exhibits
99.3 Limited Liability Company Agreement of Hudson General LLC
99.4 Press release issued on May 23, 1996
99.5 Press release issued on May 31, 1996
99.6 Press release issued on June 3, 1996
12
<PAGE> 13
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: June 14, 1996
HUDSON GENERAL CORPORATION
By: /s/ Michael Rubin
------------------------------------
Michael Rubin
Executive Vice President and
Chief Financial Officer
13
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
99.3 Limited Liability Company Agreement of Hudson General LLC 15-51
99.4 Press Release issued on May 23, 1996 52-53
99.5 Press Release issued on May 31, 1996 54-55
99.6 Press Release issued on June 3, 1996 56-57
</TABLE>
14
<PAGE> 1
EXHIBIT 99.3
LIMITED LIABILITY COMPANY AGREEMENT
OF
HUDSON GENERAL LLC
15
<PAGE> 2
LIMITED LIABILITY COMPANY AGREEMENT
OF
HUDSON GENERAL LLC
This is a Limited Liability Company Agreement dated May 31,
1996, effective as of June 1, 1996, among Hudson General Corporation
("Hudson"), a Delaware corporation, LAGS (USA) Inc. ("LAGS"), a Delaware
corporation, and Hudson General LLC (the "Company"), a Delaware limited
liability company.
ARTICLE I
DEFINITIONS
1.1 For the purposes of this Agreement:
"ACT" means the Delaware Limited Liability Company Act, as in
effect from time to time, or any successor.
"ADJUSTMENT" has the meaning set forth in Paragraph 3.8(g).
"ADJUSTMENT DATE" has the meaning set forth in Paragraph
3.8(h).
"AGREEMENT" means this Limited Liability Company Agreement, as
it may be amended from time to time.
"APPROVED AIRLINE" has the meaning set forth in Paragraph 8.1.
"AVIATION SERVICES" means the services described on pages 3
through 7 of Hudson's 1995 Annual Report to Shareholders which was filed as
Exhibit 13 to Hudson's Annual Report on Form 10-K for the fiscal year ended
June 30, 1995, including, but not limited to, aircraft ground handling services
(including, but not limited to, aircraft marshalling, loading and off-loading
of aircraft baggage, freight and commissary items, passenger ticketing, airport
porter and wheelchair services, aircraft cleaning, aircraft de-icing, ramp
sweeping, glycol recovery, water and lavatory service, maintenance and service
checks, weight and balance, cargo and mail transferring, aircraft pushbacks,
and ground power and air conditioning), airport ground transportation services,
aircraft fueling services (including, but not limited to, contract fueling,
fuel management and retail sales of fuel), warehousing airline cargo, airport
snow removal services, selling, leasing and maintaining aircraft ground support
equipment and providing specialized aircraft maintenance services.
"AVIATION SERVICES BUSINESS" means the business of the Company
and its subsidiaries of rendering Aviation Services.
"BUSINESS PLAN" has the meaning set forth in Paragraph 7.1.
16
<PAGE> 3
"CAPITAL ACCOUNT" means the capital account of a Member
maintained as required by Paragraph 3.8.
"CAPITAL CONTRIBUTION" means cash or other property
transferred to the Company in payment for Units or as a capital contribution
without purchasing Units.
"CLASS A MEMBER" means a Member who holds Class A Units (only
in the Member's capacity as a holder of those Units).
"CLASS B MEMBER" means a Member who holds Class B Units (only
in the Member's capacity as a holder of those Units).
"CLASS A REPRESENTATIVE" means a member of the Member Board
selected by the holders of the Class A Units.
"CLASS B REPRESENTATIVE" means a member of the Member Board
selected by the holders of the Class B Units.
"CLASS A UNIT" means a Unit having the special rights and
preferences provided in this Agreement. Initially, there are 740 Class A
Units, each of which is held by Hudson.
"CLASS B UNIT" means a Unit having the special rights and
preferences provided in this Agreement. Initially, there are 260 Class B
Units, each of which is held by LAGS.
"CODE" means the Internal Revenue Code of 1986, as amended,
and any successor law.
"COMPANY" means Hudson General LLC.
"COMPANY PROPERTY" has the meaning set forth in Paragraph
3.8(g).
"COMPANY PURCHASE OPTION" has the meaning set forth in
Paragraph 8.4(a).
"DEBENTURES" has the meaning set forth in Paragraph 5.5(e).
"DISSOLUTION EVENTS" has the meaning set forth in Paragraph
13.1.
"DISTRIBUTABLE NET INCOME" in a period means (i) 50% of the
Net Income for that period, minus (ii) any special reserves approved by the
Member Board to ensure that the Company and its subsidiaries will have adequate
funds (after taking account of borrowing availability under credit facilities)
to enable them to meet their reasonably expected cash needs, minus (iii) any
interest income received pursuant to Paragraph 1.3 of the Unit Purchase
Agreement (defined below); provided, however, that only 10% of the pre-tax
earnings generated by Hudson General Aviation Services, Inc. ("Hudson Canada")
will be included in Distributable Net Income.
"FISCAL QUARTER" means the first, second, third or fourth
three-month period in a Fiscal Year.
"FISCAL YEAR" means, until the Board determines otherwise, the
one-year period (or shorter period beginning on the date the Company is formed)
ending on a June 30.
17
<PAGE> 4
"GAAP" means generally accepted United States accounting
principles as in effect from time to time.
"HOLDER PURCHASE OPTION" has the meaning set forth in
Paragraph 8.4(a).
"HUDSON" means Hudson General Corporation, a Delaware
corporation.
"INITIAL CAPITAL CONTRIBUTION" means the cash paid or property
transferred to the Company by a Member as the consideration for the Member's
initial purchase of Units. The amount of the Initial Capital Contribution for
each Member will be as set forth on Schedule I hereto.
"LAGS" means LAGS (USA) Inc., a Delaware corporation.
"LUFTHANSA" has the meaning set forth in Paragraph 5.8(b).
"MEMBER" means a person who becomes a member of the Company as
provided in Paragraph 11.1.
"MEMBER BOARD" means the Board of Member Representatives
described in Article V.
"NET INCOME" and "NET LOSS" means the consolidated net income
or net loss of the Company and its subsidiaries for a period calculated in
accordance with GAAP.
"NOTICE OF EXERCISE" has the meaning set forth in Paragraph
8.4(b).
"OFFICER" means the President, any Vice President, the
Secretary, and the Treasurer of the Company, and any other officer of the
Company elected as provided in Article VI.
"PRE-TAX INCOME" means the consolidated net income (loss) of
the Company and its subsidiaries before provision (benefit) for income taxes
and the cumulative effect of changes in accounting principles for a period
calculated in accordance with GAAP.
"PRIOR YEAR" has the meaning set forth in Paragraph 7.1.
"PROPOSED TRANSFER NOTICE" has the meaning set forth in
Paragraph 8.4(a).
"PURCHASE OPTION" has the meaning set forth in Paragraph
8.4(a).
"REGISTRATION STATEMENT" has the meaning set forth in
Paragraph 5.5(c)
"REGULATIONS" means the income tax regulations promulgated
under the Code, as those regulations may be amended from time to time
(including temporary Regulations).
"REPRESENTATIVE" means a Class A Representative or a Class B
Representative.
"TAXABLE INCOME" or "TAX LOSS" means for a Fiscal Year, a
Fiscal Quarter or another period, an amount equal to the income or loss of the
Company for that Fiscal Year, Fiscal Quarter or other period, determined in the
manner in which income or loss is determined for Federal income tax purposes,
including Section 703(a) of the Code (for this purpose all items of income,
gain, loss or deduction required under Section 703(a)(1) of the Code to be
stated separately will be included in Taxable Income or Tax Loss).
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"TAX MATTERS MEMBER" has the meaning set forth in Paragraph
12.2.
"TANGIBLE ASSET" means an asset that is not described in
Section 197(d) of the Code.
"TOTAL REVENUES" means consolidated revenues of the Company
and its subsidiaries for a period calculated in the same manner in which they
are calculated in determining Net Income for that period.
"TRANSFERRING HOLDER" has the meaning set forth in Paragraph
8.4(a).
"UNIT" means a Class A Unit or a Class B Unit, or a unit of
any other class which the Company may at any time be authorized by this
Agreement to issue.
"UNIT PURCHASE AGREEMENT" means the Unit Purchase and Option
Agreement dated February 27, 1996 (effective as of January 1, 1996) between
Lufthansa Airport and Ground Services GmbH and Hudson.
"UPCOMING YEAR" has the meaning set forth in Paragraph 7.1.
Other terms which are defined in this Agreement will have the
meanings given to them where they are defined. Accounting terms which are
defined under GAAP will, unless they are specifically defined in another manner
in this Agreement, have the meanings given to them under GAAP from time to
time.
ARTICLE II
ORGANIZATION
2.1 Name of the Company. The name of the Company is
"Hudson General LLC".
2.2 Registered Office and Agent. The registered office
of the Company in the State of Delaware, and its registered agent for service
of process in that State, will be as set forth in the Certificate of Formation
of the Company, as it is initially filed with the Secretary of State of
Delaware, and as it may be amended from time to time.
2.3 Offices. The Company may have offices and places of
business at such locations, whether within or outside of the State of Delaware,
as the Member Board may from time to time determine or the business of the
Company may require.
2.4 Purposes. The purpose of the Company will be to
engage in any lawful act or activity for which limited liability companies may
be organized under the Act. Without limiting what is stated in the preceding
sentence, the initial principal purpose of the Company will be to engage in the
business of rendering Aviation Services.
2.5 Term. The existence of the Company will continue in
perpetuity until it is dissolved as provided in Article XIII.
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ARTICLE III
UNITS
3.1 Authorization to Issue Units. The Company will be
authorized to issue up to 1,451 Units, of which not more than 740 Units may be
Class A Units and not more than 711 Units may be Class B Units.
3.2 Sales of Units. The Company may sell Units for such
consideration as is approved by the Member Board in particular instances. The
consideration may be cash, non-cash assets, services or any other form of
consideration which would be lawful consideration for the issuance of stock by
a corporation incorporated in Delaware. The consideration paid by a Member to
the Company for Units will constitute a Capital Contribution by the Member to
the Company.
3.3 Rights and Preferences of Units. Each Unit of a
given class will be identical in all respects (including, but not limited to,
with regard to the rights of Members to vote, to receive distributions from
time to time, to convert Units of the class into Units of another class and to
receive distributions on liquidation of the Company) with each other Unit of
the same class. Except as expressly provided in this Agreement, each Class A
Unit will be identical with each Class B Unit.
3.4 Meetings.
(a) An annual meeting of Members of each class
will be held on the first Monday of November in each year, or if that is a
legal holiday in the place where the Company has its principal office, on the
next following business day in that place. If, pursuant to Paragraph 3.5, the
Members of two or more classes vote as a single class with regard to any
matters brought before their annual meetings, the annual meetings in that year
of the holders of those classes of Units will be combined into a single meeting
(but with separate voting with regard to any matters as to which they vote as
separate classes).
(b) Special meetings of Members of a class may be
called at any time for any purpose by a majority of the Members of that class,
or by the Members holding a majority of the Units of that class, or by the
President or the Secretary of the Company.
(c) Notice of each meeting of the Members of any
class, stating the date, time and place of the meeting and the matters to be
voted upon at it, must be given not less than ten nor more than sixty days
before the date of the meeting to each Member entitled to vote at the meeting.
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3.5 Voting.
(a) Except as provided in Article V, the Members
of all classes will vote together as though the Units were of a single class.
At any meeting of Members, each Member having the right to vote may vote at
that meeting in person or by proxy. Each Member entitled to vote at a meeting
will be entitled to one vote for each Unit of the class regarding which the
Member is entitled to vote at the meeting registered in the Member's name on
the books of the Company.
(b) The presence in person or by proxy of holders
of a majority of the Units of each class entitled to vote at the meeting will
be necessary, and will constitute a quorum, for the transaction of business at
the meeting.
(c) The selection of Class A Representatives and
Class B Representatives will be determined by plurality vote. Except as
otherwise provided in this Agreement, any other matter will be determined by
the vote of a majority of the Units which are voted with regard to it.
(d) Whenever the vote of Members at a meeting is
required or permitted in connection with any action by the Company, the meeting
and vote may be dispensed with if the action is consented to in writing by
Members having at least the minimum number of votes required to authorize the
action at a meeting at which the holders of all Units entitled to vote are
present and voted.
3.6 Hudson's Right to Convert Class A Units. Hudson may
at any time convert any number of Class A Units into the same number of Class B
Units for the purpose of selling the Class B Units to LAGS as a result of an
exercise by LAGS of the Option contained in the Unit Purchase Agreement, but
not otherwise. In order to convert Class A Units into Class B Units, Hudson
will (i) if Units are not represented by certificates, send the Company a
notice directing the Company to reduce the number of Class A Units, and
increase the number of Class B Units, registered in Hudson's name by the number
of Units being converted from Class A Units to Class B Units or (ii) if Units
are represented by certificates, send the Company the certificates representing
the Class A Units which are to be converted accompanied by a written
instruction to convert them into Class B Units, in either case (iii)
accompanied by (x) a copy of the notice of exercise of the Option with regard
to the Class B Units to be issued as a result of the conversion, and (y) a
certification by Hudson that it has not elected, and will not elect, to have
the Company sell the Units as to which the Option has been exercised.
3.7 Unit Register. The Company will maintain a Unit
register in which it will record the names, addresses and taxpayer
identification numbers of the owners of Units and the number of Units of each
class owned by each of them. Upon notification that Units have been
transferred (or, if Units are represented by certificates, upon
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receipt of certificates representing Units with appropriate documents of
assignment attached) and evidence satisfactory to the Company that the transfer
was permitted by Article VIII, the Company will record the transfer in the Unit
register. The Company may for all purposes treat the person shown in the Unit
register as the owner of the Units shown in the Unit register, even if the
Company has notice that the Units have been transferred to another person. Any
reference in this Agreement to information about Units or holders or owners of
Units shown on the books of the Company will refer to information shown in the
Unit register.
3.8 Capital Accounts.
(a) The Company will maintain on its books a
Capital Account for each Member in accordance with the terms of this Paragraph
3.8. Notwithstanding any other provision of this Agreement, Capital Accounts
will be maintained in accordance with Regulations implementing Code Section
704(b).
(b) A Member's Capital Account will be increased
by:
(i) the Member's Initial Capital
Contribution and any additional Capital Contributions the Member may
make from time to time;
(ii) the Taxable Income allocated to the
Member in accordance with Paragraph 3.9; and
(iii) other amounts, to the extent
required under Regulations Section 1.704-1(b)(2)(iv)(b).
(c) A Member's Capital Account will be decreased
by:
(i) the amount of all distributions made
with respect to Units shown on the books of the Company to be held by
the Member;
(ii) the Tax Losses allocated to the
Member in accordance with Paragraph 3.9; and
(iii) other amounts, to the extent
required under Regulations Section 1.704-1(b)(2)(iv)(b).
(d) In the event of a contribution of Tangible
Assets other than cash, the value of each such Tangible Asset shall be deemed
to be equal to its fair market value (net of any liabilities secured by such
Tangible Asset that the Company is considered to assume or take subject to
under Section 752 of the Code).
(e) (i) For purposes of this Agreement, the
fair market value of each Tangible Asset (other than cash) contributed by
Hudson as a part of its Initial Capital Contribution is the net book value of
such Tangible Asset on the books of Hudson.
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(ii) After the fair market value of each
Tangible Asset (other than cash) contributed by Hudson as part of its Initial
Capital Contribution has been determined in the manner set forth in Paragraph
3.8(e)(i),
(w) the fair market value
determined with respect to each such Tangible Asset shall be reduced
by the amount of liabilities secured by such Tangible Asset which the
Company is considered to assume or take subject to under Section 752
of the Code,
(x) the values (net of the
liabilities described in clause (e)(ii)(w)) for all such Tangible
Assets shall be added to the amount of cash that Hudson contributed as
part of its Initial Capital Contribution,
(y) the amount determined in clause
(e) (ii)(x) shall be subtracted from Hudson's Initial Capital
Contribution, and
(z) the resulting amount shall be
allocated as determined by the Company among the Company's goodwill,
going concern value, and other assets described in Section 197(d) of
the Code.
(f) In the event of a distribution of property
other than cash, the value of such property shall be deemed to be equal to its
fair market value (net of any liabilities secured by such distributed property
that the recipient Members are considered to assume or take subject to under
Section 752 of the Code). Any gain or loss associated with such property shall
be allocated to the Members' Capital Accounts in accordance with Paragraph 3.9,
and adjustments to Capital Accounts in respect of distributions of such
property shall reflect its fair market value (net of any liabilities secured by
such distributed property that the recipient Members are considered to assume
or take subject to under Section 752 of the Code).
(g) If money or other property (other than a de
minimis amount) is contributed to the Company by a new or existing Member as
consideration for Units, or if the Company is liquidated or distributes money
or other property (other than a de minimis amount) to a retiring or continuing
Member as consideration for Units, then the Capital Accounts of the Members
shall be increased or decreased to reflect the value of the Company's property,
including goodwill and other intangible assets, at the time of the contribution
or distribution ("Company Property"). Such increase or decrease (each, an
"Adjustment") shall be made in accordance with the provisions of this Paragraph
3.8.
(h) Each Adjustment shall be based on the fair
market value of the Company Property on the date of the Adjustment (the
"Adjustment Date"); provided, however, that no item of Company Property shall
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have a fair market value that is less than the amount of any nonrecourse
indebtedness to which such Company Property is subject.
(i) Each Adjustment shall reflect the manner in
which the unrealized income, gain, loss, or deduction inherent in Company
Property (that has not been reflected in the Capital Accounts previously) would
be allocated among the Members as if there were a taxable disposition of that
Company Property for its fair market value on the Adjustment Date and any
resulting income, gain, loss or deduction were allocated in accordance with
Paragraph 3.9.
(j) The Capital Accounts shall be adjusted in
accordance with Treas. Reg. Section 1.704-1(b)(2)(iv)(g) (or a successor
provision) for allocations to the Members of depreciation, depletion,
amortization, and gain or loss, as computed for book purposes, with respect to
the Company Property.
(k) The Members' distributive shares of
depreciation, depletion, amortization, and gain or loss, as computed for tax
purposes, with respect to the Company Property shall be determined so as to
take account of the variation between the adjusted tax basis and book value of
such Company Property in the same manner as under Section 704(c) of the Code.
(l) The amount of book depreciation, depletion,
or amortization for a period with respect to an item of Company Property is the
amount that bears the same relationship to the book value of such property as
the depreciation (or cost recovery deduction), depletion, or amortization
computed for tax purposes with respect to such property bears to the adjusted
tax basis of such property. If any Company Property has a zero adjusted tax
basis, then the book depreciation, depletion, or amortization may be determined
under any reasonable method selected by the Company.
3.9 Allocations.
(a) Except as set forth in Paragraphs 3.9(b),
(c), (d), and (e), Taxable Income or Tax Loss for each Fiscal Year will be
allocated among the holders of Units in proportion to the respective numbers of
the Units held by them.
(b) If with regard to any Fiscal Year, the per
Unit distributions to the holders of one class of Units are larger than the per
Unit distributions to the holders of one or more other classes of Units, then
the Taxable Income or Tax Loss (and each item of income, gain, deduction or
loss required to be stated separately) in that Fiscal Year will be allocated to
the holders of the respective classes of Units in the same proportions per Unit
as the per Unit distributions in that Fiscal Year; provided, however, that for
purposes of this Paragraph 3.9(b), any distribution made pursuant to Paragraph
4.2(c) in respect of which Taxable Income or Tax Loss has been allocated
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in a prior Fiscal Year shall not be taken into account in determining the
allocation of Taxable Income or Tax Loss under this Paragraph 3.9(b).
(c) A Member who unexpectedly receives an
adjustment, allocation or distribution described in Regulations Section
1.704-1(b)(2)(ii)(d)(4), (5), and (6) will be allocated items of income and
gain (consisting of a pro rata portion of each item of the Company's income,
including gross income, and gain for such year) in an amount and manner
sufficient to eliminate a deficit balance in such Member's Capital Account as
quickly as possible. Any allocation made pursuant to this Paragraph 3.9 will
be subject to any adjustment required to comply with Regulations Section
1.704-1(b), including, without limitation, any nonrecourse deduction or minimum
gain chargeback within the meaning of Regulation Section 1.704-2. Any
allocations made pursuant to this Paragraph 3.9(c) will be taken into account,
to the extent permitted by the Regulations, in computing subsequent allocations
of income, gain, loss or deduction, so that the net amount of any items so
allocated and all other items allocated to each Member will, to the extent
possible, be equal to the amount that would have been allocated to the Member
without regard to this Paragraph 3.9(c).
(d) In accordance with Code Section 704(c) and
the Regulations thereunder, income, gain, loss and deduction with respect to
any property contributed to the Company will, solely for Federal income tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted tax basis of the property to the Company for Federal
income tax purposes and its fair market value upon contribution to the Company.
(e) If, for any taxable period of the Company,
the Company is deemed to have a net increase (or decrease) in income for tax
purposes as a result of a redetermination by a tax authority resulting from
transactions between the Company and any Member or affiliate of any Member,
such increase (or decrease) in income will be allocated to the Member that was
(or the affiliate of which was) a party to the transaction and the Capital
Accounts of the Members shall reflect such allocations.
(f) Notwithstanding the foregoing provisions of
this Paragraph 3.9, Taxable Income or Tax Loss for the period commencing on
June 1, 1996 and ending on June 30, 1996 will be allocated 100% to Hudson.
3.10 Capital Account Balances in the Case of Transferred
Interests.
(a) In the event of a transfer of Units by Hudson
to LAGS pursuant to Article III of the Unit Purchase Agreement, Hudson's
Capital Account shall be charged, and LAGS' Capital Account shall be credited,
with the amount determined to be attributable to the transferred Units, as
determined pursuant to Paragraph 3.10(b).
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(b) The amount determined under this Paragraph
3.10(b) shall be an amount equal to (i) Hudson's Initial Capital Contribution
multiplied by (ii) a fraction, the numerator of which is equal to the number of
Units being transferred to LAGS and the denominator of which is equal to the
number of Units owned by Hudson immediately following the Closing (as such term
is defined in the Unit Purchase Agreement).
ARTICLE IV
DISTRIBUTIONS
4.1 General Rule for Distributions. The Company shall
not make any distributions to holders of Units other than as determined by the
Members. The foregoing shall not affect the repayment of any indebtedness owed
by the Company to a Member in accordance with the terms and conditions under
which such indebtedness was incurred.
4.2 Manner of Distributions.
(a) With respect to each Fiscal Year,
distributions of Distributable Net Income accrued in that year will be made to
each Member in proportion to the Units owned by such Member as of the last day
of the Fiscal Year; provided, however, that holders of Class B Units will not
be entitled to and will not receive (under any subparagraph of this Paragraph
4.2) any distributions of Net Income based on amounts of Pre-Tax Earnings, as
such term is defined in Paragraph 1.3(b) of the Unit Purchase Agreement, in the
Fiscal Years ending June 30, 1997 and 1998 in excess of (i) in the Fiscal year
ending June 30, 1997, $14,689,500, minus any earnings of Hudson Canada in that
Fiscal Year, except to the extent those earnings are at any time distributed to
the Company by Hudson Canada, and (ii) in the Fiscal Year ending June 30, 1998,
$15,862,800, minus any earnings of Hudson Canada in that Fiscal Year, except to
the extent those earnings are at any time distributed to the Company by Hudson
Canada. Any reduction in distributions otherwise payable to holders of Class B
Units by virtue of this Paragraph shall cause a corresponding increase to the
distribution payable to Hudson for each Fiscal Year.
(b) Before any distributions are made in
accordance with Paragraph 4.2(a), distributions will be made to Hudson in an
amount equal to the interest payments contemplated by Paragraph 1.3(a)(ii)
through Paragraph 1.3(a)(iv) of the Unit Purchase Agreement.
(c) To the extent the Member Board determines to
make distributions for any Fiscal Year in excess of the amounts described in
Paragraphs 4.2(a) and (b), such distributions shall be in an amount determined
by the Member Board in accordance with the following priority (subject,
however, to the limitations on distributions
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to holders of Class B Units for the Fiscal Years ending June 30, 1997 and June
30, 1998, as set forth in Paragraph 4.2(a)):
(i) First, Distributable Net Income
accrued in prior Fiscal Years and not previously distributed to Members,
starting with the earliest such Fiscal Year, will be distributed to Members who
owned Units during such prior Fiscal Year, in proportion to the Units owned by
such Members on the last day of such Fiscal Year;
(ii) Second, distributions shall be made
to Hudson and LAGS in proportion to the Units owned by them immediately after
Closing (as such term is defined in the Unit Purchase Agreement) in an amount
equal to the earnings of Hudson Canada not included in the Sum (as such term is
defined in the Unit Purchase Agreement), to the extent such amount has not
previously been distributed; and
(iii) Third, distributions shall be made
out of Net Income (except that with respect to Hudson Canada, Net Income will
be determined using cash taxes paid with respect to a Fiscal Year rather than
book taxes provided) from prior Fiscal Years not previously distributed to
Members, starting with the earliest such Fiscal Year, and will be distributed
to Members who owned Units during such prior Fiscal Year, in proportion to the
Units owned by such Members on the last day of such Fiscal Year.
(d) Notwithstanding the foregoing provisions of this
Paragraph 4.2, as soon after June 30, 1996 as is practicable, and in any event
prior to the making of any other distribution pursuant to this Section 4.2, a
distribution of cash shall be made to Hudson in an amount equal to the amount
of any Taxable Income allocated to Hudson pursuant to Paragraph 3.9(f).
ARTICLE V
BOARD OF MEMBER REPRESENTATIVES
5.1 Management by Members. The management of the Company
is fully reserved to the Members, and the Company will not have "managers," as
that term is used in the Act. The powers of the Company will be exercised by
or under the authority of, and the business and affairs of the Company will be
managed under the direction of, the Members, who will make all decisions and
take all actions for the Company, as described in this Article V.
5.2 The Member Board. In managing the Company, the
Members will act through the Member Board, or through such Committees as the
Member Board may establish. The Member Board will consist of three Class A
Representatives and two Class B Representatives. Each Class A Representative
will be a Class A Member
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(if the Class A Member is an individual) or an officer, director or employee of
a Class A Member (or of its parent company) and each Class B Representative
will be a Class B Member (if the Class B Member is an individual) or an
officer, director, or employee of a Class B Member (or of its parent company).
Except as otherwise expressly provided in this Agreement, any act (including
any vote or consent) of the Class A Representatives will be the act of all the
holders of Class A Units and any act (including any vote or consent) of the
Class B Representatives will be the act of all the holders of Class B Units.
5.3 Selection and Terms of Representatives. The
Representatives of each class will be selected by the holders of the applicable
class of Units at each annual meeting of those holders. Except as otherwise
provided in this Agreement, each Representative will serve at the pleasure of
the class of Members that the Representative represents.
5.4 Meetings.
(a) Meetings of the Member Board may be called by
any Representative on at least five days' notice to each other Representative.
(b) One Representative of each class will
constitute a quorum at a meeting of the Member Board (except that if a meeting
cannot be held because no Representative of a particular class was present, an
adjourned meeting may be held on at least five days' notice to each
Representative of that class which specifies each matter to be voted upon at
the meeting, even though no Representative of that class is present).
(c) A Representative participating in a meeting
by conference telephone or similar communications equipment by which all
persons present at the meeting can hear each other will be deemed present at
the meeting and all acts taken by the Representative during his or her
participation will be deemed taken at the meeting.
5.5 Voting.
(a) The Class A Representatives, as a class, will
be entitled to three votes, and the Class B Representatives, as a class, will
be entitled to two votes, on all matters. If there is only one Member of a
Class, or if the provisions of Paragraph 5.8 are applicable and therefore all
the Units of that Class are voted by a single Member, all the votes of the
Representatives of that Class will be cast in the same manner. If there is
more than one Member of a given Class and the provisions of Paragraph 5.8 are
not applicable, the Representatives of that Class may decide among themselves
whether to cast all the votes to which they, as a class, are entitled in the
same manner or whether to allocate those votes among Representatives of the
class. The action of at least one Representative in casting the votes of the
class of Members that Representative represents will, unless there is more than
one Member of the class
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and the other Representatives of that class object at the time the vote is
cast, constitute the vote of the Representatives of that class, even if the
other Representatives of that class are not present when the votes are cast.
(b) Except as provided in Paragraphs 5.5(c)
through (g), a majority of the votes cast with respect to a matter at a meeting
at which a quorum is present will be the act of the Member Board.
(c) At all times prior to October 1, 2000, and at
all times on and after October 1, 2000 while LAGS and Approved Airlines
(defined below) together own at least 38% of the outstanding Units, at least
four affirmative votes of the Representatives will be required for any of the
following actions:
(i) Any decision to make distributions
to holders of Units of any class with regard to a Fiscal Year which
are less than those contemplated by Paragraph 4.2, or to establish
reserves which have the effect of reducing distributions.
(ii) Any amendment of this Agreement
which affects the special rights and preferences of either the Class A
Units or the Class B Units.
(iii) Any change in the number or classes
of Units the Company is authorized to issue, any issuance by the
Company of Units of any class (other than the issuance of Units to
Hudson and to LAGS as contemplated by the Unit Purchase Agreement,
including if applicable, on exercise of the Option contained in the
Unit Purchase Agreement), any issuance by the Company of options,
rights or convertible or exchangeable securities which may entitle the
holder to acquire Units of any class, or the Company's entering into
any other type of agreement under which the Company is, or upon the
passage of time, the payment of money or the occurrence of any other
event may become, required to issue Units of any class.
(iv) Any merger or consolidation of the
Company with any other corporation or business entity, or the purchase
by the Company or any subsidiary of a 25% or greater equity interest
in any corporation or other business entity for a purchase price of
more than $1,500,000.
(v) Any sale of assets of the Company or
any subsidiary in a single transaction or a series of related
transactions which constitute 15% or more of the total assets of the
Company and its subsidiaries taken as a whole at the end of the most
recently ended Fiscal Year, or which would result in the Company and
its subsidiaries together no longer being able to engage in any aspect
of the Aviation Services Business which accounted for more than 10% of
their Total Revenues in the most recently ended Fiscal Year, except in
each case sales of products in the ordinary course of business.
(vi) Any decision by the Company to file
a registration statement under the Securities Act of 1933, as amended
(a "Registration Statement").
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(vii) The approval or amendment of the
budget included in a Business Plan (as that term is defined in
Paragraph 7.1), to the extent provided in Paragraph 7.1.
(viii) The entry by the Company or any
subsidiary into any line of business other than the Aviation Services
Business, or into any aspect of the Aviation Services Business in
which the Company is not engaged at the date of this Agreement, which
in either case is reasonably anticipated to generate revenues in
excess of 10% of the consolidated revenues of the Company and its
subsidiaries taken as a whole in any of the following three Fiscal
Years.
(ix) The cessation by the Company and its
subsidiaries taken as a whole (whether by sale of a business,
termination of a business or otherwise) of all or substantially all
their activities in any aspect of the Aviation Services Business which
accounted for more than 10% of their Total Revenues in the most
recently ended Fiscal Year.
(x) The dissolution of the Company in
accordance with Paragraph 13.1.
(xi) Any filing by the Company or a
subsidiary for relief as a debtor under any bankruptcy, insolvency,
reorganization or similar law, any application by the Company or a
subsidiary for the appointment of a receiver, trustee, custodian or
similar fiduciary for a substantial portion of the consolidated assets
of the Company and its subsidiaries, or the consent by the Company or
a subsidiary to any petition or application seeking similar relief
which is filed against the Company or the subsidiary.
(xii) The borrowing by the Company or one
or more subsidiaries in a single transaction or series of related
transactions of a sum equal to 10% or more of the total assets of the
Company and its subsidiaries at the time of the borrowing, or the
entering into of any agreement providing for borrowings of that amount
(except that (x) if an agreement providing for borrowings is approved
in accordance with this Paragraph 5.5(c), the borrowings themselves
need not be approved by the vote required by this Paragraph and (y)
the requirements of this subparagraph (xii) will not apply to
borrowings of up to $18.3 million aggregate principal amount of
indebtedness under credit agreements).
(d) At all times on and after October 1, 2000
while LAGS owns Class B Units, but those Class B Units together with the Class
B Units owned by Approved Airlines constitute less than 38% of the outstanding
Units, at least four votes will be required for any of the actions described in
subparagraphs (i) and (ii) of Paragraph 5.5(c), but not for the actions
described in any other subparagraph of that Paragraph.
(e) Notwithstanding anything to the contrary in
Paragraph 5.5(c) or (d), four affirmative votes of the Representatives shall
not be required for the Company to (i) call any of the 7% Convertible
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Subordinated Debentures Due 2011 issued by Hudson (the "Debentures") for
redemption and make any redemption payments with respect thereto, (ii) make any
payments to Hudson in accordance with the terms of an agreement dated the same
date as this agreement between the Company and Hudson or (iii) indemnify Hudson
if Hudson remains liable, or guarantees obligations, under any contract or
other agreement relating to the Aviation Services Business which Hudson is
required to transfer to the Company under the Unit Purchase Agreement.
(f) Notwithstanding anything to the contrary in
Paragraph 5.5(c) or (d), four affirmative votes of the Representatives shall
not be required for Hudson to charge to the Company the home office overhead
fees referred to in Paragraph 15.1.
(g) Any decision by the Company to exercise, or
not to exercise, a Company Purchase Option granted under Paragraph 8.4 with
regard to Units of a class will be made solely by the Representatives of the
Members who hold the other class of Units.
5.6 Action by Written Consent. Any action of the Member
Board may be taken without a meeting if written consent to the action is signed
by all the Class A Representatives and all the Class B Representatives (or,
with regard to a decision to which Paragraph 5.5(g) applies, all the class of
Representatives which makes the decision).
5.7 Committees. The Member Board may designate from
among its members an Executive Committee and other committees, each consisting
of at least one Class A Representative and one Class B Representative. The
Executive Committee will have all the authority of the Member Board, except (i)
as the Member Board otherwise provides, and (ii) that the Executive Committee
may not take any action which, under Paragraph 5.5(c) or (d), must receive at
least four votes. Other committees will have such authority as the Member
Board grants them. The Member Board will have the right at any time to remove
and replace members of committees, to change the size of committees and to
change the membership of committees (subject to the requirement in the first
sentence of this Paragraph). At any meeting of any committee, the Class A
Representatives on the committee, as a class, will be entitled to three votes,
and the Class B Representatives on the Committee, as a class, will be entitled
to two votes, unless the Member Board determines that the Class A
Representatives on the committee or the Class B Representatives on the
Committee, as a class, will be entitled to a different number of votes.
5.8 Voting Restrictions.
(a) Notwithstanding any other provision herein,
Hudson agrees that if it transfers any portion of its Class A Units to a
directly or indirectly majority owned subsidiary as permitted by Paragraph 8.1,
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Hudson will, pursuant to a contract to be entered into with the transferee,
either (1) retain all of the voting power of the transferred Units or (2)
transfer to the transferee all of the voting power of the transferred Units.
Following such a transfer of Units, the entity that exercises the voting power
of the transferred Units will be deemed to do so for all purposes of this
Agreement, and the entity that does not exercise the voting power of the
transferred Units shall be deemed not to be a Member strictly for the purpose
of voting the Transferred Units. The holder of Class A Units that votes such
Class A Units following a transfer described in this Paragraph 5.8 will vote
such Units on its own behalf, and will have no duty to represent the interests
of the other party to such transfer (Hudson or the transferee, as the case may
be), except to the extent required by law.
(b) Notwithstanding any other provision herein,
LAGS agrees that if it transfers any portion of its Class B Units to a directly
or indirectly majority owned subsidiary of LAGS or of Deutsche Lufthansa AG
("Lufthansa") as permitted by Paragraph 8.1, LAGS will, pursuant to a contract
to be entered into with the transferee, either (1) retain all of the voting
power of the transferred Units or (2) transfer to the transferee all of the
voting power of the transferred Units. Following the transfer of Units
described in this Paragraph 5.8, the entity that exercises the voting power of
the transferred Units will be deemed to do so for all purposes of this
Agreement, and the entity that does not exercise the voting power of the
transferred Units will be deemed not to be a Member strictly for the purpose of
voting the transferred Units. The holder of Class B Units that votes such
Class B Units following a transfer described in to this Paragraph 5.8 will vote
such Units on its own behalf, and will have no duty to represent the interests
of the other party to such transfer (LAGS or the transferee, as the case may
be), except to the extent required by law.
ARTICLE VI
OFFICERS
6.1 Required and Permitted Officers. The Company will
have a President, a Secretary and a Treasurer. The Member Board may also elect
a Chairman of the Board, one or more Vice Presidents (one or more of whom may
be designated an Executive Vice President or a Senior Vice President), one or
more Assistant Secretaries or Assistant Treasurers, and such other officers as
it may from time to time deem advisable. The same person may hold two or more
offices. No officer except the Chairman of the Board, if there is one, need be
a Representative.
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6.2 Election and Terms of Office. Each officer will be
elected by the Member Board and will hold office for such term, if any, as the
Member Board determines. Any officer may be removed at any time, either with
or without cause, by the Member Board.
6.3 Duties of Officers.
(a) The Chairman of the Board, if any, will
preside at all meetings of the Member Board and will have any other duties
which from time to time may be prescribed by the Member Board.
(b) The President will be the Chief Executive
Officer of the Company, will report to the Member Board and will see to it that
all directives of the Member Board are carried into effect. The President will
preside at any meeting of the Member Board at which the Chairman of the Board
is not present.
(c) The officers, other than the Chairman of the
Board and the President, will have such powers and perform such duties, in each
case subject to the control of the Member Board and the President, as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be prescribed by the Member Board.
(d) Notwithstanding any other provision of this
Agreement, each officer will participate only in the day-to-day operations of
the Aviation Services Business. No officer will, in such capacity, determine
any management policy or make any management decision, all of which will be
made by the Members, as provided in Article V.
ARTICLE VII
BUSINESS PLANS
7.1 Approval and Effect of Business Plans.
(a) Hudson and LAGS have given their general
approval to a plan relating to the operations, marketing, financing and certain
other activities, including a budget, of the Company and its subsidiaries (a
"Business Plan") with respect to the Fiscal Years of the Company ending June
30, 1996, 1997 and 1998.
(b) Not later than June 30 of each year after
1995, the Company will present to the Member Board a proposed Business Plan for
the Fiscal Year (the "Upcoming Year"), and for the three Fiscal Years,
following the Fiscal Year in which the Business Plan is presented to the Member
Board.
(c) If at the time a Business Plan for an
Upcoming Year is presented to the Member Board, the outstanding Class B Units
constitute less than 49% of the sum of all outstanding Class A Units and Class
B Units, then the supermajority voting provisions of Paragraph 5.5(c)(vii)
relating to the budget in the Business Plan
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will be applicable if, but only if, the events described in all of clauses (1),
(2) and (3) below shall have occurred: (1) a majority of the Class B
Representatives voted against approval of the budget for the Fiscal Year
immediately preceding the Upcoming Year (the "Prior Year"); (2) the actual
Pre-Tax Income for the Prior Year was less than 4.5% of Total Revenues for such
Prior Year; and (3) either (x) the budget with regard to the Upcoming Year
contemplates that Pre-Tax Income for the Upcoming Year will be less than 4.5%
of Total Revenues for the Upcoming Year or (y) notwithstanding the fact that
the budget for the Upcoming Year contemplates that Pre-Tax Income for the
Upcoming Year will be equal to or greater than 4.5% of the Total Revenues for
such Upcoming Year, a majority of the Class B Representatives provide the
Member Board with a written statement setting forth their reasonable belief
(and the reasonable bases for such belief) that Pre-Tax Income for the Upcoming
Year will be less than 4.5% of the Total Revenues for such Upcoming Year.
(d) If at the time a Business Plan for an
Upcoming Year is presented to the Member Board, the outstanding Class B Units
constitute at least 49% of the sum of all outstanding Class A Units and Class B
Units, then the supermajority voting provisions of Paragraph 5.5(c)(vii)
relating to the budget in the Business Plan will be applicable under all
circumstances, but the Class B Members will not act unreasonably in requiring
that the Representatives of that class vote against the budget.
(e) Notwithstanding any provision to the
contrary, the supermajority voting provisions of Paragraph 5.5(c)(vii) relating
to the budget in the Business Plan will not be applicable to the budget for the
Fiscal Year ending June 30, 1997.
(f) Commencing with the Fiscal Year ending June
30, 1997, the Company will conduct its business and affairs substantially in
accordance with the applicable Business Plan approved by the Member Board. If
the Member Board does not approve a proposed Business Plan, the Company will
endeavor to revise the proposed Business Plan in order to obtain Member Board
approval. Until such time as Member Board approval is obtained with respect to
a Business Plan or in the event that Member Board approval of a Business Plan
is not obtained, the Company will continue to conduct its business and affairs
substantially in accordance with the most recently approved Business Plan
relating to such period, or, if there is no such previously approved Business
Plan relating to such period, substantially in accordance with the three-year
Business Plan included in the most recently approved Business Plan for the most
recent prior period. If an approved Business Plan differs from a prior
Business Plan relating in part to the same period, the later Business Plan will
be deemed an amendment of the prior Business Plan.
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ARTICLE VIII
RESTRICTIONS ON TRANSFER OF UNITS
8.1 Subject to Paragraph 8.3, no holder of Units will
transfer, sell, assign, pledge, hypothecate, mortgage, encumber, grant any
other form of security interest in, or otherwise dispose of (together
"transfer") any Units other than in accordance with this Article VIII, except
that nothing in this Article VIII will (a) prevent LAGS from transferring Units
to a directly or indirectly majority owned subsidiary of LAGS or of Lufthansa,
or prevent Hudson from transferring Units to a directly or indirectly majority
owned subsidiary, if (i) the subsidiary of LAGS, Lufthansa or Hudson, as the
case may be, agrees in writing to be bound by all the provisions of this
Agreement which are applicable to LAGS or Hudson, as the case may be, (ii) LAGS
or Hudson, as the case may be, and the subsidiary agree in writing that if at
any time LAGS or Lufthansa, or Hudson, as the case may be, ceases to own
directly or indirectly a majority in voting power of the outstanding equity of
the subsidiary, before that occurs, the subsidiary will transfer the Units it
owns back to LAGS or Hudson, as the case may be, and (iii) the other owners of
any such majority owned subsidiary would not be prohibited from holding Units
pursuant to Paragraph 8.3, (b) prevent Hudson from selling Class B Units to
LAGS upon exercise of the Option contained in the Unit Purchase Agreement, (c)
prevent LAGS from selling or otherwise transferring Units after the fifth
anniversary of the date of this Agreement to any airline approved by Hudson (an
"Approved Airline"), which approval Hudson will not unreasonably withhold with
regard to any airline which is a potential significant user of Aviation
Services provided by the Company, by LAGS or by a joint venture in which LAGS
has a greater than 25% ownership interest, if the Approved Airline agrees in
writing to be bound by all the provisions of this Agreement which are
applicable to LAGS; provided, however that, after giving effect to any transfer
permitted by this clause (c), LAGS and Lufthansa and their majority owned
subsidiaries must collectively own at least a majority of the outstanding Class
B Units and any other holder of Class B Units must hold at least 10% of the
outstanding Class B Units or (d) prevent Hudson from pledging, hypothecating or
mortgaging its Units to secure any of its indebtedness or from transferring
Units to the holders of the secured indebtedness (or their designee(s)) upon
foreclosure of the pledge, hypothecation or mortgage; provided, however that
Hudson will use all reasonable efforts (which reasonable efforts shall not be
required to include modification of current or future terms of agreements or
offering or agreeing to any economic consideration) to cause the pledge,
hypothecation or mortgage, and the transfer of Units upon foreclosure, to be
subject to, and otherwise not interfere with, the Purchase Option (defined
below), and the right of anyone to
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exercise the Purchase Option and to receive Units on exercise of the Purchase
Option free and clear of all liens and encumbrances.
8.2 Five Year Prohibition Against Transfer. Until the
fifth anniversary of the date of this Agreement, neither LAGS nor Hudson will,
except as expressly permitted by Paragraph 8.1, transfer any Units to anyone.
8.3 Prohibition Against Transfers to Competitors.
Notwithstanding anything in this Agreement to the contrary, no holder of Units
will at any time transfer any Units to anyone who provides Aviation Services to
other persons, unless the Company consents in writing to the transfer (which
the Company will be under no obligation to do). This Paragraph will not
prevent LAGS from transferring Units to an airline solely because the airline
performs all or a portion of the Aviation Services for its own aircraft or
passengers, if the airline does not provide Aviation Services to other persons.
8.4 Rights of First Refusal.
(a) Before any holder transfers any Units to
anyone, other than under the circumstances described in Paragraph 8.1, the
holder of Units which proposes to transfer Units (a "Transferring Holder") will
give the Company and each of the other holders of Units a notice (a "Proposed
Transfer Notice") which (i) describes in reasonable detail the proposed
transfer, including the number of Units the Transferring Holder proposes to
transfer, and including, if the proposed transfer involves a sale, the proposed
sale price and the other principal terms of the sale, (ii) identifies the
person or persons to whom the Units are proposed to be transferred and (iii)
grants the Company an option (a "Company Purchase Option"), and grants to LAGS
(if Hudson is the Transferring Holder or the Units the Transferring Holder
proposes to transfer are Class B Units) or to Hudson (if LAGS is the
Transferring Holder or the Units the Transferring Holder proposes to transfer
are Class A Units), but not to any other holder of Units, an option (a "Holder
Purchase Option" and together with the related Company Purchase Option, a
"Purchase Option") to purchase all, but not less than all, the Units which are
the subject of the Proposed Transfer Notice on the terms provided in Paragraph
8.4(b).
(b) Each Company Purchase Option granted in
accordance with Paragraph 8.4(a) will be on the following terms:
(1) The term of the Company
Purchase Option will be 90 days after the day the
Proposed Transfer Notice is given to the Company, except
that if it is necessary that an expert determine the fair
market value of non-cash consideration or the Fair Market
Price of the Units which are the subject of the Proposed
Transfer Notice in order to determine the exercise
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price of the Company Purchase Option, the term of the
Company Purchase Option will be the later of (i) the 20th
day after the day on which a copy of the determination is
delivered to the Company and to all the Members or (ii)
the 90th day after the day the Proposed Transfer Notice
is given to the Company.
(2) The exercise price of the
Company Purchase Option will be (A) if the proposed
transfer or grant of a beneficial interest is a sale for
cash, the proposed sale price set forth in the Proposed
Transfer Notice or (B) if the proposed transfer is a sale
which includes consideration other than cash, the fair
market value of the non-cash consideration to be paid for
the Units which are the subject of the Company Purchase
Option plus the amount of any cash included in the
consideration, or (C) if the transfer does not involve a
sale, the Fair Market Price of those Units. For the
purposes of this Agreement, the fair market value of
non-cash consideration, and the Fair Market Price of
Units, will be as agreed upon by the Company and the
Transferring Holder or, if they are unable to agree, as
determined by an expert selected jointly by the Company
and the Transferring Holder. The fees and expenses of
such expert will be borne equally by the Company and the
Transferring Holder.
(3) The exercise price of the
Company Purchase Option will be payable in cash.
(4) The Company Purchase Option
will be exercised by a notice of exercise (a "Notice of
Exercise") delivered to the Transferring Holder before
5:00 p.m., New York City time, on the day the Company
Purchase Option expires.
(5) If the Company exercises a
Company Purchase Option, it may assign the right to
purchase the Units as to which the Company Purchase
Option was exercised to another person or persons who is
or are eligible to become a Member or Members, provided
that an assignment of the right to purchase Units as to
which a Company Purchase Option is exercised will not
relieve the Company from liability if the purchase of
those Units is not completed as provided in Paragraph
8.4(d).
(c) Each Holder Purchase Option granted in
accordance with Paragraph 8.4(a) will be on the following terms:
(1) The Holder Purchase Option will
not become exercisable unless the related Company
Purchase Option is not exercised.
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(2) The term of the Holder Purchase
Option will be 45 days after the day on which the related
Company Purchase Option expires without being exercised.
(3) The exercise price of the
Holder Purchase Option will be the same as the exercise
price of the related Company Purchase Option.
(4) The exercise price of the
Holder Purchase Option will be payable in cash.
(5) The Holder Purchase Option will
not be assignable except to an Approved Airline.
(6) The Holder Purchase Option will
be exercised by LAGS or Hudson, as the case may be, by a
Notice of Exercise delivered by the exercising holder to
the Transferring Holder before 5:00 p.m., New York City
time, on the day the Holder Purchase Option expires.
(7) If the Holder Purchase Option
is exercised, it must be exercised as to all the Units to
which it relates.
(d) If a Purchase Option is exercised, the
purchase of the Units which are the subject of the Purchase Option will take
place at the principal office of the Company at 10:00 a.m., New York City time,
on a date specified in the Notice of Exercise, which is not less than 10 nor
more than 60 days after the Notice of Exercise is given, or at such other time
and place as may be agreed upon between the Company (as to a Company Purchase
Option) or the applicable one of LAGS or Hudson (as to a Holder Purchase
Option) and the Transferring Holder.
(e) If a Proposed Transfer Notice is given and
neither the Company Purchase Option nor the Holder Purchase Option granted in
the Proposed Transfer Notice is exercised, or the Company or LAGS or Hudson, as
the case may be, exercises a Purchase Option but fails to pay for the Units
which are the subject of the Purchase Option on the date for the purchase
specified in the Notice of Exercise, the Transferring Holder may sell or
otherwise transfer the Units which were the subject of the Proposed Transfer
Notice (i) within 120 days after the Purchase Option expires, or if the
Purchase Option was exercised but the applicable one of the Company, LAGS or
Hudson failed to pay for the Units which were the subject of the Purchase
Option, within 90 days after the date for the purchase specified in the Notice
of Exercise, (ii) to the person or persons specified in the Proposed Transfer
Notice, and (iii) for consideration and on terms which are not more favorable
to the purchaser than those set forth in the Proposed Transfer Notice. Nothing
in this subparagraph will relieve the Company or LAGS or Hudson, as the case
may be, from any liability it may have because of its failure to pay for Units
as to which it has given a Notice of Exercise.
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ARTICLE IX
REGISTRATION RIGHTS
9.1 Registration of Shares.
(a) If at any time the Company files a
Registration Statement which includes in the securities which are the subject
of the Registration Statement Units of any class being sold by holders of
Units, the Company will offer to include in the securities which are the
subject of the Registration Statement Units owned by all the holders such that
the Units owned by each holder which are included in the Registration Statement
will be in the same proportion as the total Units owned by each holder whose
Units are included in the Registration Statement (except to the extent a holder
of Units requests that a lesser number of that holder's Units be included in
the Registration Statement). The terms on which Units being sold by holders
which are included in a Registration Statement will be sold will be the same,
including, if the Registration Statement relates to an underwritten offering
which includes Units being sold by any holders, inclusion in the underwritten
offering of all Units (or the same portion of all Units) to which the
Registration Statement relates which are being sold by each holder.
(b) In order to take advantage of the right to
have Units included in a Registration Statement as provided in this Paragraph,
a holder must decide to include Units in the Registration Statement within 20
days after the offer is made and must cooperate in all reasonable ways,
including entering into an underwriting agreement with customary terms if Units
are to be sold in an underwritten offering, with the efforts to file the
Registration Statement and cause it to become effective and with the reasonable
requirements of the underwriters in connection with the offering and sale of
the Units.
(c) The Company will bear the cost of any
Registration Statements filed in accordance with this Paragraph 9.1, except
that each holder of Units will pay the underwriting discounts and commissions
applicable to the Units being sold by it and will pay the costs of any separate
counsel which it elects to use in connection with the offering which is the
subject of the Registration Statement.
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ARTICLE X
INFORMATION ABOUT THE COMPANY
10.1 Right to Information. Subject to Paragraph 10.2, any
Member will be entitled at any time during normal business hours to have access
to the properties, books and records of the Company and its subsidiaries.
10.2 Confidentiality.
(a) Each Member will, and will cause its
representatives to, hold all information it receives as a result of its access
to the properties, books and records of the Company or its subsidiaries in
confidence, except to the extent that information (i) is or becomes available
to the public (other than through a breach of this Agreement), (ii) becomes
available to the Member from a third party which, insofar as the Member is
aware, is not under an obligation to the Company or to a subsidiary to keep the
information confidential, (iii) was known to the Member before it was made
available to the Member or its representative by the Company or a subsidiary,
or (iv) otherwise is independently developed by the Member.
(b) In addition to (and not in limitation of) the
provisions of Paragraph 10.2(a), LAGS and Hudson expressly recognize and
acknowledge that (x) the customers and airport authorities served by the
Company engage and will engage in discussions and negotiations with the Company
that are proprietary and confidential in nature, and (y) that many of such
customers and airport authorities compete for business with Lufthansa, and
accordingly are and will be desirous of restricting the access of Lufthansa to
information concerning their business relationships with the Company.
Accordingly, LAGS will not request that the Company provide, nor shall the
Company be required to provide, to Lufthansa or any of its representatives or
agents (except those employees of Lufthansa who have responsibility for
overseeing the performance of the Company or the Buyer's relationship with the
Company and are not engaged in its airline business in a capacity which might
lead them to be directly or indirectly (or, as to a Representative, who is not
engaged in its airline business in a capacity which might lead the
Representative to be directly) engaged in procuring for Lufthansa services in
North America which are rendered by the Company or its subsidiaries, or are
competitive with services rendered by the Company or its subsidiaries) copies
of any proprietary or confidential agreements or other documentation including,
but not limited to, proposals, notes, contracts, annexes, exhibits, cost
analyses or pricing information of any nature and in any form pertaining to
customers or airport authorities served by the Company. In addition, LAGS and
the Company will instruct and cause their employees not to provide to or
discuss with any employees of Lufthansa, other than those excepted in the
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preceding sentence, any proprietary or confidential information (whether
relating to negotiations, discussions or otherwise) pertaining to customers or
airport authorities with which the Company has a business relationship. The
Company will only engage in business transactions with Lufthansa that provide
for normal pricing, terms and conditions in the ordinary course of business and
consistent with past practice. The provisions of this Paragraph 10.2(b)
relating to Lufthansa and LAGS will be binding upon any transferee of LAGS (and
the affiliates of such transferee) that owns, or is affiliated with a person
who owns, an airline.
ARTICLE XI
MEMBERS
11.1 Admission to Membership. No person will become a
Member unless that person is shown as an owner of Units on the books of the
Company. No person may resign as a Member of a class while that Member holds
Units of that class. A person which acquires Units from the Company will become
a Member when the person acquires those Units and executes a copy of this
Agreement. A person will cease being a Member when that person disposes of all
the Units owned by the person and the disposition of those Units is registered
on the books of the Company. No person to whom Units are transferred by a
Member will become a Member (i) unless the transfer was made as permitted by
Article VIII, (ii) until the transfer is recorded on the books of the Company,
and (iii) until the person to whom the Units are transferred agrees to be bound
by all the provisions of this Agreement which were applicable to such person's
transferor and either executes a copy of this Agreement or executes and
delivers to the Company a separate document in which the person agrees to be
bound by all those provisions of this Agreement to the same extent as though
the person had executed this Agreement.
11.2 Voting Limited to Members. Notwithstanding anything
in Article III, (i) Units shown on the books of the Company as being owned by a
person which is not a Member may not be voted unless and until the registered
owner becomes a Member as provided in Paragraph 11.1 or the Units are
transferred to a Member or to a person who becomes a Member as provided in
Paragraph 11.1 and (ii) in determining the number of outstanding Units of a
class for the purpose of determining whether matters voted upon by the holders
of Units have been approved, Units shown on the books of the Company as being
owned by persons who are not Members will not be treated as being outstanding.
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ARTICLE XII
TAX MATTERS
12.1 Tax Information. Within 120 days after the original
due date of the Company's Federal income tax return for a Fiscal Year, the
Company will provide to each person shown on its books as being an owner of
Units a copy of the Company's return and a statement on Form K-1 or another
applicable form of that person's distributive share of income, gains, losses,
deductions and credits for that Fiscal Year. The Company also will provide any
other information reasonably requested by a holder of Units to enable the
holder to complete the holder's tax returns.
12.2 Tax Matters Member. Hudson is designated as the Tax
Matters Member (and the "tax matters partner" as defined in Section 6231(a)(7)
of the Code) with respect to the Company. If at any time Hudson ceases to be a
Member, the Member which holds the largest number of Units will become the Tax
Matters Member. The Tax Matters Member will (i) cause to be prepared and sign
all tax returns of the Company and (ii) manage all administrative tax
proceedings conducted at the Company level by the Internal Revenue Service or
any state, local or foreign taxing authority with respect to the Company. Any
Member has the right to participate in administrative tax proceedings related
to the determination of tax items at the Company level. Expenses of
administrative tax proceedings undertaken by the Tax Matters Member will be
paid for by the Company. Any Member which elects to participate in those
proceedings will be responsible for any expenses it may incur. After
consultation with LAGS and after taking into account the respective interests
and tax status of Hudson, LAGS and the Company, the Tax Matters Member (i) may
make, or refrain from making, any income or other tax elections for the Company
which it deems necessary or advisable, including an election pursuant to
Section 754 of the Code and (ii) shall take all other action contemplated to be
taken by it pursuant to Code Sections 6221 and through 6231. Notwithstanding
the foregoing, the Tax Matters Member will not make any income or other tax
elections or take any actions that (or fail to make such elections or to take
such actions, the failure of which) would jeopardize the treatment of the
Company as an entity which is not taxed as a corporation.
12.3 Election to be Treated as a Partnership for Tax
Purposes. If under Regulations or other administrative rules the Company is
permitted to elect to be treated as a partnership, the Tax Matters Member will
make the permitted election for the Company to be, or to continue to be,
treated as a partnership for Federal income tax purposes. Each Member consents
to any election by the Tax Matters Member for the Company to be treated as
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a partnership for Federal income tax purposes and each Member will take any
actions reasonably requested by the Company to satisfy the requirements of any
applicable Regulations or rules.
12.4 Unit Purchase Agreement. The Company and each Member
agree that the Company will be bound by, and will adhere to the provisions of
Paragraph 8.4 (Payment of Taxes) of the Unit Purchase Agreement as though the
Company were a signatory to the Unit Purchase Agreement.
12.5 Withholding. The Company shall comply with all
applicable withholding requirements imposed under the Code and the Regulations,
and any withholding taxes paid by the Company shall be deemed to be cash
distributions made to the Member with respect to whom the withholding taxes
were paid.
ARTICLE XIII
TERMINATION
13.1 Events of Dissolution. The Company will be dissolved
upon the occurrence of any of the following events ("Dissolution Events"):
(a) the Members vote for dissolution in
accordance with Paragraph 5.5(c)(x);
(b) the death, insanity, retirement, resignation,
expulsion, bankruptcy or dissolution of a Member, or the occurrence of any
event (other than a transfer of Units permitted by Article VIII) that
terminates the continued membership of a Member of the Company (a "Membership
Termination Event"), without any further action by the Members, except that
upon bankruptcy, including filing for reorganization or dissolution of any of
its Members, the Company will not be dissolved and there will not be a
Dissolution Event if the Company is continued by the consent of holders of a
majority of the Units held by Members, other than the Member which triggered
the Membership Termination Event, given within 90 days after the Membership
Termination Event; or
(c) the entry of a decree of judicial dissolution
under Section 18-802 of the Act or any other event causing dissolution of a
Limited Liability Company under the laws of the State of Delaware.
13.2 Liquidation. Upon the occurrence of a Dissolution
Event, the Company shall be liquidated and its affairs shall be wound up. All
proceeds from such liquidation shall be distributed as follows (except as
otherwise required by Section 18-804 of the Act):
(a) First, to the payment of debts and
liabilities of the Company and the expenses of liquidation.
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(b) Second, to the establishment of any reserves
which the Member Board deems reasonably necessary with regard to contingent or
unmatured liabilities or obligations of the Company. That reserve may be paid
to a liquidating agent to be applied to the payment of those obligations and
liabilities and, to the extent not required for that purpose, to be distributed
to the Members.
(c) Third, in accordance with the manner in which
distributions are made pursuant to Paragraph 4.2.
(d) Fourth, in accordance with the positive
Capital Account balance of all Members, as determined after taking into account
all capital account adjustments for the Fiscal Year during which such
liquidation occurs. All distributions required by this Paragraph 13.2(d) shall
be made by the end of such Fiscal Year, or, if later, within 90 days after the
date of such liquidation. A particular Member's interest in the Company may be
liquidated if, and only if, the Company and all of the Members agree to such
liquidation. Any liquidating distributions made to a Member in accordance with
the previous sentence shall be made in accordance with the positive Capital
Account balance of such Member, as described in this Paragraph 13.2(d). For
purposes of this Paragraph, no transfer of Units pursuant to a Purchase Option
will be deemed to constitute a liquidation of a Member's interest in the
Company.
13.3 Final Accounting. In the event of the dissolution of
the Company, prior to any liquidation, a proper accounting shall be made to the
Members from the date of the last previous accounting to the date of
dissolution.
13.4 Certificate of Cancellation. Upon the completion of
the distribution of the Company's assets, the Company will be terminated, all
Units will be cancelled, and the Members shall cause the Company to execute and
file a Certificate of Cancellation in accordance with Section 18-203 of the
Act.
13.5 No Liability for Return of Capital Contributions. No
Member will be personally liable for the return of the Capital Contribution of
any other Member. The only right of a Member upon dissolution of the Company
will be to receive distributions under this Article XIII.
ARTICLE XIV
INDEMNIFICATION
14.1 Indemnity. Subject to the provisions of Paragraph
14.4, the Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
except an action by or in the right of the
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Company, by reason of the fact that the person is or was a Member, a
Representative, an employee or an agent of the Company, or is or was serving at
the request of the Company as a Director on the Board of Directors, an
executive, officer, employee or agent of another enterprise, against expenses
including attorneys' fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the person in connection with the action,
suit or proceeding if the person acted in good faith and in a manner which the
person reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to a criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the person's conduct was
unlawful.
14.2 Indemnity for Actions By or In the Right of the
Company. Subject to the provisions of Paragraph 14.4, the Company shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the rights of
the Company to procure a judgment in its favor by reason of the fact that the
person is or was a Member, a Representative, an employee or an agent of the
Company, or is or was serving at the request of the Company as a Director on
the Board of Directors, an executive, officer, employee or agent of another
enterprise, against expenses, including amounts paid in settlement and
attorneys' fees actually and reasonably incurred by the person in connection
with the defense or settlement of the actions or suit if the person acted in
good faith and in a manner which the person reasonably believed to be in or not
opposed to the best interests of the Company. Indemnification may not be made
for any claim, issue or matter as to which such person has been adjudged by a
court of competent jurisdiction, after exhaustion of all appeals therefrom, to
be liable to the Company or for amounts paid in settlement to the Company,
unless and only to the extent that the court in which the action or suit was
brought or other court of competent jurisdiction determines upon application
that in view of all the circumstances of the case, the person is fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
14.3 Indemnity if Successful. The Company shall indemnify
a Member, a Representative, an employee or an agent of the Company against
expenses, including attorneys' fees, actually and reasonably incurred by the
person in connection with the defense of any action, suit or proceeding
referred to in Paragraphs 14.1 and 14.2 or in defense of any claim, issue or
matter therein, to the extent that such person or entity has been successful on
the merits.
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14.4 Expenses. Any indemnification under Paragraphs 14.1
and 14.2, as well as the advance payment of expenses permitted under Paragraph
14.5, unless ordered by a court or advanced pursuant to Paragraph 14.5 below,
must be made by the Company only as authorized in the specific case upon a
determination that indemnification of the Member, the Representative, the
employee or the agent is proper in the circumstances under this Article XIV.
The determination must be made:
(a) by the vote of the Member Board excluding
Representatives who are parties to the action, suit or proceeding and
constituting a quorum;
(b) if a quorum of the Member Board is not
obtainable, by independent legal counsel in a written opinion; or
(c) by the Members who were not parties to the
action, suit or proceeding.
14.5 Advance Payment of Expenses. The expenses of
Members, Representatives, employees or agents incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Company as they are
incurred and in advance of the final disposition of the action, suit or
proceeding, upon receipt of an undertaking by or on behalf of the Member,
Representative, employee or agent to repay the amount if it is ultimately
determined by a court of competent jurisdiction that the person is not entitled
to be indemnified by the Company. The provisions of this subsection do not
affect any rights to advancement of expenses to which personnel other than
Members or Representatives may be entitled under any contract or otherwise by
law.
14.6 Other Arrangements Not Excluded. The indemnification
and advancement of expenses authorized in or ordered by a court pursuant to
this Article XIV:
(a) does not exclude any other rights to which a
person seeking indemnification or advancement of expenses may be entitled under
any agreement, vote of Members, Representatives or otherwise, for either an
action in the person's official capacity or an action in another capacity while
holding the person's office, except that indemnification, unless ordered by a
court, may not be made to or on behalf of any Member, Representative, employee
or agent if a final adjudication established that the person's acts or
omissions involved intentional misconduct, fraud or a knowing violation of the
law and was material to the cause of action; and
(b) continues for a person who has ceased to be a
Member, Representative, employee or agent and inures to the benefit of the
heirs, executors and administrators of such a person; and
(c) does not preclude the Member Board from
advancing expenses to employees of the Company in its sole discretion.
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<PAGE> 33
14.7 Representatives' Liability. No Representative shall
have any personal liability to the Company or the Members for monetary damages
for breach of fiduciary duty as a Representative, provided that this Paragraph
14.7 will not eliminate the liability of a Representative (i) for any breach of
the Representative's duty of loyalty to the Company or a class of its Members,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, or (iii) for any transaction from
which the Representative derived an improper personal benefit. No Member or
Representative shall have any liability under the "corporate opportunity"
doctrine for any activity of the Member or its affiliates, which activity is
outside the scope of the Aviation Services Business in the United States or
Canada.
ARTICLE XV
GENERAL
15.1 Home Office Overhead Fees. Hudson will charge the
Company, and the Company will pay Hudson, home office overhead fees which will
be (a) for all periods through and including June 30, 1997, in an amount equal
to the sum of (i) 3% of Total Revenues, other than with regard to activities in
Canada, plus (ii) 1% of Total Revenues from activities in Canada, and (b) for
periods beginning after June 30, 1997, the amount determined as a result of
good faith discussions between Hudson and LAGS (or its successor as owner of a
majority of the outstanding Class B Units), after taking into account Total
Revenues and administrative costs of Hudson in relation to Total Revenues, or
if Hudson and LAGS (or its successor as owner of a majority of the outstanding
Class B Units) are unable to agree upon an amount despite good faith efforts to
do so, the amount described in clause (a).
15.2 Amendments. This Agreement may only be amended by
both (i) the vote of the Member Board which, if applicable, will be the vote
required by paragraph 5.5(c), and (ii) the vote of holders of a majority of the
outstanding Units, voting as though all Units were of a single class.
15.3 Notices. Any notice or other communication required
or permitted to be given under this Agreement must be in writing and will be
deemed given when delivered in person or sent by facsimile (with proof of
receipt at the number to which it is required to be sent), or on the third
business day after the day on which mailed by certified mail return receipt
requested from within the United States of America, if to the Company,
addressed to the principal office of the Company, and if to a holder of Units,
addressed to that holder at the address shown on the Unit register maintained
by the Company.
15.4 Captions. The captions of the articles and
paragraphs of this Agreement are for convenience only and do not affect the
meaning or interpretation of this Agreement.
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15.5 Governing Law. This Agreement will be governed by,
and construed under, the laws of the State of Delaware.
15.6 Jurisdiction. Any action or proceeding relating to
this Agreement or any matters arising out of or in connection with this
Agreement, and any action for enforcement of any judgment in respect thereof,
shall be brought exclusively in the courts of the State of New York or of the
United States of America for the Southern District of New York, and, by
execution and delivery of this Agreement, Hudson and LAGS and each other Member
each hereby accepts for itself and in respect of its property, generally and
unconditionally, the exclusive jurisdiction of the aforesaid courts and
appellate courts thereof. Hudson and LAGS and each other Member each
irrevocably consents to service of process out of any of the aforementioned
courts in any such action or proceeding by notice given in accordance with
Paragraph 15.3. In addition, LAGS hereby designates its General Counsel North
America, 1640 Hempstead Turnpike, East Meadow, New York 11554, or with respect
to any time when there is not a person in that capacity, LAGS hereby designates
the Vice President USA of Deutsche Lufthansa AG, at that address, as its agent
for service of process, and service upon LAGS shall be deemed to be effective
upon service upon its agent as aforesaid or of its successor designated in
accordance with the following sentence. LAGS may designate another corporate
agent or law firm reasonably acceptable to Hudson and located in the Borough of
Manhattan, in the City of New York, as successor agent for service of process
upon 30-days prior written notice to Hudson. Each other Member that is owned
by non-United States interests will also designate a corporate agent or law
firm reasonably acceptable to Hudson and located in the Borough of Manhattan,
in the City of New York, as agent for service of process (which, in the case of
any agent which is not the initial agent, must be upon 30-days prior written
notice to Hudson). Hudson and LAGS and each other Member each hereby
irrevocably waives any objection which it may now or hereafter have to the
laying of venue of any of the aforesaid actions or proceeding arising out of or
in connection with this Agreement, and for enforcement of a judgment in respect
thereof, in the courts referred to above and hereby further irrevocably waives
and agrees, to the extent permitted by applicable law, not to plead or claim
that such an action or proceeding brought in any such court has been brought in
an inconvenient forum. Nothing herein shall affect the right of any party
hereto to serve process in any other manner permitted by law.
15.7 Agreement Not to Compete. No Member will, at any
time when such Member owns Units, nor within one year after the Member ceases
to own Units, engage directly or through ownership of equity of other entities
(other than less than 2% of the shares of a publicly traded company acquired
solely as an investment), in rendering Aviation Services (other than, in the
case of LAGS or its affiliates, passenger handling services) in the
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United States of America or Canada, except that nothing will prevent LAGS or
its affiliates from rendering Aviation Services to Lufthansa German Airlines or
airlines which are alliance partners of Lufthansa German Airlines.
15.8 Counterparts. This Agreement may be executed in two
or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Limited
Liability Company Agreement as of the day shown on the first page.
HUDSON GENERAL LLC
By:
-----------------------------
Title:
HUDSON GENERAL CORPORATION
By:
-----------------------------
Title:
LAGS (USA) INC.
By:
-----------------------------
Title:
By:
-----------------------------
Title:
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<PAGE> 37
SCHEDULE I
TO LIMITED LIABILITY
COMPANY AGREEMENT
HUDSON GENERAL LLC
<TABLE>
<CAPTION>
Initial Capital Number/Class
Member Contribution of Units
------ ------------ --------
<S> <C> <C>
Hudson General An amount equal to 284.62% of the purchase price 740 Class A Units
Corporation set forth in Paragraph 1.2 of the Unit Purchase
Agreement (as such purchase price may be
adjusted pursuant to Paragraph 1.3 of the Unit
Purchase Agreement)
LAGS (USA) Inc. An amount equal to the purchase price set forth 260 Class B Units
in Paragraph 1.2 of the Unit Purchase Agreement
(as such purchase price may be adjusted pursuant
to Paragraph 1.3 of the Unit Purchase Agreement)
</TABLE>
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<PAGE> 1
EXHIBIT 99.4
PRESS RELEASE ISSUED
ON
MAY 23, 1996
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<PAGE> 2
Stockholders Michael Rubin
Approve Executive
Subject: Transaction Contact: Vice President Release: May 23, 1996
----------- -------------- ------------
Great Neck, New York - May 23, 1996 - Hudson General
Corporation ("Hudson General") announced today that its
stockholders have approved the previously announced transaction
pursuant to which Lufthansa Airport and Ground Services GmbH
("LAGS") will acquire a 26% interest in Hudson General LLC, a
newly-formed Hudson General subsidiary which will conduct Hudson
General's aviation services business. LAGS, a wholly-owned
subsidiary of Deutsche Lufthansa AG, also will receive an option,
exercisable until October 1, 2000, to increase its interest in
Hudson General LLC from 26% up to a maximum of approximately 49%.
It is anticipated that the transaction will close shortly.
Hudson General's stockholders voted on the transaction at a
Special Meeting of Stockholders held this afternoon.
Hudson General Corporation shares are traded on the American
Stock Exchange under the ticker symbol HGC.
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<PAGE> 1
EXHIBIT 99.5
PRESS RELEASE ISSUED
ON
MAY 31, 1996
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<PAGE> 2
Completion of Michael Rubin
Lufthansa Executive
Subject: Transaction Contact: Vice President Release: May 31, 1996
----------- -------------- ------------
Great Neck, New York - May 31, 1996 - Hudson General
Corporation ("Hudson General") announced today that it has
consummated the previously announced transaction pursuant to which
Lufthansa Airport and Ground Services GmbH ("LAGS") has acquired a
26% interest in Hudson General LLC, a newly-formed Hudson General
subsidiary which, effective June 1, 1996, will conduct Hudson
General's aviation services business. Hudson General will continue
to manage the aviation services business. LAGS is a wholly-owned
subsidiary of Deutsche Lufthansa AG.
As part of this transaction, as previously announced, LAGS
also acquired an option, exercisable until October 1, 2000, to
increase its equity ownership in Hudson LLC from 26% up to a
maximum of 49%.
Hudson General's stockholders approved the transaction at a
Special Meeting of Stockholders held on May 23, 1996.
Hudson General Corporation shares are traded on the American
Stock Exchange under the ticker symbol HGC.
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<PAGE> 1
EXHIBIT 99.6
PRESS RELEASE ISSUED
ON
JUNE 3, 1996
56
<PAGE> 2
Partial Michael Rubin
Redemption of Executive
Subject: Debentures Contact: Vice President Release: June 3, 1996
---------- -------------- ------------
Great Neck, New York - June 3, 1996 - Hudson General
Corporation ("Hudson") announced that it is today calling for
redemption $15,825,000 aggregate principal amount of its
outstanding 7% Convertible Subordinated Debentures Due 2011 (the
"Debentures"). The redemption date is July 22, 1996. The redemption
price is 100% of the principal amount of the Debentures, together
with accrued and unpaid interest thereon of $1.36 per $1,000
principal amount of Debentures from July 15, 1996 to the July 22,
1996 redemption date, for a total redemption price of $1,001.36 for
each $1,000 principal amount of Debentures.
The Debentures called for redemption are convertible until the
close of business on July 22, 1996 into shares of Hudson's Common
Stock at the conversion price of $32.75 per share (equivalent to a
conversion rate of approximately 30.53 shares of Common Stock for
each $1,000 principal amount of Debentures).
Chemical Bank is the paying agent and conversion agent for the
Debentures.
There are approximately $28,900,000 principal amount of
Debentures presently outstanding.
Hudson General Corporation shares are traded on the American
Stock Exchange under the ticker symbol HGC.
57
