<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission file number 1-5896
HUDSON GENERAL CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware 13-1947395
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 Great Neck Road, Great Neck, N.Y. 11021
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (516) 487-8610
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, $1 par value American Stock Exchange, Inc.
7% Convertible Subordinated Debentures
Due 2011 American Stock Exchange, Inc.
- --------------------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
None
- --------------------------------------------------------------------------------
(Title of Class)
Indicate by a checkmark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Aggregate market value of voting stock held by non-affiliates of Registrant
based on the closing price on July 31, 1996 was $41,698,876.
The number of shares outstanding (net of treasury stock) of the Registrant's
common stock as of July 31, 1996 was 1,586,532 shares.
Specific portions of the following documents are incorporated herein by
reference in the parts hereof indicated, and only such specific portions are to
be deemed filed as part of this report:
<TABLE>
<CAPTION>
Document Part
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<C> <C>
1996 Proxy Statement of Registrant (to be filed with III
the Commission pursuant to Regulation 14A no later than 120 days after the close
of its fiscal year)
Registrant's 1996 Annual Report to Shareholders I, II, IV
</TABLE>
<PAGE> 2
PART I
ITEM 1. BUSINESS
General Development of Business
Hudson General Corporation (the "Corporation" or "Registrant") was
organized in Delaware in 1961. Effective June 1, 1996, pursuant to the terms of
a Unit Purchase and Option Agreement dated February 27, 1996 (the Purchase
Agreement) between the Corporation and Lufthansa Airport and Ground Services
GmbH (LAGS), a German corporation and an indirect wholly-owned subsidiary of
Deutsche Lufthansa AG, the Corporation transferred substantially all of the
assets and liabilities of its aviation services business (the Aviation Business)
to Hudson General LLC (Hudson LLC), a newly formed limited liability company. In
exchange for the transfer of such assets and liabilities and the assumption by
Hudson LLC, as co-obligor with the Corporation, of all of the Corporation's 7%
convertible subordinated debentures, the Corporation received a 74% interest in
Hudson LLC. In addition, Hudson LLC sold LAGS a 26% interest in Hudson LLC, for
a purchase price of $23,686,000 in cash (after certain adjustments), of which
$15,848,000 was paid at the closing. The remaining portion of the purchase price
of $7,838,000 (the Deferred Payment) is to be paid in three annual installments
(together with accrued interest from January 1, 1996 at a rate of 11% per
annum), expected to be paid in September 1996, 1997 and 1998, and is subject to
potential downward adjustment based on the future earnings of the Aviation
Business. The earnings of the Aviation Business in fiscal 1996 were sufficient
for Hudson LLC to earn the full portion of the Deferred Payment due in September
1996 of $2,650,000, plus interest thereon. The Purchase Agreement also provided
for the grant to LAGS of an option, exercisable on October 1 of each year from
1996 through 2000, effective as of the preceding July 1, pursuant to which LAGS
may increase its equity
<PAGE> 3
ownership in Hudson LLC from 26% to a maximum of 49%, for a price based on a
formula related to the average earnings of the Aviation Business over the four
fiscal years preceding the exercise of the option, subject to certain minimum
and maximum amounts.
Hudson LLC is principally engaged in providing a broad range of
services to the aviation industry. The services, which are conducted by Hudson
LLC and its subsidiaries, include aircraft ground handling; aircraft de-icing;
aircraft fueling; ground transportation services; snow removal; fuel management;
cargo warehousing; ramp sweeping and glycol recovery; the sale, leasing and
maintenance of ground support equipment; specialized maintenance services and
the leasing of hangar, office and tie-down space to private aircraft owners. In
addition to its interest in Hudson LLC, the Corporation is a 50% partner with
Oxford First Corporation in a joint venture for the development and sale of land
on the Island of Hawaii (see Note 3 to Item 14(a)(1) Financial Statements).
Narrative Description of Business
Hudson LLC's snow removal and aircraft de-icing services are seasonal
in nature. The results of these operations are normally reflected in the second
and third quarters of the fiscal year, and fluctuate depending upon the severity
of the winter season. Additional information required to be provided under this
item is incorporated by reference from pages 4-7 of the Registrant's 1996 Annual
Report to Shareholders.
General Information
The Corporation does not spend a material amount for research and
development activities.
During the years ended June 30, 1996, 1995 and 1994, sources of the
Corporation's revenues which exceeded 10% of consolidated revenues in any
<PAGE> 4
year were: aircraft ground handling services (including de-icing) $85,948,000,
$74,334,000 and $68,291,000; aircraft fueling services (including fixed base
operations) $23,701,000, $22,923,000 and $21,936,000; ground transportation
services $21,108,000, $23,802,000 and $22,171,000; and snow removal services
$17,487,000, $3,706,000 and $17,871,000, respectively. (Note: In fiscal 1996,
revenues are for the eleven months ended May 31, 1996. Foreign revenues included
above are translated at the average rates of exchange in their respective fiscal
years.)
No customer of the Corporation accounted for more than 10% of
consolidated revenues during fiscal 1996.
Hudson LLC's services are generally subject to competitive bidding, and
Hudson LLC competes principally with airlines and other aviation services
companies, some of which are larger and have resources greater than Hudson LLC.
The major bases of competition are the prices at which services are offered and
the quality and efficiency in the performance of services.
The compliance with federal, state and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment
has not to date had a material effect upon the Corporation's or Hudson LLC's
capital expenditures, results of operations or competitive position. However,
the federal government and many state and local governments have enacted or
proposed legislation and regulations with respect to storage facilities for
fuel, petroleum-based products and chemicals, the disposal of hazardous waste
materials, storm water discharges, and financial responsibility for possible
liability exposures relating to fuel storage facilities. Compliance with such
legislation and regulations has resulted in expenditures by the Corporation,
including expenditures for the testing, decommissioning and/or replacement of
certain of its fuel and de-icing fluid storage facilities, and the cleanup of
fuel spills. The Corporation was and
<PAGE> 5
Hudson LLC is presently engaged in several such decommissioning and cleanup
projects, and it is anticipated that additional such expenditures, the amount of
which is presently not expected to be material, will be required.
In addition, airport authorities are coming under increasing pressure
to clean up previous contamination at their facilities, and are seeking
financial contributions from airport tenants and companies which operate at
their airports. The Corporation cannot predict at this time the amount, if any,
that it or Hudson LLC may be required to pay in connection with such airport
authority initiatives.
The Corporation and Hudson LLC employ approximately 40 and 3,700
persons, respectively.
Financial Information About Foreign and Domestic Operations and Export Sales
The Corporation, through its ownership interest in Hudson LLC, operates
in only one industry segment. For information as to foreign operations, see Note
6 to Item 14(a)(1) Financial Statements and Note 5 to Item 14(a)(2) Financial
Statements of Hudson LLC. For information relating to the Corporation's
investment in a joint venture to develop and sell land in Hawaii (the Venture),
see Note 3 to Item 14(a)(1) Financial Statements.
<PAGE> 6
ITEM 2. PROPERTIES
The Corporation's executive offices at 111 Great Neck Road, Great Neck,
New York contain approximately 13,000 square feet and are under lease through
December 31, 2002.
Hudson LLC leases office, warehouse, hangar and maintenance shop space
as well as fuel storage facilities at various airport locations in the United
States and Canada. These leases expire at various dates through 2006 and contain
various renewal options through 2020. A portion of this leased space has been
sublet to non-affiliated sublessees. The properties owned and leased by the
Corporation and Hudson LLC are suitable and adequate to conduct their
businesses.
For information relating to the Corporation's interest in land in
Hawaii, see Note 3 to Item 14(a)(1) Financial Statements and page 8 of the
Registrant's 1996 Annual Report to Shareholders.
<PAGE> 7
ITEM 3. LEGAL PROCEEDINGS
In 1988, Texaco Canada Inc. (Texaco) (now known as McColl- Frontenac
Inc.) instituted a lawsuit (the Texaco Lawsuit) in the Supreme Court of Ontario,
Canada against the Corporation, the Corporation's Canadian subsidiary (now owned
by Hudson LLC) and Petro-Canada, Inc. (the corporation which supplied aviation
fuel for the Corporation's Canadian fixed base operations). The Texaco Lawsuit's
allegations, as amended, are that the defendants interfered with contractual and
fiduciary relations, conspired to injure, and induced the breach of a fuel
supply agreement between Texaco and Innotech Aviation Limited (Innotech) in
connection with the purchase by the Corporation from Innotech in 1984 of certain
assets of Innotech's airport ground services business. The Texaco Lawsuit seeks
compensatory and punitive damages totaling $110,000,000 (Canadian)
(approximately $80,000,000 (U.S.)) plus all profits earned by the defendants
subsequent to the alleged breach. The trial, which began in May 1996, has been
adjourned until January 1997.
Innotech (which due to a name change is now called Aerospace Realties
(1986) Limited, (Aerospace)) had agreed to defend and indemnify the Corporation
against claims of whatever nature asserted in connection with, arising out of or
resulting from the fuel supply agreement with Texaco. By a letter dated February
15, 1996, the Corporation was notified by Aerospace that Aerospace has entered
into a liquidation phase and can no longer defray the cost of defending the
Texaco Lawsuit or pay for any damages resulting therefrom.
The Corporation has agreed to indemnify and hold harmless Hudson LLC,
LAGS and each affiliate of LAGS against all losses related to the Texaco
Lawsuit. The Corporation's management believes, and counsel for the Corporation
has advised based on available facts, that the Corporation will successfully
defend this action.
<PAGE> 8
In March 1994 a jury in New York State Supreme Court in Manhattan, New
York rendered a verdict against the Corporation in a civil lawsuit for personal
injuries and awarded the plaintiff a total of $21,436,000 in damages, of which
$19,186,000 was covered by insurance. The suit arose from an accident involving
a collision between a Corporation vehicle and another vehicle at JFK
International Airport in New York. The judge in the case subsequently vacated
the $2,250,000 punitive damage award (which was not covered by insurance)
against the Corporation. The judge also ruled that the jury's award of
compensatory damages was excessive in several respects, and held that this award
should be reduced to $9,600,000. The compensatory damages were fully covered by
insurance. The Corporation's insurance carrier appealed the judge's ruling,
seeking to further reduce the jury's award. The plaintiff cross-appealed the
judge's ruling which vacated the jury award of $2,250,000 in punitive damages
against the Corporation. However, in such cross-appeal, the plaintiff sought to
reinstate only $750,000 of such damages. On April 23, 1996, the Appellate
Division affirmed the judge's decision, including the judge's decision to vacate
the punitive damage award against the Corporation.
<PAGE> 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of Stockholders of the Corporation held on May 23, 1996 the
only matter voted upon was the approval of the Purchase Agreement and the
transactions contemplated thereby. The voting was as follows:
Shares Voted Shares Voted
For Against Shares Abstained
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891,055 1,160 1,871
ADDITIONAL ITEM
EXECUTIVE OFFICERS OF THE CORPORATION
<TABLE>
<CAPTION>
Name Age Position with Corporation
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<S> <C> <C>
Jay B. Langner 66 Chairman of the Board, Chief Executive Officer and
Director
Michael Rubin 49 President and Principal Financial Officer
Paul R. Pollack 54 Executive Vice President and Chief Operating
Officer
Raymond J. Rieder 46 Senior Vice President and Chief Marketing Officer
Fernando DiBenedetto 47 Senior Vice President - Operations
Donald S. Croot 67 Vice President-Canadian Operations
Noah E. Rockowitz 47 Vice President, Secretary and General Counsel
</TABLE>
No family relationships exist among the executive officers of the
Corporation. Each of the executive officers holds office at the pleasure of the
Board of Directors, except as noted below.
Mr. Langner has served as a Director of the Corporation since 1961 and
as Chairman since 1977. He served as President from 1989 until September 1996
and previously served in such capacity from 1961 until 1979. The Corporation has
an employment contract with Mr. Langner pursuant to which Mr. Langner has agreed
to render services to the Corporation as Chairman and Chief Executive Officer
for a period ending January 31, 2001.
Mr. Rubin was elected President of the Corporation in September 1996
and prior to such time served as Executive Vice President and Chief Financial
Officer of the Corporation since 1990. He has been Treasurer of
<PAGE> 10
the Corporation since 1983. Previously, Mr. Rubin had been Vice
President-Finance since 1985. He has been employed in various capacities with
the Corporation since 1971. Mr. Rubin is a Certified Public Accountant.
Mr. Pollack has served as Executive Vice President and Chief Operating
Officer of the Corporation since 1990, and prior thereto as Senior Vice
President since 1984. He was elected President of Hudson General LLC in
September 1996. He has been employed in various capacities with the Corporation,
including as a divisional officer, since 1968. Mr. Pollack is a Certified Public
Accountant.
Mr. Rieder has served as Senior Vice President and Chief Marketing
Officer of the Corporation since 1990, and prior thereto as Vice President -
Marketing since 1984. Mr. Rieder was elected Executive Vice President of Hudson
General LLC in September 1996. He has been employed in various capacities with
the Corporation, including as a divisional officer, since 1967.
Mr. DiBenedetto has served as Senior Vice President-Operations since
July 26, 1994. Prior thereto he was Vice President-Operations since 1984. He has
been employed in various capacities with the Corporation, including as a
divisional officer, since 1970.
Mr. Croot has served as Vice President-Canadian Operations of the
Corporation since 1989. He has been employed in various capacities with the
Corporation, including as a divisional officer, since 1968.
Mr. Rockowitz has served as Vice President-General Counsel since 1985
and as Secretary since 1986. Prior to joining the Corporation in 1985, he had
been Corporate Secretary and Assistant General Counsel of Belco Petroleum
Corporation since 1978.
The Corporation has employment contracts with Messrs. Pollack, Rubin
and Rieder which currently extend until December 31, 1998 and are subject to
<PAGE> 11
extension for additional three year periods unless on or before the September
30th preceding any then-existing expiration date, the Corporation notifies
the executive that it elects not to so extend the term. The Corporation also has
employment contracts with Messrs. DiBenedetto and Rockowitz which currently
extend until December 31, 1997 and are subject to extension for additional two
year periods unless on or before the September 30th preceding any then-existing
expiration date, the Corporation notifies the executive that it elects not to so
extend the term. Hudson LLC has an employment contract with Mr. Croot which
terminates on December 31, 1996, at which time Mr. Croot will retire.
<PAGE> 12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The information required to be provided under Part II, Item 5(a) and
(c) is incorporated by reference from page 12 of the Registrant's 1996 Annual
Report to Shareholders under the caption "Selected Consolidated Financial Data".
At June 30, 1996, there were 224 holders of record of the Corporation's common
stock.
The Corporation's Revolving Credit Agreement, as amended (Credit
Agreement), permits the payment of dividends (see Note 7 to Item 14(a)(1)
Financial Statements) and the purchase, redemption or retirement by the
Corporation of its stock so long as certain financial covenants are maintained.
During fiscal 1996, holders of $249,000 principal amount of the Corporation's 7%
Convertible Subordinated Debentures (the Debentures) converted such Debentures
into 7,599 shares of the Corporation's common stock. In addition, primarily as a
result of the call for redemption in July and September 1996 of the outstanding
balance of the Debentures, holders of $26,343,000 principal amount of Debentures
converted such Debentures between July 1, 1996 and September 4, 1996 into
804,259 shares of the Corporation's common stock. At September 5, 1996 no
Debentures remained outstanding.
The Board of Directors has approved the repurchase of up to 150,000
shares of the Corporation's common stock from time to time in either open market
or privately negotiated transactions. As of August 31, 1996 the Corporation had
repurchased 114,300 shares in the open market for an aggregate purchase price of
$2,010,000 pursuant to this authorization.
ITEM 6. SELECTED FINANCIAL DATA
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The information required to be provided under Part II, Item 6 is
incorporated by reference from page 12 of the Registrant's 1996 Annual Report to
Shareholders under the caption "Selected Consolidated Financial Data".
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required to be provided under Part II, Item 7 is
incorporated by reference from pages 9-11 of the Registrant's 1996 Annual Report
to Shareholders under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and the required financial
statement schedule of the Corporation and the independent auditors' reports
thereon of KPMG Peat Marwick LLP, independent auditors, for the Corporation's
fiscal years ended June 30, 1996, 1995 and 1994 are filed pursuant to Item
14(a)(1) of this Report. The financial statements and the required financial
statement schedule of Hudson LLC and the independent auditors' report thereon of
KPMG Peat Marwick LLP, independent auditors, for the month ended June 30, 1996,
and the financial statements and the required financial statement schedule of
the Venture and the independent auditors' report thereon of KPMG Peat Marwick
LLP, independent auditors, for the fiscal years ended June 30, 1996, 1995 and
1994, are filed pursuant to Item 14(d) of this Report. All such financial
statements and financial statement schedules are included herein, except for the
consolidated financial statements of the Corporation which are incorporated
herein by reference.
Selected quarterly financial data of the Registrant for the fiscal
years ended June 30, 1996 and 1995 appears in Note 13 to Item 14(a)(1) Financial
Statements.
<PAGE> 14
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE - Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required to be provided under Part III, Item 10,
relative to Directors of the Registrant is incorporated by reference from the
Registrant's 1996 definitive proxy statement to be filed with the Securities and
Exchange Commission (the "Commission") pursuant to Regulation 14A no later than
120 days after the close of its fiscal year and, relative to executive officers,
to Part I of this report under the caption "Executive Officers of the
Corporation".
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required to be provided under Part III, Items 11, 12
and 13 is incorporated by reference from the Registrant's 1996 definitive proxy
statement to be filed with the Commission pursuant to Regulation 14A no later
than 120 days after the close of its fiscal year.
<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1)
FINANCIAL STATEMENTS OF THE REGISTRANT, all of which are incorporated herein by
reference to the Registrant's 1996 Annual Report to Shareholders.
Independent Auditors' Report of KPMG Peat Marwick LLP, independent auditors,
appearing on page 24 of the 1996 Annual Report to Shareholders.
Consolidated Balance Sheets of Hudson General Corporation and Subsidiaries at
June 30, 1996 and 1995, appearing on page 14 of the 1996 Annual Report to
Shareholders.
Consolidated Statements of Earnings of Hudson General Corporation and
Subsidiaries for the Years Ended June 30, 1996, 1995 and 1994, appearing on page
13 of the 1996 Annual Report to Shareholders.
Consolidated Statements of Cash Flows of Hudson General Corporation and
Subsidiaries for the Years Ended June 30, 1996, 1995 and 1994, appearing on page
16 of the 1996 Annual Report to Shareholders.
Consolidated Statements of Stockholders' Equity of Hudson General Corporation
and Subsidiaries for the Years Ended June 30, 1996, 1995 and 1994 appearing on
page 15 of the 1996 Annual Report to Shareholders.
Notes to Consolidated Financial Statements appearing on pages 17-23 of the 1996
Annual Report to Shareholders.
<PAGE> 16
<TABLE>
<CAPTION>
(a)(2) Location
in 10-K
<S> <C>
FINANCIAL STATEMENT SCHEDULE OF THE REGISTRANT FOR THE YEARS ENDED
JUNE 30, 1996, 1995 AND 1994:
Independent Auditors' Report of KPMG Peat Marwick LLP on Financial
Statement Schedule F-1
II - Valuation and Qualifying Accounts F-2
FINANCIAL STATEMENTS OF HUDSON GENERAL LLC AND SUBSIDIARIES:
Independent Auditors' Report of KPMG Peat Marwick LLP. F-4
Consolidated Balance Sheet of Hudson General LLC and Subsidiaries
at June 30, 1996. F-6
Consolidated Statement of Earnings of Hudson General LLC and
Subsidiaries for the Period June 1, 1996 (Inception) to
June 30, 1996. F-5
Consolidated Statement of Members' Equity of Hudson General LLC
and Subsidiaries for the Period June 1, 1996 (Inception) to
June 30, 1996. F-7
Consolidated Statement of Cash Flows of Hudson General LLC and
Subsidiaries for the Period June 1, 1996 (Inception) to June 30, 1996. F-8
Notes to Consolidated Financial Statements.
F-9 - F-15
FINANCIAL STATEMENT SCHEDULE OF HUDSON GENERAL LLC AND
SUBSIDIARIES FOR THE MONTH ENDED JUNE 30, 1996:
II - Valuation and Qualifying Accounts F-16
FINANCIAL STATEMENTS OF KOHALA JOINT VENTURE AND SUBSIDIARY:
Independent Auditors' Report of KPMG Peat Marwick LLP. F-18
Consolidated Balance Sheets of Kohala Joint Venture and
Subsidiary at June 30, 1996 and 1995. F-19
Consolidated Statements of Operations and Partners' Deficit of Kohala
Joint Venture and Subsidiary for the Years Ended June 30, 1996, 1995
and 1994. F-20
Consolidated Statements of Cash Flows of Kohala Joint Venture and
Subsidiary for the Years Ended June 30, 1996, 1995 and 1994. F-21
Notes to Consolidated Financial Statements. F-22 - F-30
FINANCIAL STATEMENT SCHEDULE OF KOHALA JOINT VENTURE AND
SUBSIDIARY FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994:
II - Valuation and Qualifying Accounts F-31
</TABLE>
Schedules other than those listed above are omitted because of the absence of
the conditions under which they are required or because the information required
therein is set forth in all material respects in the financial statements,
including the notes thereto.
<PAGE> 17
(a)(3) Exhibits
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EXHIBIT
NO. EXHIBIT DESCRIPTION
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3.1 Restated Certificate of Incorporation of the
Registrant, as amended to date, filed as
Exhibit 3.1 to Quarterly Report on Form 10-Q
for the quarter ended December 31, 1986,
incorporated herein by reference.
3.2(a) Amendment to By-laws of the Registrant.
3.2(b) By-laws of the Registrant, as amended to date.
4.4(a) Revolving Credit Agreement dated as of November
25, 1992 among Hudson General Aviation Services
Inc., various banking institutions named
therein and Bank of Boston Canada, as agent,
filed as Exhibit 4.4(i) to Quarterly Report on
Form 10-Q for the quarter ended March 31, 1993,
incorporated herein by reference.
4.4(b) First Amendment to the Revolving Credit
Agreement dated as of November 25, 1992 among
Hudson General Aviation Services Inc., various
banking institutions named therein and The
Chase Manhattan Bank of Canada, as successor
agent, dated as of March 15, 1995, filed as
Exhibit 4.4(f) to Annual Report on Form 10-K
for the fiscal year ended June 30, 1995,
incorporated herein by reference.
4.4(c) Second Amendment to the Revolving Credit
Agreement dated as of November 25, 1992, among
Hudson General Aviation Services Inc., ABN Amro
Bank Canada and The Chase Manhattan Bank of
Canada individually and as successor agent,
dated as of June 1, 1996.
4.4(d) Revolving Credit Agreement dated as of June 1,
1996 among Hudson General Corporation and The
First National Bank of Boston, European
American Bank, The Chase Manhattan Bank, N.A.
and The First National Bank of Boston, as
agent.
4.4(e) Amended and Restated Revolving Credit Agreement
dated as of November 25, 1992 among Hudson
General Corporation, Hudson General LLC and The
First National Bank of Boston, European
American Bank, The Chase Manhattan Bank, N.A.
and The First National Bank of Boston, as
agent, as amended and restated as of June 1,
1996.
4.5(a) Indenture dated as of July 1, 1986 between the
Registrant and Chemical Bank (Delaware),
relating to the Registrant's 7% Convertible
Subordinated Debentures Due 2011, filed as
Exhibit 4.1 to Amendment No. 1 to Form S-2
Registration Statement under the Securities Act
of 1933, Registration No. 33-6689, incorporated
herein by reference.
4.5(b) First Supplemental Indenture dated as of April
22, 1996 among the Registrant, Hudson General
LLC and Chemical Bank Delaware to Indenture
dated as of July 1, 1986.
<PAGE> 18
4.5(c) Notice of Redemption and Expiration of
Conversion Privilege dated June 3, 1996
relating to the Registrant's 7% Convertible
Subordinated Debentures Due 2011.
4.5(d) Notice of Redemption and Expiration of
Conversion Privilege dated August 5, 1996
relating to the Registrant's 7% Convertible
Subordinated Debentures Due 2011.
10.1(a) Development Agreement dated April 29, 1981
between Kahua Ranch, Limited, and the
Registrant, filed as Exhibit 3 to Quarterly
Report on Form 10-Q for the quarter ended March
31, 1981, incorporated herein by reference.
10.1(b) Amended and Restated Joint Venture Agreement
dated April 29, 1981 between Hudson Kohala Inc.
and The Hilton Head Company of Hawaii, Inc.
(now Oxford Kohala, Inc.), filed as Exhibit 4
to Quarterly Report on Form 10-Q for the
quarter ended March 31, 1981, incorporated
herein by reference.
10.1(c) First Amendment to the Joint Venture Agreement,
Amendment and Restatement dated April 29, 1981,
such Amendment being effective as of June 30,
1984, filed as Exhibit 10 to Quarterly Report
on Form 10-Q for the quarter ended September
30, 1984, incorporated herein by reference.
10.1(d) Receivable Sales Agreement dated January 3,
1990, with amendment letters dated June 22,
1990 and August 2, 1990, between the Registrant
and Oxford First Corporation and Oxford Kohala,
Inc., filed as Exhibit 10.1(d) to Annual Report
on Form 10-K for the fiscal year ended June 30,
1990, incorporated herein by reference.
10.1(e) Commitment Agreement to Purchase Receivables
dated January 3, 1990, with amendment letter
dated August 2, 1990, between Kohala Joint
Venture and The Oxford Finance Companies, Inc.,
filed as Exhibit 10.1(e) to Annual Report on
Form 10-K for the fiscal year ended June 30,
1990, incorporated herein by reference.
10.1(f) Agreement constituting an amendment to the
Joint Venture Agreement, Amendment and
Restatement dated April 29, 1981, dated
November 2, 1990 among the Registrant, Hudson
Kohala Inc., Oxford Kohala, Inc. and Oxford
First Corporation relating to receivables of
the Kohala Joint Venture, filed as Exhibit
10.1(f) to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1990,
incorporated herein by reference.
10.1(g) Agreement constituting an amendment to the
Joint Venture Agreement, Amendment and
Restatement dated April 29, 1981, dated
September 5, 1991 among the Registrant, Hudson
Kohala Inc., Oxford Kohala, Inc. and Oxford
First Corporation relating to distributions
from the Kohala Joint Venture, filed as Exhibit
10.1(g) to Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, incorporated
herein by reference.
<PAGE> 19
10.1(h) Agreement constituting an amendment to the
Joint Venture Agreement, Amendment and
Restatement dated April 29, 1981, dated
September 26, 1991 among the Registrant, Hudson
Kohala Inc., Oxford Kohala, Inc. and Oxford
First Corporation relating to distributions
from the Kohala Joint Venture, filed as Exhibit
10.1(h) to Quarterly Report on Form 10-Q for
the quarter ended September 30, 1991,
incorporated herein by reference.
10.1(i) Second Amendment to the Joint Venture
Agreement, Amendment and Restatement dated
April 29, 1981, such Amendment being effective
as of October 1, 1994, filed as Exhibit 10.1(i)
to Quarterly Report on Form 10-Q for the
quarter ended September 30, 1994, incorporated
herein by reference.
10.2* 1981 Non-Qualified Stock Option and Stock
Appreciation Rights Plan, filed as Exhibit 15.1
to Form S-8 Registration Statement under the
Securities Act of 1933, Registration No.
2-75137, incorporated herein by reference.
10.3* 1981 Incentive Stock Option and Stock
Appreciation Rights Plan, filed as Exhibit 15.2
to Form S-8 Registration Statement under the
Securities Act of 1933, Registration No.
2-75137, incorporated herein by reference.
10.4(a)* Form of Severance Agreement, dated as of June
3, 1986, between the Registrant and Michael
Rubin, filed as Exhibit 10.5(a) to Annual
Report on Form 10-K for the fiscal year ended
June 30, 1988, incorporated herein by
reference.
10.4(b)* Amendment effective January 23, 1996, amending
the Form of Severance Agreement between the
Registrant and Michael Rubin dated as of June
3, 1986, filed as Exhibit 10.4(c) to Quarterly
Report on Form 10-Q for the quarter ended March
31, 1996, incorporated herein by reference.
10.4(c)* Amended schedule of executive officers entitled
to benefits of Severance Agreements, filed as
Exhibit 10.4(d) to Quarterly Report on Form
10-Q for the quarter ended March 31, 1996,
incorporated herein by reference.
10.5(a)* Employment Agreement dated July 28, 1988,
between the Registrant and Jay B. Langner,
filed as Exhibit 10.6(a) to Annual Report on
Form 10-K for the fiscal year ended June 30,
1988, incorporated herein by reference.
10.5(b)* Amendment dated April 16, 1990, amending the
Employment Agreement between the Registrant and
Jay B. Langner dated as of July 28, 1988, filed
as Exhibit 10.5(b) to Annual Report on Form
10-K for the fiscal year ended June 30, 1990,
incorporated herein by reference.
10.5(c)* Amendment dated August 16, 1994, amending the
Employment Agreement between the Registrant and
Jay B. Langner dated as of July 28, 1988, as
amended, filed as Exhibit 10.5(c) to Annual
<PAGE> 20
Report on Form 10-K for the fiscal year ended
June 30, 1994, incorporated herein by
reference.
10.5(d)* Amendment effective January 23, 1996, amending
the Employment Agreement between the Registrant
and Jay B. Langner dated July 28, 1988, as
amended, filed as Exhibit 10.5(e) to Quarterly
Report on Form 10-Q for the quarter ended March
31, 1996, incorporated herein by reference.
10.5(e)* Severance Agreement dated April 16, 1990
between the Registrant and Jay B. Langner,
filed as Exhibit 10.5(c) to Annual Report on
Form 10-K for the fiscal year ended June 30,
1990, incorporated herein by reference.
10.5(f)* Amendment effective January 23, 1996, amending
the Severance Agreement between the Registrant
and Jay B. Langner dated April 16, 1990, filed
as Exhibit 10.5(f) to Quarterly Report on Form
10-Q for the quarter ended March 31, 1996,
incorporated herein by reference.
10.7(a)* Form of Employment Agreement, dated February 8,
1990, between the Registrant and Michael Rubin,
filed as Exhibit 10.7(a) to Annual Report on
Form 10-K for the fiscal year ended June 30,
1990, incorporated herein by reference.
10.7(b)* Amendment effective January 23, 1996, amending
the Form of Employment Agreement between the
Registrant and Michael Rubin, dated February 8,
1990, filed as Exhibit 10.7(c) to Quarterly
Report on Form 10-Q for the quarter ended March
31, 1996, incorporated herein by reference.
10.7(c)* Amended schedule of executive officers entitled
to benefits of Employment Agreements, filed as
Exhibit 10.7(d) to Quarterly Report on Form
10-Q for the quarter ended March 31, 1996,
incorporated herein by reference.
10.8* Employment Agreement dated September 21, 1990
between the Registrant and Donald S. Croot,
filed as Exhibit 10.9 to Annual Report on Form
10-K for the fiscal year ended June 30, 1991,
incorporated herein by reference.
10.9* Description of Executive Incentive Program
adopted by the Compensation Committee of the
Board of Directors on December 1, 1993, as
amended on May 17, 1996.
<PAGE> 21
10.10(a) Unit Purchase and Option Agreement, dated
February 27, 1996 between the Registrant and
Lufthansa Airport and Ground Services GmbH, a
German corporation, filed as Exhibit 99.1 to
Form 8-K dated March 6, 1996, incorporated
herein by reference.
10.10(b) Limited Liability Company Agreement dated May
31, 1996, effective as of June 1, 1996, among
the Registrant, LAGS (USA) Inc. and Hudson
General LLC, filed as Exhibit 99.3 to Form 8-K
dated May 31, 1996, incorporated herein by
reference.
11 Computation of Earnings Per Share Information -
primary and fully diluted.
13 The Registrant's 1996 Annual Report to
Shareholders, which report, except for those
portions thereof which are expressly
incorporated by reference in this filing, is
furnished for the information of the Commission
and is not to be deemed to be filed as part of
this filing.
21 Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP, the
Corporation's independent auditors, to the
incorporation by reference into the
Corporation's Registration Statement on Form
S-8, as amended, Registration No. 2-75137.
27 Financial Data Schedule
(b) During the quarter ended June 30, 1996, the Registrant filed a Form 8-K
dated May 31, 1996, which reported the consummation of the Purchase
Agreement and the transactions contemplated thereby.
(c) Reference is made to Item 14(a)(3) above.
-------------
(d) Reference is made to Item 14(a)(2) above.
-------------
* Denotes management contract for compensatory plan or arrangement.
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned Chief Executive, Chief Financial and Chief Accounting Officers,
thereunto duly authorized on the 24th day of September 1996.
HUDSON GENERAL CORPORATION
/s/ Signature Title
/s/ Jay B. Langner Chairman of the Board and
-------------- Chief Executive Officer
Jay B. Langner
/s/ Michael Rubin President and Principal Financial Officer
-------------
Michael Rubin
/s/ Barry I. Regenstein Chief Accounting Officer
-------------------
Barry I. Regenstein
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in their capacities as Directors on the 24th day of September 1996.
/s/ Jay B. Langner /s/ Hans H. Sammer
-------------- --------------
Jay B. Langner Hans H. Sammer
/s/ Milton H. Dresner /s/ Richard D. Segal
----------------- ----------------
Milton H. Dresner Richard D. Segal
/s/ Edward J. Rosenthal /s/ Stanley S. Shuman
------------------- -----------------
Edward J. Rosenthal Stanley S. Shuman
<PAGE> 23
Independent Auditors' Report
The Board of Directors and Stockholders
Hudson General Corporation:
Under date of August 16, 1996, except as to note 7 which is as of September 5,
1996, we reported on the consolidated balance sheets of Hudson General
Corporation and subsidiaries as of June 30, 1996 and 1995 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three year period ended June 30, 1996, as contained in
the fiscal 1996 annual report to stockholders. These consolidated financial
statements and our report thereon are incorporated by reference in the annual
report on Form 10-K for the year 1996. In connection with our audits of the
aforementioned consolidated financial statements, we have also audited the
related financial statement schedule as listed in item 14(a)2. This financial
statement schedule is the responsibility of the Corporation's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
Our report refers to a change in the method of accounting for income taxes.
KPMG PEAT MARWICK LLP
Jericho, New York
September 5, 1996
<PAGE> 24
SCHEDULE II
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
..........ADDITIONS............
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER FROM END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS RESERVES OF YEAR
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996 - Allowance for doubtful
accounts receivable... $1,579,000 $ 362,000 $(1,820,000) (B,C,D) $ 121,000 (A) $ --
========== ========== =========== ========== =========
1995 - Allowance for doubtful
accounts receivable... $1,631,000 $ 178,000 $( 85,000) (B,C) $ 145,000 (A) $1,579,000
========== ========== =========== ========== ==========
1994 - Allowance for doubtful
accounts receivable... $1,500,000 $ 160,000 $ 57,000 (B,C) $ 86,000 (A) $1,631,000
========== ========== =========== ========== ==========
</TABLE>
NOTES:
(A) Write-offs.
(B) Foreign exchange.
(C) Recoveries.
(D) Includes transfer of $1,804,000 to Hudson General LLC.
<PAGE> 25
HUDSON GENERAL LLC
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE
(FORM 10-K)
JUNE 30, 1996
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
The Board of Member Representatives
Hudson General LLC
We have audited the accompanying consolidated balance sheet of Hudson General
LLC and subsidiaries as of June 30, 1996 and the related consolidated statements
of earnings, members' equity and cash flows for the period June 1 (inception) to
June 30,1996. We have also audited financial statement schedule II. These
consolidated financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial statement
schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Hudson General LLC
and subsidiaries at June 30, 1996 and the results of their operations and their
cash flows for the period June 1 (inception) to June 30, 1996, in conformity
with generally accepted accounting principles. Also in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.
Jericho, New York
August 16, 1996, except for Note 6 which is
as of September 5, 1996
<PAGE> 27
CONSOLIDATED STATEMENT OF EARNINGS
Hudson General LLC and Subsidiaries
For the Period June 1 (Inception) to June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
Revenues ......................................... $12,313
-------
Costs and expenses:
Operating ................................... 9,259
Depreciation and amortization ............... 673
Selling, general & administrative ........... 1,317
Interest .................................... 168
-------
Total costs and expenses ............... 11,417
-------
Earnings before provision for foreign income
taxes ........................................ 896
Provision for foreign income taxes ............... 41
-------
Net earnings ..................................... $ 855
=======
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 28
CONSOLIDATED BALANCE SHEET
Hudson General LLC and Subsidiaries
June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
Assets
Current assets:
Cash and cash equivalents .......................... $ 19,269
Accounts and notes receivable - net ................ 18,055
Inventory .......................................... 1,115
Prepaid expenses and other assets .................. 1,202
--------
Total current assets ..................... 39,641
Property, equipment and leasehold rights at cost,
less accumulated depreciation and amortization ...... 37,442
Long-term receivables - net ........................... 2,028
Deferred income taxes ................................. 852
Excess cost over fair value of net assets acquired .... 761
--------
$ 80,724
========
Liabilities and Members' Equity
Current liabilities:
Accounts payable ................................... $ 15,104
Income taxes payable ............................... 350
Accrued expenses and other liabilities ............. 17,735
Advances from Hudson General Corporation ........... 7,233
--------
Total current liabilities ................ 40,422
--------
Long-term debt, subordinated .......................... 28,751
--------
Members' Equity:
Contributed capital ................................ 12,123
Retained earnings .................................. 855
Equity adjustments from foreign currency translation (1,427)
--------
Total members' equity .................... 11,551
--------
$ 80,724
========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 29
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY
Hudson General LLC and Subsidiaries
For the Period June 1 (Inception) to June 30, 1996
(in thousands)
<TABLE>
<CAPTION>
Equity
Adjustments
From Foreign
Contributed Retained Currency Members'
Capital Earnings Translation Equity
----------- -------- ------------ --------
<S> <C> <C> <C> <C>
Balance, May 31, 1996 $ -- $ -- $ -- $ --
Equity contributions 12,123 -- (1,470) 10,653
Equity adjustment from foreign currency translation -- -- 43 43
Net earnings -- 855 -- 855
--------------------------------------------------------------
Balance, June 30, 1996 $12,123 $ 855 $(1,427) $11,551
==============================================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 30
CONSOLIDATED STATEMENT OF CASH FLOWS
Hudson General LLC and Subsidiaries
For the Period June 1 (Inception) to June 30,1996
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net earnings ............................................ $ 855
Adjustments to reconcile net earnings to net cash used by
operating activities:
Depreciation and amortization ............................ 673
Provision for losses on accounts receivable - net 15
Loss on sale of equipment ........................ 67
Change in other current assets and liabilities:
Accounts and notes receivables ............... (7,011)
Inventory - net .............................. (40)
Prepaid expenses and other assets ............ (256)
Accounts payable ............................. 2,365
Income taxes payable ......................... 38
Accrued expenses and other liabilities ....... (1,698)
Decrease in long-term receivables - net .......... 36
Other - net ...................................... 5
--------
Net cash used by operating activities ........ (4,951)
========
Cash flows from investing activities:
Purchases of property, equipment and leasehold rights ... (1,825)
Proceeds from sale of property and equipment ............ 23
--------
Net cash used by investing activities ........ (1,802)
--------
Cash flows from financing activities:
Capital contribution .................................... 15,848
Advances from Hudson General Corporation ................ 7,233
Principal repayments of borrowings ...................... (70)
--------
Net cash provided by financing activities .... 23,011
--------
Effect of exchange rate changes on cash .................. 9
--------
Net increase in cash and cash equivalents ................ 16,267
Cash and cash equivalents at beginning of period ......... 3,002
--------
Cash and cash equivalents at end of period ............... $ 19,269
========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hudson General LLC and Subsidiaries
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation: The consolidated financial statements include the
accounts of Hudson General LLC and its subsidiaries (Hudson LLC). All material
intercompany accounts and transactions have been eliminated in consolidation.
Description of Business: Hudson LLC provides a broad range of aviation services
to the aviation industry at twenty-four (24) airports throughout the United
States and Canada. These services include aircraft ground handling; aircraft
de-icing; aircraft fueling; fuel management; ground transportation; snow
removal; cargo warehousing; and sale, leasing and maintenance of ground support
equipment.
Inventories: Inventories are carried at the lower of average cost or market.
Depreciation and Amortization: Depreciation of property and equipment is
provided on the straight-line method over their estimated useful lives.
Leasehold rights are amortized over the original and anticipated renewal terms
of the underlying leases.
Excess Cost over Fair Value of Net Assets Acquired: The excess cost over fair
value of net assets acquired, net of accumulated amortization of $1,232,000 at
June 30, 1996, is amortized on a straight-line basis over periods not to exceed
forty years.
Income Taxes: Hudson LLC has adopted Statement of Financial Accounting Standards
(SFAS) No. 109 "Accounting for Income Taxes", which requires the use of the
liability method of accounting for deferred income taxes (see Note 7).
Financial Instruments: Hudson LLC believes that the book values of its monetary
assets and liabilities, excluding the convertible debentures (see Note 6),
approximate fair values as a result of the short-term nature of such assets and
liabilities. The fair value of the convertible debentures at June 30, 1996 is
approximately $31,500,000 based on quoted market prices.
Foreign Currency Translation: The financial position and results of operations
of Hudson LLC's Canadian operations are measured using local currency as the
functional currency. Assets and liabilities are translated into U.S. dollars at
year-end rates of exchange, and revenues and expenses are translated at the
average rates of exchange for the year. Gains or losses resulting from
translating foreign currency financial statements are accumulated as a separate
component of members' equity.
Statement of Cash Flows: For purposes of the consolidated statement of cash
flows, Hudson LLC considers all securities with an original maturity of three
months or less at the date of acquisition to be cash equivalents. During the
month ended June 30, 1996, there were no income taxes or interest paid.
<PAGE> 32
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. FORMATION AND STRUCTURE OF HUDSON GENERAL LLC
Effective June 1, 1996, pursuant to the terms of a Unit Purchase and Option
Agreement dated February 27, 1996 (the Purchase Agreement) between Hudson
General Corporation (the Corporation) and Lufthansa Airport and Ground Services
GmbH (LAGS), a German corporation and an indirect wholly-owned subsidiary of
Deutsche Lufthansa AG (Lufthansa), the Corporation transferred substantially all
of the assets and liabilities of its aviation services business (the Aviation
Business) to Hudson LLC, a newly formed limited liability company (the
Transaction). In exchange for the transfer of such assets and liabilities and
the assumption by Hudson LLC, as co-obligor with the Corporation, of all of the
Corporation's 7% convertible subordinated debentures, the Corporation received a
74% interest in Hudson LLC. In addition, Hudson LLC sold LAGS a 26% interest in
Hudson LLC, for a purchase price of $23,686,000 in cash (after certain
adjustments), of which $15,848,000 was paid at the closing. The remaining
portion of the purchase price of $7,838,000 (the Deferred Payment) is to be paid
in three annual installments (together with accrued interest from January 1,
1996 at a rate of 11% per annum), expected to be paid in September 1996, 1997
and 1998, and is subject to potential downward adjustment based on the future
earnings of the Aviation Business. The earnings of the Aviation Business in
fiscal 1996 were sufficient for Hudson LLC to earn the full portion of the
Deferred Payment due in September 1996 of $2,650,000, plus interest thereon. The
Purchase Agreement also provides for the grant to LAGS of an option, exercisable
on October 1 of each year from 1996 through 2000, effective as of the preceding
July 1, pursuant to which LAGS may increase its equity ownership in Hudson LLC
from 26% to a maximum of 49%, for a price based on a formula related to the
average earnings of the Aviation Business over the four fiscal years preceding
the exercise of the option, subject to certain minimum and maximum amounts.
Pursuant to the Purchase Agreement, Hudson LLC, the Corporation and LAGS USA
Inc., a wholly owned subsidiary of LAGS (LAGS USA), entered into a Limited
Liability Company Agreement effective June 1, 1996 (the LLC Agreement). The LLC
Agreement stipulates that the Corporation and LAGS USA will share profits and
losses in the same proportion as their respective equity interests in Hudson
LLC, except that the Corporation is entitled to all interest earned on the
Deferred Payment and LAGS USA will not share in any pre-tax earnings, as
defined, of the Aviation Business in excess of $14,690,000 and $15,863,000 in
fiscal 1997 and 1998, respectively. In addition, Hudson LLC's net earnings in
June 1996 were allocated 100% to the Corporation.
In June 1996, primarily as a result of the Corporation retaining certain trade
receivables, the Corporation made net advances of $7,233,000 on behalf of Hudson
LLC. Such balance remained outstanding at June 30, 1996 and is expected to be
repaid to the Corporation by Hudson LLC (together with accrued interest at a
rate of 5.18%).
<PAGE> 33
Pursuant to the LLC Agreement: (i) the Corporation will continue to manage the
Aviation Business and will be entitled to charge Hudson LLC an overhead fee
equal to the sum of 3% of Hudson LLC's consolidated domestic revenues and 1% of
Hudson LLC's consolidated Canadian revenues; and (ii) there will be a Member
Board on which the Corporation has three votes and LAGS USA has two votes. The
LLC Agreement allows either Member to veto certain major transactions or any
reduction in distributions stipulated in the LLC Agreement. The LLC Agreement
provides that distributions will be paid annually in an amount at least equal
to 50% of domestic and 10% of Canadian pre-tax earnings, as defined, from the
Aviation Business.
3. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Accounts, notes and long-term receivables - net at June 30, 1996 (in thousands)
consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Rental and service fees receivable................................... $17,500
Note receivable...................................................... 2,414
Equipment rental contracts and other notes
receivable (less unearned finance income of $39,000)............... 169
--------
20,083
Less: current portion (net of allowance for
doubtful accounts of $1,784,000)................................... 18,055
--------
Long-term portion....................................................$ 2,028
========
</TABLE>
On January 6, 1994, the Corporation assigned its leases and ceased operations at
Long Island MacArthur Airport in Islip, New York (LIMA) where the Corporation
had provided ground handling and fueling services to commercial airlines and
related fixed base operation services to general aviation aircraft. At the
closing, the Corporation was paid $150,000 in cash and received a promissory
note from the purchaser of its leases in the amount of $3,750,000, payable over
seven years with interest at the rate of 7%. The outstanding balance of the note
receivable at June 30, 1996 was $2,414,000. The promissory note is secured by
the assigned leases and other assets located at LIMA.
Hudson LLC provides various services at airports throughout the United States
and Canada. Hudson LLC grants credit to customers based upon an analysis of its
customers' financial position and then-existing conditions in the aviation
industry. Six of Hudson LLC's customers had individual balances outstanding
greater than 5%, and aggregating 41%, of accounts receivable-net at June 30,
1996.
Accrued expenses and other liabilities at June 30, 1996 (in thousands) consisted
of the following:
<TABLE>
<CAPTION>
<S> <C>
Salaries and wages................................................... $ 6,204
Insurance............................................................ 3,798
Operating expenses payable........................................... 3,318
Other................................................................ 4,415
---------
$17,735
=========
</TABLE>
Maintenance and repair expenses were $664,000 for the month ended June 30,1996.
Interest income included in revenues was $217,000 for the month ended June
30, 1996.
<PAGE> 34
4. PROPERTY, EQUIPMENT AND LEASEHOLD RIGHTS
The number of years over which major classes of assets are being depreciated and
amortized, and the costs and the related accumulated depreciation and
amortization thereof at June 30, 1996 (in thousands) are set forth below.
<TABLE>
<CAPTION>
Estimated
Useful Lives
------------
<S> <C> <C>
Operating equipment.............................. 2 - 12 $72,916
Leasehold rights................................. 25 2,400
Buildings........................................ 14 - 20 1,468
Office furnishings and equipment................. 3 - 10 3,365
Leasehold improvements........................... 2 - 28 6,220
--------
86,369
Accumulated depreciation and amortization........ (48,927)
--------
$37,442
========
</TABLE>
5. CANADIAN OPERATIONS
The consolidated financial statements include: assets of $16,671,000, and net
assets of $10,831,000 at June 30, 1996; and revenues of $3,208,000; and earnings
of $52,000 for the month ended June 30, 1996, related to Hudson LLC's Canadian
operations.
6. LONG-TERM DEBT
In connection with the Transaction, the revolving credit agreement that the
Corporation had with a group of banks dated November 25, 1992, as amended, was
amended and restated as of June 1, 1996, and Hudson LLC assumed and agreed to
become jointly and severally liable for any obligations thereunder (the LLC
Credit Agreement). The Corporation is a co-obligor under the LLC Credit
Agreement in an amount equal to the balance of outstanding Debentures (see
below). Pursuant to the LLC Credit Agreement, Hudson LLC may borrow funds
(including outstanding letters of credit) up to a limit of $18,000,000 (the LLC
Limit) until September 30, 1998. At such time, and at the end of each subsequent
quarter, the LLC Limit will be reduced by one-sixteenth of the LLC Limit that
was in effect on June 30, 1998 until June 30, 2002, at which time the LLC Credit
Agreement terminates. The limit may also be reduced by asset sales in excess of
certain amounts. There were no direct borrowings and $3,045,000 of outstanding
letters of credit at June 30, 1996. The LLC Credit Agreement provides Hudson LLC
with the option of selecting a rate of interest at either the base rate or
1 3/8% above the LIBO rate, as defined.
The LLC Credit Agreement requires that Hudson LLC maintain certain minimum
effective net worth requirements, as defined, which are subject to incremental
annual increases and further stipulates that Hudson LLC not incur a consolidated
net loss for any fiscal year. The LLC Credit Agreement also requires that Hudson
LLC meet certain other financial covenants and permits Hudson LLC, with certain
limitations, to prepay or otherwise purchase subordinated debt. Hudson LLC has
granted the banks a security interest in substantially all of its domestic
assets.
Hudson LLC also has an agreement with a group of banks to provide a credit
facility for its Canadian subsidiary (the Canadian Agreement) in the amount of
$5,000,000 (Cdn) (the Canadian Limit). The Canadian Limit will be reduced
commencing September 30, 1998 on the same basis as the LLC Limit. The
<PAGE> 35
Canadian Agreement provides Hudson LLC with the option of selecting a rate of
interest at either 1/2% above the prime rate or 1 5/8% above the cost of funds
rate, as defined.
In connection with the Canadian Agreement, Hudson LLC has guaranteed the
obligations of its Canadian subsidiary and granted the banks a security interest
in substantially all of its Canadian accounts receivable and certain of its
other assets, including inter-company debt from its Canadian subsidiary.
In July 1986 the Corporation issued $30,000,000 of 7% convertible subordinated
debentures due 2011 (the Debentures). In connection with the Transaction,
effective June 1, 1996, Hudson LLC assumed the obligations of the Debentures and
the Corporation remained as a co-obligor. The Debentures are convertible at any
time prior to maturity, unless previously redeemed, into shares of the
Corporation's common stock at a conversion price of $32.75 per share, subject to
adjustment in certain events. Interest on the Debentures is payable
semi-annually in January and July. The Debentures are redeemable at any time at
the option of Hudson LLC or the Corporation, in whole or in part, at 100.7% of
the principal amount thereof until July 15, 1996 and thereafter at par. The
Debentures are subject to a mandatory sinking fund, beginning in July 1997, in
annual installments of $1,500,000, which will retire 70% of the Debentures prior
to maturity. The Corporation previously repurchased $1,000,000 of the
Debentures. In addition, as of June 30, 1996, $249,000 principal amount of the
Debentures had been converted into shares of the Corporation's common stock.
Such repurchased and converted amounts may, at Hudson LLC's and the
Corporation's discretion, be used to meet sinking fund obligations. The
Debentures are subordinate to all superior debt as defined in the indenture. At
June 30, 1996 there was $28,751,000 of the Debentures outstanding.
On June 3, 1996, $15,825,000 aggregate principal amount of the Debentures was
called for redemption on July 22, 1996. On July 22, 1996, $2,166,000 of the
Debentures were redeemed, with the $13,659,000 balance having been converted
into shares of the Corporation's common stock on or prior to such redemption
date. In addition, on August 5, 1996 the balance of outstanding Debentures
(approximately $12,800,000) were called for redemption on September 4, 1996. On
September 4, 1996, $242,000 of the Debentures were redeemed, with the
$12,520,000 balance having been converted into shares of the Corporation's
common stock on or prior to such redemption date. At September 5, 1996 no
Debentures remained outstanding.
To the extent that the Debentures are converted into shares of the Corporation's
common stock, Hudson LLC will, on a subordinated basis (as defined), be indebted
to the Corporation. Hudson LLC is obligated to repay such debt to the
Corporation as follows: (i) to the extent that proceeds received by Hudson LLC
at the closing of the Transaction were not used to redeem Debentures; (ii) to
the extent that deferred payments made by LAGS are received by Hudson LLC (see
Note 2); (iii) $500,000 on July 15, 1997; and (iv) $1,500,000 on July 15, 1998
and on each July 15th thereafter until the entire principal balance is
satisfied.
7. INCOME TAXES
Provision for foreign income taxes consisted of $41,000 in current Canadian
income taxes for the month ended June 30, 1996.
Deferred tax assets are comprised of the following as of June 30, 1996 (in
thousands), which represent deferred tax assets transferred to Hudson LLC from
the Corporation on June 1, 1996:
<TABLE>
<CAPTION>
<S> <C>
Deferred tax assets:
Reserves for doubtful accounts, claims, etc.....................$196
Property, equipment and leasehold rights, principally
depreciation - foreign........................................ 591
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
<S> <C>
Minimum tax credit carryforward................................. 65
----
Net noncurrent deferred tax assets..............................$852
====
</TABLE>
Hudson LLC has adopted SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109
requires that deferred income taxes be recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. Under SFAS No. 109, the
effect on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
As a limited liability company, Hudson LLC is not a taxable entity under the
provisions of the Internal Revenue Code. The U.S. taxable results and available
tax credits of Hudson LLC pass directly to the Members' U.S. corporate income
tax returns in the manner prescribed in the LLC Agreement.
8. RETIREMENT PLANS
The Corporation maintains a 401(k) Profit Sharing Plan (the Plan) covering
substantially all of its domestic employees not subject to collective bargaining
agreements. Each year the Corporation contributes to the Plan a discretionary
contribution and makes a matching contribution equal to 25% of the Compensation
(as defined in the Plan) that each participant elects to defer (up to 5% of the
participant's Compensation) and contribute to the Plan. It is expected that
Hudson LLC will on or about January 1, 1997, establish a 401(k) Profit Sharing
Plan covering substantially all of its domestic employees not subject to
collective bargaining agreements under terms and conditions similar to those of
the Plan. Until the establishment of such plan, the Corporation will continue to
provide benefits under the Plan on behalf of Hudson LLC. For the month ended
June 30, 1996, Hudson LLC expensed $47,000 relating to the Plan.
Hudson LLC maintains a Group Registered Retirement Savings Plan (RRSP) covering
substantially all of its Canadian employees not subject to collective bargaining
agreements. Under the RRSP Hudson LLC contributes a discretionary contribution.
For the month ended June 30, 1996, the Company expensed $44,000 relating to the
RRSP.
9. COMMITMENTS AND CONTINGENCIES
(a) Leases
Minimum rental payments for future fiscal years under non-cancelable operating
leases (including $3,633,000 to be paid subsequent to June 30,1996 for operating
equipment on lease to Hudson LLC from the Corporation and excluding $1,447,000
to be received subsequent to June 30, 1996 under non-cancelable subleases) are:
$4,791,000 in 1997; $4,290,000 in 1998; $3,902,000 in 1999; $2,983,000 in 2000;
$2,377,000 in 2001; and $7,622,000 thereafter. Total rental expense incurred
amounted to $475,000 for the month ended June 30, 1996 (excluding sublease
income of $36,000).
(b) Litigation
In 1988, Texaco Canada Inc. (Texaco) (now known as McColl-Frontenac Inc.)
instituted a lawsuit (the Texaco Lawsuit) in the Supreme Court of Ontario,
Canada against the Corporation, the Corporation's Canadian subsidiary (now owned
by Hudson LLC) and Petro-Canada Inc. (the corporation which supplied aviation
fuel for the Corporation's Canadian fixed base operations). The Texaco Lawsuit's
allegations, as amended, are
<PAGE> 37
that the defendants interfered with contractual and fiduciary relations,
conspired to injure, and induced the breach of a fuel supply agreement between
Texaco and Innotech Aviation Limited (Innotech) in connection with the purchase
by the Corporation from Innotech in 1984 of certain assets of Innotech's airport
ground services business. The Texaco Lawsuit seeks compensatory and punitive
damages totaling $110,000,000 (Canadian) (approximately $80,000,000 (U.S.)) plus
all profits earned by the defendants subsequent to the alleged breach. The
trial, which began in May 1996, has been adjourned until January 1997.
Innotech (which due to a name change is now called Aerospace Realties (1986)
Limited (Aerospace)) had agreed to defend and indemnify the Corporation against
claims of whatever nature asserted in connection with, arising out of or
resulting from the fuel supply agreement with Texaco. By a letter dated February
15, 1996, the Corporation was notified by Aerospace that Aerospace has entered
into a liquidation phase and can no longer defray the cost of defending the
Texaco Lawsuit or pay for any damages resulting therefrom.
The Corporation has agreed to indemnify and hold harmless Hudson LLC, LAGS and
each affiliate of LAGS against all losses related to the Texaco Lawsuit. The
Corporation's management believes, and counsel for the Corporation has advised
based on available facts, that the Corporation will successfully defend this
action.
<PAGE> 38
SCHEDULE II
HUDSON GENERAL LLC AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE PERIOD JUNE 1 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
..........ADDITIONS............
BALANCE AT CHARGED TO CHARGED TO DEDUCTIONS BALANCE AT
BEGINNING COSTS AND OTHER FROM END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RESERVES OF PERIOD
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 - Allowance for doubtful
accounts receivable... $1,804,000 (D) $14,000 $(31,000) (B,C) $3,000 (A) $1,784,000
========== ======= ======== ====== ==========
</TABLE>
NOTES:
(A) Write-offs.
(B) Foreign exchange.
(C) Recoveries.
(D) Represents transfer of $1,804,000 from Hudson General Corporation.
<PAGE> 39
KOHALA JOINT VENTURE
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND SCHEDULE
(FORM 10-K)
JUNE 30, 1996, 1995 AND 1994
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
<PAGE> 40
Independent Auditors' Report
The Board of Directors
Hudson General Corporation
The Board of Directors
Oxford First Corporation:
We have audited the accompanying consolidated balance sheets of the Kohala
Joint Venture and subsidiary as of June 30, 1996 and 1995 and the related
consolidated statements of operations and partners' deficit, and cash
flows for each of the years in the three-year period ended June 30, 1996.
We have also audited financial statement schedule II. These consolidated
financial statements and the financial statement schedule are the
responsibility of the Venture's management. Our responsibility is to
express an opinion on these consolidated financial statements and the
financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
For the years ended June 30, 1996, 1995 and 1994, the Venture incurred net
losses of $6,042,200, $5,495,300 and $3,601,800 respectively, and at June
30, 1996 the amount of the partners' deficit was $15,374,100.
Additionally, in 1996, 1995 and 1994 the partners advanced $2,714,400,
$2,346,100 and $1,740,000, respectively, to the Venture. Unless land sales
increase significantly, additional contributions from the partners will be
required in fiscal 1997.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Kohala Joint Venture and subsidiary as of June 30, 1996 and 1995 and the
results of their operations and their cash flows for each of the years in
the three-year period ended June 30, 1996, in conformity with generally
accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Jericho, New York
August 16, 1996
<PAGE> 41
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Cash $ 266,800 89,000
Accounts receivable 48,300 43,500
Accrued interest receivable 237,600 239,900
Mortgage notes receivable, net (including amounts
from related parties of $386,500 and $978,200
in 1996 and 1995, respectively) 4,926,000 7,448,200
Land and development costs 26,709,400 26,863,000
Property, plant and equipment, net 1,646,000 1,705,000
Model home, net 593,600 687,200
Foreclosed real estate, net 2,200,200 2,395,200
Other 85,700 68,800
------------ -----------
$ 36,713,600 39,539,800
============ ===========
Liabilities and Partners' Deficit
---------------------------------
Liabilities:
Notes payable $ 576,200 3,402,400
Partner advances and accrued interest payable 50,219,500 44,047,500
Accounts payable and accrued expenses 1,292,000 1,339,900
Deposits -- 81,900
------------ -----------
Total liabilities 52,087,700 48,871,700
Contingencies
Partners' deficit (15,374,100) (9,331,900)
------------ -----------
$ 36,713,600 39,539,800
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 42
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Statements of Operations and Partners' Deficit
Years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
------------ ---------- ----------
<S> <C> <C> <C>
Net sales $ 676,800 503,600 535,900
Cost of sales 365,400 191,300 163,400
------------ ---------- ----------
Gross profit 311,400 312,300 372,500
Selling, general and administrative
expenses 2,952,400 2,851,600 2,796,700
Other (income) expense:
Interest expense 3,755,400 3,514,500 2,111,600
Interest income and other (354,200) (558,500) (934,000)
------------ ---------- ----------
Net loss (6,042,200) (5,495,300) (3,601,800)
Partners' deficit, beginning of year (9,331,900) (3,836,600) (234,800)
------------ ---------- ----------
Partners' deficit, end of year $(15,374,100) (9,331,900) (3,836,600)
============ ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 43
KOHALA JOINT VENTURE AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Proceeds from land sales $ 105,200 23,000 75,000
Interest income received 347,300 579,000 930,100
Proceeds from water company sales 341,300 246,600 281,500
Land and development cost expenditures (159,000) (243,700) (415,400)
Payments on contractor obligations -- -- (737,200)
Interest paid (212,000) (477,400) (693,900)
Selling, general and administrative expenditures paid (1,847,500) (2,062,800) (1,759,700)
Collections on mortgage notes 1,678,300 1,404,500 3,832,600
Proceeds from sale of and deposits relating to assets
held in foreclosure 57,000 89,800 --
----------- ---------- ----------
Net cash provided by (used in) operating activities 310,600 (441,000) 1,513,000
----------- ---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment (21,000) (10,900) (88,100)
----------- ---------- ----------
Cash flows from financing activities:
Advances received from partners 2,714,400 2,346,100 1,740,000
Contributions in aid of construction received -- 6,000 --
Payments on mortgage receivable financing agreements (2,826,200) (1,932,300) (3,273,500)
=========== ========== ==========
Net cash (used in) provided by financing activities (111,800) 419,800 (1,533,500)
----------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents 177,800 (32,100) (108,600)
Cash and cash equivalents at beginning of year 89,000 121,100 229,700
----------- ---------- ----------
Cash and cash equivalents at end of year $ 266,800 89,000 121,100
=========== ========== ==========
Non cash financing:
Issuance of note payable for land development $ -- 576,180 --
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 44
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1996, 1995 and 1994
(1) Summary of Significant Accounting Policies
(a) Description of the Business
The Kohala Joint Venture (the Venture) is a partnership which was formed to
acquire, develop and sell approximately 4,000 contiguous acres of land in
Hawaii (the Project). The Partners in the Venture are Hudson Kohala, Inc.
(Hudson, a wholly-owned subsidiary of Hudson General Corporation) and
Oxford Kohala, Inc. (Oxford, a wholly-owned subsidiary of Oxford First
Corporation) (Oxford First)) (together, the Partners). The terms of the
partnership are contained in the Restated Joint Venture Agreement dated
April 29, 1981, as amended (the Agreement). The Project is being
developed in four successive phases. The first two phases, containing
approximately 2,100 acres, have been developed and substantially sold.
The third phase, containing approximately 550 acres, has also been
developed and has 86 parcels available for sale. The fourth phase has yet
to be developed, except to the extent common improvements (main roadway,
water wells, etc.) have been completed.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the Venture
and its 99% owned subsidiary, the Kohala Ranch Water Company (KRWC)(note
7). All significant intercompany accounts and transactions have been
eliminated in consolidation.
(c) Partners' Deficit and Allocation of Profits and Losses
Partners' deficit includes the Partners' capital accounts in the Venture and
the minority interest (the remaining 1%) of the Partners in KRWC.
In accordance with the Agreement, profits are shared equally by the
Partners. Losses are shared by the Partners on a pro-rata basis, based
first on their respective capital accounts and then on their respective
combined advances to the Venture including accrued interest (note 5).
(d) Revenue Recognition and Land Sales
All sales to date have been from the first, second and third phases of the
Project. Revenue is being recognized under the full accrual method of
accounting. The minimum down payment for sales to be recorded is 10%.
(e) Interest Income on Mortgage Notes Receivables
Interest is not accrued on mortgage notes receivables in arrears 90 days or
more.
<PAGE> 45
2
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
(f) Capitalization of Costs
Land and development costs (including interest) are initially capitalized
and subsequently carried at the lower of average cost or net realizable
value. These costs are charged to cost of sales when the corresponding
land sale is recorded based upon the relative fair value of the parcel
sold to the aggregate fair value of all parcels in the phase. Although
the Venture believes its estimates are reasonable, there can be no
assurance that the estimated future selling prices can be realized or
that the actual costs for Phases III or IV will not exceed such
estimates.
The Venture has capitalized interest costs, as appropriate, for each phase
of the Project. During fiscal 1991, 1989 and 1987, the capitalization of
interest costs relating to the third, second and first phases,
respectively, was discontinued, as these phases were substantially
completed during the respective periods and ready for their intended use.
Effective July 1, 1994, as a result of the lack of further development
activity, capitalization of interest relating to the fourth phase has
been discontinued (note 3).
(g) Estimated Costs to Complete
At June 30, 1996, the Venture estimated that $2,479,000 of additional costs
were necessary to complete the development of Phase III. The portion of
such amount relating to unsold parcels has been offset against land and
development costs in the accompanying consolidated balance sheets.
(h) Property, Plant and Equipment
Property, plant and equipment is recorded at the lower of cost or net
realizable value.
Depreciation is provided on the straight-line method. The number of years
over which major classes of assets are depreciated and the costs and
related accumulated depreciation as of June 30, 1996 and 1995 are set
forth:
<TABLE>
<CAPTION>
Estimated
useful lives 1996 1995
------------ ---------- ---------
<S> <C> <C> <C>
Water distribution systems 20-50 years $2,773,700 2,763,200
Plant structures and equipment 3-10 years 190,400 179,900
---------- ---------
2,964,100 2,943,100
Accumulated depreciation (789,600) (709,600)
Contributions in aid of
construction (528,500) (528,500)
---------- ---------
$1,646,000 1,705,000
========== =========
</TABLE>
<PAGE> 46
3
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
Contributions in aid of construction represent contributions by customers
for plant additions made for the benefit of the customer. Accordingly,
such contributions are recorded as a reduction against property, plant
and equipment.
The Venture depreciates the model home based upon an estimated residual
value of $500,000 and a five year useful life. Depreciation expense
relating to the model home was $93,600 for fiscal years 1996 and 1995 and
$97,400 for fiscal 1994.
Depreciation expense was $173,600, $176,400 and $177,400 for fiscal 1996,
1995 and 1994, respectively.
(i) Income Taxes
As a partnership, the Venture is not a taxable entity under the provisions
of the Internal Revenue Code. The taxable results and available tax
credits of the Venture and KRWC pass directly to the Partners' corporate
income tax returns in the manner prescribed in the Agreement.
(j) Statements of Cash Flows
For the purposes of presenting the consolidated statements of cash flows,
the Venture considers all securities with an original maturity of three
months or less at the date of acquisition to be cash equivalents.
A reconciliation of net loss to net cash provided by (used in) operating
activities for fiscal 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Net loss $(6,042,200) $(5,495,300) $(3,601,800)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 173,600 176,400 177,400
Provision for losses and discounts on
mortgages receivable 600,000 988,500 378,300
Provision for losses on foreclosed real estate 356,300 -- 367,700
Sale of assets held in foreclosure 57,000 89,800 --
Interest expense in excess of interest paid 3,543,400 3,037,100 1,417,700
Mortgage loans originated on land sales (206,000) (209,500) (200,000)
Cash collections on mortgage loans 1,678,300 1,404,500 3,832,600
Excess land and development costs paid
over cost of sales 206,400 52,400 (252,000)
Repayment of contractor obligations -- -- (737,200)
</TABLE>
<PAGE> 47
4
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
<TABLE>
<S> <C> <C> <C>
Accrued interest on mortgages receivable 2,200 23,900 800
Cash for water sales in excess of accrual (4,900) (4,300) 1,800
Real estate tax accruals 35,700 (434,400) 224,000
Other (89,200) (70,100) (96,300)
----------- ---------- ----------
Total adjustments 6,352,800 5,054,300 5,114,800
----------- ---------- ----------
Net cash provided by (used in) operating activities $ 310,600 (441,000) 1,513,000
=========== ========== ==========
</TABLE>
(k) Use of Estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities at the date of the consolidated financial statements and the
reported amount of revenues and expenses during the reported period.
Management has made significant estimates as to the amounts required for
allowance for uncollectible accounts and the allowance for losses on
foreclosed real estate as well as the recoverability of land and
development costs. Actual results could differ from those estimates.
(2) Mortgage Notes Receivable
Effective July 1, 1996, the Venture adopted Statement of Financial
Accounting Standards No. 114, "Accounting by Creditors for Impairment of
a Loan" (SFAS No. 114) and Statement of Financial Accounting Standards
No. 118, "Accounting by Creditors for Impairment of a Loan -- Income
Recognition and Disclosures", (SFAS No. 118). SFAS No. 114 addresses the
accounting by creditors for impairment of a loan by specifying how
allowances for credit losses related to certain loans should be
determined. The Venture deems certain loans impaired when, based upon
current information and events, it is probable that the Company will be
unable to collect all amounts due, both principal and accrued interest.
The Venture measures impairment based on a loan's observable market price
or the fair value of the collateral since the loan is collateral
dependent and foreclosure is probable. The amount of the valuation
allowance is determined by comparing principal plus accrued interest to
the fair value of the underlying collateral. The Venture recognizes an
impairment by adjusting its existing valuation allowance with a
corresponding charge to bad debt expense. Subsequent changes in fair
value, if any, are treated in the same manner. Interest is not accrued on
mortgage notes receivable in arrears 90 days or more.
<PAGE> 48
5
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
At June 30, 1996 and 1995, mortgage notes receivable from land sales
consisted of the following:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Mortgage notes receivable $ 7,944,700 9,985,700
Allowance for uncollectible accounts (2,949,400) (2,464,200)
Reserve for cash discounts and other
allowances (69,300) (73,300)
----------- ----------
Mortgage notes receivable, net $ 4,926,000 7,448,200
=========== ==========
</TABLE>
At June 30, 1996 and 1995, 29 mortgage notes receivable were 90 days or more
in arrears, aggregating $5,145,000 and $5,174,000, respectively. As of
June 30, 1996, the $5,145,000 of such loans are considered impaired and
the allowance for uncollectible accounts balance has been established for
such accounts. The Venture's average recorded investment in impaired
loans for fiscal 1996 was $5,145,000. Accrued interest receivable on
delinquent mortgage notes receivable was $218,000 and $215,000 as of June
30, 1996 and 1995, respectively.
Stated interest rates on mortgage notes receivable outstanding at June 30,
1996 and 1995, range from 6% to 11% (averaging 9.4% as of June 30, 1996
and 9.6% as of June 30, 1995).
The Venture typically provides financing in connection with the sale of land
parcels. None of the Venture's mortgage notes receivable comprised more
than 5% of the total mortgage notes receivable balance at June 30, 1996
and 1995. The Venture is the first lien holder on all outstanding
mortgage notes receivable.
Purchasers of land parcels are entitled to discounts if certain conditions
are met. Discounts ranging from 10-20% are generally given if the
purchase price is paid in cash at the closing. If the cash is paid within
specified periods after the closing, a reduced sales discount is given.
Reserves have been established for estimated discounts to be taken by
purchasers under the various discount programs.
Scheduled collections of principal during the next five fiscal years and
thereafter are as follows:
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C> <C>
1997 $4,487,000
1998 1,881,800
1999 414,900
2000 783,100
2001 188,600
</TABLE>
<PAGE> 49
6
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
<TABLE>
<S> <C>
Thereafter 189,300
-----------
$ 7,944,700
===========
</TABLE>
(3) Land and Development Costs
Land and development costs include all costs directly associated with the
acquisition and development of the land parcels. The land was acquired by
the Venture from Hudson and recorded at cost. Major components of land
and development costs are the initial costs to acquire the land,
roadways, water, drainage, electrical and telephone lines, and various
project management expenditures, as well as unamortized capitalized
interest of $6,680,400 and $6,706,300 as of June 30, 1996 and 1995,
respectively.
(4) Foreclosed Real Estate
Foreclosed real estate represents land parcels that were reacquired in
connection with previously financed mortgages. Such parcels are valued at
the lower of their remaining receivable balance outstanding, or their net
estimated realizable value (determined in the same manner as the
allowance for uncollectible accounts), as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Foreclosed real estate $ 2,903,300 2,881,600
Allowance for losses (703,100) (486,400)
----------- ----------
Foreclosed real estate, net $ 2,200,200 2,395,200
=========== ==========
</TABLE>
During fiscal 1996, four mortgage notes receivable were transferred to
foreclosed real estate and one parcel in foreclosed real estate was sold.
The carrying values of the mortgage notes receivable transferred and
parcel sold were $581,100 and $559,400, respectively.
(5) Partner Advances Payable
The Partners have agreed to make equal advances to the Venture for all costs
necessary for the orderly development of the Project. Advances earn
interest from the date of the advance compounded quarterly at the prime
rate minus 1% (7.25% and 8% at June 30, 1996 and 1995, respectively).
On October 13, 1994, Oxford First filed for reorganization under Chapter 11 of
the Bankruptcy Code. Pursuant to an order of the Bankruptcy Court, Oxford First
(through its subsidiary, the Oxford Finance Companies, Inc.) was permitted to
transfer certain amounts to Oxford. The amounts so authorized were not
sufficient to allow Oxford to make its full share of required advances. Hudson
<PAGE> 50
7
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
opted to make additional advances (the Additional Advances) to cover
Oxford's funding deficiency. During November 1995, Oxford resumed making
advances, and in January 1996, Oxford repaid to Hudson the entire amount
of the Additional Advances of $702,000 together with $37,000 of interest
thereon. In addition, pursuant to an amended reorganization plan which
was approved by the Bankruptcy Court on September 7, 1995, Oxford First
is permitted to transfer funds to Oxford in an aggregate amount not to
exceed $750,000 in each of the calendar years 1996 and 1997 exclusive of
the repayment of the Additional Advances. The Venture, at present, is
unable to determine whether such permitted transfers will be sufficient
in order for Oxford to make its share of future advances to the Venture
or whether Oxford First will receive permission from the Bankruptcy Court
to transfer additional funds to Oxford, if required. Oxford advanced
$675,000 to the Venture during the first eight months of calendar 1996.
Unless land sales increase significantly, additional contributions from
the Partners will be required in fiscal 1997. It is anticipated that
Hudson will fund, subject to its right of reimbursement, any advances
required in fiscal 1997 in the event Oxford is not able to make its share
of advances.
During fiscal 1996, 1995 and 1994, advances accrued an average rate of
interest of 7.3%, 7.2% and 5.2%, respectively.
(6) Notes Payable
During fiscal 1991, the Venture entered into agreements with banks pursuant
to which $8,797,000 of the Venture's mortgage receivables were sold. An
additional sale of $3,148,000 of mortgage receivables to a bank was
completed during fiscal 1992. On April 30, 1996, the Venture repurchased
$1,373,000 of such mortgage receivables which represented the entire
outstanding balance thereof. Since the Venture had accounted for these
transactions as financing arrangements, the unpaid balance of the
mortgage receivables in the amount of $2,826,200 is shown as notes
payable in the accompanying consolidated balance sheet at June 30, 1995.
The maximum amounts outstanding during fiscal 1996, 1995 and 1994 were
$2,826,000, $4,758,500 and $8,031,800, respectively. The average amounts
outstanding for fiscal 1996, 1995 and 1994, based upon month-end
balances, were $1,561,000, $3,860,100 and $6,091,500, respectively. The
weighted average interest rates for fiscal 1996, 1995 and 1994 were
11.3%, 11.9% and 11.2%, respectively. The weighted average interest rates
on borrowings outstanding as of June 30, 1995 and 1994, based upon
month-end balances was 11.6% and 11.2%, respectively.
At June 30, 1996, the Company has a note payable outstanding in the amount
of $576,200 relating to certain development costs. The note matures in
December 1996 and bears interest at the prime rate plus 1%.
(7) Kohala Ranch Water Company
KRWC provides water to the Project and is owned by the Venture (99%), Hudson
(.5%), and Oxford (.5%). The assets of KRWC are comprised principally of
property, plant and equipment.
<PAGE> 51
8
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
KRWC recorded revenues of $336,300, $251,000 and $248,500 and incurred net
losses of $489,700, $487,000 and $512,200 for fiscal 1996, 1995 and 1994,
respectively.
(8) Related Party Transactions
Certain directors and officers of the Partners and certain employees of the
Venture purchased parcels in the Project at discounts from prices
generally offered to the general public. The Venture provided mortgage
financing on all such sales pursuant to which the Venture received a down
payment equal to 5% of the gross sales price before discounts and a
purchase money mortgage. The purchase money mortgages bear interest at a
rate of 8% or 9% per annum and provide for monthly principal payments
based on a 30 year amortization schedule with a balloon payment due after
seven years. In fiscal 1995, certain balloon payment due dates on such
mortgages were extended for one year. Two such balloon payments were not
made in fiscal 1996 and are past due at June 30, 1996. At June 30, 1996
and 1995, mortgage notes receivable (including 1996 past due balloon
payments) of $386,500 and $978,200, respectively, were due from related
parties. During fiscal 1996, two mortgage notes receivable in the
aggregate amount of $271,100 from former employees of a Partner became
delinquent and were foreclosed; the balances are included in foreclosed
real estate in the accompanying consolidated balance sheets.
(9) Contingencies
During fiscal 1992, the County of Hawaii passed an ordinance pursuant to
which the Venture, after subdivision approvals are obtained, would be
able to develop and subdivide the fourth phase of the Project into 1,490
units. Shortly after passage of the ordinance, a lawsuit against the
County of Hawaii was filed by two local residents of Hawaii (Plaintiffs)
seeking to invalidate such ordinance on various grounds including that
the ordinance was adopted without following State of Hawaii procedure
relating to the preparation of an Environmental Impact Statement. During
fiscal 1993, the Judge in this action granted Plaintiffs' motion for
partial summary judgment without indicating any effect on zoning of the
fourth phase. The County and the Venture have appealed this ruling. The
appeal was heard before the Hawaii Supreme Court in March 1994, and
because of an existing backlog in its caseload, the Court has not
rendered a decision. The Venture cannot, at this time, determine the
impact of the Court's ruling on the timing of the development of the
fourth phase or the expenditures related thereto.
(10) Disclosure About Fair Value of Financial Instruments
SFAS 107, "Disclosures About Fair Value of Financial Instruments", defines
the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a current transaction between willing
parties. Carrying values for delinquent mortgage notes receivable are
based on the fair value of the underlying collateral obtained from an
independent appraisal. The carrying values of the remaining mortgage
notes receivable approximate market values, since the mortgage notes
<PAGE> 52
9
KOHALA JOINT VENTURE AND SUBSIDIARY
Notes to Consolidated Financial Statements, Continued
receivable are yielding, on average, a return that is consistent with
current market rates offered for similar financing.
(11) Impact of New Accounting Standards
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long Lived Assets and for Long Lived Assets to Be Disposed Of." SFAS
No. 121 addresses accounting for the impairment of long-lived assets
(including real estate), certain identifiable intangibles and goodwill
relating to those assets to be held and used and for long-lived assets
and certain identifiable intangibles to be disposed of. The Venture will
adopt this standard effective July 1, 1996 and believes that such
adoption will not have a material effect on the Venture's financial
position or results of operations.
<PAGE> 53
Schedule II
KOHALA JOINT VENTURE
AND SUBSIDIARY
Valuation and Qualifying Accounts
Years ended June 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
----------- ---------- ----------------------- -------- ---------
Additions
Balance at Charged to Charged to Deductions Balance at
beginning costs and other from end of
Description of year expenses accounts reserves year
----------- ---------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
1996 - Allowance for
uncollectible accounts $2,464,200 600,000 -- 114,800(B) 2,949,400
========== ======= ======== ======= =========
1995 - Allowance for
uncollectible accounts $1,661,800 980,000 -- 177,600(B) 2,464,200
========== ======= ======== ======= =========
1994 - Allowance for
uncollectible accounts $1,768,300 406,300 -- 512,800(B) 1,661,800
========== ======= ======== ======= =========
1996 - Allowance for loss on
foreclosed real estate $ 486,400 356,300 -- 139,600(B) 703,100
========== ======= ======== ======= =========
1995 - Allowance for loss on
foreclosed real estate $ 745,900 -- (259,500)(A) -- 486,400
========== ======= ======== ======= =========
1994 - Allowance for loss on
foreclosed real estate $ 378,200 367,700 -- -- 745,900
========== ======= ======== ======= =========
</TABLE>
(A) Recoveries and other adjustments
(B) Write-offs
<PAGE> 54
HUDSON GENERAL CORPORATION & SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
No. Numbered
Exhibit Pages
<S> <C>
3.2(a) Amendment to By-laws of the Registrant. 55
3.2(b) By-laws of the Registrant, as amended to date. 57
4.4(c) Second Amendment to the Revolving Credit Agreement dated as of
November 25, 1992, among Hudson General Aviation Services
Inc., ABN Amro Bank Canada and The Chase Manhattan Bank of
Canada individually and as successor agent, dated as of June
1, 1996. 95
4.4(d) Revolving Credit Agreement dated as of June 1, 1996
among Hudson General Corporation and The First National
Bank of Boston, European American Bank, The Chase
Manhattan Bank, N.A. and The First National Bank of
Boston, as agent. 108
4.4(e) Amended and Restated Revolving Credit Agreement dated as of
November 25, 1992 among Hudson General Corporation, Hudson
General LLC and The First National Bank of Boston, European
American Bank, The Chase Manhattan Bank, N.A. and The First
National Bank of Boston, as agent, as amended and restated as
of June 1, 1996. 200
4.5(b) First Supplemental Indenture dated as of April 22, 1996 among
the Registrant, Hudson General LLC and Chemical Bank Delaware
to Indenture dated as of July 1, 1986. 350
4.5(c) Notice of Redemption and Expiration of Conversion Privilege
dated June 3, 1996 relating to the Registrant's 7% Convertible
Subordinated Debentures Due 2011.
362
4.5(d) Notice of Redemption and Expiration of Conversion
Privilege dated August 5, 1996 relating to the Registrant's 7%
Convertible Subordinated Debentures Due
2011. 371
10.9* Description of Executive Incentive Program adopted by the
Compensation Committee of the Board of Directors on December
1, 1993, as amended on May 17, 1996.
377
11 Computation of Earnings Per Share Information - primary
and fully diluted.
379
13 The Registrant's 1996 Annual Report to Shareholders, which
report, except for those portions thereof which are expressly
incorporated by reference in this filing, is furnished for the
information of the Commission and is not to be deemed to be
filed as part of this filing. 384
21 Subsidiaries of the Registrant. 413
23 Consent of KPMG Peat Marwick LLP, the Corporation's
independent auditors, to the incorporation by reference
into the Corporation's Registration Statement on Form
S-8, as amended, Registration No. 2-75137 415
27 Financial Data Schedule 417
</TABLE>
<PAGE> 1
EXHIBIT 3.2(a)
Amendment to By-laws of the Registrant.
<PAGE> 2
RESOLVED, that Article IV, Section 4 of the By-Laws of the Corporation
be amended to read in its entirety as follows:
SECTION 4. Chairman of the Board. The Chairman of the Board, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation, and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. Except where by law the signature of the
President is required, the Chairman of the Board shall possess the same power as
the President to sign all contracts, certificates and other instruments of the
Corporation. During the absence or disability of the President, the Chairman of
the Board shall exercise all the powers and discharge all the duties of the
President. The Chairman of the Board shall also perform such other duties and
exercise such other powers as from time to time may be assigned to the Chairman
of the Board by these By-Laws or by the Board of Directors.
RESOLVED, that Article IV, Section 5 of the By-Laws of the Corporation
be amended to read in its entirety as follows:
SECTION 5. The President. The President shall, in the absence of the
Chairman of the Board, or if a Chairman of the Board shall not have been
elected, preside at each meeting of the Board of Directors or the stockholders.
The President shall perform all duties incident to the office of President and
such other duties as may from time to time be assigned to the President by the
Board of Directors.
<PAGE> 1
EXHIBIT 3.2(b)
By-laws of the Registrant, as amended to date.
<PAGE> 2
As in effect 9/13/96
BY-LAWS OF
HUDSON GENERAL CORPORATION
INDEX
<TABLE>
<CAPTION>
Page No.
<S> <C> <C>
ARTICLE I - Offices
Section 1. Registered Office 1
2. Other Offices 1
ARTICLE II - Meetings of Stockholders
Section 1. Place of Meetings 1
2. Annual Meeting 1
3. Special Meetings 4
4. Notice of Meetings 4
5. List of Stockholders 5
6. Quorums, Adjournments 6
7. Organization 6
8. Order of Business 7
9. Voting 7
10. Inspectors 8
ARTICLE III - Board of Directors
Section 1. General Powers 9
2. Number, Qualifications, Election and
Term of Office 9
3. Nomination of Directors 10
4. Place of Meetings 13
5. First Meeting 13
6. Regular Meetings 13
7. Special Meetings 14
8. Notice of Meetings 14
9. Quorum and Manner of Acting 15
10. Organization 15
11. Resignations 16
12. Vacancies 16
13. Removal of Directors 16
14. Compensation 16
15. Committees 17
16. Action by Consent 17
17. Telephonic Meeting 18
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
By-Law Index (Continued)
Page No.
<S> <C> <C>
ARTICLE IV - Officers
Section 1. Number and Qualifications 18
2. Resignations 19
3. Removal 19
4. Chairman of the Board 19
5. The President 19
6. Vice-President 20
7. Treasurer 20
8. Secretary 21
9. The Assistant Treasurer 22
10. The Assistant Secretary 22
11. Officers' Bonds or Other Security 22
12. Compensation 23
ARTICLE V - Stock Certificates and Their Transfer
Section 1. Stock Certificates 23
2. Facsimile Signatures 24
3. Lost or Abandoned Certificates 24
4. Transfers of Stock 25
5. Transfer Agents and Registrars 25
6. Regulations 25
7. Fixing Record Date 26
8. Registered Stockholders 26
ARTICLE VI - Indemnification
Section 1. Power to Indemnify in Actions, Suits or
Proceedings other than Those by or in
the Right of the Corporation 27
2. Power to Indemnify in Actions, Suits or
Proceedings by or in the Right of the
Corporation 28
3. Authorization of Indemnification 28
4. Good Faith Defined 29
5. Indemnification by a Court 30
6. Expenses Payable in Advance 31
7. Non-exclusivity and Survival of
Indemnification 31
8. Insurance 32
9. Meaning of "Corporation" for Purposes of
Article VI 32
ARTICLE VII - General Provisions
Section 1. Dividends 33
2. Reserves 33
3. Seal 34
4. Fiscal Year 34
5. Checks, Notes, Drafts, etc. 34
6. Execution of Contracts, Deeds, etc. 34
7. Voting of Stocks in Other Corporations 34
ARTICLE VIII - Amendments 35
</TABLE>
<PAGE> 4
BY-LAWS OF
HUDSON GENERAL CORPORATION
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of the Corporation
within the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 2. Other Offices. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place or
places either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of meeting
to stockholders.
SECTION 2. Annual Meeting. The Annual Meeting of Stockholders shall be
held on such date and at such time and place as may be fixed by the Board of
Directors and stated in the notice of the meeting, for the purpose of electing
directors and for the transaction of only such
-1-
<PAGE> 5
other business as is properly brought before the meeting in accordance with
these By-Laws.
No business may be transacted at an Annual Meeting of Stockholders,
other than business that is either (a) specified in the notice of Annual Meeting
(or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the Annual Meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof), or (c) otherwise properly
brought before the Annual Meeting by any stockholder of the Corporation (i) who
is a stockholder of record on the date of the giving of the notice provided for
in this Article II, Section 2 and on the record date for the determination of
stockholders entitled to vote at such Annual Meeting, and (ii) who complies with
the notice procedures set forth in this Article II, Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding
-2-
<PAGE> 6
(30) days before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the Annual
Meeting was mailed or public disclosure of the date of the Annual Meeting was
made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
Annual Meeting (v) a brief description of the business desired to be brought
before the Annual Meeting and the reasons for conducting such business at the
Annual Meeting, (w) the name and record address of such stockholder, (x) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially by such stockholder and which are owned of record by such
stockholder, (y) a description of all arrangements or understandings between
such stockholder and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder and any
material interest of such stockholder in such business, and (z) a representation
that such stockholder intends to appear in person or by proxy at the Annual
Meeting to bring such business before the Annual Meeting.
No business shall be conducted at the Annual Meeting of Stockholders
except business brought before the Annual Meeting in accordance with the
procedures set forth in this Article II, Section 2, provided, however, that,
once business has been properly brought be-
-3-
<PAGE> 7
fore the Annual Meeting in accordance with such procedures, nothing in this
Article II, Section 2 shall be deemed to preclude discussion by any stockholder
of any such business. If the Chairman of an Annual Meeting determines that
business was not properly brought before the Annual Meeting in accordance with
the foregoing procedures, the Chairman shall declare to the Annual Meeting that
the business was not properly brought before the Annual Meeting and such
business shall not be transacted.
SECTION 3. Special Meetings. Unless otherwise prescribed by law or by
the Certificate of Incorporation, special meetings of stock holders, for any
purpose or purposes, may be called by the Board of Directors, the Chairman of
the Board, if there be one, or the President. Special meetings of stockholders
may not be called by any other person or persons.
SECTION 4. Notice of Meetings. Written notice of each annual and
special meeting of stockholders stating the date, place and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given to each stockholder of record entitled to vote
thereat not less than ten nor more than sixty days before the date of the
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice. Notice shall be given personally
or by mail, and if by mail, shall be sent in a postage prepaid envelope,
addressed to the stockholder at his address as it appears on the rec-
-4-
<PAGE> 8
ords of the Corporation. Notice by mail shall be deemed given at the time when
the same shall be deposited in the United States mail, postage prepaid. Notice
of any meeting shall not be required to be given to any person who, either
before or after the meeting shall submit a signed written waiver of notice, in
person or by proxy or who attends such meeting, except when such person attends
the meeting in person or by proxy for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, an annual or special meeting of stockholders need be
specified in any written waiver of notice.
SECTION 5. List of Stockholders. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address of and
the number of shares registered in the name of each stockholder. Such list shall
be open to the examina tion of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city, town or village where the
meeting is to be held, which place shall be specified in the notice of meeting,
or, if not specified, at the place where the meeting is to be held. The list
shall be produced and kept at the time and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
-5-
<PAGE> 9
SECTION 6. Quorum, Adjournments. The holders of a majority of the
voting power of the issued and outstanding stock of the Corpora tion entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum for the transaction of business at all meetings of the stockholders,
except as otherwise provided by statute or by the Certificate of Incorporation.
If, however, such quorum shall not be present or represented at any meeting of
stock holders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. At such adjourned meeting at which a quorum shall be
present or represented any business may be transacted which might have been
transacted at the meeting as originally called. If the adjournment is for more
than thirty days, or, if after adjournment a new record date is set, a notice of
the ad journed meeting shall be given to each stockholder of record entitled to
vote at the meeting.
SECTION 7. Organization. At each meeting of stockholders the Chairman of
the Board, if one shall have been elected, or in his absence or if one shall not
have been elected, the President, shall act as chairman of the meeting. The
Secretary, or in his absence or inability to act, the person whom the chairman
of the meeting shall appoint secretary of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
-6-
<PAGE> 10
SECTION 8. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of stockholders to one vote for each share of capital
stock of the Corporation standing in his name on the record of stockholders of
the Corporation:
(a) on the date fixed pursuant to the provisions of Sec-
tion 7 of Article V of these By-Laws as the record date for the determination of
the stockholders who shall be entitled to notice of and to vote at such meeting;
or
(b) if no such record date shall have been so fixed, then
at the close of business on the day next preceding the day on which notice
thereof shall be given, or, if notice is waived, at the close of business on the
date next preceding the day on which the meeting is held. Each stockholder
entitled to vote at any meeting of stockholders may authorize another person or
persons to act for him by a proxy signed by such stockholder or his
attorney-in-fact, but no proxy shall be voted after one year from its date,
unless the proxy provides for a longer period. Any such proxy shall be delivered
to the secretary of the meeting at or prior to the time designated in the order
of business for so delivering such proxies. When a quorum is present at any
meeting, the vote of the holders of a majority of the voting power of
-7-
<PAGE> 11
the issued and outstanding stock of the Corporation entitled to vote thereon,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of statute or of the Certificate of Incorporation or of these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. Unless required by statute, or
determined by the chairman of the meeting to be advisable, the vote on any
question need not be by ballot. On a vote by ballot, each ballot shall be signed
by the stockholder voting, or by his proxy, and shall state the number of shares
voted.
SECTION 10. Inspectors. The Board of Directors shall, in advance of any
meeting of stockholders, appoint one or more inspectors or alternate inspectors
to act at such meeting or any adjournment thereof. If any of the inspectors or
alternate inspectors so appointed shall fail to appear or act, the chairman of
the meeting shall appoint one or more inspectors. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector at such meeting with strict
impartiality and according to the best of his ability. The inspectors shall
determine the number of shares of capital stock of the Corporation outstanding
and the voting power of each, the number of shares represented at the meeting,
the existence of a quorum, the validity of proxies and ballots, and shall
receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection
-8-
<PAGE> 12
with the right to vote, count and tabulate all votes, ballots or consents,
determine the results, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. The inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. Inspectors need not be stockholders.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
SECTION 2. Number, Qualifications, Election and Term of Office. The
number of directors constituting the Board of Directors shall be not less than
three. The number of directors may be fixed, from time to time, by the
affirmative vote of a majority of the entire Board of Directors or by action of
the stockholders of the Corporation. Any decrease in the number of directors
shall be effective at the time of the next succeeding annual meeting of
stockholders unless there shall be vacancies in the Board of Directors, in which
case such decrease may become effective at any time prior to the next succeeding
annual meeting to the extent of the number of such vacancies. Directors need
-9-
<PAGE> 13
not be stockholders. Except as otherwise provided by statute or these By-Laws,
the directors shall be elected at the annual meeting of stockholders. Each
director shall hold office until his successor shall have been elected and
qualified, or until his death, or until he shall have resigned, or have been
removed, as hereinafter provided in these By-Laws.
SECTION 3. Nomination of Directors. Only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors of the Corporation. Nominations of persons for election to the Board
of Directors may be made at any annual meeting of stockholders, or at any
special meeting of stockholders called in the manner set forth in Article II,
Section 3 hereof for the purpose of electing directors, (a) by or at the
direction of the Board of Directors (or any duly authorized committee thereof),
or (b) by any stockholder of the Corporation (i) who is a stockholder of record
on the date of the giving of the notice provided for in this Article III,
Section 3 and on the record date for the determination of stockholders entitled
to vote at such meeting, and (ii) who complies with the notice procedures set
forth in this Article III, Section 3.
In addition to any other applicable requirements, for a nomination to be
made by a stockholder, such stockholder must have given timely notice thereof in
proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices
-10-
<PAGE> 14
of the Corporation (a) in the case of an annual meeting, not less than sixty
(60) days nor more than ninety (90) days prior to the anniversary date of the
immediately preceding Annual Meeting of Stockholders; provided, however, that in
the event that the Annual Meeting is called for a date that is not within thirty
(30) days before or after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the close of business on
the tenth (10th) day following the day on which notice of the date of the Annual
Meeting was mailed or public disclosure of the date of the Annual Meeting was
made, whichever first occurs, and (b) in the case of a special meeting of
stockholders called in the manner set forth in Article II, Section 3 hereof for
the purpose of electing directors, not later than the close of business on the
tenth (10th) day following the day on which notice of the date of the Special
Meeting was mailed or public disclosure of the date of the Special Meeting was
made, whichever first occurs.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially by the person and which are owned of
record by the person, and (iv) any other information relating to the person that
would be required to be disclosed in a proxy statement or other filings
-11-
<PAGE> 15
required to be made in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations promulgated
thereunder, and (b) as to the stockholder giving the notice (i) the name and
record address of such stockholder, (ii) the class or series and number of
shares of capital stock of the Corporation which are owned beneficially by such
stockholder and which are owned of record by such stockholder, (iii) a
description of all arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the Meeting to nominate the persons named in its notice, and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nom- nee to being
named as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Article III, Section 3. If the Chairman of the Meeting determines that a
nomination was not made in accordance with the foregoing procedures, the
Chairman shall declare to the Meeting that the
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nomination was defective and such defective nomination shall be dis-
regarded.
SECTION 4. Place of Meetings. Meetings of the Board of Directors
shall be held at such place or places, within or without the State of Delaware,
as the Board of Directors may from time to time determine or as shall be
specified in the notice of any such meeting.
SECTION 5. First Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the trans action of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. Such meeting may be held at any other
time or place (within or without the State of Delaware) which shall be specified
in a notice thereof given as hereinafter provided in Section 8 of this Article
III.
SECTION 6. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
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SECTION 7. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if one shall have been elected, or
by two or more directors of the Corporation or by the President.
SECTION 8. Notice of Meetings. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 8, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first-class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone or other similar means, at least
twenty-four hours before the time at which such meeting is to be held. Notice of
any such meeting need not be given to any director who shall, either before or
after the meeting, submit a signed waiver of notice or who shall attend such
meeting, except when he shall attend for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
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SECTION 9. Quorum and Manner of Acting. A majority of the entire Board
of Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to the directors unless such time
and place were announced at the meeting at which the adjournment was taken, to
the other directors. At any adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and the individual
directors shall have no powers as such.
SECTION 10. Organization. At each meeting of the Board of Directors,
the Chairman of the Board, if one shall have been elected, or in the absence of
the Chairman of the Board or if one shall not have been elected, the President
(or, in his absence, another director chosen by a majority of the directors
present) shall act as chairman of the meeting and preside thereat. The Secretary
(or, in his absence, any person appointed by the Chairman) shall act as
secretary of the meeting and keep the minutes thereof.
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SECTION 11. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein, or, if the
time when it shall become effective shall not be specified therein, immediately
upon its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 12. Vacancies. Any vacancy in the Board of Directors, whether
arising from death, resignation, removal (with or without cause), may be filled
by the vote of a majority of the directors then in office, though less than a
quorum, or by the sole remaining director or by the stockholders at the next
annual meeting thereof or at a special meeting thereof. Each director so elected
shall hold office until his successor shall have been elected and qualified.
SECTION 13. Removal of Directors. Any director may be removed either
with or without cause, at any time, by the holders of a majority of the voting
power of the issued and outstanding capital stock of the Corporation entitled to
vote at an election of directors. Any director may be removed for cause by the
Board of Directors.
SECTION 14. Compensation. The Board of Directors shall have authority
to fix the compensation, including fees and reimbursement of expenses, of
directors for services to the Corporation in any capacity.
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SECTION 15. Committees. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
addition, in the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
such absent or disqualified member. Except to the extent restricted by statute
or the Certificate of Incorporation, each such committee, to the extent provided
in the resolution creating it, shall have and may exercise all the powers and
authority of the Board of Directors and may authorize the seal of the
Corporation to be affixed to all papers which require it. Each such committee
shall serve at the pleasure of the Board of Directors and have such name as may
be determined from time to time by resolution adopted by the Board of Directors.
A majority of each committee shall constitute a quorum for the transaction of
business. Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors.
SECTION 16. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken with-
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out a meeting if all members of the Board of Directors or such committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of the proceedings of the Board of Directors or such committee,
as the case may be.
SECTION 17. Telephonic Meeting. Unless restricted by the Certificate of
Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
ARTICLE IV
Officers
SECTION 1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall include the President, one
or more Vice-Presidents, the Secretary and the Treasurer. If more than one
Vice-President is elected, they shall have the following order of seniority:
Executive Vice-President, Senior Vice-President, Vice-President. If the Board of
Directors wishes, it may also elect as an officer of the Corporation a Chairman
of the Board and may elect other officers including one or more Assistant
Treasurers and one or more Assistant Secretaries, as may be necessary or
desirable for the business of the Corporation. Any two or more offices may be
held by the same person. Each officer shall hold
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office until his successor shall have been duly elected and shall have
qualified, or until his death, or until he shall have resigned or have been
removed, as hereinafter provided in these By-Laws.
SECTION 2. Resignations. Any officer of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.
SECTION 3. Removal. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof.
SECTION 4. Chairman of the Board. The Chairman of the Board, if one
shall have been elected, shall be a member of the Board, an officer of the
Corporation, and, if present, shall preside at each meeting of the Board of
Directors or the stockholders. Except where by law the signature of the
President is required, the Chairman of the Board shall possess the same power as
the President to sign all contracts, certificates and other instruments of the
Corporation. During the absence or disability of the President, the Chairman of
the Board shall exercise all the powers and discharge all the duties of the
President. The Chairman of the Board shall also perform such other duties and
exercise such other powers as from time to time may be assigned to the Chairman
of the Board by these By-Laws or by the Board of Directors.
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SECTION 5. The President. The President shall, in the absence of the
Chairman of the Board, or if a Chairman of the Board shall not have been
elected, preside at each meeting of the Board of Directors or the stockholders.
The President shall perform all duties incident to the office of President and
such other duties as may from time to time be assigned to the President by the
Board of Directors.
SECTION 6. Vice President. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board of Directors or
the President. At the request of the President or in his absence or in the event
of his inability or refusal to act, the Vice-President, or if there shall be
more than one, the Vice-Presidents in the order of their seniority, shall
perform the duties of the President, and, when so acting, shall have the powers
of and be subject to the restrictions placed upon the President in respect of
the performance of such duties.
SECTION 7. Treasurer. The Treasurer shall
(a) have charge and custody of, and be responsible for, all the
funds and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements
in books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of Directors
or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
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(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of
Directors may require, an account of the financial condition of the Corporation;
and
(g) in general, perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 8. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a facsimile,
as hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and
other documents and records required by law are kept and filed; and
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(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors.
SECTION 9. The Assistant Treasurer. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 10. The Assistant Secretary. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 11. Officers' Bonds or Other Security. If required by the Board
of Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of his duties, in such amount and with such surety
as the Board of Directors may require.
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SECTION 12. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation.
ARTICLE V
Stock Certificates and Their Transfer
SECTION 1. Stock Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chairman of the Board or the Vice Chairman of the Board or
the President or the Vice-President and by the Treasurer or an Assistant
Treasurer or the Secretary or an Assistant Secretary of the Corporation,
certifying the number of shares owned by him in the Corporation. If the
Corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restriction of such preferences
and/or rights shall be set forth in full or summarized on the face or back of
the certificate which the Corporation shall issue to represent such class or
series of stock, provided that, except as otherwise provided in Section 202 of
the General Corporation Law of the State of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Cor-
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poration shall issue to represent such class or series of stock, a statement
that the Corporation will furnish without charge to each stockholder who so
requests the designations, preferences and relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
SECTION 2. Facsimile Signatures. Any of or all the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
SECTION 3. Lost or Abandoned Certificates. The Board of Directors may
direct, or establish a procedure providing for, a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost, stolen or
destroyed, or which have been claimed as abandoned property by a governmental
authority or its agent. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indem-
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nify it against any claim that may be made against the Corporation on account of
the alleged loss, theft or destruction of any such certificate or the issuance
of such new certificate.
SECTION 4. Transfers of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.
SECTION 5. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
SECTION 6. Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.
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SECTION 7. Fixing Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 8. Registered Stockholders. The Corporation shall be entitled
to recognize the exclusive right of a person registered on its records as the
owner of shares of stock to receive dividends and to vote as such owners, shall
be entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares of stock on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
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ARTICLE VI
Indemnification
SECTION 1. Power to Indemnify in Actions, Suits or Proceedings other
than Those by or in the Right of the Corporation. Subject to Section 3 of this
Article VI, the Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
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SECTION 2. Power to Indemnify in Actions, Suits or Proceedings by or in
the Right of the Corporation. Subject to Section 3 of this Article VI, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the Corporation to procure a judgment in its favor by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. Authorization of Indemnification. Any indemnification under
this Article VI (unless ordered by a court) shall be made by the Corporation
only as authorized in the specific case upon a de-
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termination that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standard of
conduct set forth in Section 1 or Section 2 of this Article VI, as the case may
be. Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders. To the extent,
however, that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in defense of any claim, issue or matter therein,
he shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him in connection therewith, without the necessity of
authorization in the specific case.
SECTION 4. Good Faith Defined. For purposes of any determination under
Section 3 of this Article VI, a person shall be deemed to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, to have had no reasonable cause to believe his conduct was unlawful,
if his action is based on the records or books of account of the Corporation or
another enterprise, or on information supplied to him by the officers of the
Corporation or another enterprise in the course of their
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duties, or on the advice of legal counsel for the Corporation or another
enterprise or on information or records given or reports made to the Corporation
or another enterprise by an independent certified public accountant or by an
appraiser or other expert selected with reasonable care by the Corporation or
another enterprise. The term "another enterprise" as used in this Section 4
shall mean any other corporation or any partnership, joint venture, trust,
employee benefit plan or other enterprise of which such person is or was serving
at the request of the Corporation as a director, officer, employee or agent. The
provisions of this Section 4 shall not be deemed to be exclusive or to limit in
any way the circumstances in which a person may be deemed to have met the
applicable standard of conduct set forth in Sections 1 or 2 of this Article VI,
as the case may be.
SECTION 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VI, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of Delaware for indemnification to the extent otherwise permissible
under Sections 1 and 2 of this Article VI. The basis of such indemnification by
a court shall be a determination by such court that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standards of conduct set forth in Sections 1 or 2 of this
Article VI, as the case may be. Notice of any application for indemnification
pursuant to this Section 5 shall
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be given to the Corporation promptly upon the filing of such application.
SECTION 6. Expenses Payable in Advance. Expenses incurred in defending
or investigating a threatened or pending action, suit or proceeding may be paid
by the Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VI.
SECTION 7. Non-exclusivity and Survival of Indemnification. The
indemnification and advancement of expenses provided by or granted pursuant to
this Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
By-Law, agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VI shall be made to the fullest extent permitted by law. The
provisions of this Article VI shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VI but whom the
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Corporation has the power or obligation to indemnify under the provisions of the
General Corporation Law of the State of Delaware or otherwise. The
indemnification and advancement of expenses provided by, or granted pursuant to,
this Article VI shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person.
SECTION 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power or obligation to
indemnify him against such liability under the provisions of this Article VI or
otherwise.
SECTION 9. Meaning of "Corporation" for Purposes of Article VI. For
purposes of this Article VI, references to "the Corporation" shall include, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger which,
if its separate existence had continued, would have had power and authority to
indemnify its
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directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Article VI with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
ARTICLE VII
General Provisions
SECTION 1. Dividends. Subject to statute and the Certificate of
Incorporation, dividends upon the shares of stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting. Dividends
may be paid in cash, in property or in shares of stock of the Corporation,
unless otherwise provided by statute or the Certificate of Incorporation.
SECTION 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the
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interests of the Corporation. The Board of Directors may modify or abolish any
such reserve in the manner in which it was created.
SECTION 3. Seal. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.
SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be
fixed, and once fixed, may thereafter be changed, by resolution of the Board of
Directors.
SECTION 5. Checks, Notes, Drafts, etc. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. Execution of Contracts, Deeds, etc. The Board of Directors
may authorize any officer or officers, agent or agents, in the name and on
behalf of the Corporation to enter into or execute and deliver any and all
deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 7. Voting of Stocks in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President, from time to time, may (or may appoint one or more attorneys or
agents to) cast the votes which
-34-
<PAGE> 38
the Corporation may be entitled to cast as a shareholder or otherwise in any
other corporation, any of whose shares or securities may be held by the
Corporation at meetings of the holders of the shares or other securities of such
other corporation, or to consent in writing to any action by any such other
corporation. In the event one or more attorneys or agents are appointed, the
Chairman of the Board or the President may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent. The
Chairman of the Board or the President may, or may instruct the attorneys or
agents appointed, to execute or cause to be executed in the name and on behalf
of the Corporation and under its seal or otherwise, such written proxies,
consents, waivers or other instruments as may be necessary or proper in the
premises.
ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new By-Laws adopted (a) by
action of the stockholders entitled to vote thereon at any annual or special
meeting of stockholders, or (b) if the Certificate of Incorporation so provides,
by action of the Board of Directors at a regular or special meeting thereof. Any
By-Law made by the Board of Directors may be amended or repealed by action of
the stockholders at an annual or special meeting of stockholders.
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<PAGE> 1
EXHIBIT 4.4(c)
Second Amendment to the Revolving Credit Agreement dated as of November 25,
1992, among Hudson General Aviation Services Inc., ABN Amro Bank Canada and The
Chase Manhattan Bank of Canada individually and as successor agent, dated as of
June 1, 1996.
<PAGE> 2
HUDSON GENERAL AVIATION SERVICES INC./
SOCIETE DE SERVICES HUDSON GENERAL (AVIATION) INC.
SECOND AMENDMENT ("Amendment"), dated as of June 1, 1996,
among Hudson General Aviation Services Inc./Societe de Services Hudson General
(Aviation) Inc. ("Aviation"), the banking institutions party to the Credit
Agreement referred to below (the "Banks"), and The Chase Manhattan Bank of
Canada as successor agent for itself and the Banks (the "Agent").
(a) the Revolving Credit Agreement, dated as of
November 25, 1992 and amended as of March 15, 1995 (the "Credit Agreement"),
among Aviation, the banking institutions named therein and Bank of Boston Canada
as agent for itself and the other banking institutions and (b) the Resignation
and Appointment Agreement, dated as of May 1, 1995, whereby Bank of Boston
Canada resigned as agent and The Chase Manhattan Bank of Canada was appointed as
successor agent for itself and the other banking institutions under the Credit
Agreement and the other Loan Documents.
WHEREAS Hudson General Corporation ("Hudson General") and
Hudson General LLC ("LLC") have entered into an Amended and Restated Revolving
Credit Agreement dated as of November 25, 1992 and amended and restated as of
June 1, 1996 among Hudson General, LLC, The First National Bank of Boston,
European American Bank, The Chase Manhattan Bank N.A. and such other banks as
may become parties thereto from time to time, as the same may be amended,
supplemented, replaced or restated from time to time;
AND WHEREAS, Hudson General has formed LLC and Hudson General
and its subsidiaries have transferred to LLC substantially all of the assets of
their aviation services business, including, without limitation, all of the
shares of Aviation (the "Aviation Services Business") in accordance with the
terms of that certain Unit Purchase and Option Agreement (as supplemented to the
date hereof, the "Purchase Agreement") dated February 27, 1996 between Hudson
General and Lufthansa Airport and Ground Services GmbH;
AND WHEREAS LLC wishes to assume all of Hudson General's
obligations under the Guaranty.
NOW THEREFORE for good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged by the parties hereto, the
parties hereby agree as follows:
2. Capitalized terms which are used herein without definition
and which are defined in the Credit Agreement shall have the same meanings
herein as therein.
<PAGE> 3
2
3. Each of the Banks and the Agent hereby consent to (a) the
transfer by Hudson General and its subsidiaries to LLC of substantially all of
the assets of the Aviation Services Business, including the transfer of all of
the shares of Aviation, in accordance with the terms of the Purchase Agreement;
(b) the amendment and restatement of the Guaranty to be delivered in accordance
with Section 28(a)(iii) of this Amendment; (c) the amendment and restatement of
the Assignment, Postponement and Subordination and Intercreditor Agreement to be
delivered in accordance with Section 28(a)(ii) of this Amendment; (d) the
amendment and restatement of the U.S. Loan Agreement as required by Section
28(b) of this Amendment; and (e) the amendment and restatement of the U.S.
Security Agreement as required by Section 28(a)(iii) of this Amendment.
4. Except as expressly provided for herein, as of the date
hereof, all references in the Credit Agreement, including for greater certainty,
Exhibit "A" thereto, to Hudson General shall be deemed to be references to LLC.
5. Notwithstanding Section 3 of this Amendment, references to
Hudson General in Sections 3.5(a), 3.6(a), 4.6, 4.7, and 9 (e) of the Credit
Agreement shall remain references to Hudson General.
6. Section 2.1(b) of the Credit Agreement is hereby amended by
deleting "three and one-half percentage points (3-1/2%)" where it appears in the
sixth sentence and substituting "two percentage points (2%)".
7. Section 2.4(c)(iii) of the Credit Agreement is hereby
amended by deleting "including" and substituting "excluding" therefor.
8. Section 3.5 of the Credit Agreement is hereby amended by
inserting "(a)" following "Financial Statements", by deleting all references to
"Subsidiaries" in Section 3.5(a) and substituting "HGC Subsidiaries" therefor
and by adding the following as Section 3.5(b):
"(b) Aviation has previously furnished to the Banks unaudited
pro forma consolidated financial statements of LLC and its Subsidiaries
for the fiscal year ended June 30, 1995, and at December 31, 1995 and
for the six-month period ended on such date. Such financial statements
give effect to the Contribution (as defined in the U.S. Loan Agreement)
and the other transactions contemplated under the Purchase Agreement
(as defined in the U.S. Loan Agreement), were prepared in accordance
with generally accepted accounting principles and fairly present the
pro forma consolidated assets and liabilities of LLC and its
Subsidiaries and the consolidated results of operations of LLC and its
Subsidiaries at the dates, and for the periods, to which they relate."
<PAGE> 4
3
9. Section 3.6 of the Credit Agreement is hereby amended by
inserting "(a)" following "Changes", by inserting "and the Contribution (as
defined in the U.S. Loan Agreement)" following "ordinary course of business,",
by deleting all references to "Subsidiaries" in Section 3.6(a) and substituting
"HGC Subsidiaries" therefor and by adding the following as Section 3.6(b):
"(b) Since December 31, 1995, there have been no changes in
the Aviation Services Business or the consolidated financial condition
or results of operations of the Aviation Services Business, other than
changes in the ordinary course of business, the effect of which has
not, in the aggregate, been materially adverse to the business or
financial condition of LLC and its Subsidiaries, taken as a whole.
Since the date of LLC's formation, there have been no changes in the
assets, liabilities, financial condition or business of LLC or its
Subsidiaries, other than changes in the ordinary course of business and
the Contribution (as defined in the U.S. Loan Agreement), the effect of
which has not, in the aggregate, been materially adverse to the
business or financial condition of LLC and its Subsidiaries, taken as a
whole."
10. Section 4.3 of the Credit Agreement is hereby amended by
adding "in all material respects" following "Funding Date and" on the second
line of such section.
11. Section 4.4 of the Credit Agreement is hereby deleted and
the following substituted therefor:
"No Adverse Change. (a) As of the date of any Loan there shall
have been no material adverse change since June 30, 1992 in the
business or financial affairs of Hudson General and the HGC
Subsidiaries taken as a whole.
(b) As of the date of any Loan (i) there shall be been no
material adverse change since December 31, 1995 in the Aviation
Services Business (as defined in the U.S. Loan Agreement) and (ii)
there shall have been no material adverse change since the date of the
formation of LLC in the business or financial affairs of LLC and its
Subsidiaries, taken as a whole."
12. Section 5.2(a) is hereby deleted and the following
substituted therefor:
"as soon as available but in any event within ninety days
after the end of each of its fiscal years, consolidated and
consolidating balance sheets of LLC and its Subsidiaries as at the end
of, and the related consolidated and consolidating statements of income
and consolidated statements of cash flows for, such year, and all such
statements shall be in reasonable detail, prepared in accordance with
generally accepted accounting principles and accompanied by the opinion
(only if such financial statements are required to be publicly
published) of (in form and substance reasonably satisfactory to the
Banks)
<PAGE> 5
4
independent public accountants of nationally recognized standing
selected by LLC and, concurrently with such financial statements, (if
such financial statements are required to be publicly published) a
written statement by such accountants that, in the making of the audit
necessary for their report and opinion upon such financial statements
(but without any special or additional audit procedures for the
purpose), they have obtained no knowledge of any Default, or if in the
opinion of such accountants any Default exists, they shall disclose in
such written statement the nature and status thereof.
13. Section 5.8(b) of the Credit Agreement is hereby deleted
and the following substituted therefor:
"investments in marketable, investment grade, direct or
guaranteed obligations of the Government of Canada or any province or
municipality thereof which mature within ten years from the date of
purchase."
14. Section 5.8(f) of the Credit Agreement is hereby amended
by adding "in the event that such Subsidiary has a net worth in excess of
$500,000" following the text "provided that," in the third line of such section.
15. Section 5.8 of the Credit Agreement is hereby amended by
adding the following as Sections 5.8(g) and 5.8(h) respectively:
"(g) investments in demand deposits, certificates of deposits,
time deposits and notes of any Bank or any Canadian bank having total
capital and unimpaired surplus of at least $100,000,000;"
"(h) securities commonly known as "commercial paper", or
corporate bonds which mature within ten years from the date of
purchase, in each case issued by a corporation organized and existing
under the laws of the United States of America or any state thereof or
the laws of Canada or any province thereof which at the time of
purchase have been rated by either or both of Moody's Investors
Service, Inc. and Standard and Poor's Ratings Group and the ratings for
such commercial paper are not less than "P-1" if rated by Moody's
Investors Service, Inc. and not less than "A-1" if rated by Standard
and Poor's Ratings Group or, for such bonds, are not less than "Aa" if
rated by Moody's Investors Service, Inc. and not less than "AA" if
rated by Standard & Poor's Ratings Group."
16. Sections 6.7, 6.8 and 6.9 of the Credit Agreement are
hereby deleted and the following substituted therefor:
"6.7 Prior to the Collateral Release Date or the HGC Release
Date (each as defined in the U.S. Loan Agreement) any person or group
of persons (within the meaning of
<PAGE> 6
5
Section 13 or 14 of the Securities Exchange Act of 1934, as amended),
other than any employee benefit plan or plans (within the meaning of
Section 3(3) of ERISA, as defined in the U.S. Loan Agreement) of Hudson
General or any HGC Subsidiary and other than shareholders of Hudson
General which have filed with the Securities and Exchange Commission
prior to the date of the Proxy (as defined in the U.S. Loan Agreement)
Schedules 13D or 13G pursuant to the Securities Exchange Act of 1934,
as amended, with respect to the securities of Hudson General shall
hereafter have acquired beneficial ownership (within the meaning of
Rule 13d-3 promulgated by the Securities and Exchange Commission under
said act) of more than 50% in voting power of the outstanding voting
stock of Hudson General, or during any period of twelve consecutive
calendar months, individuals who were directors of Hudson General on
the first day of such period shall cease to constitute a majority of
the board of directors of Hudson General, other than because of
replacement as a result of death or disability of one or more such
directors or replacement with the approval of a majority of those
individuals who were members of the board of directors of Hudson
General on the first day of such period or a majority of the directors
of Hudson General appointed thereafter with the approval of such
individuals;
6.8 Hudson General (prior to the Collateral Release Date or
the HGC Release Date, each as defined in the U.S. Loan Agreement), any
HGC Subsidiary (prior to the Collateral Release Date or the HGC Release
Date), LLC or any Subsidiary of LLC shall make an assignment for the
benefit of creditors, or admit in writing its inability to pay or
generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of Hudson General, LLC or any HGC Subsidiary or
Subsidiary of LLC or of any substantial part of the assets of Hudson
General, LLC or any HGC Subsidiary or any Subsidiary of LLC or shall
commence any case or other proceeding relating to Hudson General, LLC
or any HGC Subsidiary or any Subsidiary of LLC under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or shall take any action to authorize or in
furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall
be commenced against Hudson General (prior to the Collateral Release
Date or the HGC Release Date), LLC, any HGC Subsidiary (prior to the
Collateral Release Date or the HGC Release Date) or any Subsidiary of
LLC and Hudson General, LLC or any of such Subsidiaries or HGC
Subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein;
6.9 a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating Hudson General (prior
to the Collateral Release Date or the HGC Release Date, each as defined
in the U.S. Loan Agreement), LLC, any HGC Subsidiary (prior to the
Collateral Release Date or the HGC Release Date) or any Subsidiary of
LLC bankrupt or insolvent, or approving a petition in any such case or
other proceeding, or a
<PAGE> 7
6
decree or order for relief is entered in respect of Hudson General
(prior to the Collateral Release Date or the HGC Release Date), LLC,
any HGC Subsidiary (prior to the Collateral Release Date or the HGC
Release Date) or any Subsidiary of LLC in an involuntary case under
federal bankruptcy laws as now or hereafter constituted;"
17. Section 6.13 of the Credit Agreement is hereby deleted and
the following substituted therefor:
"If LLC shall cease to own 100% of the issued and outstanding
capital stock of Aviation."
18. Article 6 of the Credit Agreement is hereby amended by
adding the following as Section 6.15:
"6.15 Hudson General shall own, directly or indirectly, less
than 51% of the membership interests of LLC."
19. Sections 9(b) and (c) of the Credit Agreement are hereby
deleted and the following substituted therefor:
(b) The Obligations shall be guaranteed by LLC pursuant to an
amendment and restatement of the Guaranty and all obligations of LLC
thereunder shall be guaranteed (such guarantees to be in the form or
forms contemplated in the U.S. Loan Agreement) by the other Guarantors
having a net worth in excess of $500,000 (the guaranties of the
Guarantors are collectively referred to as the "Guaranty"). The
obligations of each Secured Guarantor under such corporation's Guaranty
shall be secured by (i) in the case of each Secured Guarantor other
than LLC, a perfected first priority security interest (subject only to
liens permitted under the U.S. Loan Agreement and entitled to priority
under applicable law) in the Subsidiary Collateral (as defined in the
U.S. Loan Agreement) pursuant to and to the extent required by the
terms of the U.S. Security Agreement executed and delivered by such
Secured Guarantor and (ii) in the case of LLC, in addition to the
foregoing, (A) a perfected first priority security interest (subject
only to the liens permitted under the U.S. Loan Agreement and entitled
to priority under applicable law) in the Collateral pursuant to and to
the extent required by the terms of the U.S. Security Agreement to
which it is a party and (B) the Assignment, Postponement and
Subordination and Intercreditor Agreement.
(c) LLC shall and it shall cause each of the other Guarantors
having a net worth in excess of $500,000 to:
(i) execute and deliver to each of the Agent and
the Banks, a Guaranty;
<PAGE> 8
7
(ii) in the case of LLC only, execute and deliver
to the Agent and the Banks, the Assignment,
Postponement and Subordination and
Intercreditor Agreement;
(iii) in the case of each Guarantor required to
deliver a Guaranty and execute and deliver
to the Agent for the benefit of the Banks,
the Agent, the lenders which are or may
become parties to the U.S. Loan Agreement
and the agent thereunder, U.S. Security
Agreements and all other documents and
instruments required to be delivered
pursuant thereto; and
(iv) execute and deliver all other documents and
instruments, including, without limitation,
corporate authority documents as the Banks
may reasonably request.
20. Section 10 of the Credit Agreement is hereby amended by
adding the following as Section 10.17:
"HGC Release Date. Upon and after the HGC Release Date (as
defined in the U.S. Loan Agreement), no Default or event with the
passage of time or the giving of notice (or both) which would become a
Default (other than with respect to the Defaults set forth in Sections
6.7, 6.8 and 6.9 hereof unless, at such time, the Collateral Release
Date (as defined in the U.S. Loan Agreement) has occurred) or any
failure to satisfy a condition precedent shall be deemed to occur or
arise as a result of any event or matter related to Hudson General."
21. The definition of "Commitment Percentage" set forth in
Exhibit "A" to the Credit Agreement is hereby amended by deleting such
definition in its entirety, and substituting therefor the following:
<PAGE> 9
8
Commitment Percentage - With respect to each Bank, the
percentage set forth opposite its name below as such Bank's
percentage of the aggregate Commitments of all of the Banks
(subject to adjustments permitted by the terms of the Credit
Agreement):
BANK COMMITMENT
PERCENTAGE
Chase Canada 80%
ABN Canada 20%
Total 100%
22. The definitions of "Guarantor(s)" and "Secured
Guarantor(s)" in Exhibit "A" to the Credit Agreement are hereby deleted and the
following shall be substituted for each such definition:
"Collectively, all of and individually, each of, LLC and all
Subsidiaries of LLC with a net worth in excess of $500,000 organized
under the laws of any State of the United States of America and
acquired or formed by LLC after the date hereof."
23. The definition of "Guaranty" in Exhibit "A" to the Credit
Agreement is hereby deleted and the following substituted therefor:
"has the meaning ascribed to such term in Section 9(b) and
includes amendments, supplements, replacements or restatements made
from time to time."
24. The following additional definition is hereby added to
Exhibit "A" to the Credit Agreement in the appropriate alphabetical order:
"HGC Subsidiary - Any corporation, association, joint stock
company, business trust or other similar organization of whose voting
stock Hudson General owns or controls, directly or indirectly, more
than 50%."
25. The Definition of "Initial Revolving Period" in Exhibit
"A" to the Credit Agreement is hereby amended by deleting "December 31, 1996"
and substituting "June 30, 1998" therefor.
26. The definition of "Reduction Commencement Date" in Exhibit
"A" to the Credit Agreement is hereby amended by deleting "December 31, 1996"
and substituting "June 30, 1998" therefor.
<PAGE> 10
9
27. Effective upon the execution of this Amendment, Schedule
3.8 to the Credit Agreement is hereby deleted and Schedule 3.8 in the form
attached to this Amendment shall be substituted therefor.
28. Aviation represents and warrants to the Banks that (a)
this Amendment and the Credit Agreement as further amended hereby (the "Amended
Credit Agreement") are its legal, valid and binding obligations, enforceable
against Aviation in accordance with their terms, (b) this Amendment and the
Amended Credit Agreement do not conflict with any charter document, agreement,
instrument or undertaking binding upon Aviation or any of its properties, (c) no
Default, or situation which with the giving of notice or the passage of time or
both would become a Default, now exists or will exist after giving effect to
this Amendment, and (d) all of the representations and warranties made by Hudson
General and LLC in the U.S. Loan Agreement are true and correct as of the date
hereof.
29. This Amendment shall become effective as of the date
hereof upon satisfaction of each of the following conditions precedent:
(a) Delivery.
(i) Aviation, the Banks and the Agent shall have
executed and delivered this Amendment;
(ii) The Banks, the Agent, Aviation, and LLC
shall have executed and delivered an
amendment and restatement of the Assignment,
Postponement and Subordination and
Intercreditor Agreement as acknowledged by
Hudson General;
(iii) LLC shall have delivered an amendment and
restatement of the Guaranty as acknowledged
by Hudson General and LLC and Hudson General
shall have delivered an amendment and
restatement of the U.S. Security Agreement
to which Hudson General is a party;
(iv) LLC shall have delivered to the Agent a copy
of the Certificate required to be delivered
to the Agent (as defined in the U.S. Loan
Agreement) pursuant to Section 4A.3.(c) of
the U.S. Loan Agreement;
(v) Chase Canada shall have assigned such
interests, rights and obligations under the
Credit Agreement to ABN Canada as shall be
necessary to achieve the Commitment
Percentages set forth in this Amendment; and
<PAGE> 11
10
(vi) Aviation shall have delivered to the Agent
amended and restated Revolving Credit Notes
in favour of each of the Banks.
(b) U.S. Loan Agreement. An amendment and restatement of the
U.S. Loan Agreement which is satisfactory to the Banks and the Agent in all
respects shall have been executed and delivered by each of Hudson General, LLC
and the lenders which are parties to the U.S. Loan Agreement.
(c) Lien and Security. The Guaranty, the Assignment,
Postponement and Subordination and Intercreditor Agreement and the U.S. Security
Agreement to which LLC is a party, in each case as amended in accordance with
clause (a) of this Section 28, shall (except as enumerated in clauses (c) and
(d) of Section 18 of the U.S. Security Agreement if such actions are not then
required) be effective to continue to create in favour of the Agent and the
Banks the legal, valid and enforceable first (except for liens expressly
permitted hereunder entitled to priority under applicable law) security interest
in the Collateral and all filings, recordings, deliveries of instruments and
other actions necessary or desirable in the opinion of the Agent to protect and
preserve such security interests shall have been duly effected and the Agent and
the Banks shall have received evidence thereof in form and substance
satisfactory to the Agent and the Banks. The Collateral and the Agent's and the
Banks' rights with respect thereto shall not be subject to any setoff, claims,
withholdings or other defenses and the Security Documents shall have been duly
registered or recorded (as a first priority assignment of and perfected security
interest in, subject to the terms of such agreements, the Collateral) in each
jurisdiction where such filing is necessary or of advantage (determined in the
Banks' sole discretion).
(d) Corporate Standing and Action. Each of the Banks shall
have received (i) a Certificate of Compliance from Industry Canada as to the
good standing of Aviation as of a recent date, and (ii) a certificate of an
Authorized Officer of Aviation, dated the date hereof, certifying (A) that
attached thereto is a true and complete copy of the Articles of Amalgamation,
all Shareholder Agreements and the bylaws of Aviation, each as amended to the
date hereof or that the Articles of Amalgamation, Shareholder Agreements and
bylaws of Aviation have not been modified, amended or supplemented since
November 25, 1992, (B) that attached thereto is a true and complete copy of
resolutions of the sole director of Aviation authorizing the execution and
delivery of this Amendment and all documents and instruments executed in
connection therewith, which resolutions are in full force and effect without
modification on the date hereof, and (C) the incumbency and signatures of the
officers of Aviation or that there have been no changes in such incumbency and
signatures since November 25, 1992.
(e) Opinions of Counsel. Each of the Banks and the Agent shall
have received a favourable legal opinion addressed to the Banks and the Agent,
dated as of the date hereof, in form and substance satisfactory to the Banks and
the Agent, from each of Noah Rockowitz, Secretary and Counsel to Aviation, and
Fraser & Beatty, Ontario legal counsel to Aviation.
<PAGE> 12
11
(f) Proceedings and Documents. All proceedings in connection
with the transaction contemplated by this Amendment and all documents incident
hereto shall be satisfactory in form and substance to the Agent, and the Agent
shall have received all information and such counterpart originals or certified
or other copies of such documents as the Agent may reasonably request.
30. Miscellaneous. The Credit Agreement and all of the Loan
Documents are each confirmed as being in full force and effect. This Amendment,
the Credit Agreement and the other Loan Documents constitute the entire
understanding of the parties with respect to the subject matter hereof and
thereof and supersede all prior understandings and agreements, whether written
or oral. This Amendment and the Credit Agreement shall be read and construed as
one agreement, and, except as expressly amended hereby, the Credit Agreement
remains unchanged. The headings in this Amendment are for convenience of
reference only and shall not alter, limit or otherwise affect the meaning
hereof. This Amendment is a Loan Document as defined in the Credit Agreement and
may be executed in any number of counterparts, which together shall constitute
one instrument, and shall bind and inure to the benefit of the parties and their
respective successors and permitted assigns. Aviation shall pay all costs and
expenses, including reasonable legal fees and disbursements of the Agent's
counsel, incurred by the Agent in preparing this Amendment. THIS AMENDMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS (OTHER THAN THE
CONFLICT OF LAWS RULES) OF THE PROVINCE OF ONTARIO AND LAWS OF CANADA APPLICABLE
THEREIN.
<PAGE> 13
12
IN WITNESS WHEREOF, each of the undersigned has executed this
Amendment under seal by a duly authorized officer as of the date first set forth
above.
HUDSON GENERAL AVIATION THE CHASE MANHATTAN BANK
SERVICES INC./SOCIETE DE OF CANADA, FOR ITSELF AND AS AGENT
SERVICES HUDSON GENERAL
(AVIATION) INC.
By: ________________________________ By: _______________________________
Title: Title:
ABN AMRO BANK CANADA
By: ________________________________
Title:
Consented to:
THE FIRST NATIONAL BANK OF BOSTON
By: ________________________________
Title:
<PAGE> 1
EXHIBIT 4.4(d)
Revolving Credit Agreement dated as of June 1, 1996 among Hudson General
Corporation and The First National Bank of Boston, European American Bank, The
Chase Manhattan Bank, N.A. and The First National Bank of Boston, as agent.
<PAGE> 2
REVOLVING CREDIT AGREEMENT
AMONG
HUDSON GENERAL CORPORATION
AND
THE FIRST NATIONAL BANK OF BOSTON
EUROPEAN AMERICAN BANK
THE CHASE MANHATTAN BANK, N.A.
THE FIRST NATIONAL BANK OF BOSTON,
AS AGENT
DATED AS OF JUNE 1, 1996
<PAGE> 3
HUDSON GENERAL CORPORATION
REVOLVING CREDIT AGREEMENT
TABLE OF CONTENTS
Page
----
1. THE REVOLVING CREDIT FACILITY; LETTERS OF CREDIT.............. 1
1.1. Commitment to Lend..................................... 1
1.2. Notes to Evidence Revolving Credit Loans............... 1
1.3. Election of Form of Revolving Credit Loan.............. 2
1.4. Aggregate Loan Limit................................... 2
1.5. Repayment of Revolving Credit Loans.................... 3
1.6. Revolving Credit Loans Commitment Fee.................. 4
1.7. Letters of Credit...................................... 4
1.8. Drawings ............................................ 5
1.9. Letter of Credit Loan Obligations Absolute............. 5
1.10. Banks' Obligations in Respect of Letters of Credit..... 6
1.11. Letter of Credit Fee................................... 6
2. CERTAIN GENERAL PROVISIONS.................................... 7
2.1. Agent's Fee............................................ 7
2.2. Facility Fee........................................... 7
2.3. Interest ............................................ 7
2.4. Place and Mode of Payments............................. 7
2.5. Inability of Agent to Determine LIBO Rates; Illegality. 8
2.6. Indemnification for Losses............................. 8
2.7. Payments to be Free of Deductions...................... 9
2.8. Change in Circumstances; Additional Costs.............. 10
2.9. Additional Amounts Payable on Account of Credit
Facilities............................................. 11
2.10. Certificates........................................... 12
2.11. Delinquent Banks....................................... 12
3. REPRESENTATIONS AND WARRANTIES................................ 12
3.1. Organization and Qualification; Authority.............. 12
3.2. Valid Obligation....................................... 13
3.3. Governmental Approvals................................. 13
3.4 Title to Properties; Absence of Liens.................. 14
3.5. Financial Statements................................... 14
3.6. Changes ............................................ 14
<PAGE> 4
ii
3.7. Taxes ............................................ 14
3.8. Litigation ............................................ 15
3.9. Use of Proceeds; Regulations U and X................... 15
3.10. Offering by the Company................................ 15
3.11. No Default or Violation of Law......................... 15
3.12. No Default ............................................ 16
3.13. Franchises, Patents, Copyrights........................ 16
3.14. No Materially Adverse Contracts........................ 16
3.15. Holding Company and Investment Company Acts............ 16
3.16. Certain Transactions................................... 16
3.17. Employee Benefit Plans................................. 17
3.18. Environmental Compliance............................... 17
3.19. Insurance ............................................ 19
3.20. Loans as Senior Indebtedness........................... 19
3.21. Perfection of Security Interest........................ 19
3.22. Hudson General LLC Representations and Warranties...... 19
4A. EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS................... 20
4A.1. Loan Documents......................................... 20
4A.2. Representations and Warranties True.................... 20
4A.3. Corporate Standing and Action.......................... 20
4A.4. Opinion of HGC's Counsel............................... 20
4A.5. Payment of Fees........................................ 21
4A.6. Validity of Liens...................................... 21
4A.7. Perfection Certificates and UCC Search Results......... 21
4A.8. Hudson General LLC Credit Agreement.................... 21
4B. CONDITIONS OF LOANS AND LETTERS OF CREDIT..................... 21
4B.1 Notice ............................................ 21
4B.2. Representations and Warranties True................... 22
4B.3. No Adverse Change..................................... 22
4B.4. Legality ............................................ 22
5. COVENANTS ............................................ 22
5.1. Punctual Payment....................................... 22
5.2. Financial Statements and Other Written Materials....... 22
5.3. Inspection ............................................ 24
5.4. Conduct of Business.................................... 24
5.5. Maintenance and Insurance.............................. 24
5.6. Taxes ............................................ 25
5.7. Ratio of Consolidated Liabilities to
Consolidated Tangible Net Worth...................... 25
5.8. Consolidated Tangible Net Worth........................ 25
5.9. Minimum Liquidity...................................... 25
<PAGE> 5
iii
5.10. Limitation on Borrowing................................. 25
5.11. Restriction on Liens.................................... 26
5.12. Limitation on Lease Commitments......................... 27
5.13. Investments and Contingent Liabilities.................. 28
5.14. Merger and Sale of Assets............................... 29
5.15. Limitation on Dividends................................. 30
5.16. Subordinated Debt....................................... 31
5.17. Notices ............................................ 31
5.18. Existence; Maintenance of Properties.................... 32
5.19. Compliance with Laws, Contracts, Licenses,
and Permits.......................................... 32
5.20. Employee Benefit Plans.................................. 33
5.21. Cash Investment in the Kohala Joint
Venture ............................................ 33
5.22. Use of Proceeds......................................... 33
5.23. Collateral Security..................................... 34
5.24. Limited Liability Agreement............................. 34
5.25. Further Assurances...................................... 34
6. DEFAULTS ............................................ 34
7. AGENT'S RELATIONSHIP WITH BANKS; AGENT'S DUTIES............... 37
8. SETOFF ............................................ 39
9. INDEMNIFICATION ............................................ 39
10. SECURITY AND GUARANTIES....................................... 40
11. MISCELLANEOUS ............................................ 41
11.1. Notices ............................................ 41
11.2. Copies of Certificates, Etc........................... 41
11.3. No Waivers............................................ 42
11.4. Massachusetts Law..................................... 42
11.5. Expenses; Taxes....................................... 42
11.6. Confidentiality of Information........................ 42
11.7. Changes, Waivers...................................... 42
11.8. Binding Effect of Agreement........................... 43
11.9. Counterparts.......................................... 43
11.10. Entire Agreement...................................... 43
11.11. Assignments or Participations by Banks or Affiliates.. 43
11.12. Term of Agreement..................................... 44
<PAGE> 6
iv
Exhibits:
Exhibit A - Definitions
Exhibit B - Form of Revolving Credit Note
Exhibit C - Form of Pledge Agreement
Exhibit D - Form of Opinion
Schedules:
Schedule 3.1 - Subsidiaries
Schedule 3.8 - Litigation
Schedule 3.18(b) - Environmental Notices
Schedule 3.18(c) - Underground Tanks
Schedule 3.19 - Insurance
Schedule 5.10 - Indebtedness
Schedule 5.11 - Liens
Schedule 5.13 - Investments
<PAGE> 7
HUDSON GENERAL CORPORATION
REVOLVING CREDIT AGREEMENT
This REVOLVING CREDIT AGREEMENT (the "Agreement") dated as of June 1,
1996, among Hudson General Corporation ("HGC"), a Delaware corporation having
its principal place of business at 111 Great Neck Road, Great Neck, New York
11022, The First National Bank of Boston, 100 Federal Street, Boston,
Massachusetts 02110, in its individual capacity ("FNB"), European American Bank,
1 EAB Plaza, Uniondale, New York 11555 ("EAB"), The Chase Manhattan Bank, N.A.,
135 Pinelawn Street, Melville, New York 11747 ("Chase") and such other banks as
may become parties hereto from time to time in accordance with the provisions
hereof (each singly, a "Bank" and collectively, the "Banks"), and The First
National Bank of Boston as agent for the Banks (the "Agent"). Capitalized terms
used in this Agreement shall have the meanings set forth in Exhibit A attached
hereto or in the sections of this Agreement referred to in Exhibit A. All
accounting terms shall, unless otherwise specified, be given the meanings
ascribed to them by generally accepted accounting principles.
Section 1. THE REVOLVING CREDIT FACILITY; LETTERS OF CREDIT.
Section 1.1. Commitment to Lend. Subject to the terms and conditions of
this Agreement, including, without limitation, the conditions precedent set
forth in Paragraph 4B hereof, and upon prior notice given to the Agent by HGC,
as provided in Paragraph 1.3, each Bank severally agrees from time to time to
make loans to HGC (individually, a "Revolving Credit Loan" and collectively, the
"Revolving Credit Loans") in an aggregate principal amount requested by HGC from
time to time between the Effective Date and the Revolving Credit Loan Maturity
Date, up to a maximum aggregate amount outstanding (after giving effect to all
amounts requested) at any one time equal to such Bank's Commitment Percentage of
the Aggregate Loan Limit, provided that the sum of the aggregate outstanding and
unpaid principal amount of all Revolving Credit Loans (after giving effect to
all amounts requested) plus the aggregate Maximum Drawing Amount of all
outstanding Letters of Credit shall at no time exceed the Aggregate Loan Limit.
Promptly upon receipt of a request for Revolving Credit Loans by HGC, the Agent
will notify the Banks thereof, and each Bank will make the proceeds of its
Revolving Credit Loan available in United States dollars in immediately
available funds on the requested date at the head office of the Agent, 100
Federal Street, Boston, Massachusetts 02110. The Revolving Credit Loans shall be
made pro rata in accordance with each Bank's Commitment Percentage. The Banks'
obligations hereunder shall be several and not joint, and except as otherwise
specifically provided in this Agreement, no Bank's obligation to lend shall be
affected by any other Bank's failure to make any Revolving Credit Loan.
Section 1.2. Notes to Evidence Revolving Credit Loans. The Revolving
Credit Loans will be evidenced by separate promissory notes of HGC in the form
of Exhibit B attached hereto (each a "Revolving Credit Note") appropriately
completed, executed and delivered by HGC to the Banks on the Effective Date.
Prior to any transfer of a
<PAGE> 8
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Revolving Credit Note, each Bank shall record thereon any appropriate notations
evidencing each Revolving Credit Loan and payment of principal made thereunder.
The outstanding amount of the Revolving Credit Loans recorded on each Bank's
Revolving Credit Note shall be prima facie evidence of the principal amount
thereof owing and unpaid to such Bank, but the failure to record, or any error
in so recording, any such amount shall not limit or otherwise affect the
obligations of HGC hereunder or under any Revolving Credit Note to make payments
of principal or interest on any Revolving Credit Note when due.
Section 1.3. Election of Form of Revolving Credit Loan. (a) As long as no
Default has occurred and is continuing and no condition which would, with either
or both the giving of notice or the lapse of time, result in a Default has
occurred and is continuing, the Banks agree from time to time between the
Effective Date and the Revolving Credit Loan Maturity Date to make Revolving
Credit Loans as either Base Rate Loans or LIBO Rate Loans, to permit conversion
of Revolving Credit Loans that are Base Rate Loans or LIBO Rate Loans to
Revolving Credit Loans of the other Type subject where applicable to Paragraph
2.6 hereof or to continue a Revolving Credit Loan as a LIBO Rate Loan for the
same Interest Period or a different Interest Period, provided that no Interest
Period shall extend beyond the Revolving Credit Loan Maturity Date. Each Base
Rate Loan made on any single occasion shall be in the minimum aggregate
principal amount of $100,000 or an integral multiple thereof. Each LIBO Rate
Loan, or a conversion thereto or a continuation thereof, made on any single
occasion shall be in the minimum aggregate principal amount of $1,000,000 or if
higher, in integral multiples of $250,000.
(b) Each Revolving Credit Loan shall be made, each conversion of a
Revolving Credit Loan from one Type to another Type and each continuation of a
Revolving Credit Loan as a LIBO Rate Loan for the same Interest Period or a
different Interest Period shall occur, upon notice (confirmed in writing, if
oral) given to the Agent by HGC no later than:
(i) if a Base Rate Loan, the same Business Day prior to 10:00
a.m. (Boston time); or
(ii) if a LIBO Rate Loan, 11:00 a.m. (Boston time), three Business
Days prior to commencement of the applicable Interest Period.
In its notice, HGC shall specify the amount of such Revolving Credit Loan and,
if a LIBO Rate Loan, the applicable Interest Period. Each notice with regard to
borrowing or a conversion to or a continuation of a LIBO Rate Loan shall be
irrevocable and binding upon HGC. Any LIBO Rate Loan shall automatically convert
to a Base Rate Loan at the end of the applicable Interest Period unless HGC in
accordance with the procedures set forth in this Paragraph 1.3 shall give the
requisite notice to continue such LIBO Rate Loan for the same or a different
Interest Period.
Section 1.4. Aggregate Loan Limit. (a) The "Aggregate Loan Limit" shall
initially be $6,000,000 and shall be irrevocably reduced (i) by such amounts by
which HGC may from time to time, upon three Business Days' prior written notice
to the Banks, elect to
<PAGE> 9
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reduce the same (in integral multiples of $100,000 or in the full remaining
amount of the Aggregate Loan Limit), (ii) from time to time in accordance with
the parenthetical of Paragraph 5.11(f)(ii) hereof and (iii) from time to time in
accordance with Paragraph 5.14(a)(iv) hereof. On the effective date of any
reduction, there shall become due and payable and HGC will pay or cause to be
paid the amount, if any, by which the sum of the aggregate outstanding and
unpaid principal amount of all Revolving Credit Loans plus the aggregate Maximum
Drawing Amount of all outstanding Letters of Credit, exceeds the reduced
Aggregate Loan Limit on the effective date of such reduction. Each repayment of
Revolving Credit Loans shall be made ratably among the Banks in accordance with
their Commitment Percentages and each reduction in the Aggregate Loan Limit
shall be made ratably among the Banks in accordance with their Commitment
Percentages.
(b) Upon the written request by HGC to the Banks received by the
Banks no later than 90 days prior to the Revolving Credit Loan Maturity Date and
the written consent of all of the Banks (such consent to be given at the sole
discretion of each Bank), the Initial Revolving Period may be extended for
successive annual periods and the Revolving Credit Loan Maturity Date shall be
reset accordingly. In the event that any revolving period is extended, HGC shall
(A) (i) execute and deliver to each of the Banks restated Revolving Credit Notes
reflecting the extended Revolving Credit Loan Maturity Date and each of the
Banks shall return to HGC the existing Revolving Credit Notes, or (ii) execute
and deliver to each of the Banks a letter authorizing such Bank to change the
Revolving Credit Loan Maturity Date set forth in such Bank's existing Revolving
Credit Note to the extended Revolving Credit Loan Maturity Date and (B) provide
each Bank with such evidence of existence and due authorization of such extended
period of borrowing, including an opinion of counsel to HGC as to the due
execution, delivery, validity and binding effect of such Revolving Credit Note
as restated or extended, as such Bank reasonably may request. In no event shall
any revolving period be extended unless at the time of such extension each of
the conditions precedent to the making of a Revolving Credit Loan set forth in
Paragraph 4B of this Agreement has been satisfied.
Section 1.5. Repayment of Revolving Credit Loans. The sum of the aggregate
outstanding and unpaid principal amounts of all Revolving Credit Loans plus the
aggregate Maximum Drawing Amounts of all outstanding Letters of Credit shall at
no time exceed the Aggregate Loan Limit, and HGC will make or cause to be made
such payments on account of principal as are necessary to comply with the
foregoing limitation, with accrued interest to the date of prepayment on the
principal amount prepaid. Payment in full of all obligations on or with respect
to the Revolving Credit Notes shall be due on the Revolving Credit Loan Maturity
Date and HGC promises to pay in full on the Revolving Credit Loan Maturity Date
all Obligations on or with respect to the Revolving Credit Notes. HGC may at any
time upon three Business Days' prior written notice to the Agent make or cause
to be made full or partial prepayment of the Revolving Credit Loans in an
integral multiple of $100,000, with accrued interest to the date of such
prepayment on the principal amount prepaid, for pro-rata application to the
Revolving Credit Loans outstanding under the Revolving Credit Notes, with
adjustments to the extent practicable to equalize any prior prepayment not
exactly in proportion, without premium or penalty, provided that
<PAGE> 10
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LIBO Rate Loans may be prepaid only on the last day of the Interest Period
applicable thereto (or otherwise with the consequences set forth in Paragraph
2.6). Subject to the terms and conditions of this Agreement, HGC may reborrow
any amount so prepaid.
Section 1.6. Revolving Credit Loans Commitment Fee. HGC agrees to pay to
the Agent, for the account of the Banks in accordance with their respective
Commitment Percentages, quarterly in arrears on the last day of each calendar
quarter commencing June 30, 1996, a commitment fee, computed from the Effective
Date at the rate of 1/2 of 1% per annum on the aggregate daily unused portion of
the Aggregate Loan Limit.
Section 1.7. Letters of Credit. Subject to the terms and conditions set
forth in this Agreement, upon written request of HGC to the Letter of Credit
Bank in accordance with this Paragraph 1.7, the Letter of Credit Bank shall
issue, with pro rata participation by all of the Banks, at any time between the
Effective Date and the Revolving Credit Loan Maturity Date and subject to the
satisfaction of the conditions precedent set forth in Paragraph 4B hereof,
Letters of Credit in such form as HGC and the Letter of Credit Bank may agree
for the account of HGC, provided that at no time shall the aggregate Maximum
Drawing Amounts of all outstanding Letters of Credit exceed $2,000,000, and
provided further that at no time shall the sum of the aggregate outstanding and
unpaid principal balance of all outstanding Revolving Credit Loans plus the
aggregate Maximum Drawing Amounts of all outstanding Letters of Credit exceed
the Aggregate Loan Limit. Letters of Credit shall be issued only for the
following purposes: (i) to support HGC's insurance policies, and (ii) for HGC's
business purposes in the ordinary course of HGC's business. Each request for
issuance of a Letter of Credit shall be in writing and shall be received by the
Letter of Credit Bank at least three Business Days prior to the proposed date of
issuance. The expiry dates, amounts and beneficiaries of the Letters of Credit
will be as designated by HGC and reasonably approved by the Letter of Credit
Bank. The Letter of Credit Bank promptly shall notify the Banks of the amounts
of all Letters of Credit issued hereunder and of any extension, reduction or
termination thereof, and the Letter of Credit Bank shall send the Banks copies
of all Letters of Credit issued hereunder as soon as reasonably practicable
after the issuance thereof. HGC may request, and the Letter of Credit Bank, upon
terms and conditions approved by HGC, shall issue, with pro rata participation
by all of the Banks, substitute Letters of Credit for the Letters of Credit to
reflect reductions in the amount of HGC's obligations supported by such Letters
of Credit. Each Letter of Credit issued by the Letter of Credit Bank hereunder
shall identify: (i) the dates of issuance and expiry of such Letter of Credit,
(ii) the amount of such Letter of Credit (which shall be a sum certain), (iii)
the beneficiary and account party of such Letter of Credit, and (iv) the drafts
and other documents necessary to be presented to the Letter of Credit Bank upon
drawing thereunder. No Letter of Credit issued hereunder shall expire after the
first anniversary of its date of issuance (provided that, at HGC's request,
Letters of Credit may contain provisions for extension or renewal, which such
extension or renewal shall be at the Banks' option, for additional terms not in
excess of one year), and in no event shall any Letter of Credit issued hereunder
expire after the Revolving Credit Loan Maturity Date. HGC agrees to execute and
deliver to the Letter of Credit Bank such further documents and instruments in
connection with any Letter of Credit issued hereunder as the Letter of Credit
Bank in accordance with its customary practices may request.
<PAGE> 11
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Section 1.8. Drawings. HGC hereby absolutely and unconditionally promises
to pay the Letter of Credit Bank as soon as possible but in any event within one
Business Day after any drawing under a Letter of Credit, in immediately
available funds, the amount of such drawing under such Letter of Credit, plus
interest thereon from the date of such drawing until repaid in full at an annual
rate equal to the Base Rate in effect from time to time. If HGC so requests in
accordance with Paragraph 4B.1 and if each of the conditions precedent to the
making of a Revolving Credit Loan set forth in Paragraph 4B of this Agreement
has been satisfied on the Business Day following a drawing under a Letter of
Credit, the amount of such drawing, plus interest thereon, for which the Letter
of Credit Bank has not been reimbursed by HGC shall become a Revolving Credit
Loan made by the Banks to HGC on such day as provided in Paragraph 1.1 hereof
bearing interest at an annual rate equal to the Base Rate in effect from time to
time. The Letter of Credit Bank shall give written notice (which written notice
shall be by facsimile transmission or telex) to HGC and the Banks of the
occurrence and amount of each drawing under a Letter of Credit promptly upon the
occurrence thereof. Each Bank agrees that on the second Business Day after any
such drawing, such Bank will immediately make available to the Letter of Credit
Bank at its head office in Boston, Massachusetts, in Federal or other
immediately available funds, its ratable share of any such drawing, plus any
interest which shall have accrued thereon, provided that each Bank's obligation
shall be reduced by its pro rata share of any reimbursement by HGC in respect of
such drawing pursuant to this Paragraph 1.8. Paragraph 1.9 hereof shall govern
HGC's obligations with respect to drawings under Letters of Credit.
Section 1.9. Letter of Credit Loan Obligations Absolute. (a) The
obligation of HGC to reimburse the Letter of Credit Bank as provided hereunder
in respect of drawings under Letters of Credit shall rank pari passu with the
obligation of HGC to repay the Revolving Credit Loans hereunder, and shall be
absolute and unconditional under any and all circumstances and shall be secured
pro rata with the other Obligations pursuant to the Security Documents. Without
limiting the generality of the foregoing, HGC's obligation to reimburse the
Letter of Credit Bank in respect of drawings under Letters of Credit shall not
be subject to any defense based on the non-application or misapplication by the
beneficiary of the proceeds of any such payment or the legality, validity,
regularity or enforceability of the Letters of Credit or any related document or
any dispute between or among HGC, the beneficiary of any Letter of Credit or any
financing institution or other party to which any Letter of Credit may be
transferred. The Letter of Credit Bank may accept or pay any draft presented to
it under any Letter of Credit regardless of when drawn or made and whether or
not negotiated, if such draft, accompanying certificate or documents and any
transmittal advice are presented or negotiated on or before the expiry date of
the Letter of Credit, or any renewal or extension thereof then in effect.
Furthermore, neither the Letter of Credit Bank nor any of its correspondents
shall be responsible, as to any document presented under a Letter of Credit
which appears to be regular on its face, and appears on its face to conform to
the terms of the Letter of Credit, for the validity or sufficiency of any
signature or endorsement, for delay in giving any notice or failure of any
instrument to bear adequate reference to the Letter of Credit, or for failure of
any person to note the amount of any draft on the reverse of the Letter of
Credit.
<PAGE> 12
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(b) Any action, inaction or omission on the part of the Letter of
Credit Bank or any of its correspondents under or in connection with any Letter
of Credit or the related instruments, documents or property, if in good faith
and in conformity with such laws, regulations or customs as are applicable,
shall be binding upon HGC and shall not place the Letter of Credit Bank or any
of its correspondents under any liability to HGC, in the absence of (i) gross
negligence or willful misconduct by the Letter of Credit Bank or its
correspondents or (ii) the failure by the Letter of Credit Bank to pay under a
Letter of Credit after presentation of a draft and documents strictly complying
with such Letter of Credit. The Letter of Credit Bank's rights, powers,
privileges and immunities specified in or arising under this Agreement are in
addition to any heretofore or at any time hereafter otherwise created or
arising, whether by statute or rule of law or contract. All Letters of Credit
issued hereunder will, except to the extent otherwise expressly provided
hereunder, be governed by the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce, Publication No. 500,
and any subsequent revisions thereof.
Section 1.10. Banks' Obligations in Respect of Letters of Credit. Each
Bank acknowledges that each Letter of Credit issued by the Letter of Credit Bank
pursuant to this Agreement is issued by the Letter of Credit Bank on behalf of
and with the pro rata participation of all of the Banks, agrees to make the
payments required by Paragraph 1.8 hereof and agrees to be responsible for its
pro rata share of all liabilities incurred by the Letter of Credit Bank in
respect of each Letter of Credit opened or extended by the Letter of Credit Bank
hereunder for the account of HGC. Each Bank agrees with the Letter of Credit
Bank and the other Banks that its obligation to make the payments required by
Paragraph 1.8 hereof shall not be affected in any way by any circumstances
(other than the gross negligence or willful misconduct of the Letter of Credit
Bank) occurring before or after the making of any payment by the Letter of
Credit Bank pursuant to any Letter of Credit, including, without limitation:
(a) any modification or amendment of, or any consent, waiver,
release or forbearance with respect to, any of the terms of this Agreement
or any other instrument or document referred to herein;
(b) the existence of any Default; or
(c) any change of any kind whatsoever in the financial position
or creditworthiness of HGC.
Section 1.11. Letter of Credit Fee. HGC shall pay to the Letter of Credit
Bank for its own account a fee in respect of each Letter of Credit issued
pursuant to Paragraph 1.7 hereof calculated at the rate of 1/4% per annum on the
Maximum Drawing Amount of each such Letter of Credit, payable quarterly in
advance during the term of such Letter of Credit, commencing upon the date of
issuance thereof. HGC also shall pay to the Letter of Credit Bank for the
accounts of the Banks (including FNB) in accordance with their Commitment
Percentages a fee in respect of each such Letter of Credit calculated at the
rate of 1-3/8% per annum on the Maximum Drawing Amount thereof, payable
quarterly in advance during the term of such Letter of Credit, commencing
<PAGE> 13
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upon the date of issuance thereof (the foregoing fees are referred to
collectively as the "Letter of Credit Fee"). In addition (but without
duplication), HGC shall pay to the Letter of Credit Bank for its own account its
standard processing, negotiating, amendment and administrative fees, as
determined in accordance with the Letter of Credit Bank's customary fees and
charges for similar facilities.
Section 2. CERTAIN GENERAL PROVISIONS.
Section 2.1. Agent's Fee. HGC shall pay to the Agent annually in advance,
for the Agent's own account, an Agent's fee in the amount of $7,500 on the
Effective Date and an Agent's fee of $5,000 on each anniversary of the Effective
Date during the term of this Agreement.
Section 2.2. Facility Fee. HGC agrees to pay to the Agent for the pro rata
accounts of the Banks on the Effective Date a facility fee in the amount of
$18,750.
Section 2.3. Interest. Except as otherwise provided in the last sentence
of this Paragraph 2.3, the Revolving Credit Notes shall bear interest on the
unpaid principal amount thereof not then due and payable, computed as follows:
(a) for Base Rate Loans, at a rate per annum equal to the Base
Rate as in effect from time to time; and
(b) with respect to LIBO Rate Loans, at a rate per annum equal to
1-3/8% above the LIBO Rate determined for the applicable Interest Period;
provided that notwithstanding anything to the contrary contained in this
Agreement or in the Revolving Credit Notes, the Banks shall not charge nor shall
HGC be required to pay interest in an amount in excess of that permitted by
applicable law. All payments of interest on Base Rate Loans shall be made
quarterly in arrears on the last day of each calendar quarter commencing June
30, 1996, and on the date when any Base Rate Loan is paid in full. Interest on
each LIBO Rate Loan shall be payable (i) on the last day of each Interest Period
relating thereto, and (ii) if any Interest Period is longer than three months,
also on the last day of each three-month period following the commencement of
such Interest Period. Any change in the Base Rate shall result in an immediate
corresponding change in the rate of interest payable on Base Rate Loans. The
Agent shall promptly notify HGC of any change in the Base Rate. Overdue
principal of and, to the extent permitted by law, overdue interest on each
Revolving Credit Note shall bear interest at a rate which is two percentage
points (2%) per annum above the Base Rate in effect from time to time,
compounded monthly whether before or after judgment. All computations of
interest and commitment fees shall be made on the basis of the actual number of
days elapsed divided by 360.
Section 2.4. Place and Mode of Payments. All payments due hereunder shall
be made, in immediately available funds in United States dollars, by HGC to the
Agent at its head office at 100 Federal Street, Boston, Massachusetts 02110.
Promptly upon receipt by the Agent of any payment, it shall wire, in immediately
available funds, to each Bank its applicable share (taking into account the
provisions of Paragraph 2.11
<PAGE> 14
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hereof) of such payment. Whenever a payment becomes due on a day which is not a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and interest and commitment fees shall accrue during such
extension. HGC hereby requests and authorizes the Agent to charge HGC's deposit
account with the Agent for all interest on the Revolving Credit Loans and all
fees payable hereunder on the dates when any such amounts are due.
Section 2.5. Inability of Agent to Determine LIBO Rates; Illegality. (a)
If the Agent shall in good faith determine that it is unable to ascertain the
LIBO Rate prior to any Interest Period, the Agent shall promptly notify HGC of
such determination (which shall be conclusive and binding on HGC and the Banks).
In such event (i) any loan request with respect to a LIBO Rate Loan to which
such Interest Period would otherwise relate shall be deemed to be a request for
a Base Rate Loan (unless HGC withdraws its request therefor), (ii) each LIBO
Rate Loan will automatically, on the last day of the then current Interest
Period relating thereto, become a Base Rate Loan, and (iii) the obligations of
the Banks to make LIBO Rate Loans or convert Base Rate Loans to LIBO Rate Loans
shall be suspended until the Agent determines that the circumstances giving rise
to such suspension no longer exist, whereupon the Agent shall so notify HGC and
the Banks. Such determination shall be made by the Agent on the day preceding
the first day of the applicable Interest Period.
(b) Notwithstanding any other provisions herein, if any present or
future law, regulation, treaty or directive or in the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain LIBO
Rate Loans, such Bank shall forthwith give notice of such circumstances to HGC
and the other Banks and thereupon (i) the obligation of such Bank to make LIBO
Rate Loans or convert Base Rate Loans to LIBO Rate Loans shall forthwith be
suspended and such Bank shall have no obligation to make LIBO Rate Loans for
purposes of Paragraph 2.11 hereof but shall make Base Rate Loans in like amount
(HGC hereby agreeing to accept such Base Rate Loans), and (ii) such LIBO Rate
Loans, if any, shall be converted automatically to Base Rate Loans on the last
day of the then current Interest Period applicable to such LIBO Rate Loans or
within such earlier period as may be required by law. HGC hereby agrees promptly
to pay the Agent for the account of such Bank, upon demand by such Bank, any
additional amounts necessary to compensate such Bank for any costs incurred by
such Bank in making any conversion in accordance with this Paragraph 2.5,
including any interest or fees payable by such Bank to lenders of funds obtained
by it in order to make or maintain its LIBO Rate Loans hereunder.
Section 2.6. Indemnification for Losses. Without prejudice to any of the
other provisions of this Agreement, HGC will, on demand by any Bank, at any time
and from time to time and as often as the occasion therefor may arise, indemnify
such Bank against any losses, costs or expenses which such Bank may at any time
and from time to time sustain or incur as a consequence of:
(a) the failure by HGC to borrow any LIBO Rate Loan, convert any
Base Rate Loan to a LIBO Rate Loan or continue any LIBO Rate Loan on the
date of borrowing, conversion or continuation designated by HGC; or
<PAGE> 15
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(b) the failure by HGC to pay, punctually on the due date thereof,
any amount payable by HGC with respect to or on account of any LIBO Rate
Loan; or
(c) repayment or conversion by HGC of all or any portion of any LIBO
Rate Loan prior to the last day of the applicable Interest Period, whether
due to acceleration of the maturity of the Revolving Credit Loans or due
to any other reason;
such losses, costs or expenses to include, without limitation:
(i) any costs incurred by such Bank in carrying funds which
were to have been borrowed by HGC (net of any interest or other
amounts received in any redeployment of such funds) or in carrying
funds to cover the amount of any overdue principal of or overdue
interest on any of the LIBO Rate Loans;
(ii) any interest payable by such Bank to lenders of the funds
borrowed by such Bank in order to carry the funds referred to in the
immediately preceding subclause (i) (net of any interest or other
amounts received in any redeployment of such funds); and
(iii) any losses (excluding losses of anticipated profit)
incurred by such Bank in liquidating or reemploying funds acquired
from third parties to effect or maintain all or any part of any LIBO
Rate Loan.
Section 2.7. Payments to be Free of Deductions. (a) All payments by HGC
hereunder shall be made without setoff or counterclaim, and free and clear of
and without deduction for any taxes, levies, imposts, duties, charges, fees,
deductions, withholdings, compulsory loans, restrictions or conditions of any
nature now or hereafter imposed or levied by any jurisdiction or any political
subdivision thereof or taxing or other authority therein (excluding in the case
of the Agent and each Bank, net income and profit and franchise taxes imposed on
the Agent or such Bank by the jurisdiction under the laws of which the Agent or
such Bank is organized or any subdivision or taxing authority thereof or therein
or by the United States of America or any taxing authority thereof), unless HGC
is compelled by law to make such deduction or withholding. If any such
obligation is imposed upon HGC with respect to any amount payable by it
hereunder, it will pay to the Banks on the date on which such amount becomes due
and payable hereunder, such additional amount as shall be necessary to enable
the Banks to receive the same net amount which they would have received on such
due date had no such obligation been imposed upon HGC. If HGC shall be required
by law to make such deduction or withholding, it will deliver to the Banks tax
receipts or other appropriate evidence of payment.
(b) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the Effective Date, and from time to time
thereafter if requested in writing by HGC, shall provide HGC with two original
Internal Revenue Service forms 1001, 4224 or W-8 as appropriate, or any
successor or other form
<PAGE> 16
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prescribed by the Internal Revenue Service, certifying that such Bank is exempt
from or entitled to a reduced rate of United States withholding tax on payments
pursuant to this Agreement. If a Bank provides a form W-8 (or any successor or
related form) to the Agent and HGC pursuant to this Paragraph 2.7, such Bank
shall also provide a certificate stating that such Bank is not a "bank" within
the meaning of Section 881(c) (3) (A) of the Internal Revenue Code of 1986 and
shall promptly notify the Agent and HGC if such Bank determines that it is no
longer able to provide such certification. Upon the reasonable request of HGC or
the Agent, each Bank that has not provided the forms or other documents, as
provided above, on the basis of being a United States person shall submit to HGC
and the Agent a certificate to the effect that it is such a "United States
person" (as defined in Section 7701 (a) (30) of the Internal Revenue Code).
(c) For any period with respect to which a Bank has failed to
provide HGC with the appropriate form described in Paragraph 2.7(b) (other than
if such failure is due to a change in law occurring subsequent to the date on
which such Bank became a party hereunder), such Bank shall not be entitled to
indemnification under this Agreement with respect to taxes imposed by the United
States.
Section 2.8. Change in Circumstances; Additional Costs. Anything herein to
the contrary notwithstanding, if any present or future applicable law (which
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof, and requests, directives, instructions and notices at
any time or from time to time hereafter made upon or otherwise issued to any
Bank or the Agent by any central bank or other fiscal, monetary or other
authority, whether or not having the force of law) shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, any Letters of Credit, such Bank's Commitment or the Revolving
Credit Loans (other than taxes based upon or measured by the income or
profits of such Bank or the Agent), or
(b) materially change the basis of taxation of (except for changes
in taxes on income or profits) payments to any Bank or the Agent of the
principal of or the interest on any Revolving Credit Loans or any other
amounts payable to any Bank or the Agent hereunder with respect to the
Revolving Credit Loans, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements, whether or not having the force of law, against assets held
by, or deposits in or for the account of, or loans by, or letters of
credit issued by, or commitments of a class of banks including an office
of any Bank, or
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(d) impose on a class of banks including any Bank or the Agent any
other conditions or requirements with respect to this Agreement, any
Revolving Credit Note, any Letters of Credit, the Revolving Credit Loans,
such Bank's Commitment, or any class of loans, letters of credit or
commitments of which the Revolving Credit Loans, the Letters of Credit or
such Bank's Commitment forms a part;
and the result of any of the foregoing is:
(i) to increase the cost to any Bank or the Agent of making,
funding, issuing, renewing, extending or maintaining any of the
Revolving Credit Loans or such Bank's Commitment or any Letter of
Credit, or
(ii) to reduce the amount of principal, interest or other
amount payable to any Bank or the Agent hereunder, on account of
such Bank's Commitment, any Letter of Credit or any of the Revolving
Credit Loans, or
(iii) to require any Bank or the Agent to make any payment or
to forego any interest or other sum payable hereunder, the amount of
which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed
received by such Bank or the Agent from HGC hereunder,
then, and in each case, HGC will, promptly upon demand made by such Bank or (as
the case may be) the Agent, at any time and from time to time and as often as
the occasion therefor may arise, pay or cause to be paid to such Bank or the
Agent such additional amounts as will be sufficient to compensate such Bank or
the Agent for such additional cost, reduction, payment or foregone interest or
other sum.
Section 2.9. Additional Amounts Payable on Account of Credit Facilities.
If any present or future law, governmental rule, regulation, policy, guideline
or directive (whether or not having the force of law) or the interpretation
thereof by any court or by any governmental or other regulatory body or official
charged with the administration or interpretation thereof affects the amount of
capital required to be maintained by any Bank or the Agent or any corporation
controlling such Bank or the Agent and such Bank or the Agent determines that
the amount of capital required to be maintained by it is increased by or based
upon the existence of such Banks' or the Agent's Commitment with respect to any
Revolving Credit Loans or Letters of Credit, in any case, other than any change
already reflected in the Reserve Rate then in effect, then such Bank or the
Agent shall notify HGC of such fact (the "Notice Date"), and, in the case of a
Bank, shall send a copy of such notice to the Agent. HGC and such Bank or (as
the case may be) the Agent shall thereafter attempt to negotiate an adjustment
to the compensation payable hereunder which will adequately compensate such Bank
or (as the case may be) the Agent in light of these circumstances. If HGC and
such Bank or (as the case may be) the Agent are unable to agree to such
adjustment within thirty days of the day on which HGC receives such notice, then
commencing on the 90th day
<PAGE> 18
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after the Notice Date, the fees and interest payable hereunder shall increase by
an amount which will, in such Bank's or (as the case may be) the Agent's
reasonable determination, provide adequate compensation.
Section 2.10. Certificates. A certificate signed by an officer of any Bank
or the Agent, setting forth any additional amount required to be paid to such
Bank or the Agent under Paragraphs 2.6 through 2.9 hereof, and the computations
made by such Bank or the Agent to determine such additional amount, shall be
submitted by the Bank or the Agent to HGC (and, with respect to demands made by
a Bank, to the Agent) in connection with each such demand, and each such
certificate shall, save for manifest error, constitute prima facie evidence of
the additional amount due. A claim by any Bank or the Agent for all or any part
of any additional amount due may be made promptly before and/or after the end of
the Interest Period to which such claim relates or during which such claim has
arisen, and before and/or after any repayment to which such claim relates.
Section 2.11. Delinquent Banks. Notwithstanding anything to the contrary
contained in this Agreement, any Bank that fails (i) to make available to the
Agent its pro rata share of any Revolving Credit Loan or any drawing under any
Letter of Credit or (ii) to comply with the provisions of Paragraph 8 with
respect to making dispositions and arrangements with the other Banks, where such
Bank's share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all of the
Banks, in each case as, when and to the full extent required by the provisions
of this Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments due to it
from HGC, whether on account of outstanding Revolving Credit Loans, interest,
fees or otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding Revolving
Credit Loans (it being understood that any such assignment shall not affect the
obligation of any Bank, including the Delinquent Bank, to make the percentage of
the Revolving Credit Loans or to participate in the issuance of Letters of
Credit requested by HGC hereunder equal to such Bank's Commitment Percentage).
The Delinquent Bank hereby authorizes the Agent to distribute such payments to
the nondelinquent Banks in proportion to their respective pro rata shares of all
outstanding Revolving Credit Loans. A Delinquent Bank shall be deemed to have
satisfied in full a delinquency when and if, as a result of application of the
assigned payments to all outstanding Revolving Credit Loans of the nondelinquent
Banks, the Banks' respective pro rata shares of all outstanding Revolving Credit
Loans have returned to those in effect immediately prior to such delinquency and
without giving effect to the nonpayment causing such delinquency.
Section 3. REPRESENTATIONS AND WARRANTIES. HGC represents and warrants
that:
Section 3.1. Organization and Qualification; Authority. (a) Each of HGC
and its Subsidiaries (i) is a corporation or, in the case of Hudson General LLC
or any other limited liability company, a limited liability company, duly
organized, validly existing
<PAGE> 19
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and in good standing under the laws of the state of its incorporation or
formation, as applicable, (ii) has all requisite power to own its property and
conduct its business as now conducted and as presently contemplated, and (iii)
is duly qualified and in good standing as a foreign entity and is duly
authorized to do business in each jurisdiction where the nature of its
properties or its business requires such qualification except for jurisdictions
in which the failure to qualify has no material adverse effect on the business,
assets or financial condition of HGC and its Subsidiaries, taken as a whole, or
on HGC's ability to perform its obligations under the Loan Documents.
(b) The execution, delivery and performance by HGC of this Agreement
and the other Loan Documents and the borrowings hereunder and the transactions
contemplated under this Agreement and the other Loan Documents (i) are within
the corporate authority of HGC, (ii) have been duly authorized by all necessary
corporate proceedings, (iii) will not contravene any provision of HGC's charter
documents or bylaws, or contravene any provision of, or result in the creation
of any mortgage, lien, pledge, charge, security interest or other encumbrance
upon any of the property of HGC (other than the Liens created under the Security
Documents) under, any other agreement, instrument or undertaking binding upon
HGC or any property of HGC, and (iv) do not conflict with or result in any
breach or contravention of any provision of law, statute, rule or regulation to
which HGC is subject or any judgment, order, writ, injunction, license or permit
applicable to HGC.
(c) Schedule 3.1 attached hereto is a complete and correct list of
all the presently existing Subsidiaries of HGC and the percentage of the capital
stock thereof owned by HGC or a Subsidiary of HGC, as such schedule may be
supplemented from time to time by written notice from HGC to the Banks. Except
for the Joint Ventures, none of HGC nor any Restricted Subsidiary of HGC is
engaged in any joint venture or partnership with any other entity.
Section 3.2. Valid Obligation. Each of this Agreement and the other Loan
Documents has been duly executed and delivered by HGC, and each of this
Agreement and the other Loan Documents constitutes a valid and legally binding
obligation of HGC, enforceable against HGC in accordance with its terms, except
as the enforcement of remedies may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights.
Section 3.3. Governmental Approvals. The execution, delivery and
performance of this Agreement and the other Loan Documents, the borrowings
hereunder and the transactions contemplated hereby and thereby do not require,
except as set forth in clauses (a) and (b) of Section 12 of the Pledge Agreement
and clauses (a) through (d) of Section 18 of the Security Agreement and except
for the consents to the assignment of permits and licenses assigned to Hudson
General LLC in connection with the Contribution which, if not obtained on or
before the Effective Date, will not have a material adverse effect on HGC and
its Subsidiaries, taken as a whole, any approval or consent of, or filing by HGC
with, any governmental or other agency or authority or any other party, or the
giving of notice to any governmental or other agency or authority or any other
party, or the recording or the delivery to other persons of an environmental
disclosure document or statement.
<PAGE> 20
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Section 3.4. Title to Properties; Absence of Liens. Except for liens
permitted by Paragraph 5.11 hereof, each of HGC and its Restricted Subsidiaries
has good and merchantable title to all of its properties, assets and rights of
every name and nature now purported to be owned by it, free from all defects,
liens, charges and encumbrances whatsoever.
Section 3.5. Financial Statements. (a) HGC has previously furnished to the
Banks (i) a consolidated balance sheet and income statement of HGC and its
Subsidiaries as at June 30, 1995, and related statements of income and cash
flows for the fiscal year then ended, certified by HGC's independent public
accountants and (ii) an unaudited consolidated balance sheet and income
statement of HGC and its Subsidiaries as at March 31, 1996, and related
unaudited statements of income and cash flows for the fiscal period then ended.
Each of the foregoing were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
specified and fairly present (subject, in the case of the unaudited financial
statements, to normal, recurring adjustments) the financial position of HGC and
its Subsidiaries as of the dates thereof and the results of the operations and
cash flows of HGC and its Subsidiaries for the fiscal periods then ended. There
were no contingent liabilities of HGC and its Subsidiaries as of such dates
involving material amounts, known to the officers of HGC which were not
disclosed in such balance sheets and the notes related thereto.
(b) HGC has also previously furnished to the Banks unaudited pro
forma consolidated financial statements of HGC and its Subsidiaries for the
fiscal year ended June 30, 1995, and at December 31, 1995, and for the six-month
period ended on such date. Such financial statements give effect to the
Contribution and the other transactions contemplated under the Purchase
Agreement, were prepared on the basis described in the notes to them, were
prepared in accordance with generally accepted accounting principles and fairly
present the pro forma consolidated assets and liabilities of HGC and its
Subsidiaries and the consolidated results of operations of HGC and its
Subsidiaries, at the dates, and for the periods, to which they relate.
Section 3.6. Changes. Since June 30, 1995, there have been no changes in
the assets, liabilities, financial condition or business of HGC or its
Subsidiaries, other than changes in the ordinary course of business and the
Contribution, the effect of which has not, in the aggregate, been materially
adverse to the business or financial condition of HGC and its Subsidiaries,
taken as a whole.
Section 3.7. Taxes. HGC and each of its Subsidiaries has filed all
federal, state and other tax returns required to be filed, and all taxes,
assessments and other such governmental charges due from each such entity have
been fully paid except for taxes which are being contested in good faith by
appropriate proceedings. HGC and each of its Subsidiaries has established on its
books reserves adequate for the payment of all federal, state and other income
tax liabilities, including those being contested as aforesaid.
<PAGE> 21
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Section 3.8. Litigation. Except as described in Schedule 3.8 attached
hereto (as such Schedule may be supplemented by HGC from time to time with the
consent of the Majority Banks), there is no litigation pending or, to the
knowledge of HGC's officers, threatened against HGC or any Subsidiary of HGC
before any court, tribunal or administrative agency or board which is of a
substantial amount and which, if adversely determined, might reasonably be
expected to materially adversely affect the ability of HGC to perform its
obligations hereunder or under any of the other Loan Documents or in respect of
the Revolving Credit Loans (after taking into account any applicable insurance
coverage).
Section 3.9. Use of Proceeds; Regulations U and X. The proceeds of the
Revolving Credit Loans will be used for general corporate purposes. No portion
of any Revolving Credit Loan is to be used, and no portion of any Letter of
Credit is to be obtained, for the purpose, whether immediate or ultimate, of
purchasing or carrying any "margin security" or "margin stock," as such terms
are used in Regulations U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 221 and 224 in violation of such regulations. Neither
HGC nor any of its Subsidiaries is engaged principally in or has as one of its
important activities the business of extending credit for the purposes of
purchasing or carrying any such "margin stock".
Section 3.10. Offering by HGC. Neither HGC nor anyone acting on HGC's
behalf has directly or indirectly offered any interest hereunder or in the
Revolving Credit Notes or any similar security for sale to, or solicited any
offer to buy any thereof from or otherwise negotiated with respect thereto with,
anyone other than the Banks and other banks. Each Bank represents to HGC that it
will not sell or otherwise dispose of any interest in its Revolving Credit Notes
so as to bring the execution and delivery of this Agreement within the
provisions of Section 5 of the Securities Act of 1933, as now in effect or as
later amended. HGC hereby notifies each of the Banks that (a) the transactions
pursuant to which the Revolving Credit Notes will be issued hereunder will not
be registered pursuant to the Securities Act of 1933 or pursuant to any state
statute or regulations governing the sale of securities generally and unless an
exemption from such registration is available, the Revolving Credit Notes must
be held indefinitely, and (b) HGC has no intention to so register in the future.
Section 3.11. No Default or Violation of Law. Neither HGC nor any of its
Subsidiaries is in violation of any provision of its charter documents or
limited liability company agreement, as the case may be, or by-laws or operating
agreement, as the case may be, or in default in any material respect under any
contract, agreement or obligation to which it may be subject or by which it or
any of its properties may be bound, which default or violation might reasonably
be expected to result in a material impairment of the ability of HGC to fulfill
its obligations hereunder or under the other Loan Documents or a material
impairment of the financial condition or business of HGC and its Subsidiaries,
taken as a whole. Neither HGC nor any Subsidiary of HGC is in violation of any
law, decree, order, judgment, statute, license, rule or regulation applicable to
it or its properties or business operations, which violation might reasonably be
expected to have a material adverse effect on the financial condition or
business of HGC and its Subsidiaries, taken as a whole.
<PAGE> 22
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Section 3.12. No Default. No Default or event which, with notice or lapse
of time or both, would constitute a Default has occurred and is continuing.
Section 3.13. Franchises, Patents, Copyrights. HGC and each of its
Subsidiaries possesses all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate
for the conduct of its business substantially as now conducted without known
conflict with any rights of others.
Section 3.14. No Materially Adverse Contracts. Neither HGC nor any of its
Subsidiaries is subject to any charter, corporate or other legal restriction, or
any judgment, decree, order, rule or regulation that is expected in the future
to have a materially adverse effect on the business, assets or financial
condition of HGC and its Subsidiaries, taken as a whole. Neither HGC nor any of
its Subsidiaries is a party to any contract or agreement that is expected, in
the judgment of HGC's officers, to have any materially adverse effect on the
business of HGC and its Subsidiaries, taken as a whole.
Section 3.15. Holding Company and Investment Company Acts. Neither HGC nor
any of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935; nor is it an
"investment company", or an "affiliated company" or a "principal underwriter" of
an "investment company", as such terms are defined in the Investment Company Act
of 1940.
Section 3.16. Certain Transactions. Except for arm's length transactions
pursuant to which HGC or any of its Subsidiaries makes payments in the ordinary
course of business upon terms no less favorable than such entity could obtain
from third parties and for transactions disclosed in HGC's financial statements
or public filings, none of the officers, directors, Shareholders (as defined
below), or employees of HGC or any of its Subsidiaries is presently a party to
any transaction with HGC or any of its Subsidiaries (other than as Shareholders,
or for services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director, Shareholder, or employee
or, to the knowledge of HGC, any corporation, partnership, trust or other entity
in which any officer, director, Shareholder, or any such employee has a
substantial interest or is an officer, director, trustee or partner. For
purposes hereof, the term "Shareholder" shall mean, with respect to HGC and its
Subsidiaries other than Hudson General LLC, those shareholders of such entity
who have filed with the Securities and Exchange Commission Schedules 13D or 13G
pursuant to the Securities Exchange Act of 1934, as amended and, with respect to
Hudson General LLC, any Member of Hudson General LLC (as defined in such
entity's Limited Liability Company Agreement) and those shareholders of any
Member of Hudson General LLC who have filed with the Securities and Exchange
Commission Schedules 13D or 13G with respect to the securities of such Member of
Hudson General LLC pursuant to the Securities Exchange Act of 1934, as amended.
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Section 3.17. Employee Benefit Plans.
(a) In General. Each Employee Benefit Plan has been maintained and
operated in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions.
(b) Terminability of Welfare Plans. Under each Employee Benefit Plan
which is an employee welfare benefit plan within the meaning of Section 3(1) or
Section 3(2)(B) of ERISA, no benefits are due unless the event giving rise to
the benefit entitlement occurs prior to plan termination (except as required by
Title I, Part 6 of ERISA). HGC or an ERISA Affiliate, as appropriate, may
terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of HGC or
such ERISA Affiliate without liability to any Person.
(c) Guaranteed Pension Plans. Each contribution required to be made
to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien provisions
of Section 302(f) of ERISA, or otherwise, has been timely made. No waiver of an
accumulated funding deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan. Except for any ERISA
Reportable Event arising in connection with the Hudson General Corporation
Pension Plan terminated as of June 30, 1992, no liability to the PBGC (other
than required insurance premiums, all of which have been paid) has been incurred
by HGC or any ERISA Affiliate with respect to any Guaranteed Pension Plan and
there has not been any ERISA Reportable Event. Based on the latest valuation of
each Guaranteed Pension Plan (which in each case occurred within twelve months
of the date of this representation), and on the actuarial methods and
assumptions employed for that valuation, the aggregate benefit liabilities of
all such Guaranteed Pension Plans within the meaning of Section 4001 of ERISA
did not exceed the aggregate value of the assets of all such Guaranteed Pension
Plans, disregarding for this purpose the benefit liabilities and assets of any
Guaranteed Pension Plan with assets in excess of benefit liabilities, by more
than $1,000,000.
(d) Multiemployer Plans. Neither HGC nor any ERISA Affiliate has
incurred any material liability (including secondary liability) to any
Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of
assets described in Section 4204 of ERISA. Neither HGC nor any ERISA Affiliate
has been notified that any Multiemployer Plan is in reorganization or insolvent
under and within the meaning of Section 4241 or Section 4245 of ERISA or that
any Multiemployer Plan intends to terminate or has been terminated under
Section 4041A of ERISA.
Section 3.18. Environmental Compliance. (a) None of HGC, its Subsidiaries
or any operator of the Real Estate is in material violation, or alleged material
violation, of any judgment, decree, order, law, license, rule or regulation
pertaining to environmental matters, including without limitation, those arising
under the Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
("CERCLA"), the Superfund
<PAGE> 24
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Amendments and Reauthorization Act of 1986 ("SARA"), the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic Substances Control Act, or any
federal, state or local statute, regulation, ordinance, order or decree relating
to health, safety or the environment (hereinafter "Environmental Laws"), which
violation could reasonably be expected to have a material adverse effect on the
business, assets or financial condition of HGC and its Subsidiaries, taken as a
whole, other than those violations which have been concluded prior to the date
hereof.
(b) Except as set forth on Schedule 3.18(b) attached hereto (as such
Schedule may be supplemented by HGC from time to time with the consent of the
Majority Banks), neither HGC nor any of its Subsidiaries has received notice
from any third party including, without limitation, any federal, state or local
governmental authority: (i) that any one of them has been identified by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party under CERCLA with respect to a site listed on the National
Priorities List, 40 C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous
waste, as defined by 42 U.S.C. Section 9601(5), any hazardous substances as
defined by 42 U.S.C. Section 9601(14), any pollutant or contaminant as defined
by 42 U.S.C. Section 9601(33) and any toxic substances, oil or hazardous
materials or other chemicals or substances regulated by any Environmental Laws
("Hazardous Substances") which any one of them has generated, transported or
Disposed of has been found at any site at which a federal, state or local agency
or other third party has conducted or has ordered that HGC or any of its
Subsidiaries conduct a remedial investigation, removal or other response action
pursuant to any Environmental Law; or (iii) that it is or shall be a named party
to any claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind whatsoever
in connection with the Release of Hazardous Substances which might reasonably be
expected to have a material adverse effect on the assets, business or financial
condition of HGC and its Subsidiaries, taken as a whole.
(c) Each of HGC and its Subsidiaries have handled the processing,
storage or Disposal of Hazardous Substances in material compliance with all
applicable Environmental Laws; and, (i) except as set forth on Schedule 3.18(c)
attached hereto (as such Schedule may be supplemented by HGC from time to time
(A) with respect to disclosure of new underground tanks installed in accordance
with applicable law, without the consent of the Majority Banks and (B) with
respect to disclosure of all other matters, with the consent of the Majority
Banks), no underground tanks or other underground storage receptacles for
Hazardous Substances are located on any portion of the Real Estate owned by HGC
or any of its Subsidiaries or where HGC any of its Subsidiaries is responsible
for the maintenance or replacement of any such tanks; (ii) in the course of any
activities conducted by HGC, Subsidiaries of HGC or operators of its Real
Estate, no Hazardous Substances have been generated or are being used on the
Real Estate except in material compliance with all applicable Environmental
Laws; (iii) to the best of HGC's knowledge, there have been no Releases on,
upon, from or into any Real Estate or real property in the vicinity of any of
the Real Estate which, through soil or groundwater contamination, may have come
to be located on any of the Real Estate, and which might reasonably be
<PAGE> 25
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expected to have a material adverse effect on the value of, all of the Real
Estate or on the business or financial condition of HGC and its Subsidiaries,
taken as a whole; and (iv) in addition, any Hazardous Substances that have been
generated by HGC or any of its Subsidiaries on any of the Real Estate have in
all material respects to the extent required by law or regulation been
transported offsite for treatment or disposal and, to the best of HGC's
knowledge, without having made any special investigation other than to review
the information and documents supplied to HGC by carriers employed by HGC with
respect to such matters, have been transported only by carriers having an
identification number issued by the EPA and have been treated or disposed of
only by treatment or disposal facilities maintaining permits as required under
applicable Environmental Laws.
Section 3.19. Insurance. Schedule 3.19 attached hereto (as such Schedule
may be supplemented from time to time by written notice from HGC to the Agent)
lists the policies and types and amounts of coverage (including all deductibles)
of theft, fire, liability, life, property, casualty, environmental impairment
and accidental spill insurance and other insurance owned or held by HGC and its
Subsidiaries as of May 1, 1996. Such policies of insurance are maintained with,
to the best of HGC's knowledge, financially sound and reputable insurance
companies, funds or underwriters. Such policies of insurance are of the kinds
and cover such risks and are in such amounts and with such deductibles and
exclusions as are consistent with the customary business practice of
corporations of established reputations engaged in the same or similar
businesses and similarly situated. All such policies are in full force and
effect; are sufficient for compliance by HGC and its Subsidiaries with all
requirements of law and of all agreements to which such Persons are parties; are
valid, outstanding and enforceable policies and provide that they will remain in
full force and effect through the respective dates set forth in such schedule;
and coverage thereunder will not be reduced by or terminate or lapse by reason
of, the transactions contemplated by or referred to in this Agreement or the
other Loan Documents.
Section 3.20. Loans as Senior Indebtedness. All indebtedness of HGC to the
Banks in respect of the principal of and interest on the Revolving Credit Notes
and all contingent liabilities of HGC in respect of Letters of Credit constitute
and will constitute "Superior Indebtedness" under the terms of the 7% Notes and
senior debt however defined under any other instrument evidencing indebtedness
which purports to be Subordinated Debt.
Section 3.21. Perfection of Security Interest. On the Effective Date, all
filings, assignments, pledges and deposits of documents or instruments shall
have been made and all other actions shall have been taken that are necessary or
advisable, under applicable law, to establish and, to the extent enumerated in
clauses (a) through (d) of Section 18 of the Security Agreement and clauses (a)
and (b) of Section 12 of the Pledge Agreement, perfect the Collateral Agent's
security interest in the Collateral. The Collateral and the Collateral Agent's
rights with respect to the Collateral are not subject to any setoff, claims,
withholdings or other defenses except as arising under applicable law.
Section 3.22. Hudson General LLC Representations and Warranties. For so
long as the Hudson General LLC Credit Agreement is in full force and effect,
each of the
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representations and warranties of Hudson General LLC and its Subsidiaries set
forth in the Hudson General LLC Credit Agreement and each of the documents and
instruments executed by Hudson General LLC and its Subsidiaries in connection
therewith, along with the definitions contained in such representations and
warranties, are hereby incorporated as if set forth herein.
Section 4A. EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS. This Agreement
shall not become effective unless and until the date (the "Effective Date") that
each of the following conditions precedent is satisfied, provided that if the
Effective Date does not occur on or before July 31, 1996 this Agreement shall be
of no further effect.
Section 4A.1. Loan Documents. (a) Each of the Loan Documents shall have
been duly executed and delivered as contemplated hereby and shall be in full
force and effect.
(b) Executed original counterparts of each of the Loan Documents
shall have been furnished to the Agent.
Section 4A.2. Representations and Warranties True. The representations and
warranties contained in Paragraph 3 shall be true and accurate on and as of the
date of this Agreement and as though made on and as of the Effective Date, no
Default shall have occurred and be continuing, and no condition shall exist, or
would result from the consummation of the transactions on the Effective Date
which, with lapse of time or the giving of notice or both, would constitute a
Default. The Banks shall have received from HGC a certificate dated the
Effective Date and signed by the President or Chief Financial Officer of HGC as
to the matters set forth in this Paragraph 4A.2 and Paragraph 4A.3 hereof.
Section 4A.3. Corporate Standing and Action. The Agent shall have
received, with copies for each Bank (a) a certificate of the Secretary of State
of the State of Delaware as to the due good standing of HGC dated as of a recent
date, (b) certificates of the Secretary of State of the State of New York and of
each other state in which HGC is required to qualify to do business as a foreign
corporation as to the good standing of HGC as a foreign corporation dated as of
a recent date and (c) a certificate of the Secretary or Assistant Secretary of
HGC, dated the Effective Date, certifying (i) that attached thereto is a true
and complete copy of the Certificate of Incorporation and the bylaws of HGC,
each as amended to the Effective Date, or that such documents have not been
amended or supplemented since November 25, 1992, (ii) that attached thereto is a
true and complete copy of resolutions of the Board of Directors of HGC
authorizing the execution and delivery of this Agreement, the borrowings
hereunder and the execution and delivery of the other Loan Documents, which
resolutions are in full force and effect without modification on the Effective
Date, and (iii) the incumbency and signatures of the officers of HGC executing
the Loan Documents and any other instrument or document delivered by HGC in
connection herewith or therewith.
Section 4A.4. Opinion of HGC's Counsel. The Agent shall have received an
opinion, dated the Effective Date, addressed to the Banks from Noah Rockowitz,
Vice President
<PAGE> 27
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- - General Counsel, counsel for HGC, substantially in the form attached hereto as
Exhibit D.
Section 4A.5. Payment of Fees. HGC shall have authorized (in writing or
verbally) the Agent to charge HGC's account on the Effective Date for the
facility fee, the Agent's fee, and, if applicable, the Letter of Credit Fee,
pursuant to Paragraphs 2.1, 2.2, and 1.11 hereof.
Section 4A.6. Validity of Liens. The Security Documents shall be effective
to create in favor of the Collateral Agent for the benefit of the Banks a legal,
valid and enforceable first priority security interest in the Collateral. All
filings, recordings, deliveries of instruments and other actions necessary or
desirable in the opinion of the Collateral Agent to protect and preserve such
security interests shall have been duly effected. The Collateral Agent shall
have received evidence thereof in form and substance satisfactory to the
Collateral Agent.
Section 4A.7. Perfection Certificate and UCC Search Results. The
Collateral Agent shall have received from HGC, a completed and fully executed
Perfection Certificate (as defined in the HGC Pledge Agreement) and the results
of UCC searches with respect to the Collateral, indicating no liens other than
liens permitted under Paragraph 5.11 hereof or for which UCC lien releases
satisfactory to the Collateral Agent have been delivered to the Collateral Agent
and otherwise in form and substance satisfactory to the Collateral Agent.
Section 4A.8. Hudson General LLC Credit Agreement. The Hudson General LLC
Credit Agreement and all other Loan Documents (as defined in the Hudson General
LLC Credit Agreement) shall have been duly executed and delivered as
contemplated thereby and shall be in full force and effect. The conditions set
forth in Paragraph 4A of the Hudson General LLC Credit Agreement shall have been
satisfied or waived pursuant to the terms thereof.
Section 4B. CONDITIONS OF REVOLVING CREDIT LOANS AND LETTERS OF CREDIT.
The obligation of the Banks to make any Revolving Credit Loan on or after the
Effective Date and the obligation of the Letter of Credit Bank, with the pro
rata participation of the Banks, to issue any Letter of Credit on or after the
Effective Date, is subject to the following conditions precedent.
Section 4B.1. Notice. In the case of Revolving Credit Loans, the Agent
shall have received from HGC in accordance with Paragraph 1.3 a written,
telegraphic or telephonic (confirmed in writing) request for Revolving Credit
Loans, signed by the President or the Chief Financial Officer of HGC. Such
request, without more, will constitute a certification by HGC and such officers
as to the matters set forth in Paragraphs 4B.2 and 4B.3 hereof. In the case of a
Letter of Credit, the Letter of Credit Bank shall have received from HGC in
accordance with Paragraph 1.7 a written, telegraphic or telephonic (confirmed in
writing) request for the issuance of a Letter of Credit and a signed letter of
credit application in form and substance satisfactory to the Letter of Credit
Bank (which will not contain any terms which are inconsistent with the terms of
this Agreement), each signed by the President or the Chief Financial
<PAGE> 28
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Officer of HGC. Such request, without more, will constitute a certification by
HGC and such officer as to the matters set forth in Paragraphs 4B.2 and 4B.3
hereof.
Section 4B.2. Representations and Warranties True. The representations and
warranties contained in Paragraph 3 shall be true and accurate in all material
respects on and as of the date of this Agreement and as though made on and as of
the date of the Revolving Credit Loan or Letter of Credit, as the case may be
(except to the extent that such representations and warranties relate to an
earlier date), no Default shall have occurred and be continuing, or would result
from the proposed Revolving Credit Loan or Letter of Credit, as the case may be,
and no condition shall exist, or would result from the proposed Revolving Credit
Loan or Letter of Credit, as the case may be, which, with lapse of time or the
giving of notice or both, would constitute a Default.
Section 4B.3. No Adverse Change. As of the date of any Revolving Credit
Loan or Letter of Credit, as the case may be, there shall have been no material
adverse change since June 30, 1995 in the business or financial affairs of HGC
and its Subsidiaries, taken as a whole.
Section 4B.4. Legality. The making of the Revolving Credit Loan or Letter
of Credit, as the case may be, shall not contravene any law or rule or
regulation thereunder binding upon HGC, any Subsidiary of HGC or any Bank.
Section 5. COVENANTS. During the term of this Agreement and so long as any
Revolving Credit Loan, Letter of Credit or Revolving Credit Note is outstanding
or any amounts are owed hereunder or any Bank has any obligation to make
Revolving Credit Loans or the Letter of Credit Bank has any obligation to issue,
extend or renew any Letters of Credit with the pro rata participation of the
Banks, HGC agrees that:
Section 5.1. Punctual Payment. It will duly and punctually pay or cause to
be paid the principal and interest on the Revolving Credit Loans, the amount of
any drawing under a Letter of Credit, the commitment fees, the Agent's fee, the
Letter of Credit Fee and all other amounts provided for in this Agreement or in
any other Loan Document, all in accordance with the terms of this Agreement and
such other Loan Documents.
Section 5.2. Financial Statements and Other Written Materials. It will
furnish to each Bank:
(a) as soon as available but in any event within ninety days after
the end of each of its fiscal years, consolidated and consolidating
balance sheets of HGC and its Subsidiaries as at the end of, and the
related consolidated and consolidating statements of income and
consolidated statements of cash flows for, such year, and all such
statements shall be in reasonable detail, prepared in accordance with
generally accepted accounting principles and accompanied by the opinion
(as to consolidated statements only) of (in form and substance reasonably
satisfactory to the Banks) independent public accountants of nationally
recognized standing selected by HGC and, concurrently with such financial
statements, a written statement by such accountants that, in the making of
the audit necessary for their report and opinion upon such financial
<PAGE> 29
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statements (but without any special or additional audit procedures for the
purpose), they have obtained no knowledge of any Default, or if in the
opinion of such accountants any Default exists, they shall disclose in
such written statement the nature and status thereof, and in either case
such statement shall set forth calculations showing compliance or
noncompliance with Paragraphs 5.7 through 5.9 and 5.23 hereof (it being
understood, however, that such accountants shall not be liable, directly
or indirectly, to anyone for failure to obtain knowledge of any Default or
the status thereof);
(b) as soon as available but in any event within sixty days after
the end of each of the first three fiscal quarters of each fiscal year of
HGC and its Subsidiaries, consolidated and consolidating balance sheets as
at the end of such fiscal quarter, and consolidated and consolidating
statements of income and consolidated cash flows for the portion of the
fiscal year then ended, all in reasonable detail and prepared in
accordance with generally accepted accounting principles, certified by the
Chief Financial Officer of HGC, subject, however, to audit and year-end
adjustments;
(c) as soon as available and if prepared in the normal course, but
in any event within 15 days of its preparation, the budget report for the
portion of the fiscal period then ended, in reasonable detail and prepared
in a manner consistent with past practices;
(d) promptly upon receipt by HGC, copies of all management letters
and other reports of substance submitted to HGC or any Subsidiary of HGC
by independent public accountants in connection with any annual or interim
audit of the books of HGC or such Subsidiary by such accountants;
(e) promptly as they become available, (i) copies of all such
financial statements, reports and proxy statements as it shall send to or
make available to its stockholders, and (ii) copies of all reports filed
by it with the Securities and Exchange Commission;
(f) concurrently with each delivery of financial statements pursuant
to clauses (a) or (b) of this Paragraph 5.2, a certificate signed by the
Chief Financial Officer of HGC setting forth calculations showing, when
required, compliance with Paragraphs 5.7 through 5.9 and 5.23 hereof, and
stating that a review of the activities of HGC and its Subsidiaries during
the period covered by such financial statements has been made under the
immediate supervision of the signer with a view to determining whether,
during such period, HGC has kept, observed, performed and fulfilled each
and every covenant and condition of this Agreement and either (i) stating
that, to the best of his knowledge and belief, there neither exists on the
date of such certificate, nor existed during such period, any Default, or
(ii) if any such Default existed or exists, specifying the nature thereof,
the period of existence thereof and what action HGC has taken, is taking
or proposes to take with respect thereto; and
<PAGE> 30
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(g) with reasonable promptness, such other information, including,
without limitation, quarterly reports as to the aging of accounts
receivable, as any Bank may reasonably request.
Section 5.3. Inspection. It will permit any representative or
representatives designated by any Bank, at such Bank's expense and subject to
applicable laws and regulations, to visit and inspect any of the properties of
HGC and its Subsidiaries and on request to examine the books of account,
records, reports and other papers of HGC and its Subsidiaries (and to make
copies thereof and extracts therefrom) and to discuss the affairs and finances
of HGC and its Subsidiaries with its officers, all at such reasonable times and
as often as may be reasonably requested.
Section 5.4. Conduct of Business. It and each of its Subsidiaries will:
(a) do or cause to be done all things necessary to keep in full
force and effect its existence, rights and franchises and will maintain
and keep in full force and effect all licenses and permits necessary to
the proper conduct of its business;
(b) not change the nature or character of its business from that
described in the Proxy, after giving effect to the Contribution and the
other transactions contemplated under the Purchase Agreement, except that
HGC or any Subsidiary of HGC, as the case may be, may withdraw from any
business activity which it deems unprofitable or unsound; and
(c) not, except for arm's length transactions pursuant to which HGC
or such Subsidiary makes payments in the ordinary course of business upon
terms no less favorable than such entity could obtain from third parties
and for transactions disclosed in HGC's financial statements or public
filings, enter into any transaction with any officer, director,
Shareholder or employee of HGC or any Subsidiary of HGC (other than as
Shareholders or for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any
officer, director, Shareholder or employee or any corporation,
partnership, trust or other entity in which to the knowledge of HGC any
officer, director, Shareholder, or any employee has a substantial interest
or is an officer, director, trustee or partner.
Section 5.5. Maintenance and Insurance. It will maintain and keep its
properties, and will cause each of its Subsidiaries to maintain and keep its
properties, in good repair, working order and condition, and from time to time
HGC will make and will cause each of its Subsidiaries to make all needed and
proper repairs, renewals, replacements, additions and improvements thereto so
that its business may be properly and advantageously conducted at all times in
accordance with the terms of this Agreement. It will maintain and will cause
each of its Subsidiaries to maintain, with financially sound and reputable
insurers, insurance with respect to its properties and business against such
casualties and contingencies, of such types and in such
<PAGE> 31
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amounts as is customary in the case of corporations of established reputations
engaged in the same or similar businesses and similarly situated.
Section 5.6. Taxes. It will pay or cause to be paid and discharged all
taxes, assessments or governmental charges on or against it or any of its
Subsidiaries or its or their properties, sales and activities, or any part
thereof, or upon the income or profits therefrom prior to the time when they
become delinquent, as well as all claims for labor, materials or supplies that
if unpaid might by law become a lien or charge upon any of its or their
properties provided that this covenant shall not apply to any tax, assessment,
charge, levy or claim which is being contested in good faith and with respect to
which adequate reserves have been established and are being maintained, and
provided further that each of HGC and its Subsidiaries will pay all taxes,
assessments, charges, levies and claims forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor.
Section 5.7. Ratio of Consolidated Liabilities to Consolidated Tangible
Net WORTH. HGC will not, as at the end of each fiscal quarter in each fiscal
year of HGC, permit the ratio of (a) Consolidated Liabilities plus, without
duplication, Subordinated Debt less (as at June 30, 1996 and September 30, 1996
only) the aggregate amount of cash of Hudson General LLC as at such date
intended to be used for the repayment of the Subordinated Debt to (b)
Consolidated Tangible Net Worth to equal or exceed 1.0 to 1.0.
Section 5.8. Consolidated Tangible Net Worth. HGC will not, as at the end
of each fiscal quarter in each fiscal year of HGC, permit Consolidated Tangible
Net Worth to be less than $28,000,000.
Section 5.9. Minimum Liquidity. HGC will not at any time permit the sum of
the cash and cash equivalents held by HGC at such time plus the unused portion
of the Aggregate Loan Limit at such time to be less than $1,000,000.
Section 5.10. Limitation on Borrowing. Neither HGC nor any of its
Restricted Subsidiaries will assume, incur or suffer to exist any indebtedness
for borrowed money, except:
(a) the indebtedness existing on the date of this Agreement and
shown on Schedule 5.10 attached hereto and extensions, renewals and
refinancings thereof provided that neither the aggregate principal amount
of such indebtedness nor the interest rate applicable thereto is increased
as a result of such extension, renewal or refinancing;
(b) the Revolving Credit Loans;
(c) Subordinated Debt consisting of not more than $29,000,000
in aggregate principal amount of 7% Notes;
(d) indebtedness of Restricted Subsidiaries to HGC;
<PAGE> 32
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(e) (i) indebtedness on account of capitalized leases permitted by
Paragraph 5.12 or 5.14(a)(iv) hereof, and (ii) additional indebtedness of
HGC and its Restricted Subsidiaries (including the amount of indebtedness
from time to time outstanding in transactions permitted by Paragraph
5.11(f)(ii) hereof) of not more than $5,000,000 in the aggregate
outstanding at any one time; and
(f) (i) unsecured guaranties by HGC of obligations of Subsidiaries
(other than any Subsidiary, direct or indirect, of HGC not organized under
the laws of a State of the United States of America (the "Foreign
Subsidiaries")) aggregating no more than $5,000,000 at any one time
outstanding and (ii) unsecured guaranties executed and delivered by HGC of
the obligations of Hudson General LLC under operating agreements to which
HGC, a Subsidiary of HGC (other than Aviation) or Hudson General LLC is a
party on the date of this Agreement.
Section 5.11. Restriction on Liens. Neither HGC nor any of its Restricted
Subsidiaries will create, incur, assume or suffer to exist any mortgage, pledge,
security interest, lien or other charge or encumbrance upon or with respect to
any of its property or assets, or assign or otherwise convey any right to
receive income, except:
(a) liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is not
required in accordance with the provisions of Paragraph 5.6;
(b) landlords' liens in respect of rent not in default or liens in
respect of pledges or deposits under worker's compensation, unemployment
insurance, social security laws or similar legislation or in connection
with appeal and similar bonds incidental to litigation, mechanics',
laborers' and materialmen's and similar liens, if the obligations secured
by such liens are not then delinquent, and liens securing the performance
of bids, tenders, contracts (other than for the payment of money) and
statutory obligations incidental to the conduct of the business of HGC and
its Restricted Subsidiaries and which do not in the aggregate materially
detract from the value of the property of HGC and Restricted its
Subsidiaries, or materially impair the use thereof in the operation of
their businesses;
(c) judgment liens which shall not have been in existence for a
period longer than thirty days after the creation thereof or, if a stay of
execution shall have been obtained, for a period longer than thirty days
after the expiration of such stay;
(d) liens securing indebtedness permitted by Paragraph 5.10(d)
hereof;
(e) liens securing the Obligations;
(f) (i) liens in existence on the date of this Agreement, all of the
same of any materiality being shown on Schedule 5.11 attached hereto, (ii)
mortgages on real property now owned or hereafter acquired (provided that
if any such
<PAGE> 33
27
mortgage is not created in connection with the purchase of or
acquisition of an interest in real property and secures indebtedness
exceeding an aggregate of $750,000 incurred in any single fiscal year
or $1,500,000 incurred during the term of this Agreement, then the
Aggregate Loan Limit shall be reduced by an amount equal to such
excess, with such reductions to be applied in accordance with the
provisions of Paragraph 1.4 hereof), and (iii) similar liens securing
any renewals, extensions or refinancings of the indebtedness secured by
the foregoing permitted liens, provided that the amount of such
indebtedness is not increased and such liens are not extended to cover
assets or properties (other than real property) not covered on the date
of this Agreement;
(g) liens held by vendors on personal property sold by such
vendors under conditional sales contracts or other similar security
agreements;
(h) liens and encumbrances incidental to the conduct of its
business or the ownership of its assets which were not incurred in
connection with the borrowing of money or the obtaining of advances of
credit, and which do not in the aggregate materially detract from the
value of its assets or materially impair the use thereof in the
operation of its business; and
(i) liens incurred to secure indebtedness of the type and
amount permitted by Paragraph 5.10(e) hereof, provided that the lesser
of the aggregate fair market value or the aggregate net book value of
the assets of HGC and its Restricted Subsidiaries used to secure such
indebtedness shall at no time exceed $7,500,000.
HGC will not and will not permit any of its Restricted Subsidiaries to
enter into or permit to exist or be binding on any of such persons any contract
or agreement which prohibits HGC or any Restricted Subsidiary of HGC from
granting a lien on any or all of its property or assets to the Banks except for
(A) revenue and service contracts or agreements concerning a single asset or
group of assets which contain usual and customary terms for contracts or
agreements of such type and which prohibit the granting of any lien on or
security interest in such asset or group of assets, (B) other agreements
permitted under Paragraph 5.11(f) hereof, provided that such agreements secure
purchase money indebtedness permitted by Paragraph 5.10 hereof incurred in
connection with the acquisition of such property and such agreements cover only
the property so acquired, (C) encumbrances and restrictions arising under
applicable law, (D) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of HGC or any of its Restricted
Subsidiaries, (E) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of HGC or any of its
Restricted Subsidiaries, and (F) any agreement relating to permitted
indebtedness incurred by a Restricted Subsidiary of HGC prior to the date on
which such Restricted Subsidiary was acquired by HGC or any other Restricted
Subsidiary of HGC and outstanding on such acquisition date.
Section 5.12. Limitation on Lease Commitments. The aggregate of the
rental payments of HGC and its Restricted Subsidiaries with respect to leases of
personal property having original terms of three years or more, other than
leases on which a
<PAGE> 34
28
Restricted Subsidiary of HGC is lessee and HGC is lessor, shall not exceed
$5,000,000 at any time.
Section 5.13. Investments and Contingent Liabilities. Neither HGC nor
any of its Restricted Subsidiaries will make or have outstanding at any time any
investments or contingent liabilities, whether by way of loan, advance,
guaranty, letter of credit exposure, extension of credit, purchase of stocks,
notes, bonds or other securities or evidences of indebtedness, or acquisition of
limited or general partnership interests, other than:
(a) those in existence on the date of this Agreement and shown
on Schedule 5.13 attached hereto, and any renewals, extensions or
refinancings thereof, provided that the amount thereof is not
increased;
(b) investments in marketable, investment grade, direct or
guaranteed obligations of the United States of America or any State or
municipality thereof which mature within ten years from the date of
purchase;
(c) investments in demand deposits, certificates of deposits,
time deposits and notes of any Bank or any United States bank having
total capital and unimpaired surplus of at least $1,000,000,000;
(d) securities commonly known as "commercial paper", or
corporate bonds which mature within ten years from the date of
purchase, in each case issued by a corporation organized and existing
under the laws of the United States of America or any state thereof
which at the time of purchase have been rated by either or both of
Moody's Investors Service, Inc. and Standard and Poor's Ratings Group
and the ratings for such commercial paper are, not less than "P-1" if
rated by Moody's Investors Service, Inc. and not less than "A-1" if
rated by Standard and Poor's Ratings Group or, for such bonds are not
less than "Aa" if rated by Moody's Investors Service, Inc. and not less
than "AA" if rated by Standard & Poor's Ratings Group;
(e) (i) unsecured guaranties by HGC of obligations of
Subsidiaries (other than any Foreign Subsidiary,) aggregating no more
than $5,000,000 at any one time outstanding and (ii) unsecured
guaranties by HGC of the obligations of Hudson General LLC under
operating agreements to which HGC, a Subsidiary of HGC (other than
Aviation) or Hudson General LLC is a party on the date of this
Agreement;
(f) those arising in the ordinary course of business or
consistent with the past business practices of HGC and its Restricted
Subsidiaries;
(g) investments in Subsidiaries (other than the Foreign
Subsidiaries and, except to the extent permitted by Paragraph
5.13(h)(i) hereof, Hudson Kohala Inc.);
<PAGE> 35
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(h) (i) participation in a certain real estate joint venture
(the "Kohala Joint Venture") with respect to land located in the State
of Hawaii, subject, however, to the provisions of Paragraph 5.21 and
(ii) participation in Joint Ventures other than the Kohala Joint
Venture, provided that the aggregate amount of investments in such
Joint Ventures does not exceed $5,000,000 during the term of the
Agreement;
(i) letters of credit (including Letters of Credit) of not
more than $2,000,000 in the aggregate at any one time outstanding;
(j) contingent liabilities incurred by the Kohala Joint
Venture not exceeding $15,000,000 in the aggregate at any one time
outstanding and arising in connection with sales of installment paper
or other receivables to financial institutions by the Kohala Joint
Venture (for purposes of this subparagraph (j) only, joint and several
contingent liabilities incurred in connection with the Kohala Joint
Venture shall be calculated at 75% of their gross amount);
(k) investments in Foreign Subsidiaries which do not exceed
$3,000,000 in the aggregate at any one time outstanding;
(l) investments by HGC in LAGS or an affiliate of LAGS in an
amount not to exceed the deferred purchase price owed to HGC under
Paragraph 1.3 of the Purchase Agreement;
(m) investments by HGC in a passenger handling services entity
which is an affiliate of LAGS or Deutsche Lufthansa AG, as set forth in
Paragraph 10.3 of the Purchase Agreement;
(n) investments of HGC in respect of indebtedness owing to HGC
from Hudson General LLC as a result of the conversion of all or a
portion of the 7% Notes into common stock of HGC in an amount not to
exceed the principal amount of the 7% Notes so converted and any
principal, premium, if any, interest and other payments made by HGC in
respect of the 7% Notes; and
(o) in addition to the foregoing, investments by HGC and its
Restricted Subsidiaries (other than investments by HGC in the Kohala
Joint Venture) which do not exceed $3,000,000 in the aggregate at any
one time outstanding.
Section 5.14. Merger and Sale of Assets. (a) HGC will not and will not
permit any of its Restricted Subsidiaries to liquidate, consolidate or merge
with or into any other corporation, or sell, lease, transfer or otherwise
dispose of any material portion of its assets, other than in the ordinary course
of business, provided that:
(i) a Restricted Subsidiary of HGC may be liquidated, merged
or consolidated with HGC if HGC shall be the surviving corporation, or
with any one or more other Subsidiaries of HGC if the successor formed
by or resulting from such liquidation, merger or consolidation shall be
a Subsidiary of HGC;
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(ii) any Restricted Subsidiary of HGC may sell, lease,
transfer or otherwise dispose of its assets to HGC or another
Subsidiary of HGC, if after giving effect to such merger,
consolidation, sale, lease, transfer or other disposition, no Default
exists;
(iii) HGC or any Restricted Subsidiary of HGC may liquidate,
consolidate or merge with any other corporation if (A) HGC or the
Restricted Subsidiary of HGC is the survivor in such transaction, (B)
the transaction qualifies as a tax-free reorganization under Section
368 of the Internal Revenue Code of 1986, as amended, and (C) after
giving effect to such transaction, no Default exists or would result
from such consolidation or merger;
(iv) HGC or any of its Restricted Subsidiaries may enter into
sale and leaseback transactions and may sell assets (other than
Collateral) at reasonable commercial prices in the ordinary course of
business, provided that all cash proceeds of any sale and leaseback
transaction and cash proceeds in excess of $500,000 from the sale of
any single asset shall, as received, but after deducting all direct
out-of-pocket expenses resulting from the transaction, be used by HGC
to reduce the Aggregate Loan Limit by such amount, with such reductions
to be applied in accordance with the provisions of Paragraph 1.4
hereof; and
(v) HGC or any Restricted Subsidiary may dispose of equipment
of such corporation, provided that (A) such equipment is no longer
needed and is not used in the operation of such corporation's
businesses, (B) such disposition is in the ordinary course of business,
consistent with past practices, and (C) the aggregate net book value of
such equipment and all other equipment disposed of by the HGC and the
Restricted Subsidiaries pursuant to this Paragraph 5.14(a)(v) (other
than equipment that has been sold by HGC or any Restricted Subsidiary
pursuant to this Paragraph 5.14(a)(v) to HGC or any Subsidiary) does
not exceed $1,000,000 in any fiscal year.
(b) Each of the Banks and the Agent hereby consents to the transfer by
HGC and its Subsidiaries to Hudson General LLC of all of the assets of the
Aviation Services Business of HGC and its Subsidiaries, including, without
limitation, the transfer to Hudson General LLC of the stock of Aviation, in
accordance with the terms of the Purchase Agreement (the "Contribution").
Section 5.15. Limitation on Dividends. HGC may declare and pay
dividends or purchase, redeem or otherwise retire any of its shares so long as
(a) no Default has occurred and is continuing and no condition which would, with
either or both the giving of notice or the lapse of time, result in a Default
has occurred and is continuing at the time such dividend is declared or paid or
such shares are purchased, redeemed or otherwise retired and (b) no Default or
condition which would, with either or both the giving of notice or the lapse of
time, result in a Default shall result from the payment of such dividend or the
purchase, redemption or retirement of such shares.
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Section 5.16. Subordinated Debt. (a) Notwithstanding any other
provision of this Agreement, HGC may without the consent of the Majority Banks,
redeem, prepay, convert or otherwise purchase all outstanding 7% Notes, provided
that in each case of redemption, prepayment, conversion or purchase no Default
has occurred and is continuing and no condition which would, with either or both
the giving of notice or lapse of time, result in a Default has occurred and is
continuing and, after giving effect to any such redemptions, prepayments,
conversions or purchases, no Default will occur and be continuing and no
condition which would, with either or both the giving of notice or the lapse of
time, result in a Default will occur or be continuing.
(b) HGC will not amend, modify or waive any term of, or permit
the amendment, modification or waiver of any term of, any Subordinated Debt if
such amendment, modification or waiver would in the reasonable judgment of the
Agent have any material adverse effect on the interests of the Banks hereunder.
Section 5.17. Notices.
(a) Defaults. HGC will promptly notify the Agent and each of
the Banks in writing of the occurrence of any Default. If any party shall give
any notice or take any other action in respect of a claimed default (whether or
not constituting a Default) under this Agreement or any other note, evidence of
indebtedness, indenture or other obligation in an aggregate principal amount of
$1,500,000 or more to which or with respect to which HGC or any of its
Subsidiaries is a party or obligor, whether as principal, guarantor, surety or
otherwise, HGC shall forthwith give written notice thereof to the Agent and each
of the Banks, describing the notice or action and the nature of the claimed
default.
(b) Environmental Events. HGC will promptly give notice to the
Agent and each of the Banks (i) upon HGC's obtaining knowledge of any material
violation of any Environmental Law regarding the Real Estate or operations of
HGC or any Subsidiary of HGC; (ii) upon HGC's obtaining knowledge of any
material known Release of any Hazardous Substances at, from, or into the Real
Estate which it reports in writing or is reportable by it in writing (or for
which any written report supplemental to any oral report is made) to any
governmental authority and which might reasonably be expected to materially
adversely affect the business or financial condition of HGC and its
Subsidiaries, taken as a whole; (iii) upon becoming aware of any inquiry
relating to a material environmental liability or a material potential
environmental liability, including any notice of material violation of any
Environmental Laws or of any material Release of Hazardous Substances, including
a notice or claim of material liability or material potential responsibility
from any third party (including without limitation any federal, state or local
governmental officials), or any formal inquiry, proceeding, demand or
investigation with regard to (A) HGC's or any person's operation of the Real
Estate, (B) material contamination on, from or into the Real Estate, or (C)
investigation or remediation of offsite locations at which HGC, any Subsidiary
of HGC or any such person's predecessors are alleged to have directly or
indirectly Disposed of material quantities of Hazardous Substances, or (D) upon
HGC's obtaining knowledge that any material expense or loss has been incurred by
such governmental authority in connection with the assessment, containment,
removal
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or remediation of any Hazardous Substances with respect to which HGC or
any Subsidiary may be liable or for which a lien may be imposed on the Real
Estate.
(c) Notice of Litigation and Judgments. HGC will, and will
cause each of its Subsidiaries to, give notice to the Agent and each of the
Banks in writing within fifteen (15) days of becoming aware of any material
litigation or proceedings threatened in writing or any pending litigation and
proceedings or any material change in any existing litigation affecting HGC or
any of its Subsidiaries or to which HGC or any of its Subsidiaries is or becomes
a party involving an uninsured claim against HGC or any of its Subsidiaries that
could reasonably be expected to have a materially adverse effect on HGC and its
Subsidiaries, taken as a whole and stating the nature and status of such
litigation or proceedings or nature of the material change in such existing
litigation or proceedings, as the case may be. HGC will, and will cause each of
its Subsidiaries to, give notice to the Agent and each of the Banks, in writing,
in form and detail satisfactory to the Agent, within ten (10) days of any
judgment not covered by insurance, final or otherwise, against HGC or any of its
Subsidiaries in an amount in excess of $500,000.
(d) Proceeds. HGC will promptly notify the Agent and each of
the Banks of the receipt of any proceeds realized by HGC or its Restricted
Subsidiaries from (i) sales of assets and leaseback transactions permitted by
Paragraph 5.14(a)(iv), and (ii) mortgages contemplated by the first
parenthetical of clause (ii) of Paragraph 5.11(f).
Section 5.18. Existence; Maintenance of Properties. HGC (a) will cause
all of its properties and those of its Subsidiaries used or useful in the
conduct of its business or the business of its Subsidiaries to be maintained and
kept in good condition, repair and working order and supplied with all necessary
equipment and (b) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
HGC may be necessary so that the business carried on in connection therewith may
be properly and advantageously conducted at all times; provided that nothing in
this Paragraph 5.18 shall prevent HGC from discontinuing the operation and
maintenance of any of its properties or any of those of its Subsidiaries if such
discontinuance is, in the judgment of HGC, desirable in the conduct of its or
their business and that do not in the aggregate materially adversely affect the
business of HGC and its Subsidiaries on a consolidated basis.
Section 5.19. Compliance with Laws, Contracts, Licenses, and Permits.
HGC will, and will cause each of its Subsidiaries to, comply in all material
respects with (a) the applicable laws and regulations wherever its business is
conducted, including all Environmental Laws, (b) the provisions of its
organizational documents and by-laws or operating agreement, as applicable, (c)
all material agreements and instruments by which it or any of its properties may
be bound and (d) all applicable decrees, orders, and judgments. If any
authorization, consent, approval, permit or license from any officer, agency or
instrumentality of any government shall become necessary or required in order
that HGC or any of its Subsidiaries may fulfill any of its obligations hereunder
or in any document or instrument executed and delivered in connection with this
Agreement to which HGC or such Subsidiary is a party, HGC will, or (as the case
<PAGE> 39
33
may be) will cause such Subsidiary to, immediately take or cause to be taken all
reasonable steps within the power of the HGC or such Subsidiary to obtain such
authorization, consent, approval, permit or license and furnish the Agent and
the Banks with evidence thereof.
Section 5.20. Employee Benefit Plans. (a) HGC will (i) promptly upon
request by any Bank or the Agent, furnish to the Agent and such Bank a copy of
the most recent actuarial statement required to be submitted under Section
103(d) of ERISA and Annual Report, Form 5500, with all required attachments, in
respect of each Guaranteed Pension Plan and (ii) promptly upon receipt or
dispatch, furnish to the Agent any notice, report or demand sent or received in
respect of a Guaranteed Pension Plan under Sections 302, 4041, 4042,
4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer Plan,
under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.
(b) Neither HGC nor any ERISA Affiliate will:
(i) engage in any "prohibited transaction" within the
meaning of Section 406 of ERISA or Section 4975 of the Code which could
result in a material liability for HGC or any of its Subsidiaries; or
(ii) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in Section
302 of ERISA, whether or not such deficiency is or may be waived; or
(iii) fail to contribute to any Guaranteed Pension
Plan to an extent which, or terminate any Guaranteed Pension Plan in a
manner which, could result in the imposition of a lien or encumbrance
on the assets of HGC or any of its Subsidiaries pursuant to Section
302(f) or Section 4068 of ERISA; or
(iv) permit or take any action which would result in
the aggregate benefit liabilities (with the meaning of Section 4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities, by more than the amount set forth in Paragraph
3.17(c).
Section 5.21. Cash Investment in the Kohala Joint Venture. It will not,
as at the end of any fiscal year, permit the Net Cash Investment for the fiscal
year ending on such date to exceed the Net Cash Investment as at the end of the
immediately preceding fiscal year for the fiscal year ending on such date by
more than $2,000,000; and it will not, at any time during the term of this
Agreement, permit the Net Cash Investment for the period commencing on July 1,
1996 and ending on such date of determination to exceed the Net Cash Investment
on July 1, 1996 by more than $5,000,000.
Section 5.22. Use of Proceeds. HGC will use the proceeds of the
Revolving Credit Loans solely for the purposes set forth in Paragraph 3.9
hereof. HGC will obtain Letters of Credit solely for the purposes set forth in
Paragraph 1.7 hereof.
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Section 5.23. Collateral Security. At all times prior to the Collateral
Release Date, the Obligations shall be secured by all of the membership units of
Hudson General LLC owned directly or indirectly by HGC. From and after the
Collateral Release Date, the Computed Value (as defined below) of the Pledged
Units plus the aggregate amount of cash collateral and marketable securities
pledged by HGC to the Collateral Agent pursuant to Paragraph 10(c) hereof shall
not at any time be less than 250% of the Aggregate Loan Limit. For purposes of
this Paragraph 5.23 and Paragraph 10 hereof, the Computed Value of each Pledged
Unit on any date of determination shall be the "Computed Value" of Hudson
General LLC and its Subsidiaries on such date, as calculated pursuant to
Paragraph 3.3(b) of the Purchase Agreement as in effect on the Effective Date,
divided by the number of units of Hudson General LLC outstanding on such date,
provided that if all of the Banks and the Agent reasonably determine at any time
that the calculation of the Computed Value of Hudson General LLC as set forth in
the Purchase Agreement does not accurately reflect the Computed Value of Hudson
General LLC at such time, then the Banks and the Agent shall notify HGC of such
fact. HGC, the Banks and the Agent shall thereafter attempt to negotiate a
formula to determine the Computed Value of Hudson General LLC. If HGC, the Banks
and the Agent are unable to agree on a new formula within sixty days of the day
on which HGC receives such notice, then commencing on such date the Computed
Value of the Pledged Units shall be the net book value of such units, determined
in accordance with generally accepted accounting principles.
Section 5.24. Limited Liability Agreement. HGC will not, and will not
permit Hudson General LLC to, effect or permit any change in or amendment to the
terms of its Limited Liability Company Agreement if such change or amendment
would have a material adverse effect on HGC or the interests of the Banks
hereunder or under any of the other Loan Documents.
Section 5.25. Further Assurances. HGC will, and will cause each of its
Subsidiaries to, execute and deliver any and all such instruments and documents,
and take all such other action, as may reasonably be required by the Agent in
order to perfect, insure and continue the rights, interests and powers of the
Agent in respect of any collateral for the Revolving Credit Loans and the
Revolving Credit Notes and the rights and interests of the Banks under this
Agreement.
Section 6. DEFAULTS. If any of the following events (each a "Default")
shall occur:
Section 6.1. HGC shall fail to pay any principal of the Revolving
Credit Loans when due (whether at any stated maturity date therefor or upon
declaration or acceleration or otherwise), or shall fail to pay any fee or any
interest on the Revolving Credit Loans or any other amount due hereunder (other
than the Agent's fee due under Paragraph 2.1 hereof) in connection with the
Revolving Credit Loans within ten days after the due date thereof, or HGC shall
fail to reimburse the Letter of Credit Bank on the Business Day after any
drawing under a Letter of Credit, or HGC shall fail to pay the Letter of Credit
Fee or any other amounts in respect of Letters of Credit within ten days after
the due date thereof, or HGC shall fail to pay the Agent's fee payable pursuant
to
<PAGE> 41
35
Paragraph 2.1 hereof when due and such failure shall continue for ten days
after written notice thereof has been given to HGC by the Agent;
Section 6.2. HGC shall fail to perform or violate any covenant
contained in any of Paragraphs 5.5 through 5.17 hereof or 5.21, 5.23 or 5.24
hereof;
Section 6.3. HGC shall fail to perform or violate any term, covenant or
agreement herein contained (other than those specified in Paragraphs 6.1 and
6.2) and such failure shall continue for five days as to a failure under
Paragraph 5.2 or as to a failure under Paragraph 5.25 and thirty days as to a
failure under other paragraphs, in each case after written notice thereof has
been given to HGC by any Bank;
Section 6.4. HGC shall fail to perform any term, covenant or agreement
contained in any of the Security Documents;
Section 6.5. any representation or warranty of HGC in Paragraph 3
hereof or in any other Loan Document, shall prove to have been false in any
material respect upon the date when made or deemed to have been made or
repeated;
Section 6.6. HGC or any Subsidiary of HGC shall fail to pay at
maturity, or within any applicable period of grace, any obligation or
obligations for borrowed monies or advances, or fail to observe or perform
(within any appropriate grace period, if any) any term, covenant or agreement
contained in any agreement by which it is bound, evidencing or securing borrowed
monies or advances in an aggregate principal amount of $1,500,000 or more;
Section 6.7. any person or group of persons (within the meaning of
Section 13 or 14 of the Securities Exchange Act of 1934, as amended), other than
any employee benefit plan or plans (within the meaning of Section 3(3) of ERISA)
of HGC or any of its Subsidiaries and other than shareholders of HGC which have
filed with the Securities and Exchange Commission prior to the date of the Proxy
Schedules 13D or 13G pursuant to the Securities Exchange Act of 1934, as
amended, with respect to the securities of HGC, shall hereafter have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said act) more than 50% in voting power
of the outstanding voting stock of HGC, or during any period of twelve
consecutive calendar months, individuals who were directors of HGC on the first
day of such period shall cease to constitute a majority of the board of
directors of HGC, other than because of replacement as a result of death or
disability of one or more such directors or replacement with the approval of a
majority of those individuals who were members of the board of directors of HGC
on the first day of such period or a majority of the directors of HGC appointed
thereafter with the approval of such individuals;
Section 6.8. HGC or any Subsidiary of HGC shall make an assignment for
the benefit of creditors, or admit in writing its inability to pay or generally
fail to pay its debts as they mature or become due, or shall petition or apply
for the appointment of a trustee or other custodian, liquidator or receiver of
HGC or any Subsidiary of HGC or of any substantial part of the assets of HGC or
any Subsidiary of HGC or shall commence any
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36
case or other proceeding relating to HGC or any Subsidiary of HGC under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or hereafter
in effect, or shall take any action to authorize or in furtherance of any of the
foregoing, or if any such petition or application shall be filed or any such
case or other proceeding shall be commenced against HGC or any Subsidiary of HGC
and HGC or any of its Subsidiaries shall indicate its approval thereof, consent
thereto or acquiescence therein;
Section 6.9. a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating HGC or any Subsidiary of HGC
bankrupt or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of HGC or any
Subsidiary of HGC in an involuntary case under federal bankruptcy laws as now or
hereafter constituted;
Section 6.10. HGC or any Subsidiary of HGC shall suffer any judgment in
excess of $1,500,000 which is not covered by insurance to be entered against it,
or any writ of attachment or execution or any similar process to be issued or
levied against a substantial part of its property, which judgment, writ or
process is not discharged, released, stayed, bonded or vacated within thirty
days after its entry, issue or levy;
Section 6.11. if this Agreement or any of the other Loan Documents
shall be cancelled, terminated, revoked or rescinded otherwise than in
accordance with the terms thereof or with the express prior written agreement,
consent or approval of the Banks, or any action at law or in equity or other
legal proceeding to cancel, revoke or rescind any of this Agreement or any of
the other Loan Documents shall be commenced by or on behalf of HGC or any
Subsidiary of HGC party thereto or any of their respective stockholders, or any
court or any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order, decree
or ruling to the effect that, any one or more of this Agreement or any of the
other Loan Documents is illegal, invalid or unenforceable in accordance with the
terms hereof or thereof;
Section 6.12. with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall have
determined in their reasonable discretion that such event reasonably could be
expected to result in liability of HGC or any of its Subsidiaries to the PBGC or
such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and
such event in the circumstances occurring reasonably could constitute grounds
for the termination of such Guaranteed Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan; or a trustee shall have been appointed
by the United States District Court to administer such Plan; or the PBGC shall
have instituted proceedings to terminate such Guaranteed Pension Plan;
Section 6.13. the occurrence of a Default under and as defined in the
Aviation Revolving Credit Agreement; or
Section 6.14. the occurrence of a Default under and as defined in the
Hudson General LLC Credit Agreement;
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then (a) if such event is a Default under Paragraph 6.7, the Aggregate Loan
Limit shall automatically be reduced to an amount equal to the principal balance
of the Revolving Credit Loans then outstanding, (b) if such event is a Default
under any of Paragraph 6.8 or Paragraph 6.9, the Banks' Commitment shall
automatically terminate, the Letter of Credit Bank with the pro rata
participation of the Banks shall be relieved of all further obligations to
issue, extend or renew Letters of Credit and all amounts owing with respect to
the Revolving Credit Notes and under this Agreement shall forthwith become due
and payable, and (c) in every other such event, and so long as such Default is
continuing, the Agent shall, if so directed by the Majority Banks, by notice in
writing to HGC, terminate immediately the Banks' Commitment and the obligation
of the Letter of Credit Bank with the pro rata participation of the Banks, to
issue, extend or renew Letters of Credit and declare all amounts owing with
respect to the Revolving Credit Notes and under this Agreement to be, and the
Revolving Credit Notes and such amounts shall thereupon forthwith become, due
and payable. If any Letters of Credit are outstanding upon the occurrence of a
Default the Agent may demand that cash or other readily marketable securities
acceptable to it in an amount equal to the Maximum Drawing Amount of all then
outstanding Letters of Credit be deposited with the Agent in pledge pursuant to
pledge agreements in form and substance satisfactory to the Agent, as collateral
security for all obligations of HGC to the Banks hereunder. HGC agrees to either
make such deposit with the Agent immediately upon such demand or cause such
Letters of Credit to be cancelled and returned to the Letter of Credit Bank
undrawn. Except as expressly provided above in this Paragraph 6, presentment,
demand, protest or other notice of any kind are hereby expressly waived. Nothing
herein contained shall in any way impair the right of any Bank to enforce
payment of its Revolving Credit Note when due. In case any one or more of the
Defaults shall have occurred and be continuing, and whether or not the Banks
shall have accelerated the maturity of the Revolving Credit Loans pursuant to
this Paragraph 6, each Bank, if owed any amount with respect to the Revolving
Credit Loans, may proceed to protect and enforce its rights by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations to such
Bank are evidenced, including as permitted by applicable law the obtaining of
the ex parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of such Bank. No remedy herein conferred upon any
Bank or the Agent or the holder of any Revolving Credit Note is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or any other provision of law.
Section 7. AGENT'S RELATIONSHIP WITH BANKS; AGENT'S DUTIES. Each of the
Banks irrevocably authorizes the Agent to receive all payments of principal of
and interest on the Revolving Credit Loans and of commitment fees, and to take
all other action delegated to it hereunder or reasonably incidental thereto. The
Agent may exercise its powers and execute its duties by or through employees or
agents and shall be entitled to take, and to rely on, advice of counsel
concerning all matters pertaining to its rights and duties under this Agreement
and the other Loan Documents. Neither
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the Agent nor any of its shareholders, directors, officers or employees nor any
other person assisting it in its duties nor any agent or employee thereof shall
be liable for any waiver, consent or approval given or any action taken or
omitted to be taken in good faith by it or them in connection herewith, or be
responsible for the consequence of any oversight or error of judgment
whatsoever, except that the Agent or such other person, as the case may be,
shall be liable for losses due to its own gross negligence or willful
misconduct. The Agent shall not be responsible for the execution or validity or
enforceability of this Agreement or any of the other Loan Documents, or for any
recitals or statements, warranties or representations herein or made in any
certificate or instrument hereafter furnished to it by or on behalf of HGC, or
be bound to ascertain or inquire as to the performance or observance of any of
the terms, conditions, covenants or agreements herein or in any other Loan
Document. The Agent shall not be bound to ascertain whether any notice, consent,
waiver or request delivered to it by HGC or by any Bank owed amounts with
respect to the Loans shall have been duly authorized or is true, accurate or
complete. HGC shall certify to the Agent the names and signatures of its
officers authorized to execute certificates and otherwise act in respect hereof,
and the Agent may conclusively rely thereon until receipt by it of notice to the
contrary. The Agent has not made nor does now make any representations or
warranties, express or implied, nor does it assume any liability to the Banks,
with respect to the credit worthiness or financial condition of HGC or any
Subsidiary of HGC. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder might
involve it in a dispute resulting in its liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated by
a court of competent jurisdiction. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agent is to be repaid,
each person to whom any such distribution shall have been made shall either
repay to the Agent its proportionate share of the amount so adjudged to be
repaid or pay over the same in such manner and to such persons as shall be
determined by such court. FNB shall have the same obligations and the same
rights, powers and privileges with respect to its Commitment and the Revolving
Credit Loans as it would have were it not also the Agent. The Agent may resign
as Agent for the Banks upon thirty days' written notice to HGC and each Bank,
whereupon a new agent shall be appointed by the Banks. The Agent may be removed
as Agent for the Banks upon thirty days' written notice to HGC and the Agent
from the Majority Banks, whereupon a new Agent shall be appointed by the Banks.
The Banks (including FNB) ratably agree hereby to indemnify and hold harmless
the Agent from and against any and all claims, actions and suits (whether
groundless or otherwise), losses, damages, costs, expenses (including any
expenses for which the Agent has not been reimbursed by HGC as required by
Paragraph 11.5), and liabilities of every nature and character arising out of or
related to this Agreement or the other Loan Documents, or the transactions
contemplated or evidenced hereby or thereby, or the Agent's actions taken
hereunder or thereunder, except to the extent that any of the same shall be
directly caused by the Agent's willful misconduct or gross negligence. The Agent
shall not take any actions with respect to any Default unless it shall have
received such instructions from the Majority Banks. The Collateral Agent shall
not exercise any remedy under
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any Security Document unless it shall have received such instructions as are
required by the Intercreditor Agreement.
Section 8. SETOFF. HGC grants to each of the Banks, as security for the
full and punctual payment and performance of its obligations hereunder, a
continuing lien and security interest in all deposits or other sums credited by
or due from any Bank to HGC and all securities or other property of HGC in the
possession of such Bank and, regardless of the adequacy of any collateral, such
sums at any time may be applied to or set off by such Bank against any and all
liabilities, direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, of HGC to such Bank. The offsetting Bank
shall provide HGC with prompt notice of any such action. Each Bank agrees with
the other Banks that (a) if any deposits or other sums credited by or due from
such Bank to HGC are applied to indebtedness of HGC to such Bank, other than
amounts owing with respect to the Revolving Credit Loans, such amount shall be
applied ratably to such other indebtedness and to the amounts owing with respect
to the Revolving Credit Loans, and (b) if such Bank (i) shall receive any
payment from HGC, whether by distributions made by the Agent, voluntary payment,
exercise of the right of setoff (including, but not limited to, a secured claim
under Section 506 of Title II of the United States Code or other security or
interest arising from, or in lieu of, such secured claim, received by such Bank
under any applicable bankruptcy, insolvency or other similar law), counterclaim,
cross action or enforcement of any claim with respect to the Revolving Credit
Loans by proof thereof in bankruptcy, reorganization, liquidation, receivership
or similar proceedings, or otherwise, and (ii) shall retain and apply to the
payment of such Bank's Revolving Credit Loans any amount in excess of its
ratable portion of the payments received by all Banks with respect to the
Revolving Credit Loans as contemplated hereby, such Bank will make such
disposition and arrangements with the other Banks with respect to such excess,
either by way of distribution, pro tanto assignment of claims, subrogation or
otherwise, as shall result in each Bank's receiving in respect of the Revolving
Credit Loans its proportionate payment as contemplated hereby.
Section 9. INDEMNIFICATION. HGC agrees to indemnify and hold harmless
the Agent and the Banks from and against any and all claims, actions and suits
whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of this
Agreement or any of the other Loan Documents or the transactions contemplated
hereby or thereby including, without limitation, (a) any actual or proposed use
by HGC or any Subsidiary of HGC of the proceeds of any of the Revolving Credit
Loans or Letters of Credit, (b) HGC or any Subsidiary of HGC entering into or
performing this Agreement or any of the other Loan Documents or (c) with respect
to HGC and Subsidiaries of HGC and their respective properties and assets, (i)
the violation of any Environmental Law, (ii) the presence, Disposal, escape,
seepage, leakage, spillage, discharge, emission, Release or threatened Release
of any Hazardous Substances, (iii) the investigation or remediation of offsite
locations at which HGC, any Subsidiary of HGC or any of such Person's
predecessors are alleged to have directly or indirectly Disposed of Hazardous
Substances or (iv) any action, suit, proceeding or investigation brought or
threatened with respect to any Hazardous Substances (including, but not limited
to, claims with respect to wrongful death, personal injury or damage to
property), in each case
<PAGE> 46
40
including, without limitation, the reasonable fees and disbursements of counsel
and allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such
liabilities, losses, damages and expenses incurred by any of the Agent or any
Bank by reason of the gross negligence or willful misconduct of the Agent or any
Bank). In litigation, or the preparation therefor, the Banks and the Agent shall
be entitled to select their own counsel and, in addition to the foregoing
indemnity, HGC agrees to pay promptly the reasonable fees and expenses of such
counsel. If, and to the extent that the obligations of HGC under this Paragraph
9 are unenforceable for any reason, HGC hereby agrees to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law. The covenants contained in this Paragraph 9
shall survive payment or satisfaction in full of all other Obligations.
Section 10. SECURITY AND GUARANTIES. (a) The Obligations shall be
secured by a perfected first priority security interest in and pledge of all of
the membership units of Hudson General LLC (or, from and after the Collateral
Release Date, solely by cash and marketable securities or that number of
membership units of Hudson General LLC necessary for compliance by HGC with
Paragraph 5.23 hereof) owned directly or indirectly by HGC (the "Pledged Units")
and the other Collateral pursuant to and to the extent required by the terms of
the Security Documents.
(b) The Banks acknowledge and agree that, subject to the provisions of
Paragraph 5.23 hereof, upon receipt of evidence satisfactory to them that (i)
all litigation against HGC and Aviation resulting from or relating to the
acquisition in 1984 of certain assets of the airport ground services business of
Innotech Aviation Limited has been fully and finally dismissed (which dismissal
is not appealable) or settled in full, (ii) HGC and Aviation have satisfied in
full all of their payment obligations, if any, with respect to such litigation,
(iii) the payment thereof has not resulted in the occurrence of any Default or
condition which would, with either or both the giving of notice or lapse of
time, result in a Default, and (iv) no Default or condition which would, with
either or both the giving of notice or the lapse of time, result in a Default,
then exists, they shall execute and deliver to the Collateral Agent a letter
acknowledging receipt of such evidence in accordance with Section 18 of the
Pledge Agreement and Section 28(a) of the Security Agreement.
(c) If the Banks at any time shall receive (i) a written notice from
HGC that LAGS or an affiliate of LAGS has delivered to HGC a Notice of Exercise
pursuant to Paragraph 3.2 of the Purchase Agreement with respect to its option
to purchase units of Hudson General LLC as described in Article III of the
Purchase Agreement, (ii) a copy of such Notice of Exercise and (iii) a written
request from HGC for the Banks to direct the Collateral Agent to release its
lien on those Pledged Units that will be purchased by LAGS or such affiliate of
LAGS, the Banks shall execute and deliver to the Collateral agent a letter
directing the Collateral Agent, on the date on which such purchase is to take
place, to release its lien on those Pledged Units to be sold to LAGS or an
affiliate of LAGS, provided that, subject to Paragraph 5.23 hereof, HGC deposits
with the Collateral Agent, in pledge pursuant to pledge agreements in form and
substance satisfactory to the Banks and the Collateral Agent, on or before such
release, cash or other readily marketable securities acceptable to the Banks and
the Collateral
<PAGE> 47
41
Agent in an amount equal to the Computed Value of the Pledged Units to be
released, along with all such documents and instruments, including, without
limitation, corporate authority documents and opinions of counsel, as the
Collateral Agent and the Banks may reasonably request.
(d) The Banks hereby acknowledge and agree that upon receipt of
evidence satisfactory to them from and after the Collateral Release Date that
the Computed Value of the Pledged Units plus the aggregate amount of cash
collateral and marketable securities pledged by HGC to the Collateral Agent
exceeds 250% of the Aggregate Loan Limit, they shall execute and deliver to the
Collateral Agent a letter acknowledging receipt of such evidence in accordance
with Section 18 of the Pledge Agreement and, subject to Paragraph 5.23 hereof,
directing the Collateral Agent to release its lien on such Pledged Units, cash
collateral, marketable securities or other Collateral as HGC may request.
(e) In the event that, following the occurrence or during the
continuance of any Default, the Collateral Agent or any Bank, as the case may
be, receives any monies in connection with the enforcement of any of the
Security Documents, or otherwise with respect to the realization upon any of the
Collateral, such monies shall be distributed for application as follows:
(i) first, to the payment of expenses incurred with respect to
the maintenance and protection of the Collateral and expenses incurred with
respect to the sale of or realization upon any of the Collateral or the
perfection, enforcement or protection of the rights of the Collateral Agent
(including reasonable attorney's fees and expenses of every kind);
(ii) second, equally and ratably to all amounts of principal,
interest, expenses and fees outstanding which constitute the Obligations (as
defined in the Security Documents) (after making provision for amounts not then
due and payable), in such order or preference as the Majority Banks may
determine; and
(iii) third, the balance, if any, shall be returned to HGC or
to such other persons as are entitled thereto.
Section 11. MISCELLANEOUS.
Section 11.1. Notices. Unless provided elsewhere in this Agreement to
the contrary, all written notices hereunder to any party hereto shall be
delivered in hand, sent by telegraph, telex, telecopy or overnight courier or
mailed by certified mail, and if so mailed shall be deemed to have been given
three calendar days after the same shall have been properly deposited in the
mails, addressed to such party at its address given at the beginning of this
Agreement, or at any other address specified by such party in writing to the
person giving such notice.
Section 11.2. Copies of Certificates, Etc. Whenever HGC is required to
deliver notices, certificates, opinions, statements or other information
hereunder to the Agent, it shall do so in such reasonable number of copies as
the Agent shall specify.
<PAGE> 48
42
Section 11.3. No Waivers. No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
failure or delay by the Agent or any Bank in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies otherwise
provided by law.
Section 11.4. Massachusetts Law. THIS AGREEMENT AND THE REVOLVING
CREDIT NOTES SHALL BE DEEMED TO BE A CONTRACT MADE UNDER SEAL AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW) AND
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section 11.5. Expenses; Taxes. Whether or not the transactions
contemplated hereby shall be consummated, HGC will pay the reasonable fees,
expenses and disbursements of the Banks' and the Agent's special counsel
incurred in connection with the review of this Agreement and the other Loan
Documents, the closings hereunder and thereunder, amendments, modifications,
approvals, consents or waivers hereto and thereto, and all reasonable
out-of-pocket expenses (including reasonable attorneys' fees and costs) incurred
by the Agent and by each Bank in connection with the preparation,
administration, interpretation or enforcement of this Agreement and the other
Loan Documents and in connection with any so-called "workout" of the Revolving
Credit Loans, including as to any "workout" or in the event of acceleration,
losses or expenses associated with foreign exchange conversions or transactions.
To the extent the Agent is not reimbursed by HGC for the foregoing fees,
expenses and disbursements, each Bank shall pay to the Agent, promptly upon
notice by the Agent, its pro-rata share of such fees, expenses and
disbursements, provided that the Majority Banks requested such action be
undertaken by the Agent. The covenants of this Paragraph 11.5 shall survive
payment or satisfaction of payment of amounts owing with respect to the
Revolving Credit Loans. HGC agrees to indemnify the Banks and the Agent from,
and hold them harmless against, any taxes, assessments, charges or penalties
made by any governmental authority by reason of the execution and delivery of
this Agreement or any of the other Loan Documents, unless any such assessment,
charge or penalty shall be the result of the negligence or misconduct of any
Bank.
Section 11.6. Confidentiality of Information. Each Bank agrees that any
reports or other information furnished to it by HGC under this Agreement and not
disclosed by HGC to the public will be held in confidence by it for use only in
connection with the purposes contemplated by this Agreement, except to the
extent that disclosure is required by law (whether by appropriate regulatory
authorities, judicial process or otherwise).
Section 11.7. Changes, Waivers. For all purposes of this Agreement, a
Default shall be deemed to be continuing until such time as it has been waived
by the Banks in accordance with this Paragraph 11.7. None of this Agreement or
the Revolving Credit
<PAGE> 49
43
Notes or any provision hereof or thereof may be changed, waived, discharged or
terminated orally but only by a statement in writing. Any waiver or amendment of
any provision of this Agreement or the Revolving Credit Notes may be granted or
effected, with the consent of HGC, by one or more substantially concurrent
written instruments signed by the Majority Banks; provided, however, that no
such consent shall be effective to (a) increase the Aggregate Loan Limit or any
Bank's Commitment without the consent of such Bank, or (b) reduce the amount of
any payment of principal or rate of interest on any Revolving Credit Note or
postpone any date fixed for the payment of any principal of or interest on any
Revolving Credit Note without the consent of the holder thereof (except by
waiver after acceleration pursuant to Paragraph 6), or (c) modify this Paragraph
11.7 or (d) amend the definition of Majority Banks, without the consent of all
the Banks, or (e) modify or waive any of the conditions precedent set forth in
Paragraphs 4A and 4B hereof, or (f) notwithstanding anything contained above,
amend or waive any of the last three sentences of Paragraph 6 hereof.
Section 11.8. Binding Effect of Agreement. This Agreement shall be
binding upon and inure to the benefit of HGC, the Banks and their respective
successors and assigns, provided that HGC may not assign or transfer its rights
hereunder.
Section 11.9. Counterparts. This Agreement and any amendment hereof may
be signed in any number of counterparts with the same effect as if the
signatures hereto and thereto were upon the same instrument. Complete sets of
counterparts shall be lodged with HGC and the Agent. In proving this Agreement
it shall not be necessary to produce or account for more than one counterpart
signed by the party against whom enforcement is sought.
Section 11.10. Entire Agreement. This Agreement and the other Loan
Documents express the entire understanding of the parties with respect to the
transactions contemplated hereby.
Section 11.11. Assignments or Participations by Banks or Affiliates.
Each Bank may assign to one or more banks or other financial institutions having
total capital and surplus of $100,000,000 or more, and otherwise reasonably
acceptable to HGC (which acceptance shall be in writing) all or any part of, or
(without the consent of HGC) may grant participations to one or more of such
banks or financial institutions in or to all or any part of, any Revolving
Credit Loan or Revolving Credit Loans owing to such Bank and the Revolving
Credit Notes held by such Bank, provided that, following the consummation of any
such assignment or participation, such Bank's or bank's Commitment Percentage
shall not be less than 10%, and to the extent of any such assignment or
participation (unless otherwise stated therein), the assignee or participant of
such assignment or participation shall have the same rights and benefits
hereunder and under such Revolving Credit Note as it would have if it were such
Bank hereunder. In the event of such assignment HGC will consent, such consent
not to be unreasonably withheld, to release the assigning Bank from the
obligations hereunder to the extent of such assignment and to sign and deliver
any releases or documents necessary to effectuate such assignment as such Bank
shall reasonably request. Notwithstanding Paragraph 11.6 hereof, each Bank may
disclose any information concerning HGC or the credit facilities to any such
bank or financial institution,
<PAGE> 50
44
provided that such bank or financial institution agrees to be bound by the
provisions of Paragraph 11.6 hereof. It shall be a condition of any assignment
as described in this Paragraph 11.11, that (a) such assignee provide a written
acknowledgment, in form and substance reasonably acceptable to the Agent and its
special counsel and HGC and its counsel, that such assignee assumes the
obligations and the rights of the assigning Bank under this Agreement and the
other Loan Documents and, if such assignee is not organized under the laws of
the United States or any state thereof, that such assignee shall provide the
Agent and HGC with satisfactory evidence that any payments made to the assignee
hereunder may be made free and clear of any withholding taxes and (b) such
assignee or an affiliate thereof accepts an assignment from the assigning Bank
(or an affiliate thereof) of a pro rata portion of such Bank's interest in the
Aviation Loans and the revolving credit loans made to Hudson General LLC under
the Hudson General LLC Credit Agreement. Notwithstanding anything contained in
this Paragraph 11.11 to the contrary, upon the occurrence and during the
continuance of a Default, each Bank may make assignments or grant participations
hereunder without the consent of HGC. HGC agrees, at its own expense, to execute
and deliver to the assignee Bank, in exchange for each surrendered Revolving
Credit Note of the assigning Bank, a new Revolving Credit Note to the order of
such assignee Bank in an amount equal to the amount assumed by such Bank and, if
the assigning Bank has retained some portion of its obligations hereunder, a new
Revolving Credit Note to the order of the assigning Bank in an amount equal to
the amount retained by it hereunder. Such new Revolving Credit Notes shall
provide that they are replacements for the surrendered Revolving Credit Notes,
shall be in an aggregate principal amount equal to the aggregate principal
amount of the surrendered Revolving Credit Notes, shall be dated the effective
date of such assignment and shall otherwise be in substantially the form of the
assigned Revolving Credit Notes.
Section 11.12. Term of Agreement. This Agreement shall continue in full
force and effect from the date hereof so long as any commitment to lend any
principal with respect to the Revolving Credit Loans or any commitment to issue
any Letter of Credit or any obligation of HGC for any interest or commitment or
other fee or obligation hereunder or on the Revolving Credit Notes shall be
outstanding.
[The remainder of this page has been intentionally left blank.]
<PAGE> 51
45
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
HUDSON GENERAL CORPORATION
By:/s/ [Illegible]
_______________________________
Title: Exec. V.P.
THE FIRST NATIONAL BANK OF
BOSTON, AS AGENT
By: /s/ Michael J. Blake
_______________________________
Title:
THE FIRST NATIONAL BANK
OF BOSTON
By: /s/ Michael J. Blake
_______________________________
Title:
EUROPEAN AMERICAN BANK
By:/s/ [Illegible]
_______________________________
Title: V.P.
THE CHASE MANHATTAN BANK, N.A.
By:/s/ [Illegible]
_______________________________
Title: Vice President
<PAGE> 52
EXHIBIT A
DEFINITIONS
Agent - See the introductory paragraph.
Aggregate Loan Limit - See Paragraph 1.4.
Agreement - See the introductory paragraphs.
Aviation - Hudson General Aviation Services Inc./Societe de Services
Hudson General (Aviation) Inc., a wholly owned subsidiary of Hudson General LLC.
Aviation Loans - Revolving credit loans made to Aviation under the
Aviation Revolving Credit Agreement.
Aviation Revolving Credit Agreement - That certain Revolving Credit
Agreement, dated as of November 25, 1992, among Aviation and the lenders that
are or may become parties thereto, as amended and in effect from time to time.
Banks - See the introductory paragraphs.
Base Rate - The higher of (a) the annual rate of interest publicly
announced by the Agent from time to time at its head office in Boston,
Massachusetts as its "base rate" and (b) 1/2% above the overnight federal funds
effective rate, as published by the Board of Governors of the Federal Reserve
System, as in effect from time to time.
Base Rate Loan - Any Revolving Credit Loan bearing interest at a rate
determined by reference to the Base Rate.
Business Day - Any day on which banking institutions in Boston,
Massachusetts and New York, New York are open for the transaction of banking
business and, in the case of LIBO Rate Loans, any day on which commercial banks
are open for international business in London or such other eurodollar interbank
market as may be selected by the Agent in its sole discretion acting in good
faith.
CERCLA - See Paragraph 3.18.
Chase - See the introductory paragraph.
Code - The Internal Revenue Code of 1986, as amended and in effect from
time to time.
Collateral - All of the property, rights and interests of HGC that are
or are intended to be subject to the security interests created by the Security
Documents.
Collateral Agent - As defined in the Security Documents.
<PAGE> 53
-2-
Collateral Release Date - The date on which the Banks deliver a letter
to the Collateral Agent in accordance with Paragraph 10(b) hereof.
Commitment - The agreement of each Bank, subject to the terms and
conditions of the Agreement, to make Revolving Credit Loans to, and to
participate in the issuance, extension or renewals of Letters of Credit for the
account of HGC.
Commitment Percentage - With respect to each Bank, the percentage set
forth opposite its name below as such Bank's percentage of the aggregate
Commitments of all of the Banks (subject to adjustments permitted by the terms
of the Agreement):
Commitment
Bank Percentage
The First National Bank of Boston 60%
The Chase Manhattan Bank, N.A. 20%
European American Bank 20%
---
Total 100%
Computed Value - See Paragraph 5.23.
Consolidated Liabilities - The consolidated liabilities of HGC and its
Subsidiaries, including, without limitation, all consolidated liabilities of HGC
and its Subsidiaries in respect of letters of credit but excluding therefrom an
amount equal to the consolidated deferred tax debits of HGC and its
Subsidiaries, all as determined in accordance with generally accepted accounting
principles.
Consolidated Tangible Net Worth - The consolidated capital and surplus
accounts of HGC and its Subsidiaries, determined in accordance with generally
accepted accounting principles, however excluding all amounts representing
adjustments resulting from foreign currency translation, whether any such
adjustment is expressed as a positive or negative number and eliminating all
assets of HGC and its Subsidiaries properly classified as intangible assets
under generally accepted accounting principles except for leasehold rights of
HGC used in its operations.
Contribution - See Paragraph 5.14(b).
Default - See Paragraph 6.
Delinquent Bank - See Paragraph 2.11.
Disposal; Dispose(d) - Disposal or dispose(d) as such term is defined
in RCRA and the regulations promulgated thereunder; provided that to the extent
the laws of a state wherein the subject property lies establishes a meaning for
such term that is broader than that specified in RCRA and the regulations
promulgated thereunder, such broader meaning shall apply.
<PAGE> 54
-3-
EAB - See the introductory paragraph.
Effective Date - See Paragraph 4A.
Employee Benefit Plan - Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by HGC or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws - See Paragraph 3.18.
EPA - See Paragraph 3.18.
ERISA - The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
ERISA Affiliate - Any individual or legal entity which is treated as a
single employer with HGC under Section 414 of the Code.
ERISA Reportable Event - A reportable event with respect to a
Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the
regulations promulgated thereunder other than a reportable event as to which the
provisions of the 30 day notice to the PBGC is waived under applicable
regulations.
FNB - See the introductory paragraph.
Foreign Subsidiaries - See Paragraph 5.10(f).
generally accepted accounting principles - (a) When used in Paragraph
5.7, 5.8 or 5.9, whether directly or indirectly through reference to a
capitalized term used therein means (i) principles that are consistent with the
principles promulgated or adopted by the Financial Accounting Standards Board
and its predecessors, in effect for the fiscal year ended on June 30, 1995, and
(ii) to the extent consistent with such principles, the accounting practice of
HGC reflected in its financial statements for the fiscal year ended on June 30,
1995, and (b) when used in general, other than as provided above, principles
that are (i) consistent with the principles promulgated or adopted by the
Financial Accounting Standards Board and its predecessors, in effect from time
to time, and (ii) consistently applied with past financial statements of HGC
adopting the same principles, provided that in each case a certified public
accountant would, insofar as the use of such accounting principles is pertinent,
be in a position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles have been properly applied.
Guaranteed Pension Plan - Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by HGC or any
ERISA Affiliate the benefits of which are guaranteed on termination in full or
in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
<PAGE> 55
-4-
Hazardous Substances - See Paragraph 3.18.
HGC - See the introductory paragraph.
Hudson General LLC - Hudson General LLC, a Delaware limited liability
company and Subsidiary of HGC.
Hudson General LLC Credit Agreement - That certain Amended and Restated
Revolving Credit Agreement, dated as of November 25, 1992 and amended and
restated as of June 1, 1996, among HGC, Hudson General LLC and the lenders which
are or may become parties thereto, as amended and in effect from time to time.
Initial Revolving Period - The period commencing on the Effective Date
and ending on June 30, 1999.
Interest Period - A period commencing on the date of making of, or
renewal of, or conversion of a Loan to, a LIBO Rate Loan, and expiring one, two,
three or six months thereafter, as designated by HGC in the notice given the
Agent under Paragraph 1.3; provided that,
(i) the initial Interest Period for any LIBO Rate Loan shall
commence on the date of the making of such Loan (including the date of
any conversion from a Base Rate Loan) and each Interest Period
occurring thereafter in respect of such LIBO Rate Loan shall commence
on the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, provided, however, that if any Interest
Period would otherwise expire on a day which is not a Business Day but
is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(iii) if any Interest Period begins on a day for which there
is no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month; and
(iv) no Interest Period in respect of any Revolving Credit
Loan shall extend beyond the Revolving Credit Loan Maturity Date.
Joint Ventures - Collectively, (i) the Kohala Joint Venture and (ii)
joint ventures entered into by HGC or any of its Restricted Subsidiaries after
the date of this Agreement in the ordinary course of its business.
Kohala Joint Venture - See Paragraph 5.13(h).
<PAGE> 56
-5-
LAGS - Lufthansa Airport and Ground Services GmbH, a German
corporation.
Letter(s) of Credit - Any United States dollar-denominated irrevocable
standby letter(s) of credit issued from time to time pursuant to the terms
hereof by the Letter of Credit Bank for the account of HGC.
Letter of Credit Bank - FNB, in its capacity as issuer of the Letter(s)
of Credit.
Letter of Credit Fee - See Paragraph 1.11.
LIBO Bid Rate - The annual rate of interest determined by the Agent, at
or about 11 a.m., London time, on the second Business Day prior to the first day
of an Interest Period, as being that at which deposits of United States dollars
during such Interest Period are offered to the Agent by prime banks in the
London interbank market at the time of determination and in accordance with the
usual practice in such market, for delivery on the first day of such Interest
Period and for the number of days comprised therein, in amounts equal (as nearly
as may be) to the amount of the unpaid principal of a Revolving Credit Loan to
which such Interest Period shall relate.
LIBO Rate - The rate of interest (rounded upwards to the nearest 1/16th
of one percent) equal to the following (with the LIBO Bid Rate and the Reserve
Rate expressed as decimals);
(LIBO Bid Rate)
--------------------
(1 - Reserve Rate)
LIBO Rate Loan - Any Revolving Credit Loan bearing interest at a rate
determined by reference to the LIBO Rate pursuant to Paragraph 2.3(b) of the
Agreement.
Loan Documents - Collectively, this Agreement, the Revolving Credit
Notes and the Security Documents, and all other instruments and documents
delivered and to be delivered pursuant to any such agreements.
Majority Banks - Those Banks which are owed or participate in 75% or
more of the sum of aggregate principal amount of Revolving Credit Loans at the
time outstanding and unpaid plus the aggregate Maximum Drawing Amount of all
outstanding Letters of Credit, or, if no Revolving Credit Loans or Letters of
Credit are outstanding, those Banks having 75% or more of the outstanding
Commitment to make Revolving Credit Loans.
Maximum Drawing Amount - As at any date of determination, with respect
to any Letter of Credit issued pursuant to the terms hereof, the maximum amount
which the beneficiary thereof may draw under such Letter of Credit as at such
date pursuant to the terms of such Letter of Credit, plus any amounts previously
drawn thereunder and not yet reimbursed by HGC, whether from the proceeds of
Revolving Credit Loans or otherwise.
<PAGE> 57
-6-
Multiemployer Plan - Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by HGC or any ERISA
Affiliate.
Net Cash Investment - As at any date of determination, (i) the
aggregate amount of cash directly or indirectly invested by HGC in the Kohala
Joint Venture during the applicable period, minus (ii) the aggregate amount of
cash proceeds directly or indirectly received by HGC with respect to the Kohala
Joint Venture during the applicable period.
Net Cash Proceeds - As at any date of determination, (i) the aggregate
amount of cash proceeds directly or indirectly received by HGC with respect to
the Kohala Joint Venture during the applicable period, minus (ii) the aggregate
amount of cash directly or indirectly invested by HGC in the Kohala Joint
Venture during the applicable period.
7% Notes - The 7% Convertible Subordinated Debentures Due 2011 issued
pursuant to the Indenture dated as of July 1, 1986, between HGC and Chemical
Bank Delaware, as Trustee, as amended by the First Supplemental Indenture
thereto.
Notice Date - See Paragraph 2.9.
Obligations - All indebtedness, obligations and liabilities of HGC to
any of the Banks and the Agent, individually or collectively, existing on the
date of this Agreement or arising thereafter, direct or indirect, joint or
several, absolute or contingent, matured or unmatured, liquidated or
unliquidated, secured or unsecured, arising by contract, operation of law or
otherwise, arising or incurred under this Agreement or any of the other Loan
Documents or in respect of any of the Revolving Credit Loans or any of the
Revolving Credit Notes or other instruments at any time evidencing any thereof.
PBGC - The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Pledge Agreement - The Pledge Agreement, dated as of the date hereof,
between HGC and the Collateral Agent substantially in the form attached hereto
as Exhibit C, as the same may be amended and in effect from time to time.
Pledged Units - See Paragraph 10(a).
Proxy - The definitive Proxy Statement dated April 25, 1996 relating to
the meeting of HGC's stockholders for the purpose of voting upon a proposal to
approve the transactions contemplated by the Purchase Agreement, as filed by HGC
with the Securities and Exchange Commission.
Purchase Agreement - That certain Unit Purchase and Option Agreement,
dated February 27, 1996, between LAGS and HGC, as such agreement is in effect on
the Effective Date as supplemented by a letter agreement dated May 31, 1996.
<PAGE> 58
-7-
RCRA - See Paragraph 3.18.
Real Estate - All real property at any time owned, leased (as lessee or
sublessee), operated or managed by HGC or any Subsidiary of HGC.
Release - A release as defined in CERCLA and the regulations
promulgated thereunder; provided that to the extent the laws of a state wherein
the subject property lies establishes a meaning for such term that is broader
than that specified in CERCLA and the regulations promulgated thereunder, such
broader meaning shall apply.
Reserve Rate - For any day with respect to a LIBO Rate Loan, the
maximum rate at which the Agent would be required to maintain reserves under
Regulation D of the Board of Governors of the Federal Reserve System (or any
successor or similar regulation relating to such reserve requirements) against
"Eurocurrency Liabilities" (as that term is used in Regulation D) regardless of
whether there are such liabilities outstanding. The Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in the
Reserve Rate and promptly thereafter the Agent shall provide HGC with written
notice of such adjustment.
Restricted Subsidiary - Each Subsidiary of HGC other than Hudson
General LLC and each Subsidiary of Hudson General LLC.
Revolving Credit Loan Maturity Date - June 30, 1999, or, if earlier,
such date on which the Commitments are terminated in accordance with the
provisions of the Agreement.
Revolving Credit Loans - Revolving credit loans made or to be made by
the Banks to HGC pursuant to Paragraph 1.1.
Revolving Credit Note(s) - See Paragraph 1.2.
SARA - See Paragraph 3.18.
Security Agreement - The Amended and Restated Security Agreement, dated
as of December 28, 1992 and amended and restated as of the Effective Date,
between HGC, Hudson General LLC and the Collateral Agent substantially in the
form of Exhibit E attached to the Hudson General LLC Credit Agreement, as the
same may be amended and in effect from time to time.
Security Documents - The Security Agreement, the Pledge Agreement, any
and all pledge agreements delivered under Paragraph 10(c) hereof, and any and
all instruments and documents required to be delivered pursuant thereto, in each
case as originally executed, or if amended, restated, modified or supplemented
from time to time, as so amended, restated, modified or supplemented.
Shareholder - See Paragraph 3.16.
<PAGE> 59
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Subordinated Debt - The indebtedness of HGC referred to in Paragraph
5.10(c) hereof and any other indebtedness that is subordinated to the Revolving
Credit Loans, the Letters of Credit and the Revolving Credit Notes in form and
substance reasonably satisfactory to the Majority Banks.
Subsidiary - With respect to any entity, any corporation, association,
joint stock company, business trust or other similar organization of whose
voting stock such entity owns or controls, directly or indirectly, more than
50%.
Type - As to any Revolving Credit Loan, its nature as a Base Rate Loan
or a LIBO Rate Loan.
<PAGE> 60
EXHIBIT B
FORM OF REVOLVING CREDIT NOTE
HUDSON GENERAL CORPORATION
$[INSERT AMOUNT] __________________, 1996
FOR VALUE RECEIVED, the undersigned, HUDSON GENERAL CORPORATION, a
Delaware corporation ("HGC"), hereby absolutely and unconditionally promises to
pay to the order of [INSERT NAME OF PAYEE BANK] (the "Bank") at the office of
the Agent (as defined in the Credit Agreement referred to below) at 100 Federal
Street, Boston, Massachusetts 02110 and in United States dollars in immediately
available funds:
(a) the principal amount of [INSERT BANK'S COMMITMENT PERCENTAGE OF
AGGREGATE LOAN LIMIT] Dollars ($____) or, if less, the aggregate unpaid
principal amount of Revolving Credit Loans made by the Bank pursuant to the
Revolving Credit Agreement, dated as of ______________, 1996, as the same is
amended and in effect from time to time (such agreement, as amended and in
effect from time to time, the "Credit Agreement"), among HGC, the Bank, the
other lenders named therein, such other lenders as may become parties thereto
from time to time and The First National Bank of Boston as Agent, payable at the
times and in accordance with the terms and conditions of the Credit Agreement
but in no event later than the Revolving Credit Loan Maturity Date (which shall
be no later than June 30, 1999); and
(b) interest on the principal balance hereof from time to time
outstanding from the date hereof through the date on which such principal amount
is paid in full at the rates provided in the Credit Agreement, payable as
provided in the Credit Agreement.
This Note evidences borrowings under, is subject to the terms and
conditions of, and has been issued by HGC in accordance with the terms of, the
Credit Agreement and is secured by the collateral described in the Pledge
Agreement. The Bank and any holder hereof are entitled to the benefits of the
Credit Agreement and may enforce the agreements of HGC contained therein.
Capitalized terms which are used in this Note without definition and which are
defined in the Credit Agreement shall have the same meanings herein as in the
Credit Agreement.
The Bank shall endorse, and is hereby irrevocably authorized by HGC to
endorse, on the schedule attached to this Note or a continuation of such
schedule attached hereto and made a part hereof, an appropriate notation
evidencing advances and repayments of principal of this Note, provided that
failure by the Bank to make any such notations shall not affect any of HGC's
obligations in respect of this Note.
<PAGE> 61
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HGC has the right in certain circumstances and the obligation in certain
other circumstances to prepay the whole or part of the principal of this Note on
the terms and conditions specified in the Credit Agreement.
If any one or more Defaults shall occur, the entire unpaid principal
amount of this Note and all of the unpaid interest accrued thereon may become or
be declared due and payable in the manner and with the effect provided in the
Credit Agreement.
HGC and every endorser and guarantor of this Note or the obligation
represented hereby waive presentment, demand, notice, protest and all other
demands and notices in connection with the delivery, acceptance, performance,
default or enforcement of this Note, assent to any extension or postponement of
the time of payment or any other indulgence, to any substitution, exchange or
release of collateral and to the addition or release of any other party or
person primarily or secondarily liable.
THIS NOTE SHALL BE DEEMED TO TAKE EFFECT AS A SEALED INSTRUMENT UNDER
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND FOR ALL PURPOSES SHALL BE
CONSTRUED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, Hudson General Corporation has caused this Note to
be signed on its behalf by its duly authorized officer as a sealed instrument as
of the day and year first above written.
HUDSON GENERAL CORPORATION
By:
------------------------------------
Title:
<PAGE> 62
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Amount of
Principal Balance of
Amount of Paid or Principal Notation
Date Loan Prepaid Unpaid Made By
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<PAGE> 63
EXHIBIT C
FORM OF PLEDGE AGREEMENT
This PLEDGE AGREEMENT dated as of June 1, 1996, is between HUDSON
GENERAL CORPORATION (the "Pledgor"), a Delaware corporation, and THE FIRST
NATIONAL BANK OF BOSTON, a national banking association, as collateral agent
(the "Collateral Agent") for the Banks (as hereinafter defined).
WHEREAS, the Pledgor has entered into a Revolving Credit Agreement,
dated as of the date hereof (as amended and in effect from time to time, the
"HGC Credit Agreement"), with The First National Bank of Boston, European
American Bank, The Chase Manhattan Bank, N.A., certain other financial
institutions (collectively, the "Banks") and The First National Bank of Boston
as agent, pursuant to which the Banks, subject to the terms and conditions
contained therein, have agreed to make loans or otherwise to extend credit to
the Pledgor; and
WHEREAS, the Pledgor has entered into an Amended and Restated Revolving
Credit Agreement, dated as of November 25, 1992 and amended and restated as of
the date hereof (as amended and in effect from time to time, the "LLC Credit
Agreement"), with Hudson General LLC (the "Company"), the Banks and The First
National Bank of Boston, as agent, pursuant to which the Banks, subject to the
terms and conditions contained therein, have agreed to make loans or otherwise
to extend credit to the Pledgor and the Company; and
WHEREAS, it is a condition precedent to the Banks' making any loans or
otherwise extending any credit to the Pledgor under the HGC Credit Agreement or
the LLC Credit Agreement that the Pledgor execute and deliver to the Collateral
Agent, for the benefit of the Banks and the Collateral Agent, a pledge agreement
in substantially the form hereof; and
WHEREAS, the Pledgor wishes to grant security interests in favor of the
Collateral Agent as herein provided;
NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. The term "Collateral" as used herein means the
Pledged Interests (as defined below) and other property at any time, whether now
or hereafter, pledged to the Collateral Agent hereunder and all income
therefrom, increases therein and proceeds thereof. The term "Default" as used
herein means a Default under the HGC Credit Agreement or, prior to the
Collateral Release Date, under the LLC Credit Agreement. All other capitalized
terms which are used herein without definition and which are defined in the HGC
Credit Agreement shall have the same meanings herein as in the HGC Credit
Agreement.
<PAGE> 64
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SECTION 2. PLEDGE OF INTERESTS. (a) To secure the due and prompt payment
and performance of the Obligations (as defined below), the Pledgor hereby
pledges, assigns, grants a continuing security interest in and lien on, and
delivers to the Collateral Agent, all right, title and interest of the Pledgor,
whether now existing or hereafter arising, in and to the Company as a member of
the Company, including, without limitation, the membership interests described
on Schedule 1 attached hereto (the "Pledged Interests") (as such schedule may be
amended and supplemented from time to time by the Pledgor with the consent of
the Banks in accordance with Paragraph 5.23 and Paragraphs 10(c) and 10(d) of
the HGC Credit Agreement), and, in each case, all rights to receive any
distributions or payments due or to become due to the Pledgor in respect of the
Pledged Interests under the terms of the Company's certificate of formation and
Limited Liability Company Agreement and all other economic benefits of the
Pledgor's interest in the Company, whether cash, property or otherwise, at any
time owing or payable to the Pledgor on account of the Pledged Interests, and
the right, but not the obligation to become a substitute member of the Company.
This pledge and security interest is for collateral purposes only, and the
Collateral Agent shall not, by virtue of this Agreement, or its receipt of any
distributions or other amounts from the Company, be deemed to be a member of the
Company, or to have assumed or become liable for any obligation of the Company
or the Pledgor.
(b) In case the Pledgor shall acquire, prior to the Collateral
Release Date, any additional membership interests of the Company (other than
membership interests received from the Company in order for the Pledgor to
satisfy its obligations under Article III of the Purchase Agreement) or any
securities exchangeable for or convertible into membership interests of the
Company, whether by purchase, dividend, distribution of capital or otherwise,
the Pledgor shall forthwith deliver to and pledge such membership interests or
other securities to the Collateral Agent under this Agreement. The Pledgor
agrees that the Collateral Agent may from time to time attach as Schedule 1
hereto an updated list of the membership interests at such time pledged
hereunder.
SECTION 3. PRO-RATA SECURITY FOR OBLIGATIONS. (a) This Agreement and
the pledge of the Collateral hereunder is made with the Collateral Agent as
security for (i) all obligations of the Pledgor to the Banks and the Agent under
or in relation to the HGC Credit Agreement, the promissory notes executed and
delivered by the Pledgor to the Banks in connection therewith and the other Loan
Documents, as such instruments are originally executed or as modified, amended,
restated, supplemented or extended, (ii) prior to the Collateral Release Date,
all of the obligations of the Pledgor and the Company (whether or not the HGC
Release Date (as defined in the LLC Credit Agreement) has occurred) to the Banks
and the Agent under or in relation to the LLC Credit Agreement, the promissory
notes executed and delivered by HGC and the Company to the Banks in connection
therewith and the other Loan Documents (as defined in the LLC Credit Agreement),
as such instruments are originally executed or as modified, amended, restated,
supplemented or extended, and (iii) all obligations of the Pledgor to the Banks
arising out of any extension, refinancing or refunding of any of the foregoing
obligations, whether such obligations are now existing or hereafter acquired or
arising, direct or indirect, joint or several, absolute or contingent, due or to
<PAGE> 65
-3-
become due, matured or unmatured, liquidated or unliquidated, arising by
contract, operation of law or otherwise (the foregoing obligations shall be
referred to herein, collectively, as the "Obligations").
(b) All amounts owing with respect to the Obligations shall be
secured pro rata by the Collateral without distinction as to whether some
Obligations are then due and payable and other Obligations are not then due and
payable. Upon any realization upon the Collateral by the Collateral Agent,
whether by receipt of dividends pursuant to Section 7 hereof or upon sale of all
or part of the Collateral pursuant to Section 8 hereof or otherwise, the Pledgor
agrees that the proceeds thereof shall be applied as set forth in Paragraph
10(e) of the HGC Credit Agreement (whether or not such agreement is then in
effect).
SECTION 4. LIQUIDATION, RECAPITALIZATION. Any sums paid upon or with
respect to any of the Pledged Interests upon the liquidation or dissolution of
the Company shall be paid over to the Collateral Agent to be held by it as
security for the Obligations; and in case any distribution of capital shall be
made on or in respect of any of the Pledged Interests or any property shall be
distributed upon or with respect to any of the Pledged Interests pursuant to the
recapitalization or reclassification of the capital of the issuer thereof or
pursuant to the reorganization of such issuer, the property so distributed shall
be delivered to the Collateral Agent to be held by it as security for the
Obligations. All sums of money and property paid or distributed in respect of
the Pledged Interests upon such a liquidation, dissolution, recapitalization or
reclassification which are received by the Pledgor shall, until paid or
delivered to the Collateral Agent, be held in trust for the Collateral Agent as
security for the Obligations.
SECTION 5. WARRANTY OF OWNERSHIP; CAPITALIZATION. (a) The Pledgor
warrants that it is the sole record and beneficial owner of the Pledged
Interests described in Section 2 hereof, subject to no pledges, liens, security
interests, charges, options, restrictions or other encumbrances except for the
security interest created by this Agreement and the option granted to LAGS as
set forth in the Purchase Agreement, and that it has the power, authority and
legal right to pledge all of such Pledged Interests pursuant to this Agreement.
(b) The Pledgor covenants that it will not, and will not
permit the Company to, authorize, issue or sell any membership interests in the
Company, or grant any options, warrants or other rights to purchase any
membership interests in the Company except for the option granted to LAGS (or an
affiliate of LAGS) under Article III of the Purchase Agreement and the issuance
by the Company of membership interests to LAGS (or an affiliate of LAGS) in
connection therewith.
(c) The Pledgor covenants that it will defend the Collateral
Agent's rights and security interest in such Pledged Interests against the
claims and demands of all persons whomsoever; and the Pledgor covenants that it
will have the like title to and right to pledge any other Collateral and will
likewise defend the Collateral Agent's rights and security interest therein.
<PAGE> 66
-4-
SECTION 6. CORPORATE POWER, AUTHORITY. The execution and delivery of
this Agreement and pledging of the Pledged Interests described in Section 2
hereof are within the Pledgor's corporate power and have been duly authorized by
all necessary corporate action and such execution and delivery and the pledging
of such Pledged Interests do not contravene any law or any rule or regulation
thereunder or any provision of the charter documents or by-laws of the Pledgor
or of any judgment, decree or order of any tribunal or of any agreement or
instrument to which the Pledgor is a party or by which it or any of its property
is bound or constitute a default thereunder.
SECTION 7. DISTRIBUTIONS, PRINCIPAL, INTEREST AND VOTING PRIOR TO
DEFAULT. Unless and until a Default shall have occurred and be continuing, the
Pledgor shall be entitled (a) to receive all cash distributions paid in respect
of the Pledged Interests and (b) to vote the Pledged Interests and to give
consents, waivers and ratifications in respect of the Pledged Interests;
provided, however, that no vote shall be cast, or consent, waiver or
ratification given or action taken which would be inconsistent with or violate
any provision of the HGC Credit Agreement, the LLC Credit Agreement (prior to
the Collateral Release Date), any other Security Document or this Agreement.
SECTION 8. REMEDIES. (a) Upon the occurrence and during the continuance
of a Default, the Collateral Agent shall thereafter have the following rights
and remedies (to the extent permitted by applicable law and subject to
compliance by the Collateral Agent with the provisions of the Company's Limited
Liability Company Agreement) in addition to the rights and remedies of a secured
party under the Uniform Commercial Code of Massachusetts, all such rights and
remedies being cumulative, not exclusive, and enforceable alternatively,
successively or concurrently:
(i) if the Collateral Agent so elects and gives notice of such
election to the Pledgor, the Collateral Agent may vote any or all of
the Pledged Interests possessing voting rights (whether or not the same
shall have been transferred into its name or the name of its nominee or
nominees) and give all consents, waivers and ratifications in respect
of the Pledged Interests and otherwise act with respect thereto as
though it were the outright owner thereof, the Pledgor hereby
irrevocably constituting and appointing the Collateral Agent the proxy
and attorney-in-fact of the Pledgor, with full power of substitution,
to do so;
(ii) the Collateral Agent may demand, sue for, collect or make
any compromise or settlement in respect of any Collateral held by it
hereunder that it deems suitable;
(iii) after ten (10) days' notice to the Pledgor and
compliance by the Collateral Agent with the terms of the Company's
Limited Liability Company Agreement, the Collateral Agent may sell,
resell, assign and deliver, or otherwise dispose of any or all of the
Collateral, for cash and/or credit and upon such terms at such place or
places and at such time or times and to such persons, firms, companies
or corporations as the Collateral Agent shall approve, all without
demand for performance by the Pledgor or advertisement or any further
notice whatsoever except such as may be required by law; and
<PAGE> 67
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(iv) the Collateral Agent may at any time, at its option,
cause all or any part of the Pledged Interests held by it to be
transferred into its name or the name of its nominee or nominees,
receive any income thereon and hold such income as additional
collateral or apply it to the Obligations.
(b) Except as otherwise provided herein and in the Company's Limited
Liability Company Agreement, the Collateral Agent may enforce its rights
hereunder without any other notice and without compliance with any other
condition precedent now or hereafter imposed by statute, rule of law or
otherwise (all of which are hereby expressly waived by the Pledgor, to the
fullest extent permitted by law). If any of the Collateral is sold by the
Collateral Agent upon credit or for future delivery, the Collateral Agent shall
not be liable for the failure of the purchaser to pay the same and, in such
event, the Collateral Agent may resell such Collateral. The Collateral Agent may
buy any part or all of the Collateral at any public sale and, if any part or all
of the Collateral is of a type customarily sold in a recognized market or is of
a type which is the subject of widely-distributed standard price quotations, the
Collateral Agent may buy at private sale and may make payments therefor by any
means. The Collateral Agent shall apply the cash proceeds actually received from
any sale or other disposition to the reasonable expenses of retaking, holding,
preparing for sale, selling and the like, to reasonable attorneys' fees, and all
legal expenses, travel and other expenses which may be incurred by the
Collateral Agent in attempting to collect the Obligations or to enforce this
Agreement or in the prosecution or defense of any action or proceeding related
to the subject matter of this Agreement; and then to the Obligations as set
forth in Paragraph 10(e) of the HGC Credit Agreement (whether or not such
agreement is then in effect) and any surplus shall be paid to the Pledgor.
(c) The Pledgor recognizes that the Collateral Agent may be unable to
effect a public sale of the Pledged Interests by reason of certain prohibitions
contained in the Securities Act of 1933, as amended, but may be compelled to
resort to one or more private sales thereof to a restricted group of purchasers
consistent with applicable laws. The Pledgor agrees that any such private sales
may be at prices and other terms less favorable to the seller than if sold at
public sales and that such private sales shall not by reason thereof be deemed
not to have been made in a commercially reasonable manner. The Collateral Agent
shall be under no obligation to delay a sale of any of the Pledged Interests for
the period of time necessary to permit the issuer of such securities to register
such securities for public sale under the Securities Act of 1933, as amended,
even if the issuer would agree to do so.
SECTION 9. MARSHALLING. The Collateral Agent shall not be required to
marshal any present or future security for (including but not limited to this
Agreement and the Collateral pledged hereunder), or guaranties of, the
Obligations or any of them, or to resort to such security or guaranties in any
particular order; and all of its rights hereunder and in respect of such
securities and guaranties shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that it lawfully may, the
Pledgor hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Collateral Agent's rights under this Agreement or under any other
instrument
<PAGE> 68
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evidencing any of the Obligations or under which any of the Obligations is
outstanding or by which any of the Obligations is secured or guaranteed, and, to
the extent that it lawfully may, the Pledgor hereby irrevocably waives the
benefits of all such laws.
SECTION 10. PLEDGOR'S OBLIGATIONS NOT AFFECTED. The obligations of the
Pledgor hereunder shall remain in full force and effect without regard to, and
shall not be impaired by (a) any bankruptcy, insolvency, reorganization,
arrangement, readjustment, composition, liquidation or the like of the Pledgor;
(b) any exercise or nonexercise, or any waiver, by the Collateral Agent of any
right, remedy, power or privilege under or in respect of any of the Obligations
or any security thereof (including this Agreement); (c) any amendment to or
modification of the HGC Credit Agreement, the other Loan Documents, the LLC
Credit Agreement, the other Loan Documents (as defined in the LLC Credit
Agreement) or any of the Obligations; (d) any amendment to or modification of
any instrument (other than this Agreement) securing any of the Obligations; or
(e) the taking of additional security for, or any guaranty of, any of the
Obligations or the release or discharge or termination of any security or
guaranty for any of the Obligations; and whether or not the Pledgor shall have
notice or knowledge of any of the foregoing.
SECTION 11. TRANSFER BY PLEDGOR. Without the prior written consent of
the Collateral Agent, the Pledgor will not sell, assign, transfer or otherwise
dispose of, grant any option with respect to, or pledge or grant any security
interest in or otherwise encumber any of the Collateral or any interest therein,
except for the pledge thereof provided for in this Agreement and except as
provided in the Purchase Agreement.
SECTION 12. NO FURTHER ACTIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or other
regulatory body or other person that has not been received, taken or made is
required for the grant by the Pledgor of the security interests granted hereby
or for the execution, delivery or performance of this Agreement by the Pledgor,
or, except for (a) the filing of financing statements and continuation
statements with respect thereto and (b) the delivery of the certificates
representing the Pledged Interests along with the appropriate instruments of
assignment duly executed in blank, for (i) the perfection and maintenance of the
security interests hereunder (including the first priority nature of such
security interests) or (ii) the exercise by the Collateral Agent of the rights
or the remedies in respect of the Collateral pursuant to this Agreement (other
than the authorization of the requisite Banks).
SECTION 13. FURTHER ASSURANCES. The Pledgor will do all such acts, and
will furnish to the Collateral Agent all such financing statements,
certificates, legal opinions and other documents and will obtain all such
governmental consents and corporate approvals and will do or cause to be done
all such other things as the Collateral Agent may reasonably request from time
to time in order to give full effect to this Agreement and to secure the rights
of the Collateral Agent hereunder.
SECTION 14. PLEDGEE'S EXONERATION. Under no circumstances shall the
Collateral Agent be deemed to assume any responsibility for, or obligation or
duty with
<PAGE> 69
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respect to, any part or all of the Collateral of any nature or kind, other than
the physical custody thereof, or any matters or proceedings arising out of or
relating thereto. The Collateral Agent shall not be required to take any action
of any kind to collect, preserve or protect its or the Pledgor's rights in the
Collateral or against other persons asserting rights in the Collateral. The
Collateral Agent's prior recourse to any part or all of the Collateral shall not
constitute a condition of any demand, suit or proceeding for payment or
collection of the Obligations.
SECTION 15. POWER OF ATTORNEY. (a) The Pledgor acknowledges the
Collateral Agent's right, to the extent permitted by applicable law, singly to
execute and file financing or continuation statements and similar notices
required by applicable law, and amendments thereto, concerning the Collateral
without execution by the Pledgor. A carbon, photographic or other reproduction
of this Agreement or any financing statement covering the Collateral or any part
thereof shall be sufficient as a financing statement where permitted by law.
(b) The Pledgor hereby irrevocably appoints the Collateral Agent as its
attorney-in-fact, effective at all times subsequent to the occurrence and during
the continuance of a Default with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, to take any action and to
execute any instrument which the Collateral Agent may reasonably deem necessary
or advisable to accomplish the purpose of this Agreement, including, without
limitation, the power and right (i) to endorse the Pledgor's name on any checks,
notes, acceptances, money orders, drafts, filings or other forms of payment or
security that may come into the Collateral Agent's possession; and (ii) to do
all other things which the Collateral Agent then determines to be necessary to
carry out the terms of this Agreement. The power conferred on the Collateral
Agent hereunder is solely to protect the Collateral Agent's interests in the
Collateral and shall not impose any duty upon the Collateral Agent to exercise
such power.
SECTION 16. NO WAIVER. No act, failure or delay by the Collateral Agent
shall constitute a waiver of its rights and remedies hereunder or otherwise, nor
shall any single or partial exercise by the Collateral Agent of any right,
remedy or power hereunder preclude any other exercise or future exercise of any
other right, remedy or power. No single or partial waiver by the Collateral
Agent of any default or right or remedy which it may have shall operate as a
waiver of any other default, right or remedy or of the same default, right or
remedy on a future occasion. The Pledgor hereby waives presentment, notice of
dishonor and protest of all instruments included in or evidencing any of the
Obligations or the Collateral, and any and all other notices and demands
whatsoever (except as expressly provided herein).
SECTION 17. NOTICES. Except as otherwise expressly provided herein, all
notices and other communications made or required to be given pursuant to this
Agreement shall be given in the manner and delivered to addresses of the Pledgor
and the Collateral Agent specified in the HGC Credit Agreement.
SECTION 18. TERMINATION. (a) Notwithstanding any other provision of
this Agreement and subject to Paragraph 5.23 of the HGC Credit Agreement, the
Pledgor
<PAGE> 70
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shall be entitled to the return, at the Pledgor's expense, of the Collateral
provided by the Pledgor in the possession or control of the Collateral Agent
either (i) upon delivery of a letter addressed to the Collateral Agent and
signed by each of the Banks specifying that the Banks have received evidence
satisfactory to them that (A) all litigation against HGC and Aviation resulting
from or relating to the acquisition in 1984 of certain assets of the airport
ground services business of Innotech Aviation Limited has been fully and finally
dismissed (and such dismissal is not appealable) or settled in full, (B) HGC and
Aviation have satisfied in full all of their payment obligations, if any, with
respect to such litigation, (C) the payment thereof has not resulted in the
occurrence of any Default or condition which would, with either or both the
giving of notice or lapse of time, result in a Default, and (D) no Default or
condition which would, with either or both the giving of notice or lapse of
time, result in a Default then exists or (ii) upon the indefeasible payment and
performance of the Obligations in full.
(b) Upon the delivery of a letter addressed to the Collateral Agent
signed by the Banks specifying that the Banks have received evidence that the
release of certain of the Collateral is permitted under Paragraph 5.23 and
Paragraph 10(d) of the HGC Credit Agreement (from and after the Collateral
Release Date) or Paragraph 10(c) of the HGC Credit Agreement (subject to the
provisions of such paragraph), the Collateral Agent shall return such Collateral
to the Pledgor and execute and deliver to the Pledgor such releases with respect
to the lien hereof as the Pledgor may reasonably request with respect to such
Collateral.
SECTION 19. CONSENTS, AMENDMENTS, WAIVERS. Any term of this Agreement
may be amended, and the performance or observance by the Pledgor of any of the
terms of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only in accordance with
Paragraph 11.7 of the HGC Credit Agreement or, if the HGC Credit Agreement is no
longer in effect, Paragraph 11.7 of the LLC Credit Agreement.
SECTION 20. PARTIES IN INTEREST. This Agreement and all obligations of
the Pledgor shall be binding upon the successors and assigns of the parties
hereto, provided, that the Pledgor may not assign or transfer its rights
hereunder without the prior written consent of the Collateral Agent.
SECTION 21. GOVERNING LAW. This Agreement and the obligations of the
Pledgor hereunder shall be deemed to be a contract under seal and shall for all
purposes be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts (excluding the laws applicable to conflicts or
choice of law).
SECTION 22. MISCELLANEOUS PROVISIONS. If any term of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity of all other
terms hereof shall be in no way affected thereby, and this Agreement shall be
construed and be enforceable as if such invalid, illegal or unenforceable term
had not been included herein. The Pledgor acknowledges receipt of a copy of this
Agreement. The descriptive
<PAGE> 71
-9-
section headings have been inserted for convenience of reference only and do not
define or limit the provisions hereof. Terms used herein without definition
which are defined in the Uniform Commercial Code of Massachusetts have such
defined meanings herein, unless the context otherwise indicates or requires.
This Agreement and any amendment hereof may be executed in several counterparts
and by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
instrument. In proving this Agreement it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
IN WITNESS WHEREOF, the Pledgor and the Collateral Agent have caused
this Agreement to be duly executed as an instrument under seal as of the date
first above written.
HUDSON GENERAL
CORPORATION
By:
---------------------------
Title:
THE FIRST NATIONAL BANK
OF BOSTON, AS COLLATERAL AGENT
By:
---------------------------
Title:
<PAGE> 72
SCHEDULE 1
PLEDGED INTERESTS
Number of Membership
Certificate Number Date of Issuance Interests
- ------------------ ---------------- ---------
Number A-1 May 31, 1996 740 Units
(effective as of June 1,
1996)
<PAGE> 73
EXHIBIT D
[Letterhead of Hudson General Corporation]
June 1, 1996
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
European American Bank
1 EAB Plaza
Uniondale, NY 11555
The Chase Manhattan Bank, N.A.
135 Pinelawn Street
Melville, NY 11747
Re: Hudson General Corporation
Ladies and Gentlemen:
I am Vice President-General Counsel of Hudson General
Corporation, a Delaware corporation ("HGC"), and have acted as counsel for HGC
in connection with the execution and delivery by HGC of the Revolving Credit
Agreement, dated as of June 1, 1996 (the "Credit Agreement") among HGC, The
First National Bank of Boston ("FNB"), in its individual capacity, European
American Bank ("EAB"), The Chase Manhattan Bank, N.A. ("Chase", and collectively
with FNB and EAB, the "Banks") and The First National Bank of Boston, as agent
for the Banks (the "Agent"), the Pledge Agreement, dated as of June 1, 1996 (the
"Pledge Agreement"), between HGC and The First National Bank of Boston, as
collateral agent (the "Collateral Agent"), and certain other agreements,
instruments and documents related to the Credit Agreement. This opinion is being
delivered pursuant to Paragraph 4A.4 of the Credit Agreement. Capitalized terms
used and not otherwise defined herein shall have the same meanings herein as in
the Credit Agreement.
In rendering the opinions set forth herein, I have examined
originals or copies, certified or otherwise identified to my satisfaction, of
the following:
(a) the Credit Agreement;
(b) the Revolving Credit Notes, each dated as of June 1, 1996,
issued by HGC to the respective Banks (each a "Note" and collectively, the
"Notes");
<PAGE> 74
The First National Bank of Boston
European American Bank
The Chase Manhattan Bank, N.A.
June 1, 1996
Page 2
(c) the Pledge Agreement;
(d) the Amended and Restated Revolving Credit Agreement, dated
as of November 25, 1992 and amended and restated as of June 1, 1996 (the "LLC
Credit Agreement") among HGC, Hudson General LLC, a Delaware limited liability
company ("Hudson LLC"), the Banks and the Agent named therein (the "LLC Credit
Agreement Secured Parties");
(e) certified copies of the Certificate of Incorporation and
By-Laws of HGC;
(f) a certified copy of certain resolutions of the Board of
Directors of HGC adopted on May 17, 1996;
(g) certificates from public officials in the State of
Delaware and in the State of New York as to the good standing of HGC in each
such jurisdiction;
(h) unfiled, but signed copies of financing statements naming
Hudson General Corporation, as debtor, and The First National Bank of Boston, as
Collateral Agent, as secured party, which I understand will be filed within ten
(10) days of the transfer of the security interest recited therein in the
offices of the Secretary of State of the State of New York and Nassau County,
New York (such filing offices, the "Filing Offices" and such financing
statements, the "Financing Statements");
(i) the Perfection Certificate of HGC (the "Perfection
Certificate"); and
(j) such other documents as I have deemed necessary or
appropriate as a basis for the opinions set forth below.
In my examination I have assumed the genuineness of all
signatures, including indorsements (other than those on behalf of HGC, with all
of which I am familiar), the legal capacity of natural persons, the authenticity
of all documents submitted to me as originals, the conformity to original
documents of all documents submitted to me as certified, conformed or
photostatic copies, and the authenticity of the originals of such copies. As to
any facts material to this opinion which I did not independently establish or
verify, I have relied upon statements and representations of officers and other
representatives of HGC and others.
Unless otherwise indicated, references in this opinion to the
"Relevant UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof in each of the State of New York and the Commonwealth of Massachusetts.
References to the "New York UCC" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York and references to the "Mass.
UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in
the Commonwealth of Massachusetts. The Credit Agreement, the Notes and the
Pledge Agreement shall hereinafter be referred to as the "Loan Documents". The
Banks, the Agent, the Collateral Agent, and the LLC Credit Agreement Secured
Parties shall hereinafter be referred to as the "Secured Parties".
<PAGE> 75
The First National Bank of Boston
European American Bank
The Chase Manhattan Bank, N.A.
June 1, 1996
Page 3
I am admitted to the Bar in the State of New York, and I
express no opinion as to the laws of any jurisdiction other than (i) the laws of
the State of New York, (ii) the General Corporation Law of the State of
Delaware, (iii) the federal laws of the United States of America, other than
such federal laws which relate to the creation and perfection of security
interests or the assignment of rights, including, without limitation, the
Federal Assignment of Claims Act of 1940, as amended and (iv) the Mass. UCC to
the extent necessary to express the opinions set forth in paragraphs 7 and 8
hereof. Each of the Loan Documents provides that it is governed by, and to be
construed in accordance with, the laws of the Commonwealth of Massachusetts. For
purposes of my opinion with respect to the laws of the Commonwealth of
Massachusetts, I have assumed with your consent and without any inquiry that the
applicable laws of the Commonwealth of Massachusetts are the same as those of
the State of New York.
My opinions are also subject to the following qualifications:
(a) I have assumed that the Credit Agreement and the Pledge
Agreement have been duly authorized, executed and delivered by the applicable
Secured Parties and are enforceable against such parties in accordance with
their respective terms;
(b) enforcement of the Loan Documents may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law);
(c) certain of the remedial provisions contained in the Pledge
Agreement, including waivers, with respect to the exercise of remedies against
the collateral may be unenforceable in whole or in part, but the inclusion of
such provisions does not affect the validity of the Pledge Agreement, and the
Pledge Agreement taken as a whole, together with applicable law, contains
adequate provisions for the practical realization of the benefits of the
security created thereby; and
(d) I express no opinion as to the effect on the opinions
expressed herein of (i) the compliance or non-compliance of any party (other
than HGC) to the Loan Documents with any state, federal or other laws or
regulations applicable to any of them, (ii) the legal or regulatory status or
the nature of the business of any of the Secured Parties, (iii) the sale or
other disposition by any of the Secured Parties of all or any portion of any
securities pledged by HGC (which will require compliance with applicable federal
and state securities laws), or (iv) any fraudulent transfer or similar laws.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, I am of the opinion
that:
1. HGC is a corporation which has been duly
incorporated and is subsisting and in good standing under the laws of the State
of Delaware, and has all requisite
<PAGE> 76
The First National Bank of Boston
European American Bank
The Chase Manhattan Bank, N.A.
June 1, 1996
Page 4
corporate power to own its property and conduct its business as now conducted
and as presently contemplated.
2. To the best of my knowledge, HGC is duly qualified
and in good standing as a foreign corporation and is duly authorized to do
business in each jurisdiction where the nature of its properties or its business
requires such qualification except for the State of Alabama.
3. The execution and delivery by HGC of the Loan
Documents, and the performance by HGC of its obligations under the Loan
Documents, are within the corporate authority of HGC, have been duly authorized
by proper corporate proceedings, will not contravene any provision of HGC's
Certificate of Incorporation or By-Laws, or contravene any provision of, or
result in the creation of any mortgage, lien, pledge, charge, security interest
or other encumbrance upon any of the property of HGC (other than liens created
under or permitted by the terms of the Loan Documents) under, any other
agreement, instrument or undertaking binding upon HGC or any property of HGC,
and do not conflict with or result in any breach or contravention of any
provision of any law, statute, rule or regulation to which HGC is subject or any
judgment, order, writ, injunction, license or permit applicable to HGC. HGC has
duly executed and delivered each of the Loan Documents.
4. Each of the Loan Documents constitutes the valid
and legally binding obligation of HGC, enforceable against HGC in accordance
with its terms. With respect to the foregoing, I express no opinion, however, as
to rights to indemnification and rights of contribution provided for in any of
the Loan Documents to the extent such rights are violative of federal or state
securities laws, rules or regulations or public policy.
5. To the best of my knowledge, except as described
in Schedule 3.8 to the Credit Agreement, there is no litigation pending or
threatened against HGC before any court, tribunal or administrative agency or
board which is of a substantial amount and which, if adversely determined, might
reasonably be expected to materially adversely affect the ability of HGC to
perform its obligations under the Loan Documents, or in respect of the Revolving
Credit Loans, after taking into account any applicable insurance coverage.
6. The execution and delivery by HGC of each of the
Loan Documents and the performance by HGC of its obligations under each of the
Loan Documents, each in accordance with its terms, do not require any approval
or consent of, or filing with, any governmental or other agency or authority
except for (a) approvals, consents and filings specified in the Loan Documents
and (b) those already obtained or made. Notwithstanding the foregoing, except as
expressly set forth in paragraphs 7 and 8 hereof, I express no opinion as to the
validity, perfection or priority of any security interest created by the Pledge
Agreement.
7. I note that the proper legal characterization of
an interest in a limited liability company is a matter not entirely free from
doubt. Accordingly, I express no opinion as
<PAGE> 77
The First National Bank of Boston
European American Bank
The Chase Manhattan Bank, N.A.
June 1, 1996
Page 5
to the proper characterization of HGC's interest in Hudson LLC. To the extent
that such interest is characterized as a "general intangible" (as defined in
Section 9-106 of the Relevant UCC) then my opinion in this paragraph 7 shall be
applicable. To the extent that such interest is characterized as a "certificated
security" (as defined in Section 8-102 of the Relevant UCC) my opinion in
paragraph 8 shall be applicable.
To the extent that HGC's interest in Hudson LLC is
characterized as a "general intangible" (as defined in Section 9-106 of the
Relevant UCC) then the provisions of the Pledge Agreement are effective to
create, in favor of the Collateral Agent for the benefit of the Secured Parties
to secure the Obligations (as defined in the Pledge Agreement), a valid security
interest under the Mass. UCC in HGC's rights in Class A units (the "Pledged
Units") of Hudson LLC identified in Schedule I hereto (the "Intangible
Collateral"). The Financing Statements are in appropriate form for filing in
each of the Filing Offices under the New York UCC. The security interest in
favor of the Collateral Agent for the benefit of the Secured Parties the
Intangible Collateral which is described in the Financing Statements will be
perfected upon the filing of the Financing Statements in the respective Filing
Offices.
My opinion in paragraph 7 with respect to the security
interest of the Collateral Agent for the benefit of the Secured Parties in the
Pledged Units is subject to the following qualifications:
(a) The security interest opinions are limited to Article 9 of
the Relevant UCC, and therefore such opinions do not address (i) laws of
jurisdictions other than the State of New York or the Commonwealth of
Massachusetts, and of the State of New York and the Commonwealth of
Massachusetts except for Article 9 of the Relevant UCC, (ii) collateral of a
type not subject to Article 9 of the Relevant UCC, and (iii) under Section 9-103
of the Relevant UCC, what law governs perfection of the security interests
granted in the collateral covered by this opinion. In addition, as noted above,
I have assumed without any inquiry that the Mass. UCC is identical in all
respects to the New York UCC;
(b) I call to your attention that under the Relevant UCC,
events occurring subsequent to the date hereof may affect any security interest
subject to the Relevant UCC including, but not limited to, factors of the type
identified in Section 9-306 with respect to proceeds; Section 9-402 with respect
to changes in name, structure and corporate identity of the debtor; Section
9-103 with respect to changes in the location of the collateral and the location
of the debtor; Section 9-316 with respect to subordination agreements; Section
9-403 with respect to continuation statements; and Sections 9-307, 9-308 and
9-309 with respect to subsequent purchasers of the collateral. In addition,
actions taken by a secured party (e.g., releasing or assigning the security
interest, delivering possession of the collateral to the debtor or another
person and voluntarily subordinating a security interest) may affect the
validity, perfection or priority of a security interest;
(c) I express no opinion with respect to the priority of the
security interest of the Collateral Agent for the benefit of the Secured Parties
in any of the Pledged Units; and
<PAGE> 78
The First National Bank of Boston
European American Bank
The Chase Manhattan Bank, N.A.
June 1, 1996
Page 6
(d) I call to your attention that becoming a member of Hudson
LLC may require compliance with the terms of the Limited Liability Company
Agreement, dated as of June 1, 1996 (the "LLC Agreement") among HGC, Hudson LLC
and the other parties named therein, or other action.
8. To the extent that HGC's interest in Hudson LLC is
characterized as a "certificated security" (as defined in Section 8-102 of the
Relevant UCC), the delivery to the Collateral Agent for the benefit of the
Secured Parties in the Commonwealth of Massachusetts of the certificates for the
Class A units of Hudson LLC identified in Schedule I hereto, together with the
Pledge Agreement, is effective under the Mass. UCC to create in favor of the
Collateral Agent for the benefit of the Secured Parties, a valid and perfected
security interest in the Pledged Units to secure the Obligations (as defined in
the Pledge Agreement). Under the Mass. UCC, no interest of any other creditor of
HGC is equal or prior to the security interest of the Collateral Agent for the
benefit of the Secured Parties in the Pledged Units.
My opinion in paragraph 8 with respect to the security
interest of the Collateral Agent for the benefit of the Secured Parties in the
Pledged Units is subject to the following qualifications:
(a) The security interest opinions are limited to Article 8 of
the Mass. UCC, and therefore such opinions do not address (i) laws of
jurisdictions other than the Commonwealth of Massachusetts, and of the
Commonwealth of Massachusetts except for Article 8 of the Mass. UCC, (ii)
collateral of a type not subject to Article 8 of the Mass. UCC, and (iii) under
Section 9-103 of the Mass. UCC, what law governs perfection of the security
interests granted in the collateral covered by this opinion. In addition, as
noted above, I have assumed without any inquiry that the Mass. UCC is identical
in all respects to the New York UCC;
(b) I call to your attention that under the Mass. UCC, events
occurring subsequent to the date hereof may affect any security interest subject
to the Mass. UCC including, but not limited to, factors of the type identified
in Section 9-306 with respect to proceeds; Section 9-402 with respect to changes
in name, structure and corporate identity of the debtor; Section 9-103 with
respect to changes in the location of the collateral and the location of the
debtor; Section 9-316 with respect to subordination agreements; Section 9-403
with respect to continuation statements; and Sections 9-307, 9-308 and 9-309
with respect to subsequent purchasers of the collateral. In addition, actions
taken by a secured party (e.g., releasing or assigning the security interest,
delivering possession of the collateral to the debtor or another person and
voluntarily subordinating a security interest) may affect the validity,
perfection or priority of a security interest;
(c) I express no opinion with respect to proceeds of, or
distributions on the Pledged Units;
(d) I have assumed that each of the Secured Parties acquired
its interest in the Pledged Units for value and in good faith and that none of
the Secured Parties has notice prior to
<PAGE> 79
The First National Bank of Boston
European American Bank
The Chase Manhattan Bank, N.A.
June 1, 1996
Page 7
or on the later of the date of delivery and the date hereof of an adverse claim
with respect to the Pledged Units;
(e) I have assumed that each of the Pledged Units is indorsed
to or registered in the name of the Collateral Agent for the benefit of the
Secured Parties or is indorsed in blank;
(f) I express no opinion with respect to the priority of the
security interests of the Collateral Agent for the benefit of the Secured
Parties in the Pledged Units against a lien creditor (as such term is defined in
Section 9-301(3) of the Mass. UCC) with respect to future advances to the extent
set forth in Section 9-301(4) of the Mass. UCC; and
(g) I call to your attention that becoming a member of Hudson
LLC may require compliance with the terms of the LLC Agreement or other action.
9. Upon the consummation of the transactions
contemplated by the Purchase Agreement, HGC shall be the registered owner of the
Pledged Units.
10. The Notes constitute "Superior Indebtedness"
under the Indenture, dated as of July 1, 1986 (the "Indenture") between HGC and
Chemical Bank Delaware, as trustee (the "Trustee") as amended by the First
Supplemental Indenture, dated as of April 22, 1996, among HGC, Hudson LLC and
the Trustee, relating to HGC's 7% Convertible Subordinated Debentures Due 2011
(the "Debentures"). The Notes are entitled to the benefits of the provisions of
such Indenture which subordinate such Debentures to "Superior Indebtedness".
This opinion is being furnished only to you and is solely for
your benefit, and is not to be used, circulated, relied upon or otherwise
referred to for any other purpose without my prior written consent provided that
the LLC Credit Agreement Secured Parties on the date hereof may rely on this
opinion on and as of the date hereof.
Very truly yours,
/s/ Noah E. Rockowitz
Noah E. Rockowitz
Vice President & General Counsel
<PAGE> 80
Schedule I to
Opinion Letter of
Noah E. Rockowitz
Dated June 1, 1996
Certificates for the Class A Units
of Hudson General LLC
---------------------
<TABLE>
<CAPTION>
Number of Certificate Date of
Registered Owner Membership Units Number Issuance
- ---------------- ---------------- ------ --------
<S> <C> <C> <C>
Hudson General 740 A-1 May 31, 1996
Corporation (effective as of
June 1, 1996)
</TABLE>
<PAGE> 81
HUDSON GENERAL CORPORATION
SUBSIDIARIES
SCHEDULE 3.1
<TABLE>
<CAPTION>
Percentage
Jurisdiction of
of Capital
Incorporation Stock Owned
------------- -----------
<S> <C> <C>
Hudson Aviation Services, Inc. California California 100%
Hudson General Coach Lines, Inc. (1) California 100%
Hudson Aviation Services, Inc. Delaware Delaware 100%
Hudson Aviation Services, Inc. Massachusetts 100%
Hudson Aviation Services-Oakland, Inc. California 100%
Hudson Kohala Inc. Delaware 100%
Hudson General LLC Delaware 74%
</TABLE>
(1) Owned by Hudson Aviation Services, Inc. California
<PAGE> 82
HUDSON GENERAL CORPORATION
LITIGATION
SCHEDULE 3.8
1. Texaco Canada Inc. (now McColl-Frontenac Inc.) v.
Petro-Canada Inc., Hudson General Aviation Services Inc.
and Hudson General Corporation
In 1988, Texaco Canada Inc. ("Texaco") (now McColl-Frontenac Inc.)
instituted a lawsuit in the Supreme Court of Ontario, Canada against HGC,
Aviation and Petro-Canada Inc., the corporation which supplied aviation fuel for
Aviation's fixed base operations. The suit's allegations, as amended, are that
the defendants interfered with contractual and fiduciary relations, conspired to
injure, and induced the breach of a fuel supply agreement between Texaco and
Innotech Aviation Limited ("Innotech") in connection with the purchase by
Aviation from Innotech in 1984 of certain assets of Innotech's airport ground
services business. The suit seeks compensatory and punitive damages totaling
$110,000,000 (Canadian) plus all profits earned by the defendants subsequent to
the alleged breach. The trial of this suit commenced on May 6, 1996 and is
anticipated to be lengthy. Innotech (which due to a name change is now called
Aerospace Realties (1986) Limited ("Aerospace")) had agreed to defend and
indemnify HGC and Aviation against claims of whatever nature asserted in
connection with, arising out of or resulting from the fuel supply agreement with
Texaco. By a letter dated February 15, 1996, HGC was notified by Aerospace that
Aerospace has entered into a liquidation phase and can no longer defray the cost
of defending this lawsuit or pay for any damages resulting therefrom. HGC's
management believes, and counsel for HGC and Aviation has advised based on
available facts, that HGC and Aviation will successfully defend this action.
2. Michael and Kerri Balletta, Melody and Jeffrey Gross, James and Bari
Rodgers v. Russell Worrell, et. al.
These three lawsuits, which have been consolidated, were commenced in
1991 by the parents of three children and allege that the children were sexually
abused by the driver and matron of a school bus operated by Valley Transit
("Valley") used to transport handicapped children to special schools under
contract with the County of Nassau, N.Y. (the "County"). Besides the driver and
matron, the defendants include Valley, the County, the local school district of
each child and HGC. HGC provides management services to the County with respect
to the County's program to transport handicapped school children, but does not
itself operate the transportation services. The lawsuits seek a total of
$150,000,000 of compensatory and $150,000,000 of punitive damages.
The alleged intentional torts (which were not committed by HGC) and
punitive damages may not be covered by insurance. In the Management Services
Agreement between HGC and the County, the County has agreed to indemnify HGC,
and to cause the transportation contractor to indemnify HGC, against claims
arising out of or in connection with the conduct or operation of the
transportation services and any acts of the contractor and its employees. The
insurance company for Valley is defending HGC pursuant to an insurance policy
under which HGC is an additional insured.
<PAGE> 83
HUDSON GENERALCORPORATION
ENVIRONMENTAL NOTICES
SCHEDULE 3.18(b)
1. Salt Lake City-County Health Department
Notice of Violation and Order of Compliance
HDWQR 21/2-14-91
This Notice and Order results from a spill on February 13, 1991 of
approximately 4,500 gallons of jet fuel at the Company's fuel farm at Salt Lake
City International Airport. The spill occurred when the driver of an
unaffiliated company's fuel delivery truck overfilled one of the Company's fuel
storage tanks. No fine or other penalty has been assessed against the Company.
The Company took immediate action to remove surface contamination and
is cooperating with the Salt Lake City Airport authorities in the environmental
investigation to determine the impact of the spill on subsurface soil and ground
water. The Company has also brought a lawsuit against the fuel delivery company
which caused the spill.
2. Vancouver International Airport Authority
Aviation is in the process of cleaning up soil contaminated by two
leaking underground waste oil tanks on one of its former leaseholds at Vancouver
International Airport, which tanks were negligently installed by a preceding
leaseholder. Aviation has reserved its rights against this leaseholder.
3. Massport Environmental Claim
In April 1994, a law firm representing the Massachusetts Port Authority
("Massport") sent a letter (the "Original Demand") to thirty-seven (37)
companies, including HGC, notifying the addressees that Massport believed that
they were liable for contamination of soil and groundwater at Logan
International Airport in East Boston, Massachusetts (the "Airport"). Massport
claimed that it was performing response actions at the Airport, and stated that
it was seeking "contribution, reimbursement and payment of an equitable share of
the costs of past, current and future response actions undertaken by
Massport...".
The Original Demand identified twenty-four (24) spills of fuel, oil and
hydraulic fluid at various places at the Airport which allegedly had been caused
by HGC between January 1982 and September 1992. In addition, the Original Demand
proposed a settlement by which HGC would pay a per capita share of past response
costs (such share to be a minimum of $311,761) and agree to pay a per capita
share of all future response costs or undertake to perform all necessary future
response actions at locations where it had releases.
<PAGE> 84
HUDSON GENERAL CORPORATION
ENVIRONMENTAL NOTICES
SCHEDULE 3.18(B)
In July 1994, HGC responded to the Original Demand, raising numerous
objections to Massport's allegations and requesting considerable additional
information in Massport's possession.
Following an informational meeting held by Massport in September 1994
for all parties which had received the Original Demand, Massport sent a letter
dated October 5, 1994 to HGC (the "Massport Proposal") clarifying its position
and proposing a greatly reduced settlement payment. The Massport Proposal first
proposed a cash-out payment by HGC for past response costs of $29,968 in respect
of a reduced total of twenty-two (22) spills. (By contrast, Massport alleged a
grand total of 2,462 spills at the Airport since 1953.) The Massport Proposal
further limited Massport's claim against HGC for future response costs to three
sites where HGC allegedly had a total of only ten (10) spills. The proposed
settlement in respect of these future response costs was $526,154, bringing
Massport's aggregate settlement proposal to $556,122.
After obtaining additional information from Massport, HGC responded to
the Massport Proposal by letter dated January 20, 1995, reiterating objections
made previously and stating additional objections. However, HGC offered to pay
Massport $75,000 in return for a complete release and a mutually acceptable
settlement agreement that would include indemnification by Massport against any
claims brought against HGC by any other party, including government agencies.
HGC did not hear further from Massport until it received a letter dated
March 5, 1996 (the "Massport 1996 Letter") in which Massport stated that it had
now identified a grand total of 2,593 spills at the Airport prior to March 9,
1994. The Massport 1996 Letter proposed a revised cash-out payment by HGC for
past response costs of $32,334, and expanded Massport's claim against HGC for
future response costs to a total of twenty-seven (27) spills at five (5) sites.
Massport's proposed settlement in respect of these future response costs totaled
$1,500,347, for an aggregate settlement demand of $1,532,681.
HGC is considering how it will respond to the new Massport proposal.
4. Notices Referred to in Paragraph 3.18(b) of this Agreement Relating to
Violations, Claims, Proceedings and Other Matters Which Have Been Concluded.
<PAGE> 85
HUDSON GENERAL CORPORATION
UNDERGROUND STORAGE TANKS
SCHEDULE 3.18(c)
<TABLE>
<CAPTION>
BRANCH LOCATION CAPACITY/GALLONS
- ------ -------- ----------------
U.S.
- ----
<S> <C> <C>
JFK Building 69 4,000
4,000
350
EWR Julia Street 5,000
LAX Imperial Highway 10,000
10,000
500
HOU Fuel Farm 20,000
20,000
20,000
20,000
20,000
BOS Delta Fuel Farm Twelve (12)
(operated @ 30,000
for
Delta)
CANADA
- ------
Toronto Maintenance 500
Calgary Maintenance 200
</TABLE>
<PAGE> 86
HUDSON GENERAL CORPORATION
SCHEDULE OF INSURANCE
SCHEDULE 3.19
<TABLE>
<CAPTION>
POLICY TYPE LIMITS DEDUCTIBLE
- ----------- ------ ----------
<S> <C> <C>
Commercial Blanket Bond $ 3Mill $25,000
Airport Liability 500Mill 10,000(PD)
Excess Auto * 25Mill 0
Directors & Officers Liability 10Mill 5-100,000
Excess Directors & Officers Liability 10Mill 0
Fiduciary Liability 4Mill 1,000
General/Auto Liability 2Mill 500,000
Worker's Compensation (U.S.) Statutory 500,000
Worker's Compensation (Canada) Statutory 0
Pollution Liability 2Mill 100,000
Property - Primary 10Mill 50/100,000(PP/Real)
Property - Excess 10Mill 0
Cargo Legal Liability * 25Mill 10,000
Warehouseman's LL (JFK) 20Mill 50,000
Warehouseman's LL (Orlando) 5Mill 2,500
Contractor's Environmental Impairment Liability 10Mill 100,000
General/Auto Liability (Buses) 1Mill 50,000
General/Auto Liability Excess (Buses) 1Mill 0
</TABLE>
* Included under Airport Liability Policy.
<PAGE> 87
HUDSON GENERAL CORPORATION
SCHEDULE OF INDEBTEDNESS
SCHEDULE 5.10
7% Convertible Subordinated Debentures due 2011.............. $ 28,901,000
Revolving Credit Agreement dated as of June 1,
1996......................................................... 0
<PAGE> 88
HUDSON GENERAL CORPORATION
SCHEDULE OF LIENS
SCHEDULE 5.11
Pursuant to a certain agreement with the Port Authority of New York and New
Jersey, the Port Authority has the right to purchase certain motor coaches
(buses) upon the conditions set forth in such agreements.
Mortgage Lien on certain property in Hawaii acquired by a joint venture, of
which the Company or one of its subsidiaries is a partner.
Pursuant to certain agreements with USAir, America West and Southwest Airlines
(the "Airlines"), the Airlines have the right to purchase certain hydrant
fueling carts upon the conditions set forth in such agreements.
<PAGE> 89
HUDSON GENERAL CORPORATION
SCHEDULE OF INVESTMENTS AND CONTINGENT LIABILITIES
SCHEDULE 5.13
<TABLE>
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Indemnity agreement executed on behalf of American International Group related
to a Bond for Phase III of the Kohala Ranch subdivision of Kohala
Joint Venture........................................................................... $ 1,700,000 (1)
Note receivable related to the sale of certain
property in Fort Lauderdale, Florida.................................................... $ 212,000 (4)
Advances to and accrued interest from Kohala Joint
Venture................................................................................. $ 24,963,151 (3)
Investment in Hawaii Joint Venture - net................................................ $ 15,791,821 (1)
Note receivable related to the sale of the FBO
located at Long Island MacArthur Airport................................................ $ 2,458,368 (4)
Letter of Credit drawn on Royal Bank of Canada in
favor of Vancouver Airport Authority.................................................... $ 100,000 (2)
</TABLE>
On the Books of:
(1) Hudson General Corporation and/or Hudson Kohala Inc.
(2) Hudson General Aviation Services Inc. - in Canadian dollars.
(3) Hudson Kohala Inc.
(4) Hudson General LLC
<PAGE> 1
EXHIBIT 4.4(e)
Amended and Restated Revolving Credit Agreement dated as of November 25,
1992 among Hudson General Corporation, Hudson General LLC and The First National
Bank of Boston, European American Bank, The Chase Manhattan Bank, N.A. and The
First National Bank of Boston, as agent, as amended and restated as of June 1,
1996.
<PAGE> 2
AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
AMONG
HUDSON GENERAL CORPORATION
HUDSON GENERAL LLC
AND
THE FIRST NATIONAL BANK OF BOSTON
EUROPEAN AMERICAN BANK
THE CHASE MANHATTAN BANK, N.A.
THE FIRST NATIONAL BANK OF BOSTON,
AS AGENT
DATED AS OF NOVEMBER 25, 1992
AND AMENDED AND RESTATED AS OF JUNE 1, 1996
<PAGE> 3
HUDSON GENERAL CORPORATION
HUDSON GENERAL LLC
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
TABLE OF CONTENTS
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Page
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1. THE REVOLVING CREDIT FACILITY; LETTERS OF CREDIT ...................... 2
1.1. Commitment to Lend; Existing Revolving Credit Loan .............. 2
1.2. Notes to Evidence Revolving Credit Loans ........................ 3
1.3. Election of Form of Revolving Credit Loan ....................... 3
1.4. Aggregate Loan Limit ............................................ 4
1.5. Repayment of Revolving Credit Loans ............................. 5
1.6. Revolving Credit Loans Commitment Fee ........................... 5
1.7. Letters of Credit ............................................... 5
1.8. Drawings ........................................................ 6
1.9. Letter of Credit Loan Obligations Absolute ...................... 7
1.10. Banks' Obligations in Respect of Letters of Credit .............. 8
1.11. Letter of Credit Fee ............................................ 8
1.12. Existing Letters of Credit ...................................... 8
2. CERTAIN GENERAL PROVISIONS ............................................ 9
2.1. Agent's Fee ..................................................... 9
2.2. Facility Fee .................................................... 9
2.3. Interest ........................................................ 9
2.4. Place and Mode of Payments ...................................... 10
2.5. Inability of Agent to Determine LIBO Rates; Illegality .......... 10
2.6. Indemnification for Losses ...................................... 11
2.7. Payments to be Free of Deductions ............................... 11
2.8. Change in Circumstances; Additional Costs ....................... 12
2.9. Additional Amounts Payable on Account of Credit Facilities ...... 14
2.10. Certificates .................................................... 14
2.11. Delinquent Banks ................................................ 14
2.12. Concerning Joint and Several Liability of HGC and
the Company ................................................... 15
3. REPRESENTATIONS AND WARRANTIES ........................................ 16
3.1. Organization and Qualification; Authority ....................... 16
3.2. Valid Obligation ................................................ 16
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3.3. Governmental Approvals ........................................ 17
3.4. Title to Properties; Absence of Liens ......................... 17
3.5. Financial Statements .......................................... 17
3.6. Changes ....................................................... 17
3.7. Taxes ......................................................... 18
3.8. Litigation .................................................... 18
3.9. Use of Proceeds; Regulations U and X .......................... 18
3.10. Offering by HGC or the Company ................................ 18
3.11. No Default or Violation of Law ................................ 18
3.12. No Default .................................................... 19
3.13. Franchises, Patents, Copyrights ............................... 19
3.14. No Materially Adverse Contracts ............................... 19
3.15. Holding Company and Investment Company Acts ................... 19
3.16. Certain Transactions .......................................... 19
3.17. Employee Benefit Plans ........................................ 20
3.18. Environmental Compliance ...................................... 21
3.19. Insurance ..................................................... 22
3.20. Loans as Senior Indebtedness .................................. 22
3.21. Perfection of Security Interest ............................... 23
3.22. HGC Representations and Warranties ............................ 23
4A. EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS .......................... 23
4A.1. Loan Documents ................................................ 23
4A.2. Representations and Warranties True ........................... 23
4A.3. Corporate Standing and Action ................................. 23
4A.4. Opinion of HGC's and Company's Counsel ........................ 24
4A.5. Payment of Fees ............................................... 24
4A.6. Validity of Liens ............................................. 24
4A.7. Perfection Certificate and UCC Search Results ................. 24
4A.8. Original Credit Agreement ..................................... 25
4A.9. HGC Credit Agreement .......................................... 25
4A.10. Amendment to Aviation Revolving Credit Agreement .............. 25
4A.11. Purchase Agreement ............................................ 25
4A.12. Certain Assignments ........................................... 25
4B. CONDITIONS OF REVOLVING CREDIT LOANS AND LETTERS
OF CREDIT .......................................................... 25
4B.1 Notice ........................................................ 25
4B.2. Representations and Warranties True ........................... 26
4B.3. No Adverse Change ............................................. 26
4B.4. Legality ...................................................... 26
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5. COVENANTS ........................................................... 26
5.1. Punctual Payment ............................................. 26
5.2. Financial Statements and Other Written
Materials .................................................. 27
5.3. Inspection ................................................... 28
5.4. Conduct of Business .......................................... 28
5.5. Maintenance and Insurance .................................... 29
5.6. Taxes ........................................................ 29
5.7. Ratio of Consolidated Liabilities to
Effective Net Worth ........................................ 29
5.8. Effective Net Worth .......................................... 29
5.9. Ratio of Consolidated EBDIT to Consolidated
Cash Interest .............................................. 30
5.10. Consolidated Net Loss ........................................ 30
5.11. Debt Service Coverage Ratio .................................. 30
5.12. Limitation on Borrowing ...................................... 30
5.13. Restriction on Liens ......................................... 31
5.14. Limitation on Lease Commitments .............................. 33
5.15. Investments and Contingent Liabilities ....................... 33
5.16. Merger and Sale of Assets .................................... 35
5.17. Dividends .................................................... 36
5.18. Limitations on Capital Expenditures .......................... 36
5.19. Subordinated Debt ............................................ 36
5.20. Notices ...................................................... 37
5.21. Existence; Maintenance of Properties ......................... 38
5.22. Compliance with Laws, Contracts, Licenses,
and Permits ................................................. 38
5.23. Employee Benefit Plans ....................................... 39
5.24. Use of Proceeds .............................................. 39
5.25. Limited Liability Agreement .................................. 39
5.26. Covenants in HGC Credit Agreement ............................ 40
5.27. Further Assurances ........................................... 40
6. DEFAULTS ............................................................ 40
7. AGENT'S RELATIONSHIP WITH BANKS; AGENT'S DUTIES ..................... 43
8. SETOFF .............................................................. 45
9. INDEMNIFICATION ..................................................... 45
10. SECURITY AND GUARANTIES ............................................. 46
</TABLE>
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11. MISCELLANEOUS ....................................................... 47
11.1. Notices ...................................................... 47
11.2. Copies of Certificates, Etc .................................. 47
11.3. No Waivers ................................................... 47
11.4. Massachusetts Law ............................................ 48
11.5. Expenses; Taxes .............................................. 48
11.6. Confidentiality of Information ............................... 48
11.7. Changes, Waivers ............................................. 48
11.8. Binding Effect of Agreement .................................. 49
11.9. Counterparts ................................................. 49
11.10. Entire Agreement ............................................. 49
11.11. Assignments or Participations by Banks or Affiliates ......... 49
11.12. Term of Agreement ............................................ 50
11.13. Certain Transitional Arrangements ............................ 50
11.14. Assumption of Obligations .................................... 51
11.15. Obligations of HGC ........................................... 51
</TABLE>
Exhibits:
Exhibit A - Definitions
Exhibit B - Form of Revolving Credit Note
Exhibit C - Form of Subsidiary Guaranty
Exhibit D - Form of Subsidiary Security
Agreement
Exhibit E - Form of Company Security Agreement
Exhibit F - Form of Opinion
Schedules:
Schedule 1.12 - Existing Letters of Credit
Schedule 3.1 - Subsidiaries
Schedule 3.8 - Litigation
Schedule 3.18(b) - Environmental Notices
Schedule 3.18(c) - Underground Tanks
Schedule 3.19 - Insurance
Schedule 5.12(a) - Indebtedness
Schedule 5.12(h) - Terms of Intercompany Debt
Schedule 5.13 - Liens
Schedule 5.15 - Investments
<PAGE> 7
HUDSON GENERAL CORPORATION
HUDSON GENERAL LLC
AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT
This AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT (the "Agreement")
dated as of November 25, 1992 and amended and restated as of June 1, 1996, among
Hudson General Corporation ("HGC"), a Delaware corporation having its principal
place of business at 111 Great Neck Road, Great Neck, New York 11022, Hudson
General LLC (the "Company"), a Delaware limited liability company having its
principal place of business at 111 Great Neck Road, Great Neck, New York 11022,
The First National Bank of Boston, 100 Federal Street, Boston, Massachusetts
02110, in its individual capacity ("FNB"), European American Bank, 1 EAB Plaza,
Uniondale, New York 11555 ("EAB"), The Chase Manhattan Bank, N.A., 135 Pinelawn
Street, Melville, New York 11747 ("Chase") and such other banks as may become
parties hereto from time to time in accordance with the provisions hereof (each
singly, a "Bank" and collectively, the "Banks"), and The First National Bank of
Boston as agent for the Banks (the "Agent"). Capitalized terms used in this
Agreement shall have the meanings set forth in Exhibit A attached hereto or in
the sections of this Agreement referred to in Exhibit A. All accounting terms
shall, unless otherwise specified, be given the meanings ascribed to them by
generally accepted accounting principles.
WHEREAS, HGC, the Banks and the Agent are parties to that certain
Revolving Credit and Term Loan Agreement, dated as of November 25, 1992, as
amended (as so amended, the "Original Credit Agreement"), pursuant to which the
Banks made revolving credit loans and a term loan to HGC, and issued letters of
credit for the account of HGC; and
WHEREAS, HGC has repaid in full the term loan made to it by the Banks
under the Original Credit Agreement; and
WHEREAS, HGC has formed the Company and wishes to transfer to the
Company, subject to the Collateral Agent's liens and security interests,
substantially all of the assets of HGC's aviation services business (the
"Aviation Services Business"), including, without limitation, the assets of
certain of its Subsidiaries which are actively engaged in the Aviation Services
Business and the stock of Aviation; and
WHEREAS, the Company wishes to assume, and become jointly and severally
liable with HGC for, all of HGC's obligations under the Original Credit
Agreement; and
WHEREAS, HGC, the Company, the Banks and the Agent wish to amend and
restate the Original Credit Agreement in its entirety in order to reflect the
transfer by HGC and certain of its Subsidiaries, subject to the Collateral
Agent's liens and security
<PAGE> 8
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interests, of substantially all of the Aviation Services Business to the Company
and the Company's agreement to become jointly and severally liable for HGC's
obligations under the Original Credit Agreement and to make certain other
changes to the terms and provisions of the Original Credit Agreement;
NOW, THEREFORE (the foregoing recitals being part of this Agreement),
HGC, the Company, the Banks and the Agent agree that as of the Effective Date,
the Original Credit Agreement shall be amended and restated in its entirety as
set forth herein and shall be in full force and effect as provided herein.
SECTION 1. THE REVOLVING CREDIT FACILITY; LETTERS OF CREDIT.
SECTION 1.1. COMMITMENT TO LEND; EXISTING REVOLVING CREDIT LOANS. (a)
Subject to the terms and conditions of this Agreement, including, without
limitation, the conditions precedent set forth in Paragraph 4B hereof, and upon
prior notice given to the Agent by the Company, as provided in Paragraph 1.3,
each Bank severally agrees from time to time to make loans to the Company
(individually, a "Revolving Credit Loan" and collectively, the "Revolving Credit
Loans") in an aggregate principal amount requested by the Company from time to
time between the Effective Date and the Revolving Credit Loan Maturity Date, up
to a maximum aggregate amount outstanding (after giving effect to all amounts
requested) at any one time equal to such Bank's Commitment Percentage of the
Aggregate Loan Limit, provided that the sum of the aggregate outstanding and
unpaid principal amount of all Revolving Credit Loans (after giving effect to
all amounts requested) plus the aggregate Maximum Drawing Amount of all
outstanding Letters of Credit plus the Aviation Loan Amounts shall at no time
exceed the Aggregate Loan Limit. Promptly upon receipt of a request for
Revolving Credit Loans by the Company, the Agent will notify the Banks thereof,
and each Bank will make the proceeds of its Revolving Credit Loan available in
United States dollars in immediately available funds on the requested date at
the head office of the Agent, 100 Federal Street, Boston, Massachusetts 02110.
The Revolving Credit Loans shall be made pro rata in accordance with each Bank's
Commitment Percentage. The Banks' obligations hereunder shall be several and not
joint, and except as otherwise specifically provided in this Agreement, no
Bank's obligation to lend shall be affected by any other Bank's failure to make
any Revolving Credit Loan.
(b) On and as of the Effective Date (i) all Revolving Credit Loans (if
any) outstanding under (and as defined in) the Original Credit Agreement shall
constitute Revolving Credit Loans outstanding under this Agreement, (ii) each
Base Rate Loan outstanding under (and as defined in) the Original Credit
Agreement shall constitute a Base Rate Loan outstanding hereunder, shall bear
interest from and after the Effective Date at the rate of interest for Base Rate
Loans as set forth in Paragraph 2.3 hereof and all interest accrued with respect
to such Base Rate Loan, including all interest accrued prior to the Effective
Date, shall be payable by HGC and the Company on June 30, 1996 and thereafter in
accordance with the terms of this Agreement and (iii) each LIBO Rate Loan
outstanding under (and as defined in) the Original Credit Agreement shall
constitute a LIBO Rate Loan outstanding hereunder with the same Interest Period
as was applicable to such LIBO Rate Loan outstanding under the Original Credit
Agreement, shall bear interest from and after the Effective Date at the
<PAGE> 9
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rate of interest for LIBO Rate Loans as set forth in Paragraph 2.3 hereof and
all interest accrued with respect to such LIBO Rate Loan, including all interest
accrued prior to the Effective Date, shall be payable by HGC and the Company on
the next Interest Payment Date for such LIBO Rate Loan hereunder. The
obligations of HGC and the Company with respect to all such Revolving Credit
Loans shall be subject to and governed by the applicable terms and provisions of
this Agreement and the other Loan Documents.
SECTION 1.2. NOTES TO EVIDENCE REVOLVING CREDIT LOANS. The Revolving
Credit Loans will be evidenced by separate restated promissory notes of HGC and
the Company in the form of Exhibit B attached hereto (each a "Revolving Credit
Note") appropriately completed, executed and delivered by HGC and the Company to
the Banks on the Effective Date. Prior to any transfer of a Revolving Credit
Note, each Bank shall record thereon any appropriate notations evidencing each
Revolving Credit Loan and payment of principal made thereunder. The outstanding
amount of the Revolving Credit Loans recorded on each Bank's Revolving Credit
Note shall be prima facie evidence of the principal amount thereof owing and
unpaid to such Bank, but the failure to record, or any error in so recording,
any such amount shall not limit or otherwise affect the obligations of HGC or
the Company hereunder or under any Revolving Credit Note to make payments of
principal or interest on any Revolving Credit Note when due.
SECTION 1.3. ELECTION OF FORM OF REVOLVING CREDIT LOAN. (a) As long as
no Default has occurred and is continuing and no condition which would, with
either or both the giving of notice or the lapse of time, result in a Default
has occurred and is continuing, the Banks agree from time to time between the
Effective Date and the Revolving Credit Loan Maturity Date to make Revolving
Credit Loans as either Base Rate Loans or LIBO Rate Loans, to permit conversion
of Revolving Credit Loans that are Base Rate Loans or LIBO Rate Loans to
Revolving Credit Loans of the other Type subject where applicable to Paragraph
2.6 hereof or to continue a Revolving Credit Loan as a LIBO Rate Loan for the
same Interest Period or a different Interest Period, provided that no Interest
Period shall extend beyond the Revolving Credit Loan Maturity Date, and further
provided that the aggregate outstanding principal amount of Revolving Credit
Loans having Interest Periods ending after any date on which a reduction of such
principal is required under Paragraph 1.4(a) or (b) hereof shall not exceed the
aggregate principal balance of Revolving Credit Loans permitted to be
outstanding after such date. Each Base Rate Loan made on any single occasion
shall be in the minimum aggregate principal amount of $100,000 or an integral
multiple thereof. Each LIBO Rate Loan, or a conversion thereto or a continuation
thereof, made on any single occasion shall be in the minimum aggregate principal
amount of $1,000,000 or if higher, in integral multiples of $250,000.
(b) Each Revolving Credit Loan shall be made, each conversion of a
Revolving Credit Loan from one Type to another Type and each continuation of a
Revolving Credit Loan as a LIBO Rate Loan for the same Interest Period or a
different Interest Period shall occur, upon notice (confirmed in writing, if
oral) given to the Agent by the Company no later than:
<PAGE> 10
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(i) if a Base Rate Loan, the same Business Day prior to 10:00
a.m. (Boston time); or
(ii) if a LIBO Rate Loan, 11:00 a.m. (Boston time), three
Business Days prior to commencement of the applicable Interest Period.
In the notice, the Company shall specify the amount of such Revolving Credit
Loan and, if a LIBO Rate Loan, the applicable Interest Period. Each notice with
regard to borrowing or a conversion to or a continuation of a LIBO Rate Loan
shall be irrevocable and binding upon the Company. Any LIBO Rate Loan shall
automatically convert to a Base Rate Loan at the end of the applicable Interest
Period unless the Company in accordance with the procedures set forth in this
Paragraph 1.3 shall give the requisite notice to continue such LIBO Rate Loan
for the same or a different Interest Period.
SECTION 1.4. AGGREGATE LOAN LIMIT. (a) The "Aggregate Loan Limit" shall
initially be $18,000,000 and shall be irrevocably reduced (i) on the last day of
each March, June, September and December commencing on the first such date after
the Reduction Commencement Date, and thereafter until the Revolving Credit Loan
Maturity Date, or until the Company has elected to reduce the full remaining
amount of the Aggregate Loan Limit as provided in the following clause (iv) and
the Revolving Credit Loans are repaid in full, by 1/16 of the Aggregate Loan
Limit in effect at the close of business on the Reduction Commencement Date,
(ii) from time to time in accordance with the parenthetical of Paragraph
5.13(f)(ii) hereof, (iii) from time to time in accordance with Paragraph
5.16(a)(iv) hereof, and (iv) by such amounts by which the Company may from time
to time, upon three Business Days' prior written notice to the Banks, elects to
reduce the same (in integral multiples of $100,000 or in the full remaining
amount of the Aggregate Loan Limit). Any reduction in the Aggregate Loan Limit
which occurs after the Reduction Commencement Date, by reason of application of
clause (ii), clause (iii) or clause (iv) above shall be applied pro rata to
reduce the remaining required reductions in the Aggregate Loan Limit under
clause (i) above. On the effective date of any reduction, there shall become due
and payable and HGC and the Company will, jointly and severally, pay or cause to
be paid the amount, if any, by which the sum of the aggregate outstanding and
unpaid principal amount of all Revolving Credit Loans plus the aggregate Maximum
Drawing Amount of all outstanding Letters of Credit plus the Aviation Loan
Amounts, exceeds the reduced Aggregate Loan Limit on the effective date of such
reduction. Each repayment of Revolving Credit Loans shall be made ratably among
the Banks in accordance with their Commitment Percentages and each reduction in
the Aggregate Loan Limit shall be made ratably among the Banks in accordance
with their Commitment Percentages.
(b) Upon the written request by the Company to the Banks received by
the Banks no later than 90 days prior to the Reduction Commencement Date and the
written consent of all of the Banks (such consent to be given at the sole
discretion of each Bank), the Initial Revolving Period may be extended for
successive annual periods and the Reduction Commencement Date and the Revolving
Credit Loan Maturity Date shall be reset accordingly. In the event that any
revolving period is extended, HGC and the Company shall (A) (i) execute and
deliver to each of the Banks restated Revolving Credit Notes reflecting the
extended Revolving Credit Loan Maturity Date
<PAGE> 11
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and each of the Banks shall return to HGC and the Company the existing Revolving
Credit Notes, or (ii) execute and deliver to each of the Banks a letter
authorizing such Bank to change the Revolving Credit Loan Maturity Date set
forth in such Bank's existing Revolving Credit Note to the extended Revolving
Credit Loan Maturity Date and (B) provide each Bank with such evidence of
existence and due authorization of such extended period of borrowing, including
an opinion of counsel to HGC and the Company as to the due execution, delivery,
validity and binding effect of such Revolving Credit Note as restated or
extended, as such Bank reasonably may request. In no event shall any revolving
period be extended unless at the time of such extension each of the conditions
precedent to the making of a Revolving Credit Loan set forth in Paragraph 4B of
this Agreement has been satisfied.
SECTION 1.5. REPAYMENT OF REVOLVING CREDIT LOANS. The sum of the
aggregate outstanding and unpaid principal amounts of all Revolving Credit Loans
plus the aggregate Maximum Drawing Amounts of all outstanding Letters of Credit
plus the Aviation Loan Amounts shall at no time exceed the Aggregate Loan Limit,
and HGC and the Company, jointly and severally, will make or cause to be made
such payments on account of principal as are necessary to comply with the
foregoing limitation, with accrued interest to the date of prepayment on the
principal amount prepaid. Payment in full of all obligations on or with respect
to the Revolving Credit Notes shall be due on the Revolving Credit Loan Maturity
Date and each of HGC and the Company, jointly and severally, promises to pay in
full on the Revolving Credit Loan Maturity Date all Obligations on or with
respect to the Revolving Credit Notes. HGC and the Company may at any time upon
three Business Days' prior written notice to the Agent make or cause to be made
full or partial prepayment of the Revolving Credit Loans in an integral multiple
of $100,000, with accrued interest to the date of such prepayment on the
principal amount prepaid, for pro-rata application to the Revolving Credit Loans
outstanding under the Revolving Credit Notes, with adjustments to the extent
practicable to equalize any prior prepayment not exactly in proportion, without
premium or penalty, provided that LIBO Rate Loans may be prepaid only on the
last day of the Interest Period applicable thereto (or otherwise with the
consequences set forth in Paragraph 2.6). Subject to the terms and conditions of
this Agreement, HGC and the Company may reborrow any amount so prepaid.
SECTION 1.6. REVOLVING CREDIT LOANS COMMITMENT FEE. Each of HGC and the
Company, jointly and severally, agrees to pay to the Agent, for the account of
the Banks in accordance with their respective Commitment Percentages, quarterly
in arrears on the last day of each calendar quarter commencing June 30, 1996, a
commitment fee, computed from the Effective Date at the rate of 1/2 of 1% per
annum on the aggregate daily unused portion of the Aggregate Loan Limit.
SECTION 1.7. LETTERS OF CREDIT. Subject to the terms and conditions set
forth in this Agreement, upon written request of the Company to the Letter of
Credit Bank in accordance with this Paragraph 1.7, the Letter of Credit Bank
shall issue, with pro rata participation by all of the Banks, at any time
between the Effective Date and the Revolving Credit Loan Maturity Date and
subject to the satisfaction of the conditions precedent set forth in Paragraph
4B hereof, Letters of Credit in such form as the Company and the Letter of
Credit Bank may agree for the account of the Company,
<PAGE> 12
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provided that at no time shall the aggregate Maximum Drawing Amounts of all
outstanding Letters of Credit exceed $6,000,000, and provided further that at no
time shall the sum of the aggregate outstanding and unpaid principal balance of
all outstanding Revolving Credit Loans plus the aggregate Maximum Drawing
Amounts of all outstanding Letters of Credit plus the Aviation Loan Amounts
exceed the Aggregate Loan Limit. Letters of Credit shall be issued only for the
following purposes: (i) to support the Company's insurance policies, and (ii)
for the Company's business purposes in the ordinary course of the Company's
business. Each request for issuance of a Letter of Credit shall be in writing
and shall be received by the Letter of Credit Bank at least three Business Days
prior to the proposed date of issuance. The expiry dates, amounts and
beneficiaries of the Letters of Credit will be as designated by the Company and
reasonably approved by the Letter of Credit Bank. The Letter of Credit Bank
promptly shall notify the Banks of the amounts of all Letters of Credit issued
hereunder and of any extension, reduction or termination thereof, and the Letter
of Credit Bank shall send the Banks copies of all Letters of Credit issued
hereunder as soon as reasonably practicable after the issuance thereof. The
Company may request, and the Letter of Credit Bank, upon terms and conditions
approved by the Company, shall issue, with pro rata participation by all of the
Banks, substitute Letters of Credit for the Letters of Credit to reflect
reductions in the amount of the Company's obligations supported by such Letters
of Credit. Each Letter of Credit issued by the Letter of Credit Bank hereunder
shall identify: (i) the dates of issuance and expiry of such Letter of Credit,
(ii) the amount of such Letter of Credit (which shall be a sum certain), (iii)
the beneficiary and account party of such Letter of Credit, and (iv) the drafts
and other documents necessary to be presented to the Letter of Credit Bank upon
drawing thereunder. No Letter of Credit issued hereunder shall expire after the
first anniversary of its date of issuance (provided that, at the Company's
request, Letters of Credit may contain provisions for extension or renewal,
which such extension or renewal shall be at the Banks' option, for additional
terms not in excess of one year), and in no event shall any Letter of Credit
issued hereunder expire after the Revolving Credit Loan Maturity Date. The
Company agrees to execute and deliver to the Letter of Credit Bank such further
documents and instruments in connection with any Letter of Credit issued
hereunder as the Letter of Credit Bank in accordance with its customary
practices may request.
SECTION 1.8. DRAWINGS. Each of HGC and the Company hereby, jointly and
severally, absolutely and unconditionally promises to pay the Letter of Credit
Bank as soon as possible but in any event within one Business Day after any
drawing under a Letter of Credit, in immediately available funds, the amount of
such drawing under such Letter of Credit, plus interest thereon from the date of
such drawing until repaid in full at an annual rate equal to the Base Rate in
effect from time to time. If the Company so requests in accordance with
Paragraph 4B.1 and if each of the conditions precedent to the making of a
Revolving Credit Loan set forth in Paragraph 4B of this Agreement has been
satisfied on the Business Day following a drawing under a Letter of Credit, the
amount of such drawing, plus interest thereon, for which the Letter of Credit
Bank has not been reimbursed by HGC or the Company shall become a Revolving
Credit Loan made by the Banks to the Company on such day as provided in
Paragraph 1.1 hereof bearing interest at an annual rate equal to the Base Rate
in effect from time to time. The Letter of Credit Bank shall give written notice
(which written notice shall
<PAGE> 13
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be by facsimile transmission or telex) to HGC, the Company and the Banks of the
occurrence and amount of each drawing under a Letter of Credit promptly upon the
occurrence thereof. Each Bank agrees that on the second Business Day after any
such drawing, such Bank will immediately make available to the Letter of Credit
Bank at its head office in Boston, Massachusetts, in Federal or other
immediately available funds, its ratable share of any such drawing, plus any
interest which shall have accrued thereon, provided that each Bank's obligation
shall be reduced by its pro rata share of any reimbursement by HGC or the
Company in respect of such drawing pursuant to this Paragraph 1.8. Paragraph 1.9
hereof shall govern HGC's and the Company's obligations with respect to drawings
under Letters of Credit.
SECTION 1.9. LETTER OF CREDIT LOAN OBLIGATIONS ABSOLUTE. (a) The joint
and several obligations of HGC and the Company to reimburse the Letter of Credit
Bank as provided hereunder in respect of drawings under Letters of Credit shall
rank pari passu with the obligations of HGC and the Company to repay the
Revolving Credit Loans hereunder, and shall be absolute and unconditional under
any and all circumstances and shall be secured pro rata with the other
Obligations pursuant to the Security Agreements. Without limiting the generality
of the foregoing, HGC's and the Company's obligations to reimburse the Letter of
Credit Bank in respect of drawings under Letters of Credit shall not be subject
to any defense based on the non-application or misapplication by the beneficiary
of the proceeds of any such payment or the legality, validity, regularity or
enforceability of the Letters of Credit or any related document or any dispute
between or among the Company, HGC, the beneficiary of any Letter of Credit or
any financing institution or other party to which any Letter of Credit may be
transferred. The Letter of Credit Bank may accept or pay any draft presented to
it under any Letter of Credit regardless of when drawn or made and whether or
not negotiated, if such draft, accompanying certificate or documents and any
transmittal advice are presented or negotiated on or before the expiry date of
the Letter of Credit, or any renewal or extension thereof then in effect.
Furthermore, neither the Letter of Credit Bank nor any of its correspondents
shall be responsible, as to any document presented under a Letter of Credit
which appears to be regular on its face, and appears on its face to conform to
the terms of the Letter of Credit, for the validity or sufficiency of any
signature or endorsement, for delay in giving any notice or failure of any
instrument to bear adequate reference to the Letter of Credit, or for failure of
any person to note the amount of any draft on the reverse of the Letter of
Credit.
(b) Any action, inaction or omission on the part of the Letter of
Credit Bank or any of its correspondents under or in connection with any Letter
of Credit or the related instruments, documents or property, if in good faith
and in conformity with such laws, regulations or customs as are applicable,
shall be binding upon HGC and the Company and shall not place the Letter of
Credit Bank or any of its correspondents under any liability to HGC or the
Company, in the absence of (i) gross negligence or willful misconduct by the
Letter of Credit Bank or its correspondents or (ii) the failure by the Letter of
Credit Bank to pay under a Letter of Credit after presentation of a draft and
documents strictly complying with such Letter of Credit. The Letter of Credit
Bank's rights, powers, privileges and immunities specified in or arising under
this Agreement are in addition to any heretofore or at any time hereafter
otherwise
<PAGE> 14
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created or arising, whether by statute or rule of law or contract. All Letters
of Credit issued hereunder will, except to the extent otherwise expressly
provided hereunder, be governed by the Uniform Customs and Practice for
Documentary Credits (1993 Revision), International Chamber of Commerce,
Publication No. 500, and any subsequent revisions thereof.
SECTION 1.10. BANKS' OBLIGATIONS IN RESPECT OF LETTERS OF CREDIT. Each
Bank acknowledges that each Letter of Credit issued by the Letter of Credit Bank
pursuant to this Agreement is issued by the Letter of Credit Bank on behalf of
and with the pro rata participation of all of the Banks, agrees to make the
payments required by Paragraph 1.8 hereof and agrees to be responsible for its
pro rata share of all liabilities incurred by the Letter of Credit Bank in
respect of each Letter of Credit opened or extended by the Letter of Credit Bank
hereunder for the account of the Company. Each Bank agrees with the Letter of
Credit Bank and the other Banks that its obligation to make the payments
required by Paragraph 1.8 hereof shall not be affected in any way by any
circumstances (other than the gross negligence or willful misconduct of the
Letter of Credit Bank) occurring before or after the making of any payment by
the Letter of Credit Bank pursuant to any Letter of Credit, including, without
limitation:
(a) any modification or amendment of, or any consent, waiver,
release or forbearance with respect to, any of the terms of this
Agreement or any other instrument or document referred to herein;
(b) the existence of any Default; or
(c) any change of any kind whatsoever in the financial position
or creditworthiness of HGC or the Company.
SECTION 1.11. LETTER OF CREDIT FEE. HGC and the Company shall pay to
the Letter of Credit Bank for its own account a fee in respect of each Letter of
Credit issued pursuant to Paragraph 1.7 hereof calculated at the rate of 1/4%
per annum on the Maximum Drawing Amount of each such Letter of Credit, payable
quarterly in advance during the term of such Letter of Credit, commencing upon
the date of issuance thereof. HGC and the Company also shall pay to the Letter
of Credit Bank for the accounts of the Banks (including FNB) in accordance with
their Commitment Percentages a fee in respect of each such Letter of Credit
calculated at the rate of 1-3/8% per annum on the Maximum Drawing Amount
thereof, payable quarterly in advance during the term of such Letter of Credit,
commencing upon the date of issuance thereof (the foregoing fees are referred to
collectively as the "Letter of Credit Fee"). In addition (but without
duplication), HGC and the Company shall pay to the Letter of Credit Bank for its
own account its standard processing, negotiating, amendment and administrative
fees, as determined in accordance with the Letter of Credit Bank's customary
fees and charges for similar facilities.
SECTION 1.12. EXISTING LETTERS OF CREDIT. Each of HGC, the Company and
the Banks hereby agree that from and after the Effective Date, the letters of
credit issued by FNB as letter of credit bank under the Original Credit
Agreement for the account of HGC
<PAGE> 15
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and listed and described on Schedule 1.12 attached hereto shall be Letters of
Credit for all purposes of this Agreement (including, without limitation, the
provisions of Paragraph 1.11 hereof, provided that there shall be no duplication
of the fees previously paid or payable under the Original Credit Agreement with
respect to such outstanding letters of credit), and the Banks hereby affirm
their pro rata participation in such Letters of Credit. Each of HGC and the
Company hereby affirms its liability with respect to the reimbursement
obligations under each such Letter of Credit as provided herein. The Letter of
Credit Bank, the Agent, the Banks, HGC and the Company hereby further agree that
from and after the Effective Date, the Letter of Credit Fee payable with respect
to each letter of credit listed and described on Schedule 1.12 attached hereto
shall be calculated and payable in accordance with Paragraph 1.11 hereof. The
Company and HGC represent and warrant that on the date hereof the aggregate
Maximum Drawing Amount of all outstanding Letters of Credit is $3,050,007.00.
SECTION 2. CERTAIN GENERAL PROVISIONS.
SECTION 2.1. AGENT'S FEE. Each of HGC and the Company, jointly and
severally, shall pay to the Agent annually in advance, for the Agent's own
account, an Agent's fee in the amount of $22,500 on the Effective Date and an
Agent's fee of $15,000 on each anniversary of the Effective Date during the term
of this Agreement.
SECTION 2.2. FACILITY FEE. Each of HGC and the Company, jointly and
severally, agrees to pay to the Agent for the pro rata accounts of the Banks on
the Effective Date a facility fee in the amount of $56,250.
SECTION 2.3. INTEREST. Except as otherwise provided in the last
sentence of this Paragraph 2.3, the Revolving Credit Notes shall bear interest
on the unpaid principal amount thereof not then due and payable, computed as
follows:
(a) for Base Rate Loans, at a rate per annum equal to the Base
Rate as in effect from time to time; and
(b) with respect to LIBO Rate Loans, at a rate per annum equal to
1-3/8% above the LIBO Rate determined for the applicable Interest
Period;
provided that notwithstanding anything to the contrary contained in this
Agreement or in the Revolving Credit Notes, the Banks shall not charge nor shall
HGC or the Company be required to pay interest in an amount in excess of that
permitted by applicable law. All payments of interest on Base Rate Loans shall
be made quarterly in arrears on the last day of each calendar quarter commencing
June 30, 1996, and on the date when any Base Rate Loan is paid in full. Interest
on each LIBO Rate Loan shall be payable (i) on the last day of each Interest
Period relating thereto, and (ii) if any Interest Period is longer than three
months, also on the last day of each three-month period following the
commencement of such Interest Period. Any change in the Base Rate shall result
in an immediate corresponding change in the rate of interest payable on Base
Rate Loans. The Agent shall promptly notify HGC and the Company of any change in
the Base Rate. Overdue principal of and, to the extent permitted by
<PAGE> 16
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law, overdue interest on each Revolving Credit Note shall bear interest at a
rate which is two percentage points (2%) per annum above the Base Rate in effect
from time to time, compounded monthly, whether before or after judgment. All
computations of interest and commitment fees shall be made on the basis of the
actual number of days elapsed divided by 360.
SECTION 2.4. PLACE AND MODE OF PAYMENTS. All payments due hereunder
shall be made, in immediately available funds in United States dollars, by HGC
and the Company to the Agent at its head office at 100 Federal Street, Boston,
Massachusetts 02110. Promptly upon receipt by the Agent of any payment, it shall
wire, in immediately available funds, to each Bank its applicable share (taking
into account the provisions of Paragraph 2.11 hereof) of such payment. Whenever
a payment becomes due on a day which is not a Business Day, the maturity thereof
shall be extended to the next succeeding Business Day, and interest and
commitment fees shall accrue during such extension. Each of HGC and the Company
hereby requests and authorizes the Agent to charge such entity's deposit account
with the Agent for all interest on the Revolving Credit Loans and all fees
payable hereunder on the dates when any such amounts are due.
SECTION 2.5. INABILITY OF AGENT TO DETERMINE LIBO RATES; ILLEGALITY.
(a) If the Agent shall in good faith determine that it is unable to ascertain
the LIBO Rate prior to any Interest Period, the Agent shall promptly notify HGC
and the Company of such determination (which shall be conclusive and binding on
HGC, the Company and the Banks). In such event (i) any loan request with respect
to a LIBO Rate Loan to which such Interest Period would otherwise relate shall
be deemed to be a request for a Base Rate Loan (unless HGC and the Company
withdraw their request therefor), (ii) each LIBO Rate Loan will automatically,
on the last day of the then current Interest Period relating thereto, become a
Base Rate Loan, and (iii) the obligations of the Banks to make LIBO Rate Loans
or convert Base Rate Loans to LIBO Rate Loans shall be suspended until the Agent
determines that the circumstances giving rise to such suspension no longer
exist, whereupon the Agent shall so notify HGC, the Company and the Banks. Such
determination shall be made by the Agent on the day preceding the first day of
the applicable Interest Period.
(b) Notwithstanding any other provisions herein, if any present or
future law, regulation, treaty or directive or in the interpretation or
application thereof shall make it unlawful for any Bank to make or maintain LIBO
Rate Loans, such Bank shall forthwith give notice of such circumstances to HGC,
the Company and the other Banks and thereupon (i) the obligation of such Bank to
make LIBO Rate Loans or convert Base Rate Loans to LIBO Rate Loans shall
forthwith be suspended and such Bank shall have no obligation to make LIBO Rate
Loans for purposes of Paragraph 2.11 hereof but shall make Base Rate Loans in
like amount (HGC and the Company hereby agreeing to accept such Base Rate
Loans), and (ii) such LIBO Rate Loans, if any, shall be converted automatically
to Base Rate Loans on the last day of the then current Interest Period
applicable to such LIBO Rate Loans or within such earlier period as may be
required by law. Each of HGC and the Company hereby, jointly and severally,
agrees promptly to pay the Agent for the account of such Bank, upon demand by
such Bank, any additional amounts necessary to compensate such Bank for any
<PAGE> 17
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costs incurred by such Bank in making any conversion in accordance with this
Paragraph 2.5, including any interest or fees payable by such Bank to lenders of
funds obtained by it in order to make or maintain its LIBO Rate Loans hereunder.
SECTION 2.6. INDEMNIFICATION FOR LOSSES. Without prejudice to any of
the other provisions of this Agreement, HGC and the Company will, on demand by
any Bank, at any time and from time to time and as often as the occasion
therefor may arise, indemnify such Bank against any losses, costs or expenses
which such Bank may at any time and from time to time sustain or incur as a
consequence of:
(a) the failure by the Company to borrow any LIBO Rate Loan,
convert any Base Rate Loan to a LIBO Rate Loan or continue any LIBO
Rate Loan on the date of borrowing, conversion or continuation
designated by the Company; or
(b) the failure by HGC or the Company to pay, punctually on
the due date thereof, any amount payable by HGC and the Company with
respect to or on account of any LIBO Rate Loan; or
(c) repayment or conversion by HGC or the Company of all or any
portion of any LIBO Rate Loan prior to the last day of the applicable
Interest Period, whether due to acceleration of the maturity of the
Revolving Credit Loans or due to any other reason;
such losses, costs or expenses to include, without limitation:
(i) any costs incurred by such Bank in carrying funds
which were to have been borrowed by the Company (net of any
interest or other amounts received in any redeployment of such
funds) or in carrying funds to cover the amount of any overdue
principal of or overdue interest on any of the LIBO Rate Loans;
(ii) any interest payable by such Bank to lenders of the
funds borrowed by such Bank in order to carry the funds referred
to in the immediately preceding subclause (i) (net of any interest
or other amounts received in any redeployment of such funds); and
(iii) any losses (excluding losses of anticipated profit)
incurred by such Bank in liquidating or reemploying funds acquired
from third parties to effect or maintain all or any part of any
LIBO Rate Loan.
SECTION 2.7. PAYMENTS TO BE FREE OF DEDUCTIONS. (a) All payments by HGC
and the Company hereunder shall be made without setoff or counterclaim, and free
and clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein
(excluding in the case of the Agent and each Bank, net income and profit and
franchise taxes imposed on the Agent or such Bank by the
<PAGE> 18
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jurisdiction under the laws of which the Agent or such Bank is organized or any
subdivision or taxing authority thereof or therein or by the United States of
America or any taxing authority thereof), unless HGC or the Company is compelled
by law to make such deduction or withholding. If any such obligation is imposed
upon HGC or the Company with respect to any amount payable by it hereunder, it
will pay to the Banks on the date on which such amount becomes due and payable
hereunder, such additional amount as shall be necessary to enable the Banks to
receive the same net amount which they would have received on such due date had
no such obligation been imposed upon HGC or the Company, as applicable. If HGC
or the Company shall be required by law to make such deduction or withholding,
it will deliver to the Banks tax receipts or other appropriate evidence of
payment.
(b) Each Bank organized under the laws of a jurisdiction outside the
United States, on or prior to the Effective Date, and from time to time
thereafter if requested in writing by HGC or the Company, shall provide each of
HGC or the Company with two original Internal Revenue Service forms 1001, 4224
or W-8 as appropriate, or any successor or other form prescribed by the Internal
Revenue Service, certifying that such Bank is exempt from or entitled to a
reduced rate of United States withholding tax on payments pursuant to this
Agreement. If a Bank provides a form W-8 (or any successor or related form) to
the Agent and HGC or the Company pursuant to this Paragraph 2.7, such Bank shall
also provide a certificate stating that such Bank is not a "bank" within the
meaning of section 881(c)(3)(A) of the Internal Revenue Code of 1986 and shall
promptly notify the Agent and HGC or the Company if such Bank determines that it
is no longer able to provide such certification. Upon the reasonable request of
HGC or the Company or the Agent, each Bank that has not provided the forms or
other documents, as provided above, on the basis of being a United States person
shall submit to HGC or the Company and the Agent a certificate to the effect
that it is such a "United States person" (as defined in Section 7701(a)(30) of
the Internal Revenue Code).
(c) For any period with respect to which a Bank has failed to provide
HGC or the Company with the appropriate form described in Paragraph 2.7(b)
(other than if such failure is due to a change in law occurring subsequent to
the date on which such Bank became a party hereunder), such Bank shall not be
entitled to indemnification under this Agreement with respect to taxes imposed
by the United States.
SECTION 2.8. CHANGE IN CIRCUMSTANCES; ADDITIONAL COSTS. Anything herein
to the contrary notwithstanding, if any present or future applicable law (which
expression, as used herein, includes statutes, rules and regulations thereunder
and interpretations thereof by any competent court or by any governmental or
other regulatory body or official charged with the administration or the
interpretation thereof, and requests, directives, instructions and notices at
any time or from time to time hereafter made upon or otherwise issued to any
Bank or the Agent by any central bank or other fiscal, monetary or other
authority, whether or not having the force of law) shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to
this Agreement, any Letters of Credit, such Bank's Commitment or the
Revolving
<PAGE> 19
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Credit Loans (other than taxes based upon or measured by the income or
profits of such Bank or the Agent), or
(b) materially change the basis of taxation of (except for changes
in taxes on income or profits) payments to any Bank or the Agent of the
principal of or the interest on any Revolving Credit Loans or any other
amounts payable to any Bank or the Agent hereunder with respect to the
Revolving Credit Loans, or
(c) impose or increase or render applicable (other than to the
extent specifically provided for elsewhere in this Agreement) any
special deposit, reserve, assessment, liquidity, capital adequacy or
other similar requirements, whether or not having the force of law,
against assets held by, or deposits in or for the account of, or loans
by, or letters of credit issued by, or commitments of a class of banks
including an office of any Bank, or
(d) impose on a class of banks including any Bank or the Agent any
other conditions or requirements with respect to this Agreement, any
Revolving Credit Note, any Letters of Credit, the Revolving Credit
Loans, such Bank's Commitment, or any class of loans, letters of credit
or commitments of which the Revolving Credit Loans, the Letters of
Credit or such Bank's Commitment forms a part;
and the result of any of the foregoing is:
(i) to increase the cost to any Bank or the Agent of
making, funding, issuing, renewing, extending or maintaining any
of the Revolving Credit Loans or such Bank's Commitment or any
Letter of Credit, or
(ii) to reduce the amount of principal, interest or other
amount payable to any Bank or the Agent hereunder, on account of
such Bank's Commitment, any Letter of Credit or any of the
Revolving Credit Loans, or
(iii) to require any Bank or the Agent to make any payment or
to forego any interest or other sum payable hereunder, the amount
of which payment or foregone interest or other sum is calculated
by reference to the gross amount of any sum receivable or deemed
received by such Bank or the Agent from HGC and the Company
hereunder,
then, and in each case, HGC and the Company will, promptly upon demand made by
such Bank or (as the case may be) the Agent, at any time and from time to time
and as often as the occasion therefor may arise, pay or cause to be paid to such
Bank or the Agent such additional amounts as will be sufficient to compensate
such Bank or the Agent for such additional cost, reduction, payment or foregone
interest or other sum.
<PAGE> 20
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SECTION 2.9. ADDITIONAL AMOUNTS PAYABLE ON ACCOUNT OF CREDIT
FACILITIES. If any present or future law, governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law) or the
interpretation thereof by any court or by any governmental or other regulatory
body or official charged with the administration or interpretation thereof
affects the amount of capital required to be maintained by any Bank or the Agent
or any corporation controlling such Bank or the Agent and such Bank or the Agent
determines that the amount of capital required to be maintained by it is
increased by or based upon the existence of such Banks' or the Agent's
Commitment with respect to any Revolving Credit Loans or Letters of Credit, in
any case, other than any change already reflected in the Reserve Rate then in
effect, then such Bank or the Agent shall notify HGC and the Company of such
fact (the "Notice Date"), and, in the case of a Bank, shall send a copy of such
notice to the Agent. HGC, the Company and such Bank or (as the case may be) the
Agent shall thereafter attempt to negotiate an adjustment to the compensation
payable hereunder which will adequately compensate such Bank or (as the case may
be) the Agent in light of these circumstances. If HGC, the Company and such Bank
or (as the case may be) the Agent are unable to agree to such adjustment within
thirty days of the day on which HGC and the Company receive such notice, then
commencing on the 90th day after the Notice Date, the fees and interest payable
hereunder shall increase by an amount which will, in such Bank's or (as the case
may be) the Agent's reasonable determination, provide adequate compensation.
SECTION 2.10. CERTIFICATES. A certificate signed by an officer of any
Bank or the Agent, setting forth any additional amount required to be paid to
such Bank or the Agent under Paragraphs 2.6 through 2.9 hereof, and the
computations made by such Bank or the Agent to determine such additional amount,
shall be submitted by the Bank or the Agent to HGC and the Company (and, with
respect to demands made by a Bank, to the Agent) in connection with each such
demand, and each such certificate shall, save for manifest error, constitute
prima facie evidence of the additional amount due. A claim by any Bank or the
Agent for all or any part of any additional amount due may be made promptly
before and/or after the end of the Interest Period to which such claim relates
or during which such claim has arisen, and before and/or after any repayment to
which such claim relates.
SECTION 2.11. DELINQUENT BANKS. Notwithstanding anything to the
contrary contained in this Agreement, any Bank that fails (i) to make available
to the Agent its pro rata share of any Revolving Credit Loan or any drawing
under any Letter of Credit or (ii) to comply with the provisions of Paragraph 8
with respect to making dispositions and arrangements with the other Banks, where
such Bank's share of any payment received, whether by setoff or otherwise, is in
excess of its pro rata share of such payments due and payable to all of the
Banks, in each case as, when and to the full extent required by the provisions
of this Agreement, shall be deemed delinquent (a "Delinquent Bank") and shall be
deemed a Delinquent Bank until such time as such delinquency is satisfied. A
Delinquent Bank shall be deemed to have assigned any and all payments due to it
from HGC and the Company, whether on account of outstanding Revolving Credit
Loans, interest, fees or otherwise, to the remaining nondelinquent Banks for
application to, and reduction of, their respective pro rata shares of all
outstanding Revolving Credit Loans (it being understood that any such assignment
<PAGE> 21
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shall not affect the obligation of any Bank, including the Delinquent Bank, to
make the percentage of the Revolving Credit Loans or to participate in the
issuance of Letters of Credit requested by HGC and the Company hereunder equal
to such Bank's Commitment Percentage). The Delinquent Bank hereby authorizes the
Agent to distribute such payments to the nondelinquent Banks in proportion to
their respective pro rata shares of all outstanding Revolving Credit Loans. A
Delinquent Bank shall be deemed to have satisfied in full a delinquency when and
if, as a result of application of the assigned payments to all outstanding
Revolving Credit Loans of the nondelinquent Banks, the Banks' respective pro
rata shares of all outstanding Revolving Credit Loans have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
SECTION 2.12. CONCERNING JOINT AND SEVERAL LIABILITY OF HGC AND THE
COMPANY. Subject to Paragraph 11.15 hereof, in consideration of the financial
accommodations to be provided by the Banks and the Agent hereunder for the
mutual benefit, direct and indirect, of each of HGC and the Company, and in
consideration of the undertaking of each of HGC and the Company to accept joint
and several liability for the obligations of each of them, each of HGC and the
Company jointly and severally irrevocably and unconditionally hereby accepts,
not merely as a surety but also as a co-debtor, joint and several liability with
each other hereunder with respect to the payment and performance of all of the
Obligations arising under this Agreement, it being the intention of the parties
hereto that all the Obligations shall be the joint and several obligations of
HGC and the Company without preferences or distinction among them. Subject to
Paragraph 11.15 hereof, if and to the extent that either HGC or the Company
shall fail to make any payment with respect to any of the Obligations hereunder
as and when due or to perform any of such Obligations in accordance with the
terms thereof, then in each such event, the other entity will make such payment
with respect to, or perform, such Obligations. Subject to Paragraph 11.15
hereof, the obligations of each of HGC and the Company under the provisions of
this Paragraph constitute full recourse obligations of such entity enforceable
against it to the full extent of its properties and assets, irrespective of the
validity, regularity or enforceability of this Agreement or any other
circumstance whatsoever. Subject to Paragraph 11.15 hereof, the joint and
several liability of HGC and the Company hereunder shall continue in full force
and effect notwithstanding any merger, amalgamation or any other change
whatsoever in the name, constitution or place of formation of either of HGC or
the Company, any of the Banks or the Agent. The provisions of this Paragraph are
made for the benefit of each of the Banks and the Agent and their successors and
assigns, and, subject to Paragraph 11.15 hereof, may be enforced by them from
time to time against either HGC or the Company as often as occasion therefor may
arise and without requirement on the part of any of the Banks or the Agent first
to marshall any of its claims or to exercise any of its rights against the other
entity or to exhaust any remedies available to them against the other entity or
to resort to any other source or means of obtaining payment of any of the
Obligations hereunder or to elect any other remedy. Subject to Paragraph 11.15
hereof, the provisions of this Paragraph shall remain in effect until all the
Obligations shall have been paid in full or otherwise fully satisfied and the
Commitments shall have terminated.
<PAGE> 22
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SECTION 3. REPRESENTATIONS AND WARRANTIES. Each of the Company and,
prior to the HGC Release Date, HGC jointly and severally represents and warrants
that:
SECTION 3.1. ORGANIZATION AND QUALIFICATION; AUTHORITY. (a) Each of the
Company and its Subsidiaries (i) is a corporation or, in the case of the Company
or any other limited liability company, a limited liability company, duly
organized, validly existing and in good standing under the laws of the state of
its incorporation or formation, as applicable, (ii) has all requisite power to
own its property and conduct its business as now conducted and as presently
contemplated, and (iii) is duly qualified and in good standing as a foreign
entity and is duly authorized to do business in each jurisdiction where the
nature of its properties or its business requires such qualification.
(b) The execution, delivery and performance by each of HGC, the
Company and the Guarantors of this Agreement and the other Loan Documents to
which such entity is a party, and in the case of HGC and the Company, the
borrowings hereunder and the transactions contemplated under this Agreement and
the other Loan Documents to which HGC and the Company are a party, and in the
case of each of the Guarantors, the transactions contemplated by the Loan
Documents to which such Guarantor is a party (i) are within the authority of
such entity, (ii) have been duly authorized by all necessary proceedings, (iii)
will not contravene any provision of such entity's limited liability company
agreement or charter documents, as applicable, or bylaws or operating agreement,
as applicable, or contravene any provision of, or result in the creation of any
mortgage, lien, pledge, charge, security interest or other encumbrance upon any
of the property of such entity (other than the Liens created under the Security
Documents) under, any other agreement, instrument or undertaking binding upon
such entity or any property of such entity, and (iv) do not conflict with or
result in any breach or contravention of any provision of law, statute, rule or
regulation to which such entity is subject or any judgment, order, writ,
injunction, license or permit applicable to such entity.
(c) Schedule 3.1 attached hereto is a complete and correct list
of all the presently existing Subsidiaries of the Company and the percentage of
the capital stock thereof owned by the Company or a Subsidiary of the Company,
as such schedule may be supplemented from time to time by written notice from
the Company to the Banks. Except for the Joint Ventures, neither the Company nor
any Subsidiary of the Company is engaged in any joint venture or partnership
with any other entity.
SECTION 3.2. VALID OBLIGATION. Each of this Agreement and the other
Loan Documents has been duly executed and delivered by HGC, the Company, and
each Guarantor party to such Loan Document, and each of this Agreement and the
other Loan Documents to which HGC, the Company or any Guarantor is a party
constitutes a valid and legally binding obligation of each such entity,
enforceable against such entity in accordance with its terms, except as the
enforcement of remedies may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights.
<PAGE> 23
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SECTION 3.3. GOVERNMENTAL APPROVALS. The execution, delivery and
performance of this Agreement and the other Loan Documents, the borrowings
hereunder and the transactions contemplated hereby and thereby do not require,
except as set forth in clauses (a) through (d) of Section18 of each of the
Security Agreements and clauses (a) and (b) of Section12 of the Pledge Agreement
and except for consents to the assignment of permits and licenses assigned to
the Company in connection with the Contribution which, if not obtained on or
before the Effective Date, will not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole, any approval or consent of, or
filing by HGC, the Company or any Guarantor with, any governmental or other
agency or authority or any other party, or the giving of notice to any
governmental or other agency or authority or any other party, or the recording
or the delivery to other persons of an environmental disclosure document or
statement.
SECTION 3.4. TITLE TO PROPERTIES; ABSENCE OF LIENS. Except for liens
permitted by Paragraph 5.13 hereof, each of the Company and its Subsidiaries has
good and merchantable title to all of its properties, assets and rights of every
name and nature now purported to be owned by it, free from all defects, liens,
charges and encumbrances whatsoever. The Company and its Subsidiaries have, or
have access to, everything they need to conduct the Aviation Services Business
substantially as it was being conducted by HGC and its Subsidiaries prior to the
transfer contemplated by the Purchase Agreement. The fact that certain assets
that are used by HGC and its Subsidiaries in connection with the Aviation
Services Business are not being transferred to the Company on the Effective Date
will not have a material adverse effect on the Company and its Subsidiaries,
taken as a whole.
SECTION 3.5. FINANCIAL STATEMENTS. The Company has previously furnished
to the Banks unaudited pro forma consolidated financial statements of the
Company and its Subsidiaries for the fiscal year ended June 30, 1995, and at
December 31, 1995, and for the six-month period ended on such date. Such
financial statements give effect to the Contribution and the other transactions
contemplated under the Purchase Agreement, were prepared on the basis described
in the notes to them, were prepared in accordance with generally accepted
accounting principles and fairly present the pro forma consolidated assets and
liabilities of the Company and its Subsidiaries and the consolidated results of
operations of the Company and its Subsidiaries, at the dates, and for the
periods, to which they relate.
SECTION 3.6. CHANGES. Since December 31, 1995, there have been no
changes in the Aviation Services Business or the consolidated financial
condition or results of operations of the Aviation Services Business, other than
changes in the ordinary course of business, the effect of which has not, in the
aggregate, been materially adverse to the business or financial condition of the
Company and its Subsidiaries, taken as a whole. Since the date of the Company's
formation, there have been no changes in the assets, liabilities, financial
condition or business of the Company or its Subsidiaries, other than changes in
the ordinary course of business and the Contribution, the effect of which has
not, in the aggregate, been materially adverse to the business or financial
condition of the Company and its Subsidiaries, taken as a whole.
<PAGE> 24
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SECTION 3.7. TAXES. Each of the Company and its Subsidiaries has filed
all federal, state and other tax returns required to be filed, and all taxes,
assessments and other such governmental charges due from each such entity have
been fully paid except for taxes which are being contested in good faith by
appropriate proceedings. Each of the Company and its Subsidiaries has
established on its books reserves adequate for the payment of all federal, state
and other income tax liabilities, including those being contested as aforesaid.
SECTION 3.8. LITIGATION. Except as described in Schedule 3.8 attached
hereto (as such Schedule may be supplemented by HGC and the Company from time to
time with the consent of the Majority Banks), there is no litigation pending or,
to the knowledge of HGC's or the Company's officers, threatened against the
Company or any Subsidiary of the Company before any court, tribunal or
administrative agency or board which is of a substantial amount and which, if
adversely determined, might reasonably be expected to materially adversely
affect the ability of HGC or the Company to perform its obligations hereunder or
under any of the other Loan Documents or in respect of the Revolving Credit
Loans (after taking into account any applicable insurance coverage).
SECTION 3.9. USE OF PROCEEDS; REGULATIONS U AND X. The proceeds of the
Revolving Credit Loans will be used for general corporate purposes. No portion
of any Revolving Credit Loan is to be used, and no portion of any Letter of
Credit is to be obtained, for the purpose, whether immediate or ultimate, of
purchasing or carrying any "margin security" or "margin stock," as such terms
are used in Regulations U and X of the Board of Governors of the Federal Reserve
System, 12 C.F.R. Parts 221 and 224 in violation of such regulations. Neither
the Company nor any of its Subsidiaries is engaged principally in or has as one
of its important activities the business of extending credit for the purposes of
purchasing or carrying any such "margin stock".
SECTION 3.10. OFFERING BY HGC OR THE COMPANY. None of HGC, the Company
or anyone acting on such entity's behalf has directly or indirectly offered any
interest hereunder or in the Revolving Credit Notes or any similar security for
sale to, or solicited any offer to buy any thereof from or otherwise negotiated
with respect thereto with, anyone other than the Banks and other banks. Each
Bank represents to HGC and the Company that it will not sell or otherwise
dispose of any interest in its Revolving Credit Notes so as to bring the
execution and delivery of this Agreement within the provisions of Section 5 of
the Securities Act of 1933, as now in effect or as later amended. Each of HGC
and the Company hereby notifies each of the Banks that (a) the transactions
pursuant to which the Revolving Credit Notes will be issued hereunder will not
be registered pursuant to the Securities Act of 1933 or pursuant to any state
statute or regulations governing the sale of securities generally and unless an
exemption from such registration is available, the Revolving Credit Notes must
be held indefinitely, and (b) neither HGC nor the Company has any intention to
so register in the future.
SECTION 3.11. NO DEFAULT OR VIOLATION OF LAW. None of HGC, the Company
nor any of its Subsidiaries is in violation of any provision of its charter
documents or limited liability company agreement, as the case may be, or by-laws
or operating agreement, as the case may be, or in default in any material
respect under any contract, agreement or
<PAGE> 25
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obligation to which it may be subject or by which it or any of its properties
may be bound, which default or violation might reasonably be expected to result
in a material impairment of the ability of HGC or the Company to fulfill its
obligations hereunder or under the other Loan Documents or a material impairment
of the financial condition or business of the Company and its Subsidiaries,
taken as a whole. Neither the Company nor any Subsidiary of the Company is in
violation of any law, decree, order, judgment, statute, license, rule or
regulation applicable to it or its properties or business operations, which
violation might reasonably be expected to have a material adverse effect on the
financial condition or business of the Company and its Subsidiaries, taken as a
whole.
SECTION 3.12. NO DEFAULT. No Default or event which, with notice or
lapse of time or both, would constitute a Default has occurred and is
continuing.
SECTION 3.13. FRANCHISES, PATENTS, COPYRIGHTS. Each of the Company and
its Subsidiaries possesses all franchises, patents, copyrights, trademarks,
trade names, licenses and permits, and rights in respect of the foregoing,
adequate for the conduct of its business substantially as now conducted without
known conflict with any rights of others.
SECTION 3.14. NO MATERIALLY ADVERSE CONTRACTS. Neither the Company nor
any of its Subsidiaries is subject to any charter, corporate, organizational or
other legal restriction, or any judgment, decree, order, rule or regulation that
is expected in the future to have a materially adverse effect on the business,
assets or financial condition of the Company and its Subsidiaries, taken as a
whole. Neither the Company nor any of its Subsidiaries is a party to any
contract or agreement that is expected, in the judgment of HGC's or the
Company's officers, to have any materially adverse effect on the business of the
Company and its Subsidiaries, taken as a whole.
SECTION 3.15. HOLDING COMPANY AND INVESTMENT COMPANY ACTS. Neither the
Company nor any of its Subsidiaries is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company", as
such terms are defined in the Public Utility Holding Company Act of 1935; nor is
it an "investment company", or an "affiliated company" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940.
SECTION 3.16. CERTAIN TRANSACTIONS. Except for arm's length
transactions pursuant to which the Company or any of its Subsidiaries makes
payments in the ordinary course of business upon terms no less favorable than
such entity could obtain from third parties and for transactions disclosed in
the Company's financial statements or public filings, none of the officers,
directors, Shareholders (as defined below), or employees of the Company or any
of its Subsidiaries is presently a party to any transaction with the Company or
any of its Subsidiaries (other than as Shareholders, or for services as
employees, officers and directors), including any contract, agreement or other
arrangement providing for the furnishing of services to or by, providing for
rental of real or personal property to or from, or otherwise requiring payments
to or from any officer, director, Shareholder, or employee or, to the knowledge
of the Company, any corporation, partnership, trust or other entity in which any
officer,
<PAGE> 26
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director, Shareholder, or any such employee has a substantial interest or is an
officer, director, trustee or partner. For purposes hereof, the term
"Shareholder" shall mean any Member of the Company (as defined in the Company's
Limited Liability Company Agreement) and those shareholders of any Member of the
Company who have filed with the Securities and Exchange Commission Schedules 13D
or 13G with respect to the securities of such Member of the Company pursuant to
the Securities Exchange Act of 1934, as amended.
SECTION 3.17. EMPLOYEE BENEFIT PLANS.
(a) In General. Each Employee Benefit Plan has been maintained
and operated in compliance in all material respects with the provisions of ERISA
and, to the extent applicable, the Code, including but not limited to the
provisions thereunder respecting prohibited transactions.
(b) Terminability of Welfare Plans. Under each Employee Benefit
Plan which is an employee welfare benefit plan within the meaning of Section3(1)
or Section3(2)(B) of ERISA, no benefits are due unless the event giving rise to
the benefit entitlement occurs prior to plan termination (except as required by
Title I, Part 6 of ERISA). The Company or an ERISA Affiliate, as appropriate,
may terminate each such Plan at any time (or at any time subsequent to the
expiration of any applicable bargaining agreement) in the discretion of the
Company or such ERISA Affiliate without liability to any Person.
(c) Guaranteed Pension Plans. Each contribution required to be
made to a Guaranteed Pension Plan, whether required to be made to avoid the
incurrence of an accumulated funding deficiency, the notice or lien provisions
of Section302(f) of ERISA, or otherwise, has been timely made. No waiver of an
accumulated funding deficiency or extension of amortization periods has been
received with respect to any Guaranteed Pension Plan. No liability to the PBGC
(other than required insurance premiums, all of which have been paid) has been
incurred by the Company or any ERISA Affiliate with respect to any Guaranteed
Pension Plan and there has not been any ERISA Reportable Event. Based on the
latest valuation of each Guaranteed Pension Plan (which in each case occurred
within twelve months of the date of this representation), and on the actuarial
methods and assumptions employed for that valuation, the aggregate benefit
liabilities of all such Guaranteed Pension Plans within the meaning of
Section4001 of ERISA did not exceed the aggregate value of the assets of all
such Guaranteed Pension Plans, disregarding for this purpose the benefit
liabilities and assets of any Guaranteed Pension Plan with assets in excess of
benefit liabilities, by more than $1,000,000.
(d) Multiemployer Plans. Neither the Company nor any ERISA
Affiliate has incurred any material liability (including secondary liability) to
any Multiemployer Plan as a result of a complete or partial withdrawal from such
Multiemployer Plan under Section 4201 of ERISA or as a result of a sale of
assets described in Section 4204 of ERISA. Neither the Company nor any ERISA
Affiliate has been notified that any Multiemployer Plan is in reorganization or
insolvent under and within the
<PAGE> 27
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meaning of Section 4241 or Section 4245 of ERISA or that any Multiemployer Plan
intends to terminate or has been terminated under Section 4041A of ERISA.
SECTION 3.18. ENVIRONMENTAL COMPLIANCE. (a) None of the Company, its
Subsidiaries or any operator of the Real Estate is in material violation, or
alleged material violation, of any judgment, decree, order, law, license, rule
or regulation pertaining to environmental matters, including without limitation,
those arising under the Resource Conservation and Recovery Act ("RCRA"), the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 as
amended ("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986
("SARA"), the Federal Clean Water Act, the Federal Clean Air Act, the Toxic
Substances Control Act, or any federal, state or local statute, regulation,
ordinance, order or decree relating to health, safety or the environment
(hereinafter "Environmental Laws"), which violation could reasonably be expected
to have a material adverse effect on the business, assets or financial condition
of the Company and its Subsidiaries, taken as a whole, other than those
violations which have been concluded prior to the date hereof.
(b) Except as set forth on Schedule 3.18(b) attached hereto (as
such Schedule may be supplemented by HGC and the Company from time to time with
the consent of the Majority Banks), neither the Company nor any of its
Subsidiaries has received notice from any third party including, without
limitation, any federal, state or local governmental authority: (i) that any one
of them has been identified by the United States Environmental Protection Agency
("EPA") as a potentially responsible party under CERCLA with respect to a site
listed on the National Priorities List, 40 C.F.R. Part 300 Appendix B (1986);
(ii) that any hazardous waste, as defined by 42 U.S.C. Section 9601(5), any
hazardous substances as defined by 42 U.S.C. Section 9601(14), any pollutant or
contaminant as defined by 42 U.S.C. Section9601(33) and any toxic substances,
oil or hazardous materials or other chemicals or substances regulated by any
Environmental Laws ("Hazardous Substances") which any one of them has generated,
transported or Disposed of has been found at any site at which a federal, state
or local agency or other third party has conducted or has ordered that the
Company or any of its Subsidiaries conduct a remedial investigation, removal or
other response action pursuant to any Environmental Law; or (iii) that it is or
shall be a named party to any claim, action, cause of action, complaint, or
legal or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the Release of Hazardous
Substances which might reasonably be expected to have a material adverse effect
on the assets, business or financial condition of the Company and its
Subsidiaries, taken as a whole.
(c) The Company and each of its Subsidiaries have handled the
processing, storage or Disposal of Hazardous Substances in material compliance
with all applicable Environmental Laws; and, (i) except as set forth on Schedule
3.18(c) attached hereto (as such Schedule may be supplemented by the Company and
HGC from time to time (A) with respect to disclosure of new underground tanks
installed in accordance with applicable law, without the consent of the Majority
Banks and (B) with respect to disclosure of all other matters, with the consent
of the Majority Banks), no underground tanks or other underground storage
receptacles for Hazardous
<PAGE> 28
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Substances are located on any portion of the Real Estate owned by the Company or
any of its Subsidiaries or where the Company or any of its Subsidiaries is
responsible for the maintenance or replacement of any such tanks; (ii) in the
course of any activities conducted by the Company, Subsidiaries of the Company
or operators of its Real Estate, no Hazardous Substances have been generated or
are being used on the Real Estate except in material compliance with all
applicable Environmental Laws; (iii) to the best of HGC's and the Company's
knowledge, there have been no Releases on, upon, from or into any Real Estate or
real property in the vicinity of any of the Real Estate which, through soil or
groundwater contamination, may have come to be located on any of the Real
Estate, and which might reasonably be expected to have a material adverse effect
on the value of, all of the Real Estate or on the business or financial
condition of the Company and its Subsidiaries, taken as a whole; and (iv) in
addition, any Hazardous Substances that have been generated by the Company or
any of its Subsidiaries on any of the Real Estate have in all material respects
to the extent required by law or regulation been transported offsite for
treatment or disposal and, to the best of HGC's and the Company's knowledge,
without having made any special investigation other than to review the
information and documents supplied to the Company by carriers employed by the
Company with respect to such matters, have been transported only by carriers
having an identification number issued by the EPA and have been treated or
disposed of only by treatment or disposal facilities maintaining permits as
required under applicable Environmental Laws.
SECTION 3.19. INSURANCE. Schedule 3.19 attached hereto (as such
Schedule may be supplemented from time to time by written notice from HGC and
the Company to the Agent) lists the policies and types and amounts of coverage
(including all deductibles) of theft, fire, liability, life, property, casualty,
environmental impairment and accidental spill insurance and other insurance
owned or held by HGC and the Company and its Subsidiaries as of May 1, 1996.
Such policies of insurance are maintained with, to the best of HGC's and the
Company's knowledge, financially sound and reputable insurance companies, funds
or underwriters. Such policies of insurance are of the kinds and cover such
risks and are in such amounts and with such deductibles and exclusions as are
consistent with the customary business practice of corporations of established
reputations engaged in the same or similar businesses and similarly situated.
All such policies are in full force and effect; are sufficient for compliance by
the Company and its Subsidiaries with all requirements of law and of all
agreements to which such Persons are parties; are valid, outstanding and
enforceable policies and provide that they will remain in full force and effect
through the respective dates set forth in such schedule; and coverage thereunder
will not be reduced by or terminate or lapse by reason of, the transactions
contemplated by or referred to in this Agreement or the other Loan Documents.
SECTION 3.20. LOANS AS SENIOR INDEBTEDNESS. All indebtedness of HGC and
the Company to the Banks in respect of the principal of and interest on the
Revolving Credit Notes and all contingent liabilities of HGC and the Company in
respect of Letters of Credit constitute and will constitute "Superior
Indebtedness" under the terms of the 7% Notes and senior debt however defined
under the terms of any other instrument evidencing indebtedness which purports
to be Subordinated Debt.
<PAGE> 29
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SECTION 3.21. PERFECTION OF SECURITY INTEREST. On the Effective Date,
all filings, assignments, pledges and deposits of documents or instruments shall
have been made and all other actions shall have been taken that are necessary or
advisable, under applicable law, to establish and, to the extent enumerated in
clauses (a) through (d) of Section18 of each of the Security Agreements and
clauses (a) and (b) of Section12 of the Pledge Agreement, perfect the Collateral
Agent's security interest in the Collateral. The Collateral and the Collateral
Agent's rights with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses except as arising under applicable law.
SECTION 3.22. HGC REPRESENTATIONS AND WARRANTIES. Unless and until the
HGC Release Date has occurred, each of the representations and warranties of HGC
set forth in the HGC Credit Agreement and each of the documents and instruments
executed and delivered by HGC in connection therewith, along with the
definitions contained in such representations and warranties, are hereby
incorporated herein as if set forth herein.
SECTION 4A. EFFECTIVE DATE; CONDITIONS TO EFFECTIVENESS. This Agreement
shall not become effective and the Original Credit Agreement shall remain in
full force and effect unless and until the date (the "Effective Date") that each
of the following conditions precedent is satisfied, provided that if the
Effective Date does not occur on or before July 31, 1996 this Agreement shall be
of no further effect.
SECTION 4A.1. LOAN DOCUMENTS. (a) Each of the Loan Documents shall
have been duly executed and delivered as contemplated hereby and shall be in
full force and effect.
(b) Executed original counterparts of each of the Loan Documents
shall have been furnished to the Agent.
SECTION 4A.2. REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties contained in Paragraph 3 shall be true and accurate on and as of
the date of this Agreement and as though made on and as of the Effective Date,
no Default shall have occurred and be continuing, and no condition shall exist,
or would result from the consummation of the transactions on the Effective Date
which, with lapse of time or the giving of notice or both, would constitute a
Default. The Banks shall have received from HGC and the Company a certificate
dated the Effective Date and signed by the President or Chief Financial Officer
of each of HGC and the Company as to the matters set forth in this Paragraph
4A.2 and Paragraph 4A.3 hereof, and as to the aggregate Maximum Drawing Amount
of all outstanding Letters of Credit on the Effective Date.
SECTION 4A.3. CORPORATE STANDING AND ACTION. The Agent shall have
received, with copies for each Bank:
(a) certificates of the Secretary of State of the State of Delaware as
to the due good standing of HGC and the qualification of the Company dated as of
a recent date,
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(b) certificates of the Secretary of State of the State of New York
and of each other state in which HGC and/or the Company is required to qualify
to do business as a foreign entity as to the good standing of HGC and/or the
qualification of the Company as a foreign entity dated as of a recent date, and
(c) a certificate of the Secretary or Assistant Secretary of each of
HGC and the Company, dated the Effective Date, certifying (i) that attached
thereto is a true and complete copy of the Certificate of Incorporation or
Limited Liability Company Agreement, as applicable, and the bylaws or operating
agreement, as applicable, of such entity, each as amended to the Effective Date,
or, with respect to HGC, that its Certificate of Incorporation and bylaws have
not been amended or supplemented since November 25, 1992, (ii) that attached
thereto is a true and complete copy of resolutions of the Board of Directors or
Board of Member Representatives, as applicable, of such entity authorizing the
execution and delivery of this Agreement, the borrowings hereunder and the
execution and delivery of the other Loan Documents to which such entity is a
party, which resolutions are in full force and effect without modification on
the Effective Date, and (iii) the incumbency and signatures of the officers of
such entity executing the Loan Documents to which such entity is a party and any
other instrument or document delivered by such entity in connection herewith or
therewith.
SECTION 4A.4. OPINION OF HGC'S AND COMPANY'S COUNSEL. The Agent shall
have received an opinion, dated the Effective Date, addressed to the Banks from
Noah Rockowitz, Vice President - General Counsel, counsel for HGC and the
Company, substantially in the form attached hereto as Exhibit F. Such counsel
may rely on the advice and opinions of Canadian counsel as to matters of
Canadian law.
SECTION 4A.5. PAYMENT OF FEES. Each of HGC and the Company shall have
authorized (in writing or verbally) the Agent to charge HGC's or the Company's
account on the Effective Date for the facility fee, the Agent's fee, the
commitment fee under the Original Credit Agreement and, if applicable, the
Letter of Credit Fee, pursuant to Paragraphs 2.1, 2.2, 1.1 and 1.11 hereof.
SECTION 4A.6. VALIDITY OF LIENS. The Security Documents shall be
effective to continue in favor of the Collateral Agent for the benefit of the
Banks a legal, valid and enforceable first priority (except for liens permitted
under Paragraph 5.13 hereof entitled to priority under applicable law) security
interest in the Collateral. All filings, recordings, deliveries of instruments
and other actions necessary or desirable in the opinion of the Collateral Agent
to protect and preserve such security interests shall have been duly effected,
except as enumerated in clauses (c) through (d) of Section18 of each of the
Security Agreements if such actions are not then required. The Collateral Agent
shall have received evidence thereof in form and substance satisfactory to the
Collateral Agent.
SECTION 4A.7. PERFECTION CERTIFICATE AND UCC SEARCH RESULTS. The
Collateral Agent shall have received from the Company, a completed and fully
executed Perfection Certificate (as defined in the Company Security Agreement)
and the results of UCC searches with respect to the Company Collateral,
indicating no liens other than liens permitted under Paragraph 5.13 hereof or
for which UCC lien releases
<PAGE> 31
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satisfactory to the Collateral Agent have been delivered to the Collateral Agent
and otherwise in form and substance satisfactory to the Collateral Agent.
SECTION 4A.8. ORIGINAL CREDIT AGREEMENT. All fees, including the
Commitment Fee (as defined in the Original Credit Agreement), expenses and other
amounts payable pursuant to the Original Credit Agreement, excluding all
outstanding Revolving Credit Loans (as defined in the Original Credit Agreement)
and accrued interest thereon, shall have been paid in full.
SECTION 4A.9. HGC CREDIT AGREEMENT. The HGC Credit Agreement and all
other Loan Documents (as defined in the HGC Credit Agreement) shall have been
duly executed and delivered as contemplated thereby and shall be in full force
and effect. The conditions set forth in Paragraph 4A of the HGC Credit Agreement
shall have been satisfied or waived pursuant to the terms thereof.
SECTION 4A.10. AMENDMENT TO AVIATION REVOLVING CREDIT AGREEMENT. Each
of Aviation and the lenders which are parties to the Aviation Revolving Credit
Agreement on the Effective Date shall have executed and delivered an amendment
to the Aviation Revolving Credit Agreement which is satisfactory to the Banks in
all respects and such amendment and the Aviation Revolving Credit Agreement as
amended by such amendment shall be in full force and effect.
SECTION 4A.11. PURCHASE AGREEMENT. HGC and its Subsidiaries shall have
transferred, or have given the Company and its Subsidiaries access to, all
assets necessary for the Company and its Subsidiaries to conduct the Aviation
Services Business (including the stock of Aviation) substantially as it was
being conducted by HGC and its Subsidiaries before the transfer of assets
contemplated by Paragraph 5.2 of the Purchase Agreement (the "Contribution").
The Closing under and as defined under the Purchase Agreement shall have
occurred in accordance with the terms of such agreement. The Banks shall have
received from HGC and the Company a certificate dated the Effective Date and
signed by the President or Chief Financial Officer of each of HGC and the
Company as to the matters set forth in this Paragraph 4A.11 along with certified
copies of the fully-executed Purchase Agreement and all documents and
instruments executed or delivered in connection therewith.
SECTION 4A.12. CERTAIN ASSIGNMENTS. Chase shall have assigned such
interests, rights and obligations under the Original Credit Agreement to FNB and
EAB as shall be necessary to achieve the Commitment Percentages set forth
herein.
SECTION 4B. CONDITIONS OF REVOLVING CREDIT LOANS AND LETTERS OF CREDIT.
The obligation of the Banks to make any Revolving Credit Loan on or after the
Effective Date and the obligation of the Letter of Credit Bank, with the pro
rata participation of the Banks, to issue any Letter of Credit on or after the
Effective Date, is subject to the following conditions precedent.
SECTION 4B.1. NOTICE. In the case of Revolving Credit Loans, the Agent
shall have received from the Company in accordance with Paragraph 1.3 a written,
telegraphic or telephonic (confirmed in writing) request for Revolving Credit
Loans, signed by the
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President or the Chief Financial Officer of the Company. Such request, without
more, will constitute a certification by the Company and such officers as to the
matters set forth in Paragraphs 4B.2 and 4B.3 hereof. In the case of a Letter of
Credit, the Letter of Credit Bank shall have received from the Company in
accordance with Paragraph 1.7 a written, telegraphic or telephonic (confirmed in
writing) request for the issuance of a Letter of Credit and a signed letter of
credit application in form and substance satisfactory to the Letter of Credit
Bank (which will not contain any terms which are inconsistent with the terms of
this Agreement), each signed by the President or the Chief Financial Officer of
the Company. Such request, without more, will constitute a certification by the
Company and such officers as to the matters set forth in Paragraphs 4B.2 and
4B.3 hereof.
SECTION 4B.2. REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties contained in Paragraph 3 shall be true and accurate in all
material respects on and as of the date of this Agreement and as though made on
and as of the date of the Revolving Credit Loan or Letter of Credit, as the case
may be (except to the extent that such representations and warranties relate to
an earlier date), no Default shall have occurred and be continuing, or would
result from the proposed Revolving Credit Loan or Letter of Credit, as the case
may be, and no condition shall exist, or would result from the proposed
Revolving Credit Loan or Letter of Credit, as the case may be, which, with lapse
of time or the giving of notice or both, would constitute a Default.
SECTION 4B.3. NO ADVERSE CHANGE. As of the date of any Revolving Credit
Loan or Letter of Credit, as the case may be, (a) there shall have been no
material adverse change since December 31, 1995 in the Aviation Services
Business and (b) there shall have been no material adverse change since the date
of the formation of the Company in the business or financial affairs of the
Company and its Subsidiaries, taken as a whole.
SECTION 4B.4. LEGALITY. The making of the Revolving Credit Loan or
Letter of Credit, as the case may be, shall not contravene any law or rule or
regulation thereunder binding upon HGC, the Company, any Subsidiary of HGC or
the Company or any Bank.
SECTION 5. COVENANTS. During the term of this Agreement and so long as
any Revolving Credit Loan, Letter of Credit or Revolving Credit Note is
outstanding or any amounts are owed hereunder or any Bank has any obligation to
make Revolving Credit Loans or the Letter of Credit Bank has any obligation to
issue, extend or renew any Letters of Credit with the pro rata participation of
the Banks, each of HGC (but only prior to the HGC Release Date) and the Company,
jointly and severally, agrees that:
SECTION 5.1. PUNCTUAL PAYMENT. It will duly and punctually pay or cause
to be paid the principal and interest on the Revolving Credit Loans, the amount
of any drawing under a Letter of Credit, the commitment fees, the Agent's fee,
the Letter of Credit Fee and all other amounts provided for in this Agreement or
in any other Loan Document, all in accordance with the terms of this Agreement
and such other Loan Documents.
<PAGE> 33
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SECTION 5.2. FINANCIAL STATEMENTS AND OTHER WRITTEN MATERIALS. It will
furnish to each Bank:
(a) as soon as available but in any event within ninety days
after the end of each of its fiscal years, consolidated and
consolidating balance sheets of HGC and its Subsidiaries and of the
Company and its Subsidiaries as at the end of, and the related
consolidated and consolidating statements of income and consolidated
statements of cash flows for, such year, and all such statements shall
be in reasonable detail, prepared in accordance with generally accepted
accounting principles and accompanied by the opinion (as to
consolidated statements only and, with respect to the Company and its
Subsidiaries, only if such financial statements are required to be
publicly published) of (in form and substance reasonably satisfactory
to the Banks) independent public accountants of nationally recognized
standing selected by HGC or the Company, as applicable, and,
concurrently with such financial statements (if, with respect to the
Company and its Subsidiaries, such financial statements are required to
be publicly published) a written statement by such accountants that, in
the making of the audit necessary for their report and opinion upon
such financial statements (but without any special or additional audit
procedures for the purpose), they have obtained no knowledge of any
Default, or if in the opinion of such accountants any Default exists,
they shall disclose in such written statement the nature and status
thereof, and in either case such statement shall set forth calculations
showing compliance or noncompliance with Paragraphs 5.7 through 5.11
hereof (it being understood, however, that such accountants shall not
be liable, directly or indirectly, to anyone for failure to obtain
knowledge of any Default or the status thereof);
(b) as soon as available but in any event within sixty days after
the end of each of the first three fiscal quarters of each fiscal year
of the Company and its Subsidiaries, consolidated and consolidating
balance sheets as at the end of such fiscal quarter, and consolidated
and consolidating statements of income and consolidated cash flows for
the portion of the fiscal year then ended, all in reasonable detail and
prepared in accordance with generally accepted accounting principles,
certified by the Chief Financial Officer of the Company, subject,
however, to audit and year-end adjustments;
(c) as soon as available and if prepared in the normal course,
but in any event within 15 days of its preparation, the budget report
for the portion of the fiscal period then ended, in reasonable detail
and prepared in a manner consistent with past practices;
(d) promptly upon receipt by the Company, copies of all
management letters and other reports of substance submitted to the
Company or any Subsidiary of the Company by independent public
accountants in connection with any annual or interim audit of the books
of the Company or such Subsidiary by such accountants;
<PAGE> 34
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(e) promptly as they become available, (i) copies of all such
financial statements, reports and proxy statements as it shall send to
or make available to its stockholders, and (ii) copies of all reports
filed by it with the Securities and Exchange Commission;
(f) concurrently with each delivery of financial statements
pursuant to clauses (a) or (b) of this Paragraph 5.2, a certificate
signed by the Chief Financial Officer of the Company setting forth
calculations showing, when required, compliance with Paragraphs 5.7
through 5.11 hereof, certifying as to the matters set forth in
Paragraph 5.16(a)(v) hereof with respect to dispositions of equipment
made during the period covered by such financial statements and stating
that a review of the activities of, the Company and its Subsidiaries
during the period covered by such financial statements has been made
under the immediate supervision of the signers with a view to
determining whether, during such period, the Company has kept,
observed, performed and fulfilled each and every covenant and condition
of this Agreement and either (i) stating that, to the best of their
knowledge and belief, there neither exists on the date of such
certificate, nor existed during such period, any Default, or (ii) if
any such Default existed or exists, specifying the nature thereof, the
period of existence thereof and what action the Company has taken, is
taking or proposes to take with respect thereto; and
(g) with reasonable promptness, such other information, including,
without limitation, quarterly reports as to the aging of accounts
receivable, as any Bank may reasonably request.
SECTION 5.3. INSPECTION. The Company will permit any representative or
representatives designated by any Bank, at such Bank's expense and subject to
applicable laws and regulations, to visit and inspect any of the properties of
the Company and its Subsidiaries and on request to examine the books of account,
records, reports and other papers of the Company and its Subsidiaries (and to
make copies thereof and extracts therefrom) and to discuss the affairs and
finances of the Company and its Subsidiaries with its officers, all at such
reasonable times and as often as may be reasonably requested.
SECTION 5.4. CONDUCT OF BUSINESS. The Company and each of its
Subsidiaries will:
(a) do or cause to be done all things necessary to keep in full
force and effect its existence, rights and franchises and will maintain
and keep in full force and effect all licenses and permits necessary to
the proper conduct of its business;
(b) not change the nature or character of its business from that
described in the Proxy, after giving effect to the Contribution and the
transactions contemplated under the Purchase Agreement, except that the
Company or any Subsidiary of the Company, as the case may be, may
withdraw from any business activity which it deems unprofitable or
unsound; and
<PAGE> 35
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(c) not, except for arm's length transactions pursuant to which
the Company or such Subsidiary makes payments in the ordinary course of
business upon terms no less favorable than such entity could obtain
from third parties and for transactions disclosed in the Company's
financial statements or public filings, enter into any transaction with
any officer, director, Shareholder or employee of the Company or any
Subsidiary of the Company (other than as Shareholders or for services
as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services
to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director,
Shareholder or employee or any corporation, partnership, trust or other
entity in which to the knowledge of the Company any officer, director,
Shareholder, or any employee has a substantial interest or is an
officer, director, trustee or partner.
SECTION 5.5. MAINTENANCE AND INSURANCE. The Company will maintain and
keep its properties, and will cause each of its Subsidiaries to maintain and
keep its properties, in good repair, working order and condition, and from time
to time the Company will make and will cause each of its Subsidiaries to make
all needed and proper repairs, renewals, replacements, additions and
improvements thereto so that its business may be properly and advantageously
conducted at all times in accordance with the terms of this Agreement. The
Company will maintain and will cause each of its Subsidiaries to maintain, with
financially sound and reputable insurers, insurance with respect to its
properties and business against such casualties and contingencies, of such types
and in such amounts as is customary in the case of corporations of established
reputations engaged in the same or similar businesses and similarly situated.
SECTION 5.6. TAXES. The Company will pay or cause to be paid and
discharged all taxes, assessments or governmental charges on or against it or
any of its Subsidiaries or its or their properties, sales and activities, or any
part thereof, or upon the income or profits therefrom prior to the time when
they become delinquent, as well as all claims for labor, materials or supplies
that if unpaid might by law become a lien or charge upon any of its or their
properties provided that this covenant shall not apply to any tax, assessment,
charge, levy or claim which is being contested in good faith and with respect to
which adequate reserves have been established and are being maintained, and
provided further that the Company and each of its Subsidiaries will pay all
taxes, assessments, charges, levies and claims forthwith upon the commencement
of proceedings to foreclose any lien that may have attached as security
therefor.
SECTION 5.7. RATIO OF CONSOLIDATED LIABILITIES TO EFFECTIVE NET WORTH.
The Company will not, as at the end of each fiscal quarter in each fiscal year
of the Company, permit the ratio of (a) Consolidated Liabilities less
Subordinated Debt to (b) Effective Net Worth to equal or exceed 1.875 to 1.00.
SECTION 5.8. EFFECTIVE NET WORTH. The Company will not, as at the end
of each fiscal quarter in each fiscal year of the Company, permit Effective Net
Worth to be less than $16,000,000 at June 30, 1996 and $18,000,000 at the end of
each fiscal quarter thereafter, which requirement shall increase on June 30 of
each year beginning
<PAGE> 36
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June 30, 1997 by 25% of positive Consolidated Net Income for the fiscal
year of the Company ending on such date, with no deductions for losses,
provided that at no time shall the required Effective Net Worth under
this Paragraph 5.8 exceed $25,000,000.
SECTION 5.9. RATIO OF CONSOLIDATED EBDIT TO CONSOLIDATED CASH INTEREST.
The Company will not, as at the end of each fiscal quarter in each fiscal year
of the Company, permit the ratio of the Consolidated EBDIT for the period
consisting of such fiscal quarter and the three preceding fiscal quarters of the
Company and its Subsidiaries to Consolidated Cash Interest for the same period
to be less than 3.00 to 1.00. With respect to the fiscal quarters of the Company
ended on or prior to March 31, 1997, Consolidated EBDIT and Consolidated Cash
Interest shall be calculated based on the pro forma financial statements
referred to in Paragraph 3.5 hereof.
SECTION 5.10. CONSOLIDATED NET LOSS. The Company will not incur any
Consolidated Net Loss for any fiscal year of the Company.
SECTION 5.11. DEBT SERVICE COVERAGE RATIO. The Company will not as at
the end of each fiscal quarter in each fiscal year of the Company permit the
ratio of (i) Consolidated EBDIT for the period consisting of the four
consecutive fiscal quarters of the Company ending on such date (each such
period, a "Measuring Period"), minus the aggregate amount of federal and state
income taxes paid in cash by the Company and its Subsidiaries (net of any cash
refunds received by the Company and its Subsidiaries) during such period to (ii)
Consolidated Debt Service determined with respect to the Measuring Period (as
set forth in the definition of Consolidated Debt Service), to be less than 1.30
to 1.00. With respect to the fiscal quarters of the Company ended on or prior to
March 31, 1997, Consolidated EBDIT and Consolidated Debt Service shall be
calculated based on the pro forma financial statements referred to in Paragraph
3.5 hereof.
SECTION 5.12. LIMITATION ON BORROWING. Neither the Company nor any of
its Subsidiaries will assume, incur or suffer to exist any indebtedness for
borrowed money, except:
(a) the indebtedness existing on the date of this Agreement and
shown on Schedule 5.12(a) attached hereto and extensions, renewals and
refinancings thereof provided that neither the aggregate principal
amount of such indebtedness nor the interest rate applicable thereto is
increased as a result of such extension, renewal or refinancing;
(b) the Revolving Credit Loans and the Aviation Loans;
(c) Subordinated Debt consisting of not more than $29,000,000 in
aggregate principal amount of 7% Notes;
(d) indebtedness of Subsidiaries (other than Aviation and any
other Subsidiary, direct or indirect, of the Company not organized
under the laws of a State of the United States of America (the "Foreign
Subsidiaries")) to the Company;
<PAGE> 37
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(e) indebtedness on account of capitalized leases permitted by
Paragraph 5.14 or 5.16(a)(iv);
(f) additional indebtedness of the Company and its Subsidiaries
(including the amount of indebtedness from time to time outstanding in
transactions permitted by Paragraph 5.13(f)(ii)) to persons other than
the Company or any of its Subsidiaries of not more than $5,000,000 in
the aggregate outstanding at any one time;
(g) indebtedness of Aviation and the Foreign Subsidiaries to the
Company and its Subsidiaries to the extent permitted by Paragraph
5.15(k) hereof;
(h) unsecured Indebtedness of the Company to HGC incurred as a
result of the conversion of all or a portion of the 7% Notes into
common stock of HGC in an amount not to exceed the principal amount of
the 7% Notes so converted and any principal, premium, if any, interest
and other payments made by HGC in respect of the 7% Notes, provided
that such indebtedness is expressly subordinated to the payment and
performance of the Obligations upon substantially the terms set forth
in Schedule 5.12(h) attached hereto; and
(i) (i) the Guaranty, (ii) each Subsidiary Guaranty, and (iii)
unsecured guaranties by the Company of obligations of Subsidiaries
(other than Aviation and the Foreign Subsidiaries) aggregating no more
than $5,000,000 at any one time outstanding.
SECTION 5.13. RESTRICTION ON LIENS. Neither the Company nor any of its
Subsidiaries will create, incur, assume or suffer to exist any mortgage, pledge,
security interest, lien or other charge or encumbrance upon or with respect to
any of its property or assets, or assign or otherwise convey any right to
receive income, except:
(a) liens for taxes, fees, assessments and other governmental
charges to the extent that payment of the same may be postponed or is
not required in accordance with the provisions of Paragraph 5.6;
(b) landlords' liens in respect of rent not in default or liens
in respect of pledges or deposits under worker's compensation,
unemployment insurance, social security laws or similar legislation or
in connection with appeal and similar bonds incidental to litigation,
mechanics', laborers' and materialmen's and similar liens, if the
obligations secured by such liens are not then delinquent, and liens
securing the performance of bids, tenders, contracts (other than for
the payment of money) and statutory obligations incidental to the
conduct of the business of the Company and its Subsidiaries and which
do not in the aggregate materially detract from the value of the
property of the Company and its Subsidiaries, or materially impair the
use thereof in the operation of their businesses;
<PAGE> 38
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(c) judgment liens which shall not have been in existence for a
period longer than thirty days after the creation thereof or, if a stay
of execution shall have been obtained, for a period longer than thirty
days after the expiration of such stay;
(d) liens securing indebtedness permitted by Paragraph 5.12(d)
hereof (other than indebtedness of any Secured Guarantor (as such times
as such Secured Guarantor's Subsidiary Security Agreement is in effect)
to the Company);
(e) liens securing the Obligations;
(f) (i) liens in existence on the date of this Agreement, all of
the same of any materiality being shown on Schedule 5.13 attached
hereto, (ii) mortgages on real property now owned or hereafter acquired
(provided that if any such mortgage is not created in connection with
the purchase of or acquisition of an interest in real property and
secures indebtedness exceeding an aggregate of $750,000 incurred in any
single fiscal year or $1,500,000 incurred during the term of this
Agreement, then the Aggregate Loan Limit shall be reduced by an amount
equal to such excess, with such reductions to be applied in accordance
with the provisions of Paragraph 1.4 hereof), and (iii) similar liens
securing any renewals, extensions or refinancings of the indebtedness
secured by the foregoing permitted liens, provided that the amount of
such indebtedness is not increased and such liens are not extended to
cover assets or properties (other than real property) not covered on
the date of this Agreement;
(g) liens held by vendors on personal property sold by such
vendors under conditional sales contracts or other similar security
agreements;
(h) liens on assets of Aviation securing obligations owed by
Aviation to the Company, provided that, from and after the Effective
Date and for so long as the Assignment Agreement remains in effect,
such liens have been subordinated and assigned by the Company to the
lenders that are or may become parties to the Aviation Revolving Credit
Agreement as security for the obligations of the Company to such
lenders under the Guaranty;
(i) liens securing the Obligations (as defined in the Aviation
Revolving Credit Agreement);
(j) liens on assets of each Secured Guarantor securing such
corporation's obligations under its Subsidiary Guaranty;
(k) other liens and encumbrances incidental to the conduct of its
business or the ownership of its assets which were not incurred in
connection with the borrowing of money or the obtaining of advances of
credit, and which do not in the aggregate materially detract from the
value of its assets or materially impair the use thereof in the
operation of its business; and
<PAGE> 39
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(l) liens incurred to secure indebtedness permitted by Paragraph
5.12(e).
The Company will not and will not permit any of its Subsidiaries to
enter into or permit to exist or be binding on any of such persons any contract
or agreement which prohibits the Company or any Subsidiary of the Company from
granting a lien on any or all of its property or assets to the Banks except for
(A) revenue and service contracts or agreements concerning a single asset or
group of assets which contain usual and customary terms for contracts or
agreements of such type and which prohibit the granting of any lien on or
security interest in such asset or group of assets, (B) other agreements
permitted under Paragraph 5.13(f) hereof, provided that such agreements secure
purchase money indebtedness permitted by Paragraph 5.12 hereof incurred in
connection with the acquisition of such property and such agreements cover only
the property so acquired, (C) encumbrances and restrictions arising under
applicable law, (D) customary provisions restricting subletting or assignment of
any lease governing a leasehold interest of the Company or any of the its
Subsidiaries, (E) customary restrictions on dispositions of real property
interests found in reciprocal easement agreements of the Company or any of its
Subsidiaries, and (F) any agreement relating to permitted indebtedness incurred
by a Subsidiary of the Company prior to the date on which such Subsidiary was
acquired by the Company or any other Subsidiary of the Company and outstanding
on such acquisition date.
SECTION 5.14. LIMITATION ON LEASE COMMITMENTS. The aggregate of the
rental payments of the Company and its Subsidiaries with respect to leases of
personal property having original terms of three years or more, other than
leases on which a Subsidiary of the Company is lessee and the Company is lessor,
shall not exceed $7,500,000 at any time.
SECTION 5.15. INVESTMENTS AND CONTINGENT LIABILITIES. Neither the
Company nor any of its Subsidiaries will make or have outstanding at any time
any investments or contingent liabilities, including, without limitation, any
investments or contingent liabilities in or with respect to Hudson Kohala Inc.,
whether by way of loan, advance, guaranty, letter of credit exposure, extension
of credit, purchase of stocks, notes, bonds or other securities or evidences of
indebtedness, or acquisition of limited or general partnership interests, other
than:
(a) those in existence on the date of this Agreement and shown on
Schedule 5.15 attached hereto, and any renewals, extensions or
refinancings thereof, provided that the amount thereof is not
increased;
(b) investments in marketable, investment grade, direct or
guaranteed obligations of the United States of America or any State or
municipality thereof which mature within ten years from the date of
purchase;
(c) investments in demand deposits, certificates of deposits,
time deposits and notes of any Bank or any United States bank having
total capital and unimpaired surplus of at least $1,000,000,000;
<PAGE> 40
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(d) securities commonly known as "commercial paper", or corporate
bonds which mature within ten years from the date of purchase, in each
case issued by a corporation organized and existing under the laws of
the United States of America or any state thereof which at the time of
purchase have been rated by either or both of Moody's Investors
Service, Inc. and Standard and Poor's Ratings Group and the ratings for
such commercial paper are not less than "P-1" if rated by Moody's
Investors Service, Inc. and not less than "A-1" if rated by Standard
and Poor's Ratings Group or, for such bonds, are not less than "Aa" if
rated by Moody's Investors Service, Inc. and not less than "AA" if
rated by Standard & Poor's Ratings Group;
(e) (i) the Guaranty, (ii) each Subsidiary Guaranty, and (iii)
unsecured guaranties by the Company of obligations of Subsidiaries
(other than Aviation and the Foreign Subsidiaries) aggregating no more
than $5,000,000 at any one time outstanding;
(f) those arising in the ordinary course of business or
consistent with the past business practices of the Company and its
Subsidiaries;
(g) investments in Subsidiaries (other than Aviation and the
Foreign Subsidiaries);
(h) letters of credit (including Letters of Credit) of not more
than $7,000,000 in the aggregate at any one time outstanding;
(i) with respect to Aviation, investments permitted under the
Aviation Revolving Credit Agreement;
(j) in addition to the foregoing, investments by the Company and
its Subsidiaries not exceeding $3,000,000 in the aggregate at any one
time outstanding;
(k) investments in Aviation and the Foreign Subsidiaries and
investments in Joint Ventures, provided that the aggregate amount by
which such investments increase during the period commencing on the
date hereof and ending on any date of determination (disregarding for
purposes of this calculation an investment of one type which is
replaced by an investment of another type in an identical amount) shall
not exceed $5,000,000;
(l) investments by the Company in LAGS or an affiliate of LAGS in
an amount not to exceed the amount of the deferred purchase price owed
to the Company under Paragraph 1.3 of the Purchase Agreement; and
(m) investments by the Company in a passenger handling services
entity which is an affiliate of LAGS or Deutsche Lufthansa AG, as set
forth in Paragraph 10.3 of the Purchase Agreement.
<PAGE> 41
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SECTION 5.16. MERGER AND SALE OF ASSETS. (a) The Company will not and
will not permit any of its Subsidiaries to liquidate, consolidate or merge with
or into any other corporation, or sell, lease, transfer or otherwise dispose of
any material portion of its assets, other than in the ordinary course of
business, provided that:
(i) a Subsidiary of the Company may be liquidated, merged or
consolidated with the Company if the Company shall be the surviving
corporation, or with any one or more other Subsidiaries of the Company
if the successor formed by or resulting from such liquidation, merger
or consolidation shall be a Subsidiary of the Company, provided that if
such Subsidiary is a Secured Guarantor the Collateral Agent shall have
received 30 days' prior written notice of such merger or consolidation
and such Secured Guarantor and the successor formed by or resulting
from such merger or consolidation shall have delivered all such
documents, instruments and opinions of counsel as the Collateral Agent
may have reasonably requested to preserve and continue its first
priority, perfected security interest in and lien on the assets of such
Secured Guarantor;
(ii) (A) any Subsidiary of the Company that is not a Secured
Guarantor may sell, lease, transfer or otherwise dispose of its assets
to the Company or another Subsidiary of the Company, and any Secured
Guarantor may sell, lease, transfer or otherwise dispose of its assets
to the Company or any other Secured Guarantor if, in each case, after
giving effect to such merger, consolidation, sale, lease, transfer or
other disposition, no Default exists, and (B) any Secured Guarantor may
sell Collateral to any Subsidiary of the Company that is not a Secured
Guarantor to the extent that the limitations of Paragraph 5.16(a)(v)
are not exceeded by giving effect to such sale and if after giving
effect to such sale no Default exists;
(iii) the Company or any Subsidiary of the Company may
consolidate, liquidate or merge with any other corporation if (A) the
Company or the Subsidiary of the Company is the survivor in such
transaction, (B) the transaction qualifies as a tax-free reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended, and
(C) after giving effect to such transaction, no Default exists or would
result from such consolidation or merger;
(iv) the Company or any of its Subsidiaries may enter into sale
and leaseback transactions and may sell assets (other than Collateral)
at reasonable commercial prices in the ordinary course of business,
provided that all cash proceeds of any sale and leaseback transaction
and cash proceeds in excess of $500,000 from the sale of any single
asset shall, as received, but after deducting all direct out-of-pocket
expenses resulting from the transaction, be used by the Company to
reduce the Aggregate Loan Limit by such amount, with such reductions to
be applied in accordance with the provisions of Paragraph 1.4 hereof;
and
(v) the Company or any Secured Guarantor may dispose of
(including by sale to a Subsidiary that is not a Secured Guarantor)
Collateral consisting of
<PAGE> 42
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equipment of such corporation, provided that (A) such equipment is no
longer needed and is not used in the operation of such corporation's
businesses, (B) such disposition is in the ordinary course of business,
consistent with past practices, and (C) the aggregate net book value of
such equipment and all other equipment disposed of by the Company and
the Secured Guarantors pursuant to this Paragraph 5.16(a)(v) (other
than equipment that has been sold by the Company or any Secured
Guarantor pursuant to this Paragraph 5.16(a)(v) to the Company or any
Secured Guarantor) does not exceed $1,000,000 in any fiscal year.
(b) Each of the Banks and the Agent hereby consents to the
Contribution.
SECTION 5.17. DIVIDENDS. The Company may declare and pay dividends or
purchase, redeem or otherwise retire any of its membership interests so long as
(a) no Default has occurred and is continuing and no condition which would, with
either or both the giving of notice or the lapse of time, result in a Default
has occurred and is continuing at the time such dividend is declared or paid or
such membership interests are purchased, redeemed or otherwise retired and (b)
no Default or condition which would, with either or both the giving of notice or
the lapse of time, result in a Default shall result from the payment of such
dividend or the purchase, redemption or retirement of such membership interests,
provided that no portion of the deferred purchase price owed to the Company from
LAGS (or an affiliate of LAGS) under Paragraph 1.3 of the Purchase Agreement may
be distributed until such purchase price is paid in cash to the Company by LAGS
(or such affiliate).
SECTION 5.18. LIMITATIONS ON CAPITAL EXPENDITURES. The Company or any
of its Subsidiaries, in the aggregate, shall not make any expenditures for the
acquisition or improvement of capital assets unless (a) such capital
expenditures are made in connection with its business as described in Paragraph
5.4(b) hereof and (b) the aggregate amount of all such capital expenditures does
not exceed $16,000,000 in any fiscal year of the Company.
SECTION 5.19. SUBORDINATED DEBT. (a) Notwithstanding any other
provision of this Agreement, HGC and the Company may (i) with the prior written
consent of the Majority Banks, prepay in whole or in part at any time, any of
its Subordinated Debt except that incurred after the date hereof, and (ii)
without the consent of the Majority Banks, redeem, prepay, convert or otherwise
purchase all outstanding 7% Notes with the proceeds received by the Company in
connection with the transactions contemplated under the Purchase Agreement and
prepay any Subordinated Debt of the Company to HGC described in Paragraph
5.12(h) hereof, provided that in each case of redemption, prepayment, conversion
or purchase no Default has occurred and is continuing and no condition which
would, with either or both the giving of notice or lapse of time, result in a
Default has occurred and is continuing and, after giving effect to any such
redemptions, prepayments, conversions or purchases, no Default will occur and be
continuing and no condition which would, with either or both the giving of
notice or the lapse of time, result in a Default will occur or be continuing.
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(b) Neither HGC nor the Company will amend, modify or waive any
term of, or permit the amendment, modification or waiver of any term of, any
Subordinated Debt if such amendment, modification or waiver would in the
reasonable judgment of the Agent have any material adverse effect on the
interests of the Banks hereunder.
SECTION 5.20. NOTICES.
(a) Defaults. Each of HGC and the Company will promptly notify
the Agent and each of the Banks in writing of the occurrence of any Default. If
any party shall give any notice or take any other action in respect of a claimed
default (whether or not constituting a Default) under this Agreement or any
other note, evidence of indebtedness, indenture or other obligation in an
aggregate principal amount of $1,500,000 or more to which or with respect to
which the Company or any of its Subsidiaries is a party or obligor, whether as
principal, guarantor, surety or otherwise, HGC and the Company shall forthwith
give written notice thereof to the Agent and each of the Banks, describing the
notice or action and the nature of the claimed default.
(b) Environmental Events. Each of HGC and the Company will
promptly give notice to the Agent and each of the Banks (i) upon HGC's or the
Company's obtaining knowledge of any material violation of any Environmental Law
regarding the Real Estate or operations of the Company or any Subsidiary of the
Company; (ii) upon HGC's or the Company's obtaining knowledge of any material
known Release of any Hazardous Substances at, from, or into the Real Estate
which it reports in writing or is reportable by it in writing (or for which any
written report supplemental to any oral report is made) to any governmental
authority and which might reasonably be expected to materially adversely affect
the business or financial condition of the Company and its Subsidiaries, taken
as a whole; (iii) upon becoming aware of any inquiry relating to a material
environmental liability or a material potential environmental liability,
including any notice of material violation of any Environmental Laws or of any
material Release of Hazardous Substances, including a notice or claim of
material liability or material potential responsibility from any third party
(including without limitation any federal, state or local governmental
officials), or any formal inquiry, proceeding, demand or investigation with
regard to (A) the Company's or any person's operation of the Real Estate, (B)
material contamination on, from or into the Real Estate, or (C) investigation or
remediation of offsite locations at which the Company, any Subsidiary of the
Company or any such person's predecessors are alleged to have directly or
indirectly Disposed of material quantities of Hazardous Substances, or (D) upon
the Company's obtaining knowledge that any material expense or loss has been
incurred by such governmental authority in connection with the assessment,
containment, removal or remediation of any Hazardous Substances with respect to
which the Company or any Subsidiary of the Company may be liable or for which a
lien may be imposed on the Real Estate.
(c) Notice of Litigation and Judgments. The Company will, and
will cause each of its Subsidiaries to, give notice to the Agent and each of the
Banks in writing within fifteen (15) days of becoming aware of any material
litigation or
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proceedings threatened in writing or any pending litigation and proceedings or
any material change in any existing litigation affecting the Company or any of
its Subsidiaries or to which the Company or any of its Subsidiaries is or
becomes a party involving an uninsured claim against the Company or any of its
Subsidiaries that could reasonably be expected to have a materially adverse
effect on the Company and its Subsidiaries, taken as a whole and stating the
nature and status of such litigation or proceedings or nature of the material
change in such existing litigation or proceedings, as the case may be. The
Company will, and will cause each of its Subsidiaries to, give notice to the
Agent and each of the Banks, in writing, in form and detail satisfactory to the
Agent, within ten (10) days of any judgment not covered by insurance, final or
otherwise, against the Company or any of its Subsidiaries in an amount in excess
of $500,000.
(d) Proceeds. The Company will promptly notify the Agent and each
of the Banks of the receipt of any proceeds realized by the Company or its
Subsidiaries from (i) sales of assets and leaseback transactions permitted by
Paragraph 5.16(a)(iv), and (ii) mortgages contemplated by the first
parenthetical of clause (ii) of Paragraph 5.13(f).
SECTION 5.21. EXISTENCE; MAINTENANCE OF PROPERTIES. (a) The Company (i)
will cause all of its properties and those of its Subsidiaries used or useful in
the conduct of its business or the business of its Subsidiaries to be maintained
and kept in good condition, repair and working order and supplied with all
necessary equipment and (ii) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided that nothing in this Paragraph 5.21 shall prevent the Company from
discontinuing the operation and maintenance of any of its properties or any of
those of its Subsidiaries if such discontinuance is, in the judgment of the
Company, desirable in the conduct of its or their business and that do not in
the aggregate materially adversely affect the business of the Company and its
Subsidiaries on a consolidated basis.
(b) Each of HGC and the Company will, and HGC will cause each of its
Subsidiaries to, use its best efforts (which best 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 all of the operating agreements
and contracts of HGC and its Subsidiaries with respect to the Aviation Services
Business which are not transferred to the Company or any of its Subsidiaries on
the Effective Date to be transferred to the Company or any of its Subsidiaries
as soon as practicable.
SECTION 5.22. COMPLIANCE WITH LAWS, CONTRACTS, LICENSES, AND PERMITS.
The Company will, and will cause each of its Subsidiaries to, comply in all
material respects with (a) the applicable laws and regulations wherever its
business is conducted, including all Environmental Laws, (b) the provisions of
its organizational documents and by-laws or operating agreement, as applicable,
(c) all material agreements and instruments by which it or any of its properties
may be bound and (d) all applicable decrees, orders, and judgments. If any
authorization, consent, approval,
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permit or license from any officer, agency or instrumentality of any government
shall become necessary or required in order that the Company or any of its
Subsidiaries may fulfill any of its obligations hereunder or in any document or
instrument executed and delivered in connection with this Agreement to which
HGC, the Company or such Subsidiary is a party, HGC or the Company will, or (as
the case may be) will cause such Subsidiary to, immediately take or cause to be
taken all reasonable steps within the power of HGC, the Company or such
Subsidiary to obtain such authorization, consent, approval, permit or license
and furnish the Agent and the Banks with evidence thereof.
SECTION 5.23. EMPLOYEE BENEFIT PLANS. (a) The Company will (i) promptly
upon request by any Bank or the Agent, furnish to the Agent and such Bank a copy
of the most recent actuarial statement required to be submitted under
Section103(d) of ERISA and Annual Report, Form 5500, with all required
attachments, in respect of each Guaranteed Pension Plan and (ii) promptly upon
receipt or dispatch, furnish to the Agent any notice, report or demand sent or
received in respect of a Guaranteed Pension Plan under Sections 302, 4041,
4042, 4043, 4063, 4065, 4066 and 4068 of ERISA, or in respect of a Multiemployer
Plan, under Sections 4041A, 4202, 4219, 4242, or 4245 of ERISA.
(b) Neither the Company nor any ERISA Affiliate will:
(i) engage in any "prohibited transaction" within the
meaning of Sections 406 of ERISA or Sections 4975 of the Code which
could result in a material liability for the Company or any of its
Subsidiaries; or
(ii) permit any Guaranteed Pension Plan to incur an
"accumulated funding deficiency", as such term is defined in Section
302 of ERISA, whether or not such deficiency is or may be waived; or
(iii) fail to contribute to any Guaranteed Pension Plan to an
extent which, or terminate any Guaranteed Pension Plan in a manner
which, could result in the imposition of a lien or encumbrance on the
assets of the Company or any of its Subsidiaries pursuant to
Section 302(f) or Section 4068 of ERISA; or
(iv) permit or take any action which would result in the
aggregate benefit liabilities (with the meaning of Section4001 of
ERISA) of all Guaranteed Pension Plans exceeding the value of the
aggregate assets of such Plans, disregarding for this purpose the
benefit liabilities and assets of any such Plan with assets in excess
of benefit liabilities, by more than the amount set forth in Paragraph
3.17(c).
SECTION 5.24. USE OF PROCEEDS. The Company and HGC will use the
proceeds of the Revolving Credit Loans solely for the purposes set forth in
Paragraph 3.9 hereof. The Company will obtain Letters of Credit solely for the
purposes set forth in Paragraph 1.7 hereof.
SECTION 5.25. LIMITED LIABILITY AGREEMENT. The Company will not effect
or permit any change in or amendment to the terms of its Limited Liability
Company Agreement
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if such change or amendment would have a material adverse effect on HGC or the
interests of the Banks hereunder and under the other Loan Documents.
SECTION 5.26. COVENANTS IN HGC CREDIT AGREEMENT. Unless and until the
HGC Release Date has occurred, HGC shall observe and comply, and shall cause its
Subsidiaries to observe and comply, with each of the covenants of HGC and its
Subsidiaries set forth in the HGC Credit Agreement and the documents and
instruments executed and delivered in connection therewith and such covenants
and the definitions contained in such covenants shall be incorporated herein as
if set forth herein.
SECTION 5.27. FURTHER ASSURANCES. Each of HGC and the Company will, and
will cause each of its Subsidiaries to, execute and deliver any and all such
instruments and documents, and take all such other action, as may reasonably be
required by the Agent in order to perfect, insure and continue the rights,
interests and powers of the Agent in respect of any collateral for the Revolving
Credit Loans and the Revolving Credit Notes and the rights and interests of the
Banks under this Agreement.
SECTION 6. DEFAULTS. If any of the following events (each a "Default")
shall occur:
SECTION 6.1. the Company or HGC shall fail to pay any principal of the
Revolving Credit Loans when due (whether at any stated maturity date therefor or
upon declaration or acceleration or otherwise), or shall fail to pay any fee or
any interest on the Revolving Credit Loans or any other amount due hereunder
(other than the Agent's fee due under Paragraph 2.1 hereof) in connection with
the Revolving Credit Loans within ten days after the due date thereof, or the
Company or HGC shall fail to reimburse the Letter of Credit Bank on the Business
Day after any drawing under a Letter of Credit, or the Company or HGC shall fail
to pay the Letter of Credit Fee or any other amounts in respect of Letters of
Credit within ten days after the due date thereof, or the Company or HGC shall
fail to pay the Agent's fee payable pursuant to Paragraph 2.1 hereof when due
and such failure shall continue for ten days after written notice thereof has
been given to the Company and HGC by the Agent;
SECTION 6.2. the Company shall fail to perform or violate any covenant
contained in any of Paragraphs 5.5 through 5.20 or 5.25 hereof;
SECTION 6.3. the Company or HGC shall fail to perform or violate any
term, covenant or agreement herein contained (other than those specified in
Paragraphs 6.1 and 6.2) and such failure shall continue for five days as to a
failure under Paragraph 5.2 or as to a failure under Paragraph 5.27 and thirty
days as to a failure under other paragraphs, in each case after written notice
thereof has been given to HGC and the Company by any Bank;
SECTION 6.4. the Company or any Guarantor shall fail to perform any
term, covenant or agreement contained in any of the Security Documents;
SECTION 6.5. any representation or warranty of the Company or HGC in
Paragraph 3 hereof or in any other Loan Document, or any representation or
warranty of any of the
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Guarantors in any of the Loan Documents to which such Guarantor is a party shall
prove to have been false in any material respect upon the date when made or
deemed to have been made or repeated;
SECTION 6.6. the Company or any Subsidiary of the Company shall fail to
pay at maturity, or within any applicable period of grace, any obligation or
obligations for borrowed monies or advances, or fail to observe or perform
(within any appropriate grace period, if any) any term, covenant or agreement
contained in any agreement by which it is bound, evidencing or securing borrowed
monies or advances in an aggregate principal amount of $1,500,000 or more;
SECTION 6.7. (a) prior to the Collateral Release Date or the HGC
Release Date, any person or group of persons (within the meaning of Section 13
or 14 of the Securities Exchange Act of 1934, as amended), other than any
employee benefit plan or plans (within the meaning of Section 3(3) of ERISA) of
HGC or any of its Subsidiaries and other than shareholders of HGC which have
filed with the Securities and Exchange Commission prior to the date of the Proxy
Schedules 13D or 13G pursuant to the Securities Exchange Act of 1934, as
amended, with respect to the securities of HGC, shall hereafter have acquired
beneficial ownership (within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under said act) of more than 50% in voting
power of the outstanding voting stock of HGC, or during any period of twelve
consecutive calendar months, individuals who were directors of HGC on the first
day of such period shall cease to constitute a majority of the board of
directors of HGC, other than because of replacement as a result of death or
disability of one or more such directors or replacement with the approval of a
majority of those individuals who were members of the board of directors of HGC
on the first day of such period or a majority of the directors of HGC appointed
thereafter with the approval of such individuals;
(b) HGC shall own, directly or indirectly, less than 51% of the
membership interests of the Company at any time;
SECTION 6.8. HGC (prior to the Collateral Release Date or the HGC
Release Date), the Company, any Subsidiary of HGC (prior to the Collateral
Release Date or the HGC Release Date) or any Subsidiary of the Company shall
make an assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or become
due, or shall petition or apply for the appointment of a trustee or other
custodian, liquidator or receiver of HGC, the Company or any Subsidiary of HGC
or the Company or of any substantial part of the assets of HGC, the Company or
any Subsidiary of HGC or the Company or shall commence any case or other
proceeding relating to HGC, the Company or any Subsidiary of HGC or the Company
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation or similar law of any jurisdiction, now or
hereafter in effect, or shall take any action to authorize or in furtherance of
any of the foregoing, or if any such petition or application shall be filed or
any such case or other proceeding shall be commenced against HGC (prior to the
Collateral Release Date or the HGC Release Date), the Company, any Subsidiary of
HGC (prior to the Collateral Release Date or the HGC Release Date) or any
Subsidiary of the Company
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and HGC, the Company or any of such Subsidiaries shall indicate its approval
thereof, consent thereto or acquiescence therein;
SECTION 6.9. a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating HGC (prior to the Collateral
Release Date or the HGC Release Date), the Company, any Subsidiary of HGC (prior
to the Collateral Release Date or the HGC Release Date) or any Subsidiary of the
Company bankrupt or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of HGC (prior
to the Collateral Release Date or the HGC Release Date), the Company, any
Subsidiary of HGC (prior to the Collateral Release Date or the HGC Release Date)
or any Subsidiary of the Company in an involuntary case under federal bankruptcy
laws as now or hereafter constituted;
SECTION 6.10. the Company or any Subsidiary of the Company shall suffer
any judgment in excess of $1,500,000 which is not covered by insurance to be
entered against it, or any writ of attachment or execution or any similar
process to be issued or levied against a substantial part of its property, which
judgment, writ or process is not discharged, released, stayed, bonded or vacated
within thirty days after its entry, issue or levy;
SECTION 6.11. if this Agreement or any of the other Loan Documents
shall be cancelled, terminated, revoked or rescinded otherwise than in
accordance with the terms thereof or with the express prior written agreement,
consent or approval of the Banks, or any action at law or in equity or other
legal proceeding to cancel, revoke or rescind any of this Agreement or any of
the other Loan Documents shall be commenced by or on behalf of HGC, the Company
or any Subsidiary of the Company party thereto or any of their respective
stockholders, or any court or any other governmental or regulatory authority or
agency of competent jurisdiction shall make a determination that, or issue a
judgment, order, decree or ruling to the effect that, any one or more of this
Agreement or any of the other Loan Documents is illegal, invalid or
unenforceable in accordance with the terms hereof or thereof;
SECTION 6.12. with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall have
determined in their reasonable discretion that such event reasonably could be
expected to result in liability of the Company or any of its Subsidiaries to the
PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000
and such event in the circumstances occurring reasonably could constitute
grounds for the termination of such Guaranteed Pension Plan by the PBGC or for
the appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan; or a trustee shall have been appointed
by the United States District Court to administer such Plan; or the PBGC shall
have instituted proceedings to terminate such Guaranteed Pension Plan;
SECTION 6.13. the occurrence of a Default under and as defined in the
Aviation Revolving Credit Agreement; or
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SECTION 6.14. the occurrence of a Default under and as defined in the
HGC Credit Agreement prior to the occurrence of the HGC Release Date;
then (a) if such event is a Default under Paragraph 6.7, the Aggregate Loan
Limit shall automatically be reduced to an amount equal to the principal balance
of the Revolving Credit Loans then outstanding, (b) if such event is a Default
under any of Paragraph 6.8 or Paragraph 6.9, the Banks' Commitment shall
automatically terminate, the Letter of Credit Bank with the pro rata
participation of the Banks shall be relieved of all further obligations to
issue, extend or renew Letters of Credit and all amounts owing with respect to
the Revolving Credit Notes and under this Agreement shall forthwith become due
and payable, and (c) in every other such event, and so long as such Default is
continuing, the Agent shall, if so directed by the Majority Banks, by notice in
writing to HGC and the Company, terminate immediately the Banks' Commitment and
the obligation of the Letter of Credit Bank with the pro rata participation of
the Banks, to issue, extend or renew Letters of Credit and declare all amounts
owing with respect to the Revolving Credit Notes and under this Agreement to be,
and the Revolving Credit Notes and such amounts shall thereupon forthwith
become, due and payable. If any Letters of Credit are outstanding upon the
occurrence of a Default the Agent may demand that cash or other readily
marketable securities acceptable to it in an amount equal to the Maximum Drawing
Amount of all then outstanding Letters of Credit be deposited with the Agent in
pledge pursuant to pledge agreements in form and substance satisfactory to the
Agent, as collateral security for all obligations of HGC and the Company to the
Banks hereunder. Each of HGC and the Company, jointly and severally, agrees to
either make such deposit with the Agent immediately upon such demand or cause
such Letters of Credit to be cancelled and returned to the Letter of Credit Bank
undrawn. Except as expressly provided above in this Paragraph 6, presentment,
demand, protest or other notice of any kind are hereby expressly waived. Nothing
herein contained shall in any way impair the right of any Bank to enforce
payment of its Revolving Credit Note when due. In case any one or more of the
Defaults shall have occurred and be continuing, and whether or not the Banks
shall have accelerated the maturity of the Revolving Credit Loans pursuant to
this Paragraph 6, each Bank, if owed any amount with respect to the Revolving
Credit Loans, may proceed to protect and enforce its rights by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations to such
Bank are evidenced, including as permitted by applicable law the obtaining of
the ex parte appointment of a receiver, and, if such amount shall have become
due, by declaration or otherwise, proceed to enforce the payment thereof or any
other legal or equitable right of such Bank. No remedy herein conferred upon any
Bank or the Agent or the holder of any Revolving Credit Note is intended to be
exclusive of any other remedy and each and every remedy shall be cumulative and
shall be in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity or by statute or any other provision of law.
SECTION 7. AGENT'S RELATIONSHIP WITH BANKS; AGENT'S DUTIES. Each of the
Banks irrevocably authorizes the Agent to receive all payments of principal of
and interest on the Revolving Credit Loans and of commitment fees, and to take
all other action delegated to it hereunder or reasonably incidental thereto. The
Agent may
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exercise its powers and execute its duties by or through employees or agents and
shall be entitled to take, and to rely on, advice of counsel concerning all
matters pertaining to its rights and duties under this Agreement and the other
Loan Documents. Neither the Agent nor any of its shareholders, directors,
officers or employees nor any other person assisting it in its duties nor any
agent or employee thereof shall be liable for any waiver, consent or approval
given or any action taken or omitted to be taken in good faith by it or them in
connection herewith, or be responsible for the consequence of any oversight or
error of judgment whatsoever, except that the Agent or such other person, as the
case may be, shall be liable for losses due to its own gross negligence or
willful misconduct. The Agent shall not be responsible for the execution or
validity or enforceability of this Agreement or any of the other Loan Documents,
or for any recitals or statements, warranties or representations herein or made
in any certificate or instrument hereafter furnished to it by or on behalf of
HGC or the Company, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or in
any other Loan Document. The Agent shall not be bound to ascertain whether any
notice, consent, waiver or request delivered to it by HGC or the Company or by
any Bank owed amounts with respect to the Loans shall have been duly authorized
or is true, accurate or complete. Each of HGC and the Company shall certify to
the Agent the names and signatures of its officers authorized to execute
certificates and otherwise act in respect hereof, and the Agent may conclusively
rely thereon until receipt by it of notice to the contrary. The Agent has not
made nor does now make any representations or warranties, express or implied,
nor does it assume any liability to the Banks, with respect to the credit
worthiness or financial condition of HGC or the Company or any Subsidiary of HGC
or the Company. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. If in the opinion of the Agent the
distribution of any amount received by it in such capacity hereunder might
involve it in a dispute resulting in its liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated by
a court of competent jurisdiction. If a court of competent jurisdiction shall
adjudge that any amount received and distributed by the Agent is to be repaid,
each person to whom any such distribution shall have been made shall either
repay to the Agent its proportionate share of the amount so adjudged to be
repaid or pay over the same in such manner and to such persons as shall be
determined by such court. FNB shall have the same obligations and the same
rights, powers and privileges with respect to its Commitment and the Revolving
Credit Loans as it would have were it not also the Agent. The Agent may resign
as Agent for the Banks upon thirty days' written notice to HGC, the Company and
each Bank, whereupon a new agent shall be appointed by the Banks. The Agent may
be removed as Agent for the Banks upon thirty days' written notice to HGC, the
Company and the Agent from the Majority Banks, whereupon a new Agent shall be
appointed by the Banks. The Banks (including FNB) ratably agree hereby to
indemnify and hold harmless the Agent from and against any and all claims,
actions and suits (whether groundless or otherwise), losses, damages, costs,
expenses (including any expenses for which the Agent has not been reimbursed by
HGC or the Company as required by Paragraph 11.5), and liabilities of every
nature and character arising out of or related to this Agreement or the other
Loan Documents, or the transactions contemplated or
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evidenced hereby or thereby, or the Agent's actions taken hereunder or
thereunder, except to the extent that any of the same shall be directly caused
by the Agent's willful misconduct or gross negligence. The Agent shall not take
any actions with respect to any Default unless it shall have received such
instructions from the Majority Banks. The Collateral Agent shall not exercise
any remedy under any Security Document unless it shall have received such
instructions as are required by the Intercreditor Agreement.
SECTION 8. SETOFF. Each of HGC (prior to the HGC Release Date) and the
Company grants to each of the Banks, as security for the full and punctual
payment and performance of its obligations hereunder, a continuing lien and
security interest in all deposits or other sums credited by or due from any Bank
to HGC or the Company and all securities or other property of HGC or the Company
in the possession of such Bank and, regardless of the adequacy of any
collateral, such sums at any time may be applied to or set off by such Bank
against any and all liabilities, direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, of HGC and the Company to
such Bank. The offsetting Bank shall provide HGC and the Company with prompt
notice of any such action. Each Bank agrees with the other Banks that (a) if any
deposits or other sums credited by or due from such Bank to HGC or the Company
are applied to indebtedness of HGC or the Company to such Bank, other than
amounts owing with respect to the Revolving Credit Loans, such amount shall be
applied ratably to such other indebtedness and to the amounts owing with respect
to the Revolving Credit Loans, and (b) if such Bank (i) shall receive any
payment from HGC or the Company, whether by distributions made by the Agent,
voluntary payment, exercise of the right of setoff (including, but not limited
to, a secured claim under Section 506 of Title II of the United States Code or
other security or interest arising from, or in lieu of, such secured claim,
received by such Bank under any applicable bankruptcy, insolvency or other
similar law), counterclaim, cross action or enforcement of any claim with
respect to the Revolving Credit Loans by proof thereof in bankruptcy,
reorganization, liquidation, receivership or similar proceedings, or otherwise,
and (ii) shall retain and apply to the payment of such Bank's Revolving Credit
Loans any amount in excess of its ratable portion of the payments received by
all Banks with respect to the Revolving Credit Loans as contemplated hereby,
such Bank will make such disposition and arrangements with the other Banks with
respect to such excess, either by way of distribution, pro tanto assignment of
claims, subrogation or otherwise, as shall result in each Bank's receiving in
respect of the Revolving Credit Loans its proportionate payment as contemplated
hereby.
SECTION 9. INDEMNIFICATION. Each of HGC and the Company, jointly and
severally, agrees to indemnify and hold harmless the Agent and the Banks from
and against any and all claims, actions and suits whether groundless or
otherwise, and from and against any and all liabilities, losses, damages and
expenses of every nature and character arising out of this Agreement or any of
the other Loan Documents or the transactions contemplated hereby or thereby
including, without limitation, (a) any actual or proposed use by HGC, the
Company or any Subsidiary of HGC or the Company of the proceeds of any of the
Revolving Credit Loans or Letters of Credit, (b) HGC, the Company or any
Subsidiary of HGC or the Company entering into or performing this Agreement or
any of the other Loan Documents or (c) with respect to
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HGC, the Company and Subsidiaries of HGC or the Company and their respective
properties and assets, (i) the violation of any Environmental Law, (ii) the
presence, Disposal, escape, seepage, leakage, spillage, discharge, emission,
Release or threatened Release of any Hazardous Substances, (iii) the
investigation or remediation of offsite locations at which HGC, the Company, any
Subsidiary of HGC or the Company or any of such Person's predecessors are
alleged to have directly or indirectly Disposed of Hazardous Substances or (iv)
any action, suit, proceeding or investigation brought or threatened with respect
to any Hazardous Substances (including, but not limited to, claims with respect
to wrongful death, personal injury or damage to property), in each case
including, without limitation, the reasonable fees and disbursements of counsel
and allocated costs of internal counsel incurred in connection with any such
investigation, litigation or other proceeding (but excluding any such
liabilities, losses, damages and expenses incurred by any of the Agent or any
Bank by reason of the gross negligence or willful misconduct of the Agent or any
Bank). In litigation, or the preparation therefor, the Banks and the Agent shall
be entitled to select their own counsel and, in addition to the foregoing
indemnity, each of HGC and the Company, jointly and severally, agrees to pay
promptly the reasonable fees and expenses of such counsel. If, and to the extent
that the obligations of HGC and the Company under this Paragraph 9 are
unenforceable for any reason, each of HGC and the Company hereby agrees to make
the maximum contribution to the payment in satisfaction of such obligations
which is permissible under applicable law. The covenants contained in this
Paragraph 9 shall survive payment or satisfaction in full of all other
Obligations.
SECTION 10. SECURITY AND GUARANTIES. (a) The Obligations shall continue
to be secured by a perfected first priority security interest (subject only to
liens permitted under Paragraph 5.13 hereof and entitled to priority under
applicable law) in the Company Collateral pursuant to and to the extent required
by the terms of the Company Security Documents.
(b) HGC and the Company will execute and deliver on the Effective
Date, in form and substance satisfactory to the Banks, an amendment and
restatement of HGC's absolute and unconditional guaranty (the "Guaranty") of all
obligations of Aviation to the lenders that are or may become parties to the
Aviation Revolving Credit Agreement and the agent thereunder.
(c) The Company shall cause each of its Subsidiaries with a net worth
determined in accordance with generally accepted accounting principles of
$500,000 or more organized under the laws of any state of the United States of
America and acquired or formed by the Company after the date hereof, no later
than 60 days after the acquisition or formation of such Subsidiary, to:
(i) execute and deliver to each of the Banks, the Agent, the
lenders which are or may become parties to the Aviation Revolving
Credit Agreement and the agent thereunder, a Subsidiary Guaranty;
(ii) if the Collateral Release Date has not occurred, execute
and deliver to the Collateral Agent for the benefit of the Banks, the
Agent, the lenders which are or may become parties to the Aviation
Revolving Credit Agreement and the
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agent thereunder, a Subsidiary Security Agreement and all other
documents and instruments required to be delivered pursuant thereto;
and
(iii) execute and deliver all other documents and
instruments, including, without limitation, corporate authority
documents as the Banks may reasonably request.
(d) The Banks acknowledge and agree that, upon receipt from the
Company or any Secured Guarantor of evidence satisfactory to the Banks in all
respects that such entity has disposed of Collateral in accordance with the
terms of this Agreement, they shall execute and deliver to the Collateral Agent
a letter authorizing and directing the Collateral Agent to execute and deliver
such releases with respect to its lien on such entity as such entity shall
reasonably request.
(e) The Banks acknowledge and agree that, upon receipt of evidence
satisfactory to them that (i) all litigation against HGC and Aviation resulting
from or relating to the acquisition in 1984 of certain assets of the airport
ground services business of Innotech Aviation Limited has been fully and finally
dismissed (which dismissal is not appealable) or settled in full, (ii) HGC and
Aviation have satisfied in full all of their payment obligations, if any, with
respect to such litigation, (iii) the payment thereof has not resulted in the
occurrence of any Default or condition which would, with either or both the
giving of notice or lapse of time, result in a Default, and (iv) no Default or
condition which would, with either or both the giving of notice or the lapse of
time, result in a Default then exists, they shall execute and deliver to the
Collateral Agent a letter acknowledging receipt of such evidence in accordance
with Section 28(a) of each of the Security Agreements and Section 18 of the
Pledge Agreement.
SECTION 11. MISCELLANEOUS.
SECTION 11.1. NOTICES. Unless provided elsewhere in this Agreement to
the contrary, all written notices hereunder to any party hereto shall be
delivered in hand, sent by telegraph, telex, telecopy or overnight courier or
mailed by certified mail, and if so mailed shall be deemed to have been given
three calendar days after the same shall have been properly deposited in the
mails, addressed to such party at its address given at the beginning of this
Agreement, or at any other address specified by such party in writing to the
person giving such notice.
SECTION 11.2. COPIES OF CERTIFICATES, ETC. Whenever HGC or the Company
is required to deliver notices, certificates, opinions, statements or other
information hereunder to the Agent, it shall do so in such reasonable number of
copies as the Agent shall specify.
SECTION 11.3. NO WAIVERS. No waiver shall extend to or affect any
obligation not expressly waived or impair any right consequent thereon. No
failure or delay by the Agent or any Bank in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The
<PAGE> 54
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rights and remedies herein provided are cumulative and not exclusive of any
rights or remedies otherwise provided by law.
SECTION 11.4. MASSACHUSETTS LAW. THIS AGREEMENT AND THE REVOLVING
CREDIT NOTES SHALL BE DEEMED TO BE A CONTRACT MADE UNDER SEAL AND SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW) AND
APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
SECTION 11.5. EXPENSES; TAXES. Whether or not the transactions
contemplated hereby shall be consummated, HGC and the Company will pay the
reasonable fees, expenses and disbursements of the Banks' and the Agent's
special counsel incurred in connection with the review of this Agreement and the
other Loan Documents, the closings hereunder and thereunder, amendments,
modifications, approvals, consents or waivers hereto and thereto, and all
reasonable out-of-pocket expenses (including reasonable attorneys' fees and
costs) incurred by the Agent and by each Bank in connection with the
preparation, administration, interpretation or enforcement of this Agreement and
the other Loan Documents and in connection with any so-called "workout" of the
Revolving Credit Loans, including as to any "workout" or in the event of
acceleration, losses or expenses associated with foreign exchange conversions or
transactions. To the extent the Agent is not reimbursed by HGC and the Company
for the foregoing fees, expenses and disbursements, each Bank shall pay to the
Agent, promptly upon notice by the Agent, its pro-rata share of such fees,
expenses and disbursements, provided that the Majority Banks requested such
action be undertaken by the Agent. The covenants of this Paragraph 11.5 shall
survive payment or satisfaction of payment of amounts owing with respect to the
Revolving Credit Loans. Each of HGC and the Company, jointly and severally,
agrees to indemnify the Banks and the Agent from, and hold them harmless
against, any taxes, assessments, charges or penalties made by any governmental
authority by reason of the execution and delivery of this Agreement or any of
the other Loan Documents, unless any such assessment, charge or penalty shall be
the result of the negligence or misconduct of any Bank.
SECTION 11.6. CONFIDENTIALITY OF INFORMATION. Each Bank agrees that any
reports or other information furnished to it by HGC or the Company under this
Agreement and not disclosed by HGC or the Company to the public will be held in
confidence by it for use only in connection with the purposes contemplated by
this Agreement, except to the extent that disclosure is required by law (whether
by appropriate regulatory authorities, judicial process or otherwise).
SECTION 11.7. CHANGES, WAIVERS. For all purposes of this Agreement, a
Default shall be deemed to be continuing until such time as it has been waived
by the Banks in accordance with this Paragraph 11.7. None of this Agreement or
the Revolving Credit Notes or any provision hereof or thereof may be changed,
waived, discharged or terminated orally but only by a statement in writing. Any
waiver or amendment of any provision of this Agreement or the Revolving Credit
Notes may be granted or effected, with the consent of HGC (prior to the HGC
Release Date) and the Company, by one or
<PAGE> 55
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more substantially concurrent written instruments signed by the Majority Banks;
provided, however, that no such consent shall be effective to (a) increase the
Aggregate Loan Limit or any Bank's Commitment without the consent of such Bank,
or (b) reduce the amount of any payment of principal or rate of interest on any
Revolving Credit Note or postpone any date fixed for the payment of any
principal of or interest on any Revolving Credit Note without the consent of the
holder thereof (except by waiver after acceleration pursuant to Paragraph 6), or
(c) modify this Paragraph 11.7 or (d) amend the definition of Majority Banks,
without the consent of all the Banks, or (e) modify or waive any of the
conditions precedent set forth in Paragraphs 4A and 4B hereof, or (f)
notwithstanding anything contained above, amend or waive any of the last three
sentences of Paragraph 6 hereof. The Security Documents may be amended or any
provision thereof waived only in accordance with the terms of the Intercreditor
Agreement.
SECTION 11.8. BINDING EFFECT OF AGREEMENT. This Agreement shall be
binding upon and inure to the benefit of HGC, the Company, the Banks and their
respective successors and assigns, provided that neither HGC nor the Company may
assign or transfer its rights hereunder.
SECTION 11.9. COUNTERPARTS. This Agreement and any amendment hereof may
be signed in any number of counterparts with the same effect as if the
signatures hereto and thereto were upon the same instrument. Complete sets of
counterparts shall be lodged with HGC, the Company and the Agent. In proving
this Agreement it shall not be necessary to produce or account for more than one
counterpart signed by the party against whom enforcement is sought.
SECTION 11.10. ENTIRE AGREEMENT. This Agreement and the other Loan
Documents express the entire understanding of the parties with respect to the
transactions contemplated hereby.
SECTION 11.11. ASSIGNMENTS OR PARTICIPATIONS BY BANKS OR AFFILIATES.
Each Bank may assign to one or more banks or other financial institutions having
total capital and surplus of $100,000,000 or more, and otherwise reasonably
acceptable to HGC (prior to the HGC Release Date) and the Company (which
acceptance shall be in writing) all or any part of, or (without the consent of
HGC and the Company) may grant participations to one or more of such banks or
financial institutions in or to all or any part of, any Revolving Credit Loan or
Revolving Credit Loans owing to such Bank and the Revolving Credit Notes held by
such Bank, provided that, following the consummation of any such assignment or
participation, such Bank's or bank's Commitment Percentage shall not be less
than 10%, and to the extent of any such assignment or participation (unless
otherwise stated therein) the assignee or participant of such assignment or
participation shall have the same rights and benefits hereunder and under such
Revolving Credit Note as it would have if it were such Bank hereunder. In the
event of such assignment HGC (prior to the HGC Release Date) and the Company
will consent, such consent not to be unreasonably withheld, to release the
assigning Bank from the obligations hereunder to the extent of such assignment
and to sign and deliver any releases or documents necessary to effectuate such
assignment as such Bank shall reasonably request. Notwithstanding Paragraph 11.6
hereof, each
<PAGE> 56
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Bank may disclose any information concerning HGC or the Company or the credit
facilities to any such bank or financial institution, provided that such bank or
financial institution agrees to be bound by the provisions of Paragraph 11.6
hereof. It shall be a condition of any assignment as described in this Paragraph
11.11, that (a) such assignee provides a written acknowledgment, in form and
substance reasonably acceptable to the Agent and its special counsel and HGC,
the Company and their counsel, that such assignee assumes the obligations and
the rights of the assigning Bank under this Agreement and the other Loan
Documents and, if such assignee is not organized under the laws of the United
States or any state thereof, that such assignee shall provide the Agent and HGC
and the Company with satisfactory evidence that any payments made to the
assignee hereunder may be made free and clear of any withholding taxes and (b)
such assignee or an affiliate thereof accepts an assignment from the assigning
Bank (or an affiliate thereof) of a pro rata portion of such Bank's interest in
the Aviation Loans and the revolving credit loans made to HGC under the HGC
Credit Agreement. Notwithstanding anything contained in this Paragraph 11.11 to
the contrary, upon the occurrence and during the continuance of a Default, each
Bank may make assignments or grant participations hereunder without the consent
of HGC or the Company. Each of HGC and the Company agrees, at its own expense,
to execute and deliver to the assignee Bank, in exchange for each surrendered
Revolving Credit Note of the assigning Bank, a new Revolving Credit Note to the
order of such assignee Bank in an amount equal to the amount assumed by such
Bank and, if the assigning Bank has retained some portion of its obligations
hereunder, a new Revolving Credit Note to the order of the assigning Bank in an
amount equal to the amount retained by it hereunder. Such new Revolving Credit
Notes shall provide that they are replacements for the surrendered Revolving
Credit Notes, shall be in an aggregate principal amount equal to the aggregate
principal amount of the surrendered Revolving Credit Notes, shall be dated the
effective date of such assignment and shall otherwise be in substantially the
form of the assigned Revolving Credit Notes.
SECTION 11.12. TERM OF AGREEMENT. This Agreement shall continue in full
force and effect from the date hereof so long as any commitment to lend any
principal with respect to the Revolving Credit Loans or any commitment to issue
letters of credit or any obligation of HGC or the Company for any interest or
commitment or other fee or obligation hereunder or on the Revolving Credit Notes
shall be outstanding.
SECTION 11.13. CERTAIN TRANSITIONAL ARRANGEMENTS. Promptly after the
Effective Date, the Banks will cancel and return to HGC the promissory notes
previously delivered by HGC to the Banks pursuant to the Original Credit
Agreement. For purposes of this Agreement, any Letters of Credit previously
issued under the Original Credit Agreement which remain outstanding on the
Effective Date shall be deemed to Letters of Credit hereunder, and the
provisions of this Agreement, including without limitation, Paragraph 1.8
hereof, shall apply thereto. Pursuant to Paragraph 1.1(b) hereof, all accrued
and unpaid interest (if any) attributable to periods prior to the Effective Date
shall be payable on the dates such amounts would have been due under the
Original Credit Agreement. Such amounts shall be payable to the Agent for the
respective accounts of the Persons entitled thereto under the Original Credit
Agreement, according to their applicable shares of such amounts as provided in
the Original Credit Agreement.
<PAGE> 57
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SECTION 11.14. ASSUMPTION OF OBLIGATIONS. (a) The Company hereby
expressly assumes, confirms and agrees to pay and perform, observe and maintain
in full force and effect all of the covenants, agreements, liabilities and
indebtedness of HGC under the Original Credit Agreement as amended and restated
as set forth herein, including, without limitation, any and all Obligations in
respect of principal, interest, fees, expenses and other amounts payable or to
become payable under the Loan Documents.
(b) From and after the Effective Date, the Company is and shall be
subject to and bound by, and shall be entitled to the benefits of, each of the
Loan Documents as if the Company had been the "Company" and the obligor party
under the Original Credit Agreement from the original execution and delivery
thereof.
(c) The Company hereby expressly acknowledges, assumes, and agrees to
be subject to and to maintain in full force and effect, the Security Documents
to which HGC was or is a party and the continuously perfected, first-priority
liens and security interests of the Collateral Agent and the Banks thereunder,
with respect to all assets of the Company, without any lapse or change in the
perfection or priority thereof, such that the consummation of the Contribution
shall not adversely affect or impair the rights and remedies of the Collateral
Agent and the Banks under the Security Documents in any way whatsoever.
SECTION 11.15. OBLIGATIONS OF HGC. (a) The Banks and the Agent hereby
agree that the aggregate amount of HGC's payment obligations hereunder and under
the other Loan Documents shall at no time exceed an amount equal to the
aggregate amount of HGC's obligations with respect to the 7% Notes outstanding
at such time.
(b) The Banks and the Agent hereby agree that from and after the date
on which all of the 7% Notes are indefeasibly paid in full in cash or converted,
as certified to the Agent and the Banks by HGC and the Company, HGC shall no
longer be a borrower hereunder and shall be released of all of its payment and
performance obligations hereunder (including, without limitation, the
Obligations) and under the other Loan Documents, provided that HGC shall not be
released under (i) the Pledge Agreement and (ii) the Company Security Agreement
(solely to the extent of HGC's obligations with respect to the HGC Credit
Agreement) until the Collateral Release Date shall have occurred, and of its
agreement under Paragraph 8 hereof. In addition, upon and after such date, no
Default or event with the passage of time or the giving of notice (or both)
which would become a Default (other than (x) the Default set forth in Paragraph
6.7(b) hereof, and (y) with respect to the Defaults set forth in Paragraphs
6.7(a), 6.8 and 6.9 hereof unless, at such time, the Collateral Release Date
shall have occurred) or any failure to satisfy a condition precedent shall be
deemed to occur or arise as a result of any event or matter related to HGC
(other than any matter related to the Pledge Agreement unless, at such time, the
Collateral Release Date has occurred) and HGC shall not be deemed to represent
or warrant as to any matter set forth herein (including, without limitation, as
to matters set forth in Paragraph 3 hereof) or in any other Loan Document,
provided that HGC shall continue to make the representations and warranties
under (i) the Pledge Agreement and (ii) the Company Security Agreement (solely
to the extent of HGC's obligations with respect to the HGC
<PAGE> 58
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Credit Agreement) until the Collateral Release Date shall have occurred. HGC
shall continue to be obligated to the Banks and the Agent as set forth herein
and under the other Loan Documents, or its obligations to the Banks and the
Agents hereunder and under the other Loan Documents shall be reinstated,
notwithstanding any prior certification to the Banks and the Agent pursuant to
this Paragraph, if at any time any payment made with respect to the 7% Notes is
rescinded or must otherwise be returned to HGC or the Company upon the
insolvency, bankruptcy or reorganization of HGC or the Company, or otherwise,
all as though such payment had not been made or value received.
[The remainder of this page has been intentionally left blank.]
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
HUDSON GENERAL CORPORATION
By: /s/ illegible
-------------------------------------------
Title: Executive Vice President
HUDSON GENERAL LLC
By: /s/ illegible
-------------------------------------------
Title: Executive Vice President
THE FIRST NATIONAL BANK OF
BOSTON, AS AGENT
By: /s/ illegible
-------------------------------------------
Title:
THE FIRST NATIONAL BANK
OF BOSTON
By: /s/ illegible
-------------------------------------------
Title: Executive Vice President
EUROPEAN AMERICAN BANK
By: /s/ illegible
-------------------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK, N.A.
By: /s/ illegible
-------------------------------------------
Title: Vice President
<PAGE> 60
EXHIBIT A
DEFINITIONS
Agent - See the introductory paragraphs.
Aggregate Loan Limit - See Paragraph 1.4.
Agreement - See the introductory paragraphs.
Assignment Agreement - The Amended and Restated Assignment,
Postponement and Subordination and Intercreditor Agreement, dated as of November
25, 1992 and amended and restated as of the Effective Date, among HGC, the
Company, Aviation and the lenders which are or may become parties under the
Aviation Revolving Credit Agreement, as the same may be amended and in effect
from time to time.
Aviation - Hudson General Aviation Services Inc./Societe de Services
Hudson General (Aviation) Inc., a wholly owned Subsidiary of the Company.
Aviation Loan Amounts - The U.S. Dollar Equivalent of the aggregate
principal amount of all outstanding Aviation Loans.
Aviation Loans - Revolving credit loans made to Aviation under the
Aviation Revolving Credit Agreement.
Aviation Revolving Credit Agreement - That certain Revolving Credit
Agreement, dated as of November 25, 1992, among Aviation and the lenders which
are or may become parties thereto, as amended and in effect from time to time.
Aviation Services Business - See the introductory paragraphs.
Banks - See the introductory paragraphs.
Base Rate - The higher of (a) the annual rate of interest publicly
announced by the Agent from time to time at its head office in Boston,
Massachusetts as its "base rate" and (b) 1/2% above the overnight federal funds
effective rate, as published by the Board of Governors of the Federal Reserve
System, as in effect from time to time.
Base Rate Loan - Any Revolving Credit Loan bearing interest at a rate
determined by reference to the Base Rate.
Business Day - Any day on which banking institutions in Boston,
Massachusetts and New York, New York are open for the transaction of banking
business and, in the case of LIBO Rate Loans, any day on which commercial banks
are open for international business in London or such other eurodollar interbank
market as may be selected by the Agent in its sole discretion acting in good
faith.
<PAGE> 61
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CERCLA - See Paragraph 3.18.
Chase - See the introductory paragraph.
Code - The Internal Revenue Code of 1986, as amended and in effect from
time to time.
Collateral - Collectively, the Company Collateral and the Subsidiary
Collateral.
Collateral Agent - As defined in each of the Security Agreements.
Collateral Release Date - That date on which the Banks deliver a letter
to the Collateral Agent in accordance with Paragraph 10(e) hereof.
Commitment - The agreement of each Bank, subject to the terms and
conditions of the Agreement, to make Revolving Credit Loans to, and to
participate in the issuance, extension or renewals of Letters of Credit for the
account of, the Company and HGC.
Commitment Percentage - With respect to each Bank, the percentage set
forth opposite its name below as such Bank's percentage of the aggregate
Commitments of all of the Banks (subject to adjustments permitted by the terms
of the Agreement):
<TABLE>
<CAPTION>
Commitment
Bank Percentage
---- ----------
<S> <C>
The First National Bank of Boston 60%
The Chase Manhattan Bank, N.A. 20%
European American Bank 20%
---
Total 100%
</TABLE>
Company - See the introductory paragraphs.
Company Collateral - All of the property, rights and interests of each
of HGC and the Company that are or are intended to be subject to the security
interests created by the Company Security Documents.
Company Security Agreement - The Amended and Restated Security
Agreement, dated as of December 28, 1992 and amended and restated as of the
Effective Date, between HGC, the Company and the Collateral Agent substantially
in the form attached hereto as Exhibit E, as the same may be amended and in
effect from time to time.
Company Security Documents - The Company Security Agreement, the
Guaranty, the Assignment Agreement, the Pledge Agreement and any and all
instruments and documents required to be delivered pursuant thereto, in each
case as
<PAGE> 62
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originally executed, or if amended, restated, modified or supplemented from time
to time, as so amended, restated, modified or supplemented.
Consolidated Cash Interest - For any fiscal period, the sum of the
consolidated expenses for the Company and its Subsidiaries paid in cash or
accrued during such period for interest on indebtedness of the Company and its
Subsidiaries for such period, determined in accordance with generally accepted
accounting principles.
Consolidated Debt Service - For any Measuring Period, the sum of (i)
Consolidated Cash Interest for such period, plus (ii) the aggregate amount of
principal that will become due and payable by the Company and its Subsidiaries
during the four consecutive fiscal quarters immediately succeeding such period
on long-term indebtedness (excluding the Revolving Credit Loans) of the Company
and its Subsidiaries, plus (iii) an amount equal to 20% of the average daily
outstanding and unpaid principal amount of the Revolving Credit Loans for the
Measuring Period, each as determined in accordance with generally accepted
accounting principles.
Consolidated EBDIT - For any fiscal period, the Consolidated Net Income
of the Company and its Subsidiaries before provision for federal and state
income taxes, minus all extraordinary nonrecurring items of income (excluding
any net operating loss carryforward), plus all extraordinary nonrecurring items
of expense, plus the consolidated interest expense of the Company and its
Subsidiaries for such fiscal period, plus the aggregate amount of depreciation
and amortization charges made in calculating Consolidated Net Income for such
period, all as determined in accordance with generally accepted accounting
principles.
Consolidated Liabilities - The consolidated liabilities of the Company
and its Subsidiaries, including without limitation, all consolidated liabilities
of the Company and its Subsidiaries in respect of letters of credit, but
excluding therefrom an amount equal to the consolidated deferred tax debits of
the Company and its Subsidiaries, all as determined in accordance with generally
accepted accounting principles.
Consolidated Net Income (or Loss) - For any fiscal period, the
consolidated net income (or loss) of the Company and its Subsidiaries, after
deduction of all expenses, taxes and other proper charges, determined in
accordance with generally accepted accounting principles.
Consolidated Tangible Net Worth - The consolidated capital and surplus
accounts of the Company and its Subsidiaries, determined in accordance with
generally accepted accounting principles, however excluding all amounts
representing adjustments resulting from foreign currency translation, whether
any such adjustment is expressed as a positive or negative number, and
eliminating all assets of the Company and its Subsidiaries properly classified
as intangible assets under generally accepted accounting principles, except for
leasehold rights of the Company used in its operations.
Contribution - See Paragraph 4A.11.
<PAGE> 63
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Default - See Paragraph 6.
Delinquent Bank - See Paragraph 2.11.
Disposal; Dispose(d) - Disposal or dispose(d) as such term is defined
in RCRA and the regulations promulgated thereunder; provided that to the extent
the laws of a state wherein the subject property lies establishes a meaning for
such term that is broader than that specified in RCRA and the regulations
promulgated thereunder, such broader meaning shall apply.
EAB - See the introductory paragraphs.
Effective Date - See Paragraph 4A.
Effective Net Worth - As at any date of determination, the sum of
Consolidated Tangible Net Worth plus Subordinated Debt outstanding as at such
date plus an amount equal to the aggregate amount of the deferred purchase price
owed by LAGS (or an affiliate of LAGS) to the Company on such date under
Paragraph 1.3 of the Purchase Agreement.
Employee Benefit Plan - Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained oR contributed to by the Company or any ERISA
Affiliate, other than a Multiemployer Plan.
Environmental Laws - See Paragraph 3.18.
EPA - See Paragraph 3.18.
ERISA - The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
ERISA Affiliate - Any individual or legal entity which is treated as a
single employer with the Company under Section 414 of the Code.
ERISA Reportable Event - A reportable event with respect to a
Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the
regulations promulgated thereunder other than a reportable event as to which the
provisions of the 30 day notice to the PBGC is waived under applicable
regulations.
FNB - See the introductory paragraphs.
Foreign Subsidiaries - See Paragraph 5.12(d).
generally accepted accounting principles - (a) When used in Paragraphs
5.7, 5.8, 5.9, 5.10 or 5.11, whether directly or indirectly through reference to
a capitalized term used therein means (i) principles that are consistent with
the principles promulgated or adopted by the Financial Accounting Standards
Board and its predecessors, in effect for the fiscal year ended on June 30,
1995, and (ii) to the extent consistent with such
<PAGE> 64
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principles, the accounting practice of the Company reflected in the pro forma
financial statements for the fiscal year ended on June 30, 1995, and (b) when
used in general, other than as provided above, means principles that are (i)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, in effect from time to time,
and (ii) consistently applied with past financial statements of HGC and the
Company adopting the same principles, provided that in each case a certified
public accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles) as
to financial statements in which such principles have been properly applied.
Guaranteed Pension Plan - Any employee pension benefit plan within the
meaning of Section3(2) of ERISA maintained or contributed to by the Company or
any ERISA Affiliate the benefits of which are guaranteed on termination in full
or in part by the PBGC pursuant to Title IV of ERISA, other than a Multiemployer
Plan.
Guarantor(s) - Collectively, all of, and individually, each of, the
Subsidiaries of the Company organized under the laws of a State of the United
States of America and acquired or formed by the Company after the date hereof
with a net worth determined in accordance with generally accepted accounting
principles of at least $500,000.
Guaranty - See Paragraph 10.
Hazardous Substances - See Paragraph 3.18.
HGC - See the introductory paragraphs.
HGC Credit Agreement - That certain Revolving Credit Agreement, dated
as of June 1, 1996, among HGC and the lenders which are or may become parties
thereto, as amended and in effect from time to time, or if no longer in effect,
as in effect immediately prior to the termination thereof.
HGC Release Date - That date on which HGC is released of its
obligations hereunder and under the other Loan Documents (other than the Company
Security Agreement) in accordance with Paragraph 11.15(b) hereof.
Initial Revolving Period - The period commencing on the Effective Date
and ending on June 30, 1998.
Intercreditor Agreement -The Amended and Restated Intercreditor
Agreement, dated as of November 25, 1992, and amended and restated on or before
the Effective Date, among the Banks, the Agent, the Collateral Agent, the
lenders that are parties to the Aviation Revolving Credit Agreement, the Agent
thereunder and acknowledged and consented to by HGC, the Company and the Secured
Guarantors, in form and substance satisfactory to the Banks and the Agent, as
the same may be amended and in effect from time to time.
<PAGE> 65
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Interest Period - A period commencing on the date of making of, or
renewal of, or conversion of a Loan to, a LIBO Rate Loan, and expiring one, two,
three or six months thereafter, as designated by HGC and the Company in the
notice given the Agent under Paragraph 1.3; provided that,
(i) the initial Interest Period for any LIBO Rate Loan shall
commence on the date of the making of such Loan (including the date of
any conversion from a Base Rate Loan) and each Interest Period
occurring thereafter in respect of such LIBO Rate Loan shall commence
on the date on which the next preceding Interest Period expires;
(ii) if any Interest Period would otherwise expire on a day
which is not a Business Day, such Interest Period shall expire on the
next succeeding Business Day, provided, however, that if any Interest
Period would otherwise expire on a day which is not a Business Day but
is a day of the month after which no further Business Day occurs in
such month, such Interest Period shall expire on the next preceding
Business Day;
(iii) if any Interest Period begins on a day for which there is
no numerically corresponding day in the calendar month at the end of
such Interest Period, such Interest Period shall end on the last
Business Day of such calendar month; and
(iv) no Interest Period in respect of any Revolving Credit Loan
shall extend beyond the Revolving Credit Loan Maturity Date.
Joint Ventures - Joint ventures entered into by the Company or any of
its Subsidiaries after the date of this Agreement in the ordinary course of its
Aviation Services Business.
LAGS - Lufthansa Airport and Ground Services GmbH, a German
corporation.
Letter(s) of Credit - Any United States dollar-denominated irrevocable
standby letter(s) of credit issued from time to time pursuant to the terms
hereof by the Letter of Credit Bank for the account of the Company.
Letter of Credit Bank - FNB, in its capacity as issuer of the Letter(s)
of Credit.
Letter of Credit Fee - See Paragraph 1.11.
LIBO Bid Rate - The annual rate of interest determined by the Agent, at
or about 11 a.m., London time, on the second Business Day prior to the first day
of an Interest Period, as being that at which deposits of United States dollars
during such Interest Period are offered to the Agent by prime banks in the
London interbank market at the time of determination and in accordance with the
usual practice in such market, for delivery on the first day of such Interest
Period and for the number of days comprised therein, in amounts equal (as nearly
as may be) to the amount of the unpaid principal of a Revolving Credit Loan to
which such Interest Period shall relate.
<PAGE> 66
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LIBO Rate - The rate of interest (rounded upwards to the nearest 1/16th
of one percent) equal to the following (with the LIBO Bid Rate and the Reserve
Rate expressed as decimals);
(LIBO Bid Rate)
------------------
(1 - Reserve Rate)
LIBO Rate Loan - Any Revolving Credit Loan bearing interest at a rate
determined by reference to the LIBO Rate pursuant to Paragraph 2.3(b) of the
Agreement.
Loan Documents - Collectively, this Agreement, the Revolving Credit
Notes, the Intercreditor Agreement and the Security Documents, and all other
instruments and documents delivered and to be delivered pursuant to any such
agreements.
Majority Banks - Those Banks which are owed or participate in 75% or
more of the sum of aggregate principal amount of Revolving Credit Loans at the
time outstanding and unpaid plus the aggregate Maximum Drawing Amount of all
outstanding Letters of Credit, or, if no Revolving Credit Loans or Letters of
Credit are outstanding, those Banks having 75% or more of the outstanding
Commitment to make Revolving Credit Loans.
Maximum Drawing Amount - As at any date of determination, with respect
to any Letter of Credit issued pursuant to the terms hereof, the maximum amount
which the beneficiary thereof may draw under such Letter of Credit as at such
date pursuant to the terms of such Letter of Credit, plus any amounts previously
drawn thereunder and not yet reimbursed by HGC or the Company, whether from the
proceeds of Revolving Credit Loans or otherwise.
Measuring Period - See Paragraph 5.11.
Multiemployer Plan - Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Company or any ERISA
Affiliate.
7% Notes - The 7% Convertible Subordinated Debentures Due 2011 issued
pursuant to the Indenture dated as of July 1, 1986, between HGC and Chemical
Bank Delaware, as Trustee, as amended by the First Supplemental Indenture
thereto.
Notice Date - See Paragraph 2.9.
Obligations - All indebtedness, obligations and liabilities of HGC and
the Company to any of the Banks and the Agent, individually or collectively,
existing on the date of this Agreement or arising thereafter, and all
indebtedness, obligations and liabilities of the Company under the Guaranty,
existing on the date of this Agreement or arising thereafter, direct or
indirect, joint or several, absolute or contingent, matured or unmatured,
liquidated or unliquidated, secured or unsecured, arising by contract, operation
of law or otherwise, arising or incurred under this Agreement or
<PAGE> 67
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any of the other Loan Documents or in respect of any of the Revolving Credit
Loans or any of the Revolving Credit Notes or other instruments at any time
evidencing any thereof.
Original Credit Agreement - See the introductory paragraphs.
PBGC - The Pension Benefit Guaranty Corporation created by Section4002
of ERISA and any successor entity or entities having similar responsibilities.
Pledge Agreement - The Pledge Agreement, dates as of the Effective
Date, between HGC and the Collateral Agent substantially in the form of Exhibit
C to the HGC Credit Agreement, as the same may be amended and in effect from
time to time.
Proxy - The definitive Proxy Statement dated April 25, 1996 relating to
the meeting of HGC's stockholders for the purpose of voting upon a proposal to
approve the transactions contemplated by the Purchase Agreement, as filed by HGC
with the Securities and Exchange Commission.
Purchase Agreement - That certain Unit Purchase and Option Agreement,
dated February 27, 1996, between LAGS and HGC, as such agreement is in effect on
the Effective Date as supplemented by a letter agreement dated May 31, 1996.
RCRA - See Paragraph 3.18.
Real Estate - All real property at any time owned, leased (as lessee or
sublessee), operated or managed by the Company or any Subsidiary of the Company.
Reduction Commencement Date - June 30, 1998, or such later date set by
the Banks pursuant to Paragraph 1.4(b).
Release - A release as defined in CERCLA and the regulations
promulgated thereunder; provided that to the extent the laws of a state wherein
the subject property lies establishes a meaning for such term that is broader
than that specified in CERCLA and the regulations promulgated thereunder, such
broader meaning shall apply.
Reserve Rate - For any day with respect to a LIBO Rate Loan, the
maximum rate at which the Agent would be required to maintain reserves under
Regulation D of the Board of Governors of the Federal Reserve System (or any
successor or similar regulation relating to such reserve requirements) against
"Eurocurrency Liabilities" (as that term is used in Regulation D) regardless of
whether there are such liabilities outstanding. The Reserve Rate shall be
adjusted automatically on and as of the effective date of any change in the
Reserve Rate and promptly thereafter the Agent shall provide HGC and the Company
with written notice of such adjustment.
Revolving Credit Loan Maturity Date - The date which occurs on the
fourth anniversary of the Reduction Commencement Date or, if earlier, such date
on which the Commitments are terminated in accordance with the provisions of the
Agreement.
<PAGE> 68
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Revolving Credit Loans - Revolving credit loans made or to be made by
the Banks to HGC and the Company pursuant to Paragraph 1.1.
Revolving Credit Note(s) - See Paragraph 1.2.
SARA - See Paragraph 3.18.
Secured Guarantor(s) - Collectively, all of, and individually, each of
the Subsidiaries of the Company organized under the laws of any state of the
United States of America and acquired or formed by the Company after the date
hereof with a net worth determined in accordance with generally accepted
accounting principles of at least $500,000.
Security Agreements - Collectively, the Company Security Agreement and
the Subsidiary Security Agreements.
Security Documents - Collectively, the Company Security Documents and
the Subsidiary Security Documents.
Shareholder - See Paragraph 3.16.
Subordinated Debt - Collectively, (a) the indebtedness referred to in
Paragraph 5.12(c) hereof, (b) the indebtedness referred to in Paragraph 5.12(h)
hereof and (c) other indebtedness of the Company and its Subsidiaries that is
subordinated to the Revolving Credit Loans, the Letters of Credit and the
Revolving Credit Notes in form and substance reasonably satisfactory to the
Majority Banks.
Subsidiary - Any corporation, association, joint stock company,
business trust or other similar organization of whose voting stock HGC or the
Company owns or controls, directly or indirectly, more than 50%.
Subsidiary Collateral - All of the property, rights and interests of
the Secured Guarantors that are or are intended to be subject to the security
interests created by the Subsidiary Security Documents.
Subsidiary Guaranties - Collectively, all of, and individually, each
of, the Unlimited Guaranties of the Guarantors delivered to the Banks, the
Agent, the lenders that are or may become parties to the Aviation Revolving
Credit Agreement, and the agent thereunder after the date hereof, in each case
substantially in the form of Exhibit C attached hereto, as the same may be
amended and in effect from time to time.
Subsidiary Security Agreements - Collectively, all of, and
individually, each of the Security Agreements executed and delivered to the
Collateral Agent by the Secured Guarantors after the date hereof, in each case
substantially in the form of Exhibit D attached hereto, as the same may be
amended and in effect from time to time.
<PAGE> 69
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Subsidiary Security Documents - The Subsidiary Security Agreements, the
Subsidiary Guaranties, and any and all instruments and documents required to be
delivered pursuant thereto, in each case as originally executed, or if amended,
restated, modified or supplemented from time to time, as so amended, restated,
modified or supplemented.
Type - As to any Revolving Credit Loan, its nature as a Base Rate Loan
or a LIBO Rate Loan.
U.S. Dollar Equivalent - With respect to any amounts denominated in
Canadian dollars, the amount of United States dollars which would be obtained
upon conversion of Canadian dollars into United States dollars, calculated at
the middle spot rate of exchange of the Toronto, Canada, office of the Agent
under the Aviation Revolving Credit Agreement as of the close of business on the
date of determination.
<PAGE> 70
EXHIBIT B
FORM OF RESTATED REVOLVING CREDIT NOTE
HUDSON GENERAL CORPORATION
HUDSON GENERAL LLC
$[INSERT AMOUNT] ________________, 1996
FOR VALUE RECEIVED, each of the undersigned, HUDSON GENERAL CORPORATION,
a Delaware corporation ("HGC"), and HUDSON GENERAL LLC, a Delaware limited
liability company (the "Company"), hereby absolutely and unconditionally,
jointly and severally, promises to pay to the order of [INSERT NAME OF PAYEE
BANK] (the "Bank") at the office of the Agent (as defined in the Credit
Agreement referred to below) at 100 Federal Street, Boston, Massachusetts 02110
and in United States dollars in immediately available funds:
(a) the principal amount of [INSERT BANK'S COMMITMENT PERCENTAGE OF
AGGREGATE LOAN LIMIT] Dollars ($___) or, if less, the aggregate unpaid principal
amount of Revolving Credit Loans made by the Bank pursuant to the Amended and
Restated Revolving Credit Agreement, dated as of November 25, 1992 and amended
and restated as of ______________, 1996, as the same is amended and in effect
from time to time (such agreement, as amended and in effect from time to time,
the "Credit Agreement"), among HGC, the Company, the Bank, the other lenders
named therein, such other lenders as may become parties thereto from time to
time and The First National Bank of Boston as Agent, payable at the times and in
accordance with the terms and conditions of the Credit Agreement but in no event
later than the Revolving Credit Loan Maturity Date (which shall be no later than
June 30, 2002); and
(b) interest on the principal balance hereof from time to time
outstanding from the date hereof through the date on which such principal amount
is paid in full at the rates provided in the Credit Agreement, payable as
provided in the Credit Agreement.
This Note evidences borrowings under, is subject to the terms and
conditions of, and has been issued by HGC and the Company in accordance with the
terms of, the Credit Agreement and is secured by the collateral described in the
Security Documents. The Bank and any holder hereof are entitled to the benefits
of the Credit Agreement and may enforce the agreements of HGC and the Company
contained therein. Capitalized terms which are used in this Note without
definition and which are defined in the Credit Agreement shall have the same
meanings herein as in the Credit Agreement.
<PAGE> 71
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The Bank shall endorse, and is hereby irrevocably authorized by HGC and
the Company to endorse, on the schedule attached to this Note or a continuation
of such schedule attached hereto and made a part hereof, an appropriate notation
evidencing advances and repayments of principal of this Note, provided that
failure by the Bank to make any such notations shall not affect any of HGC's or
the Company's obligations in respect of this Note.
Each of HGC and the Company has the right in certain circumstances and
the obligation in certain other circumstances to prepay the whole or part of the
principal of this Note on the terms and conditions specified in the Credit
Agreement.
If any one or more Defaults shall occur, the entire unpaid principal
amount of this Note and all of the unpaid interest accrued thereon may become or
be declared due and payable in the manner and with the effect provided in the
Credit Agreement.
Each of HGC and the Company and every endorser and guarantor of this
Note or the obligation represented hereby waive presentment, demand, notice,
protest and all other demands and notices in connection with the delivery,
acceptance, performance, default or enforcement of this Note, assent to any
extension or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral and to the addition or release
of any other party or person primarily or secondarily liable.
This Note has been issued as a replacement and in exchange for (but does
not evidence payment or satisfaction of) the Revolving Credit Note issued to the
Bank by HGC pursuant to the Original Credit Agreement.
THIS NOTE SHALL BE DEEMED TO TAKE EFFECT AS A SEALED INSTRUMENT UNDER
THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS AND FOR ALL PURPOSES SHALL BE
CONSTRUED IN ACCORDANCE WITH SUCH LAWS.
IN WITNESS WHEREOF, each of HGC and the Company has caused this Note to
be signed on its behalf by its duly authorized officer as a sealed instrument as
of the day and year first above written.
HUDSON GENERAL CORPORATION
By:____________________________________
Title:
HUDSON GENERAL LLC
By:____________________________________
Title:
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Amount of
Principal Balance of
Amount of Paid or Principal Notation
Date Loan Prepaid Unpaid Made By
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<PAGE> 73
EXHIBIT C
FORM OF SUBSIDIARY
UNLIMITED GUARANTY
[INSERT NAME OF SUBSIDIARY]
TO: (a) THE FIRST NATIONAL BANK OF BOSTON, EUROPEAN AMERICAN BANK, THE
CHASE MANHATTAN BANK, N.A. and each of the other financial institutions
(the "US Banks") which are or may become parties to that certain
Amended and Restated Revolving Credit Agreement, dated as of November
25, 1992 and amended and restated as of June 1, 1996, as amended,
restated, modified or supplemented from time to time (as the same is in
effect from time to time, the "US Credit Agreement"), among the US
Banks, The First National Bank of Boston as agent (the "US Agent"),
Hudson General Corporation ("HGC") and Hudson General LLC (the
"Company") and the US AGENT; and
(b) ABN AMRO BANK CANADA, THE CHASE MANHATTAN BANK OF CANADA and each
of the other financial institutions (the "Canada Banks") which are or
may become parties to that certain Revolving Credit Agreement, dated as
of November 25, 1992, as amended (as so amended and in effect from time
to time, the "Aviation Credit Agreement"), among the Canada Banks, The
Chase Manhattan Bank of Canada as successor agent (the "Canadian
Agent") and Hudson General Aviation Services Inc./Societe de Services
Hudson General (Aviation) Inc. ("Aviation"), a wholly owned Subsidiary
of the Company, and the CANADIAN AGENT.
1. DEFINITIONS. For purposes hereof, the term "Banks" shall mean (a)
the US Banks, (b) the Canada Banks and (c) the successors and assigns of the
foregoing, the term "Obligations" shall have the meaning set forth in Section 2
hereof and the term "Agents" shall mean the US Agent and the Canadian Agent. All
other capitaliZed terms which are used herein without definition and which are
defined in the US Credit Agreement shall have the same meanings herein as in the
US Credit Agreement.
2. GUARANTY OF PAYMENT AND PERFORMANCE OF OBLIGATIONS. In consideration
of the US Banks' extending credit or otherwise in their discretion giving from
time to time, financial or banking facilities or accommodations to HGC and the
Company and the Canada Banks' extending credit or otherwise in their discretion
giving time, financial or other banking facilities or accommodations to
Aviation, [INSERT NAME OF GUARANTOR] (the "Guarantor"), a wholly owned
Subsidiary of the Company, hereby absolutely and unconditionally (a) promises to
pay to the Banks and the Agents the amount of any Obligations (as defined below)
not paid when due (subject to any applicable grace periods with respect to the
payment of any such Obligations); (b) guarantees to the Banks and the Agents
that HGC and the Company will duly and punctually pay or perform, at the place
specified therefor or, if no place is specified, at the US Agent's head office
located at 100 Federal Street, Boston, Massachusetts 02110 or at the branch of
the US Agent where this Guaranty is given, all indebtedness, obligations and
liabilities, joint
<PAGE> 74
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or several, direct or indirect, matured or unmatured, liquidated or
unliquidated, primary or secondary, absolute or contingent, of HGC and the
Company to the Banks and the Agents, or any of them, now or hereafter owing or
incurred (including, without limitation, costs and expenses incurred by the
Banks and the Agents in attempting to collect or enforce any of the foregoing)
which are chargeable to HGC or the Company either by law or under the terms of
(i) the US Credit Agreement and the Notes and (ii) the Guaranty, accrued in each
case to the date of payment hereunder (collectively, the "Obligations" and
individually, an "Obligation"); and (c) guarantees to the Banks and the Agents
that if there is an agreement evidencing or executed and delivered in connection
with any Obligation, each of HGC and the Company will perform in all other
respects strictly in accordance with the terms thereof. This Guaranty is an
absolute, unconditional and continuing guaranty of the full and punctual payment
and performance by each of HGC and the Company of the Obligations and not of
their collectability only and is in no way conditioned upon any requirement that
the Banks or the Agents first attempt to collect any of the Obligations from HGC
or the Company or resort to any security or other means of obtaining payment of
any of the Obligations which the Banks or the Agents now have or may acquire
after the date hereof, or upon any other contingency whatsoever. Upon any
default by HGC or the Company in the full and punctual payment and performance
of any of the Obligations (upon the expiration of any applicable grace periods),
the liabilities and obligations of the Guarantor hereunder with respect to such
Obligations in default shall, at the option of the Banks and the Agents, or any
of them, become forthwith due and payable to the Banks and the Agents without
demand or notice of any nature, all of which are expressly waived by the
Guarantor. Payments by the Guarantor hereunder may be required by the Banks and
the Agents on any number of occasions.
3. GUARANTOR'S FURTHER AGREEMENTS TO PAY. The Guarantor further agrees,
as the principal obligor and not as a guarantor only, to pay to the Banks and
the Agents forthwith upon demand, in funds immediately available to the Banks
and the Agents, all costs and expenses (including court costs and legal
expenses, including, without limitation, reasonable allocated costs of staff
counsel) incurred or expended by the Banks and/or the Agents in connection with
this Guaranty and the enforcement hereof, together with interest on amounts
recoverable under this Guaranty from the time such amounts become due until
payment, whether before or after judgment, at the rate of interest charged by
the Banks in similar circumstances, but in no event less than 2% per annum above
the Base Rate in effect from time to time provided, that if such interest
exceeds the maximum amount permitted to be paid under applicable law, then such
interest shall be reduced to such maximum permitted amount. Any change in the
Base Rate shall result in an immediate corresponding change in the rate of
interest payable on amounts recoverable under this Guaranty.
4. PAYMENTS. The Guarantor agrees that the Obligations will be paid and
performed strictly in accordance with their respective terms, regardless of any
law, regulation or order now or hereinafter in effect in any jurisdiction
affecting any of such terms or the rights of any Agent or any Bank with respect
thereto.
5. UNLIMITED LIABILITY OF GUARANTOR. Subject to Section 16 hereof, the
liability of the Guarantor hereunder shall be unlimited.
<PAGE> 75
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6. TERMINATION OF GUARANTY. The obligations of the Guarantor under this
Guaranty shall continue in full force and effect until payment in full of, and
performance of all of the Obligations and all other amounts payable hereunder.
Notwithstanding the foregoing, this Guaranty shall continue to be effective or
shall be reinstated, as the case may be, if at any time any payment made or
value received with respect to any Obligation is rescinded or must otherwise be
restored or returned by the Banks and/or the Agents upon the insolvency,
bankruptcy or reorganization of HGC, the Company or otherwise, as though such
payment had not been made or value received.
7. SECURITY; SETOFF. The obligations of the Guarantor under this
Guaranty are secured by a lien on certain of its assets in favor of the
Collateral Agent, for the benefit of the Banks, pursuant to a Security Agreement
dated as of the date hereof. The Guarantor also grants to each of the Agents and
the Banks, as security for the full and punctual payment and performance of the
Guarantor's obligations hereunder, a continuing lien on and security interest in
all securities and other property belonging to the Guarantor now or hereafter
held by such Agent or such Bank and in all deposits (general or special, time or
demand, provisional or final) and other sums credited by or due from such Agent
or such Bank to the Guarantor or subject to withdrawal by the Guarantor; and
regardless of the adequacy of any collateral or other means of obtaining
repayment of the Obligations, each of the Agents and the Banks is hereby
authorized at any time and from time to time, without notice to the Guarantor
(any such notice being expressly waived by the Guarantor) and to the fullest
extent permitted by law, to set off the whole or any portion or portions of any
or all such deposits and other sums and apply such deposits and other sums
against obligations of the Guarantor which are due under this Guaranty, whether
or not such Agent or such Bank shall have made any demand under this Guaranty.
8. GUARANTOR'S REPRESENTATIONS, WARRANTIES AND COVENANTS. (a) The
Guarantor represents and warrants to the Banks and the Agents that it is a
corporation duly organized, validly existing and in good standing under the laws
of [ _________ ].
(b) The Guarantor represents and warrants to the Banks and the Agents
that it has all requisite power and authority and full legal right to execute
and deliver and to perform all of its obligations under this Guaranty. The
execution, delivery, and performance of this Guaranty has been duly authorized
by all necessary corporate action, and does not and will not (under present law)
contravene any law or governmental regulation or order presently binding on the
Guarantor, or contravene any provisions of or constitute a default under any
indenture, contract, or other instrument to which the Guarantor is a party or by
which the Guarantor is bound.
(c) The Guarantor represents and warrants to the Banks and the Agents
that this Guaranty is the legal, valid and binding obligation of the Guarantor,
enforceable against it in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to or affecting the enforcement of creditors' rights as applied to
the Guarantor, and except to the extent that enforceability is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
<PAGE> 76
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(d) The Guarantor covenants with the Banks and the Agents that it will
cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence and its rights and franchises, that it shall not
default under any provision of its charter, other incorporation papers, by-laws
or stock provisions or any amendment thereof or under any indenture or agreement
to which it is a party or by which it is bound, that it shall comply with all
covenants set forth in the U.S. Credit Agreement which are applicable to
Subsidiaries of the Company, and that it shall not violate any applicable laws
or orders, regulations, rulings or requirements of a court or public body or
authority by which it or its properties are bound, which default or violation
might reasonably be expected to have a material adverse effect on the business
or financial condition of the Guarantor, the Company and its Subsidiaries, taken
as a whole.
9. AGENTS' AND BANKS' FREEDOM TO DEAL WITH HGC AND OTHER PARTIES. The
Banks and the Agents shall be at liberty, without giving notice to or obtaining
the assent of the Guarantor and without relieving the Guarantor of any liability
hereunder, to deal with HGC, the Company and with each other party who now is or
after the date hereof becomes liable in any manner for any of the Obligations,
in such manner as the Banks and the Agents in their sole discretion deem fit,
and to this end the Guarantor gives to the Banks and the Agents full authority
in their sole discretion to do any or all of the following things: (a) extend
credit, make loans and afford other financial accommodations to HGC or the
Company at such times, in such amounts and on such terms as the Banks may
approve, (b) vary the terms and grant extensions or renewals of any present or
future indebtedness or obligation to the Banks and/or the Agents of HGC, the
Company or of any such other party, (c) grant time, waivers and other
indulgences in respect thereof, (d) vary, exchange, release or discharge, wholly
or partially, or delay in or abstain from perfecting and enforcing any security
or guaranty or other means of obtaining payment of any of the Obligations which
the Banks and/or the Agents now have or acquire after the date hereof, (e)
accept partial payments from HGC, the Company or any such other party, (f)
release or discharge, wholly or partially, any endorser or guarantor, and (g)
compromise or make any settlement or other arrangement with HGC, the Company or
any such other party.
10. UNENFORCEABILITY OF OBLIGATIONS AGAINST HGC OR THE COMPANY;
INVALIDITY OF SECURITY OR OTHER GUARANTIES. If for any reason either HGC or the
Company has no legal existence or is under no legal obligation to discharge any
of the Obligations undertaken or purported to be undertaken by it or on its
behalf, or if any of the monies included in the Obligations have become
irrecoverable from HGC or the Company by operation of law or for any other
reason, this Guaranty shall nevertheless be binding on the Guarantor to the same
extent as if the Guarantor at all times had been the principal debtor on all
such Obligations. In the event that acceleration of the time for payment of the
Obligations is stayed upon the insolvency, bankruptcy or reorganization of HGC
or the Company, or for any other reason, all such amounts otherwise subject to
acceleration under the terms of any agreement evidencing, securing or otherwise
executed in connection with any Obligation shall be immediately due and payable
by the Guarantor. This Guaranty shall be in addition to any other guaranty or
other security for the Obligations, and it shall not be prejudiced or rendered
unenforceable by the invalidity of any such other guaranty or security.
<PAGE> 77
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11. TAXES. All payments hereunder shall be made without any
counterclaim or setoff, free and clear of, and without reduction by reason of,
any taxes, levies, imposts, charges and withholdings, restrictions or conditions
of any nature, which are now or may hereafter be imposed, levied or assessed by
any country, political subdivision or taxing or other authority therein
(excluding in the case of each Agent and each Bank, net income and profit and
franchise taxes imposed on such Agent or such Bank by the jurisdiction under the
laws of which such Agent or such Bank is organized or any subdivision or taxing
authority thereof or therein or by the United States or Canada or any taxing
authority thereof) ("Taxes"), all of which will be for the account of and paid
by the Guarantor. If for any reason, any such reduction is made or any Taxes are
paid by any Agent or any Bank, the Guarantor will pay to such Agent or such Bank
such additional amounts as may be necessary to ensure that such Agent or such
Bank receives the same net amount which it would have received had no reduction
been made or Taxes paid.
12. WAIVERS BY GUARANTOR. The Guarantor waives: demand, protest, notice
of acceptance hereof, notice of any action taken or omitted by the Banks or the
Agents in reliance hereon, notice of any Obligations incurred, any requirement
that the Banks or the Agents be diligent or prompt in making demands hereunder,
giving notice of any default by HGC or the Company or asserting any other right
of the Banks or the Agents hereunder and all other notices of any kind. The
Guarantor also irrevocably waives, to the fullest extent permitted by law, all
defenses which at any time may be available in respect of the Guarantor's
obligations hereunder by virtue of any homestead exemption, statute of
limitations, valuation, stay, moratorium law or other similar law now or
hereafter in effect, any right to require the marshalling of assets of HGC, the
Company or any other entity or other person primarily or secondarily liable with
respect to any of the Obligations, and all suretyship defenses generally.
13. SUBROGATION; SUBORDINATION. Until the payment and performance in
full of all Obligations, the Guarantor shall not exercise any rights against HGC
or the Company arising as a result of payment by the Guarantor hereunder, by way
of subrogation or otherwise, and will not prove any claim in competition with
the Banks or the Agents in respect of any payment hereunder in bankruptcy or
insolvency proceedings of any nature; the Guarantor will not claim any setoff or
counterclaim against HGC or the Company in respect of any liability of the
Guarantor to HGC or the Company; and the Guarantor waives any benefit of and any
right to participate in any collateral which may be held by the Banks and/or the
Agents. The payment of any amount due with respect to any indebtedness of HGC or
the Company now or hereafter held by the Guarantor is hereby subordinated to the
prior payment in full of the Obligations. The Guarantor agrees that after the
occurrence of any default in the payment or performance of the Obligations, the
Guarantor will not demand, sue for or otherwise attempt to collect any such
indebtedness of HGC or the Company to the Guarantor until the Obligations shall
have been paid in full. Notwithstanding the foregoing sentence, if the Guarantor
shall collect, enforce or receive any amount in respect of such indebtedness,
such amount shall be collected, enforced and received by the Guarantor as
trustee for the Banks and the Agents and be paid over to the Collateral Agent
for the benefit of the Agents and the Banks on account of the Obligations
without affecting in any manner the liability of the Guarantor under any other
provision of this Guaranty.
<PAGE> 78
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14. DEMANDS AND NOTICES. Any demand on or notice to the Guarantor shall
be in writing and shall be effective when handed to the Guarantor or left at or
mailed or sent by telegraph to the Guarantor's address set forth on the
signature page hereof.
15. AMENDMENTS, WAIVERS. No provision of this Guaranty can be changed,
waived, discharged or terminated except by an instrument in writing signed by
the Majority US Banks and the Majority Canada Banks (in each case, as defined in
the Intercreditor Agreement) and the Guarantor expressly referring to the
provision of this Guaranty to which such instrument relates; and no such waiver
shall extend to, affect or impair any right with respect to any Obligation which
is not expressly dealt with therein. No course of dealing or delay or omission
on the part of the Banks or the Agents in exercising any right shall operate as
a waiver thereof or otherwise be prejudicial thereto.
16. SEVERABILITY, ETC. It is the intention and agreement of the
Guarantor, the Agents and the Banks that the obligations of the Guarantor under
this Guaranty shall be valid and enforceable against the Guarantor to the
maximum extent permitted by applicable law. Accordingly, if any provision of
this Guaranty creating any obligation of the Guarantor in favor of the Banks or
the Agents shall be declared to be invalid or unenforceable in any respect or to
any extent, it is the stated intention and agreement of the Guarantor, the
Agents and the Banks that any balance of the obligation created by such
provision and all other obligations of the Guarantor to the Banks and the Agents
created by other provisions of this Guaranty shall remain valid and enforceable.
Likewise, if by final order a court of competent jurisdiction shall declare any
sums which the Banks or the Agents may be otherwise entitled to collect from the
Guarantor under this Guaranty to be in excess of those permitted under any law
(including any federal or state fraudulent conveyance or like statute or rule of
law) applicable to the Guarantor's obligations under this Guaranty, it is the
stated intention and agreement of the Guarantor, the Agents and the Banks that
all sums not in excess of those permitted under such applicable law shall remain
fully collectible by the Banks and the Agents from the Guarantor.
17. FURTHER ASSURANCES. The Guarantor agrees that it will from time to
time, at the request of an Agent, do all such things and execute all such
documents as such Agent may reasonably consider necessary or desirable to give
full effect to this Guaranty and to perfect and preserve the rights and powers
of the Banks and the Agents hereunder.
18. MISCELLANEOUS PROVISIONS. THIS GUARANTY IS INTENDED TO TAKE EFFECT
AS A SEALED INSTRUMENT TO BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (EXCLUDING THE LAWS APPLICABLE TO
CONFLICTS OR CHOICE OF LAW). This Guaranty shall inure to the benefit of the
Banks, the Agents and their successors in title and assigns, and shall be
binding on the Guarantor and the Guarantor's successors in title, assigns and
legal representatives. This Guaranty may be executed in several counterparts and
by each party on a separate counterpart, each of which when so executed and
delivered shall be an original, but all of which together shall constitute one
instrument. In proving this Guaranty it shall not be necessary to produce or
account for more than one such counterpart signed by the party against whom
enforcement is sought.
<PAGE> 79
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IN WITNESS WHEREOF, the Guarantor has executed this Guaranty or has
caused this Guaranty to be executed on its behalf by an officer or other person
thereunto duly authorized as of the _____ day of ______________, 19___.
111 Great Neck Road [INSERT NAME OF GUARANTOR]
Great Neck, N.Y. 11021
Attention: President
By:___________________________________
Title:
Accepted and agreed:
THE FIRST NATIONAL BANK OF
BOSTON
By:___________________________________
Title:
EUROPEAN AMERICAN BANK
By:___________________________________
Title:
THE CHASE MANHATTAN BANK, N.A.
By:___________________________________
Title:
THE FIRST NATIONAL BANK OF
BOSTON, AS US AGENT
By:___________________________________
Title:
<PAGE> 80
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ABN AMRO BANK CANADA
By:___________________________________
Title:
THE CHASE MANHATTAN BANK OF CANADA
By:___________________________________
Title:
THE CHASE MANHATTAN BANK OF CANADA,
AS CANADIAN AGENT
By:___________________________________
Title:
<PAGE> 81
EXHIBIT D
FORM OF SUBSIDIARY
SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of [_________________, 19__], between
[INSERT NAME], a [___] corporation (the "Company"), and The First National Bank
of Boston, a national banking association, as collateral agent (hereinafter, in
such capacity, the "Collateral Agent") for the Banks (as hereinafter defined).
WHEREAS, Hudson General Corporation ("HGC") and Hudson General LLC (the
"LLC") have entered into an Amended and Restated Revolving Credit Agreement,
dated as of November 25, 1992 and amended and restated as of June 1, 1996 (as
amended and in effect from time to time, the "Credit Agreement"), with The First
National Bank of Boston, European American Bank, The Chase Manhattan Bank, N.A.,
certain other financial institutions (collectively, the "US Banks"), and The
First National Bank of Boston as agent (the "US Agent") pursuant to which the US
Banks, subject to the terms and conditions contained therein, have agreed to
make loans or otherwise to extend credit to HGC and the LLC; and
WHEREAS, pursuant to that certain Amended and Restated Guaranty dated
February 3, 1993 and amended and restated June 1, 1996 (the "LLC Guaranty") in
favor of ABN AMRO Bank Canada and The Chase Manhattan Bank of Canada
(collectively, the "Canada Banks") and the Canadian Agent (as defined below),
the LLC has guaranteed all of the obligations of Hudson General Aviation
Services Inc./Societe de Services Hudson General (Aviation) Inc. ("HGAS"), a
wholly owned subsidiary of the LLC, to the Canada Banks and the Canadian Agent
under a Revolving Credit Agreement, dated as of November 25, 1992, as amended
(as amended and in effect from time to time, the "HGAS Credit Agreement"), among
HGAS, the Canada Banks and The Chase Manhattan Bank of Canada as successor agent
(the "Canadian Agent"), and certain promissory notes executed and delivered in
connection therewith; and
WHEREAS, pursuant to that certain guaranty of even date herewith (the
"Guaranty") in favor of each of the US Banks, the US Agent, the Canada Banks and
the Canadian Agent, the Company has guaranteed all obligations of HGC and the
LLC under (i) the Credit Agreement and certain promissory notes executed and
delivered in connection therewith, and (ii) the LLC Guaranty; and
WHEREAS, it is a condition precedent to the US Banks' making any loans
or otherwise extending credit to HGC and the LLC under the Credit Agreement and
the Canada Banks' making any loans or otherwise extending credit to HGAS under
the HGAS Credit Agreement that the Company execute and deliver to the Collateral
Agent, for the benefit of the Banks (as defined below) and the Collateral Agent,
a security agreement in substantially the form hereof;
<PAGE> 82
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NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. For purposes hereof, the term "Banks" shall
mean (a) the US Banks, (b) the CanadA Banks, (c) the US Agent, (d) the Canadian
Agent and (e) the successors and assigns of the foregoing, and the term
"Obligations" shall have the meaning set forth in Section 3 hereof. All other
capitalized terms used herein withouT definitions shall have the respective
meanings provided therefor in the Credit Agreement. All terms defined in the
Uniform Commercial Code of the Commonwealth of Massachusetts and used herein
shall have the same definitions herein as specified therein.
SECTION 2. GRANT OF SECURITY INTEREST.
(a) The Company hereby grants to the Collateral Agent, for the benefit
of the Banks and the Collateral Agent, to secure the payment and performance in
full of all of the Obligations (as defined below), a continuing security
interest in and so pledges and assigns to the Collateral Agent, for the benefit
of the Banks and the Collateral Agent, the following properties, assets and
rights of the Company, wherever located, whether now owned or hereafter acquired
or arising, and all proceeds and products thereof (all of the same being
hereinafter called the "Collateral"):
(i) all accounts of every kind and nature whether now owned or
hereafter acquired by the Company, including accounts receivable, all
instruments pertaining thereto, all security and guaranties with
respect thereto, all rights of the Company pertaining to goods giving
rise thereto, including the right of stoppage in transit, and all
security interests, liens and pledges, whether voluntary or
involuntary, securing the account debtors' obligations to the Company
thereunder, and all contract rights (to the extent that such rights are
to the payment of money), rights to the payment of money, chattel
paper, documents, instruments (including certificated securities) and
uncertificated securities, in each case whether now owned or hereafter
acquired by the Company;
(ii) all inventory (other than any fuel), raw materials, and
work in progress, in each case whether now owned or hereafter acquired
by the Company;
(iii) all general intangibles now owned or hereafter acquired
by the Company, including, without limitation, license fees, patents,
patent applications, trademarks, trademark applications, trade names,
copyrights, copyright applications, rights to sue and recover for past
infringement of patents, trademarks and copyrights, computer programs,
computer software, engineering drawings, service marks, customer lists,
goodwill, and all recorded data of any kind or nature, regardless of
the medium of recording including, without limitation, all software,
writings, plans, specifications and schematics (other than any general
intangibles relating to contracts except as expressly granted herein);
(iv) all equipment now owned or acquired by the Company after
the date hereof and all related equipment, parts and accessions and
additions with respect
<PAGE> 83
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thereto and tires thereon which are now owned or hereafter acquired,
and all substitutions and replacements which are now owned or hereafter
acquired by the Company; and
(v) all proceeds, including, without limitation, insurance
refund claims and all other insurance claims and proceeds, with respect
to any of the foregoing.
Notwithstanding the foregoing, the term "Collateral" shall not include:
(A) any property, asset or right of the Company described in
clauses (i), (ii) and (iii) above to the extent that such property,
asset or right of the Company is subject to any legally binding
contract provision restricting the pledge or assignment of such
property, right or asset as contemplated herein;
(B) any of the shares of capital stock of the Subsidiaries of
the Company;
(C) certificated and uncertificated securities owned by the
Company (other than of any Subsidiary of the Company) provided, that if
the market value of such securities exceeds $50,000 in the aggregate
then all such certificated and uncertificated securities owned by the
Company (other than of any Subsidiary of the Company) shall constitute
the Collateral;
(D) any of the equipment now owned by the Company which is
specifically identified on Schedule 1 attached hereto (except as set
forth to the contrary in Section 6(a) hereof); and
(E) any equipment hereafter acquired by the Company either (x)
with financing provided by a purchase money lender to the extent
permitted by Paragraph 5.13(f) of the Credit Agreement, or (y) for
purposes of fulfilling the Company's obligations under any contract
with an account debtor which by its terms prohibits the Company from
subjecting any of the equipment identified to such contract to any
lien, which equipment the Company shall have identified in a supplement
to Schedule 1 attached hereto delivered to the Collateral Agent
together with certificate of the Company certifying that such equipment
has been so financed or has been so identified with such a contract.
(b) Pursuant to the terms hereof, the Company has endorsed, assigned
and delivered to the Collateral Agent all negotiable or non-negotiable
instruments (including certificated securities) and chattel paper which
constitute Collateral, together with stock powers or other appropriate
instruments of transfer or assignment duly executed in blank as the Collateral
Agent may have specified. In the event that the Company shall, after the date of
this Agreement, acquire any other negotiable or non-negotiable instruments
(including certificated securities but excluding checks received by the Company
in the ordinary course of its business in connection with the collection of its
accounts) or chattel paper which constitute Collateral, the Company shall
forthwith endorse, assign and deliver the same to the Collateral Agent,
accompanied by such stock powers or other instruments of transfer or assignment
duly executed in blank as the Collateral Agent may from time to time specify. To
the extent that any such securities are uncertificated, appropriate book-
<PAGE> 84
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entry transfers reflecting the pledge of such securities created hereby have
been or, in the case of uncertificated securities which constitute Collateral
hereafter acquired by the Company, will at the time of such acquisition be, duly
made for the account of the Collateral Agent or one or more nominees of the
Collateral Agent with the issuer of such securities or other appropriate
book-entry facility or financial intermediary, with the Collateral Agent having
at all times the right to obtain definitive certificates (in the Collateral
Agent's name or in the name of one or more nominees of the Collateral Agent)
where the issuer customarily or otherwise issues certificates, all to be held as
Collateral hereunder. The Company hereby acknowledges that the Collateral Agent
may, in its discretion, appoint one or more financial institutions to act as the
Collateral Agent's agent in holding in custodial accounts instruments or other
financial assets in which the Collateral Agent is granted a security interest
hereunder, including, without limitation, certificates of deposit and other
instruments evidencing short term obligations.
SECTION 3. OBLIGATIONS SECURED. The Collateral hereunder constitutes
and will constitute continuing secuRity for (i) all of the obligations of the
Company to the Banks under or in relation to the Guaranty as such guaranty is
originally executed or as modified, amended, restated, supplemented or extended
and (ii) all obligations of the Company to the Banks arising out of any
extension, refinancing or refunding of any of the foregoing obligations, whether
such obligations are now existing or hereafter acquired or arising, direct or
indirect, joint or several, absolute or contingent, due or to become due,
matured or unmatured, liquidated or unliquidated, arising by contract, operation
of law or otherwise (hereinafter collectively referred to as the "Obligations").
SECTION 4. CONCERNING ACCOUNTS AND CHATTEL PAPER. The Company
represents and warrants to the Collateral Agent that it keeps or causes to be
kept, and covenants with the Collateral Agent that it shall keep or cause to be
kept, separate records of accounts, chattel paper and instruments which are
complete and accurate in all material respects. The Company covenants and agrees
that from time to time upon the request of the Collateral Agent, it shall
deliver to the Collateral Agent a list of the names, addresses, face value, and
dates of invoice(s) for each account debtor obligated on any account or chattel
paper and for each obligor on instruments for which the Company is an obligee,
along with such additional information with respect to its accounts, chattel
paper and instruments as the Collateral Agent reasonably may request. The
Company covenants with the Collateral Agent that, except with respect to any
renewal of any contract existing on the date hereof which restricts such
assignment, it shall use its reasonable efforts to enter into contracts with
account debtors which do not restrict the assignment by the Company of any of
its property, assets or rights of the kind described in Section 2(a)(i) hereof
with respect to such contract.
SECTION 5. CONCERNING SECURITIES. (a) Any sums or other property paid
or distributed upon or with respeCt to any securities which constitute
Collateral, whether by dividend or redemption or upon the liquidation or
dissolution of the issuer thereof or otherwise, shall, except to the limited
extent provided in Section 5(b), be paId over and delivered to the Collateral
Agent to be held by the Collateral Agent, for the benefit of the Banks and the
Collateral Agent, as security for the payment and performance in full of all of
the Obligations. In case, pursuant to the recapitalization or reclassification
of the capital of the issuer thereof or pursuant to the reorganization thereof,
any distribution of capital shall be made on or in
<PAGE> 85
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respect of any of the securities which constitute Collateral or any property
shall be distributed upon or with respect to any of such securities, the
property so distributed shall be delivered to the Collateral Agent, for the
benefit of the Banks and the Collateral Agent, to be held by it as security for
the Obligations. Except to the limited extent provided in Section 5(b), all sums
of money and property paid or distributed in respect of any securities which
constitute Collateral, whether as a dividend or upon such a liquidation,
dissolution, recapitalization or reclassification or otherwise, that are
received by the Company shall, until paid or delivered to the Collateral Agent,
be held in trust for the Collateral Agent, for the benefit of the Banks and the
Collateral Agent, as security for the payment and performance in full of all of
the Obligations.
(b) So long as no Default shall have occurred and be continuing, the
Company shall be entitled to receive all cash dividends paid in respect of any
securities which constitute Collateral, to vote such securities and to give
consents, waivers and ratifications in respect of such securities; provided,
however, that no vote shall be cast or consent, waiver or ratification given by
the Company if the effect thereof would impair any of such securities or be
inconsistent with or result in any violation of any of the provisions of the
Credit Agreement or any of the other Loan Documents. All such rights of the
Company to receive cash dividends shall cease in case a Default shall have
occurred and be continuing. All such rights of the Company to vote and give
consents, waivers and ratifications with respect to any securities which
constitute Collateral shall, at the Collateral Agent's option, as evidenced by
the Collateral Agent's notifying the Company of such election, cease in case a
Default shall have occurred and be continuing.
SECTION 6. CONCERNING EQUIPMENT. (a) The Company represents and
warrants to the Collateral Agent and covenants with the Collateral Agent that
the equipment identified on Schedule 1 attached hereto (as such schedule may be
supplemented from time to time by the Company in accordance with Section 2(a)(E)
hereof) was and will be either acquired by the Company (i) with financing
provided by a purchase money lender to the extent permitted by Paragraph 5.13(f)
of the Credit Agreement, or (ii) for purposes of fulfilling the Company's
obligations under any contract with an account debtor which by its terms
prohibits the Company from subjecting any of the equipment identified with such
contract to any lien. Any equipment identified on Schedule 1 attached hereto
which was not either acquired by the Company (i) with the financing provided by
a purchase money lender to the extent permitted by Paragraph 5.13(f) of the
Credit Agreement, or (ii) for the purposes of fulfilling the Company's
obligations under any contract with an account debtor which by its terms
prohibits the Company from subjecting such equipment identified with such
contract to any lien, shall be deemed to be Collateral.
(b) The Company covenants with the Collateral Agent that, except with
respect to any renewal of any contract existing on the date hereof which
prohibits such assignment, it shall use its reasonable efforts to enter into
contracts with account debtors which do not prohibit the Company from subjecting
any of the equipment identified with such contracts to any lien, encumbrance or
assignment.
(c) The Company represents and warrants to the Collateral Agent and
covenants with the Collateral Agent that (i) Collateral for which motor vehicle
or any other certificate of title is required is listed on Schedule 2 attached
hereto, and such Collateral is titled in
<PAGE> 86
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the jurisdictions located in the United States of America listed on Schedule 2
attached hereto and will remain titled in such jurisdictions, provided that the
Company may retitle any Collateral for which motor vehicle or any other
certificate of title is required in another jurisdiction located in the United
States of America provided that the retitling of such Collateral is reflected in
the revised Schedule 2 next delivered to the Collateral Agent pursuant to the
terms hereof; and (ii) Collateral for which no certificate of title is required,
but for which registration under motor vehicle laws is required, is registered
in the jurisdictions located in the United States of America listed on Schedule
2 and will remain registered in such jurisdictions, provided that the Company
may terminate any such registration which is no longer required under applicable
law and may reregister any Collateral in a different or the same jurisdiction
provided that such reregistration is reflected in the revised Schedule 2 next
delivered to the Collateral Agent pursuant to the terms hereof. The Company
shall deliver to the Collateral Agent, concurrently with each delivery by the
Borrower of the compliance certificate pursuant to Paragraph 5.2(f) of the
Credit Agreement, a revised Schedule 2 reflecting equipment acquired by the
Company after the date hereof and, if any equipment has been retitled or
reregistered after the date hereof in accordance with the terms of this
Agreement, the jurisdiction in which such equipment has been retitled or
reregistered.
(d) The Company covenants with the Collateral Agent that if a Default
shall have occurred and be continuing, the Company shall, within 30 days of the
request of the Collateral Agent, deliver to the Collateral Agent all
certificates of title and related applications for title for all Collateral for
which motor vehicle or any other certificate of title is required, endorsed by
the Company to reflect the security interest granted hereunder to the Collateral
Agent.
SECTION 7. CONCERNING PATENTS AND TRADEMARKS. (a) The Company
represents and warrants to the CollatEral Agent that as of the date hereof, the
Company does not have any right to and is not entitled to the benefits of any
patents, trademarks, service marks, tradenames or logos. If the Company shall
acquire rights to any new trademarks, trade names, logos, service marks or
patentable inventions, or becomes entitled to the benefit of any patent or
trademark or service mark registration application, or application for any
reissue, division, continuation, renewal, extension or continuation-in-part of
any patent, any improvement on any patent, or any trademark or service mark
registration after the date hereof, within 15 days after acquiring such rights,
the Company shall execute and deliver to the Collateral Agent as a supplement to
this Agreement a Patent Collateral Assignment and Security Agreement
satisfactory to the Collateral Agent in all respects and the provisions of this
Agreement shall automatically apply thereto. The Company shall provide to the
Collateral Agent all information reasonably requested by the Collateral Agent
and reasonably necessary to perfect the Collateral Agent's security interest in
such trademark, trade name, logo, service mark and patent registrations and
applications. The Company will not enter into any agreements outside of the
ordinary course of its business affecting any of its trademarks, trade names,
logos, service marks or patents acquired after the date hereof without the prior
written consent of the Collateral Agent. The Company grants to the Collateral
Agent the right upon the occurrence of a Default to sue for any infringement
(past, present or future) of the Company's patent, trademark, trade name, logo,
or service mark rights and/or to join the Company as a nominal party plaintiff
in any trademark, service mark, trade name, logo or patent infringement suit.
<PAGE> 87
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(b) The Company represents and warrants to the Collateral Agent that as
of the date hereof, the Company does not own or have any rights to any
copyrights which are registered with the United States Copyright Office. If the
Company acquires copyright rights or such rights accrue to the Company after the
date hereof, the provisions of this Agreement shall automatically apply thereto.
The Company will give written notice to the Collateral Agent of any federal
copyright registration or application obtained or filed after the date hereof.
The Company shall provide to the Collateral Agent all information reasonably
requested by the Collateral Agent and reasonably necessary to perfect the
Collateral Agent's security interest in such copyright registrations and
applications. The Company will not enter into any agreements outside of the
ordinary course of its business affecting any of its copyrights acquired after
the date hereof without the prior written consent of the Collateral Agent. The
Company grants to the Collateral Agent the right upon the occurrence and
continuance of a Default to sue for any infringement (past, present or future)
of the Company's copyright rights and/or to join the Company as a nominal party
plaintiff in any copyright infringement suit.
SECTION 8. GOVERNMENT CONTRACTS. If a Default shall have occurred and
be continuing, the Company shaLl upon the request of the Collateral Agent,
execute all such documents, and take all such actions, as the Collateral Agent
shall determine to be necessary or appropriate from time to time under the
Federal Assignment of Claims Act of 1940, as amended, in order to confirm and
assure to the Collateral Agent its rights under this Agreement with respect to
any and all Collateral consisting of the Company's rights to moneys due or to
become due under any contracts or agreements with or orders from the United
States government or any agency or department thereof, the assignment of which
is not prohibited by such contract or agreement (collectively, "Government
Receivables"). Without limiting the generality of the foregoing, the Company
agrees that (i) within three Business Days after such request from the
Collateral Agent, it shall execute and deliver to the Collateral Agent a
confirmatory assignment substantially in the form of Exhibit A attached hereto
(a "Confirmatory Assignment") with respect to each Government Receivable
existing on the date of such request, and (ii) within ten Business Days after
the creation of any new Governmental Receivable after the date of such request
from the Collateral Agent, it shall execute and deliver to the Collateral Agent
a Confirmatory Assignment with respect to such Government Receivable. The
Company hereby irrevocably authorizes the Collateral Agent, or its designee, at
the Company's expense, to file with the United States government (or the
appropriate agency or instrumentality thereof) a notice of each such assignment
of a Government Receivable substantially in the form of Exhibit B attached
hereto (a "Notice of Assignment"), to which a copy of the relevant Confirmatory
Assignment may be attached, and appoints the Collateral Agent as the Company's
attorney-in-fact to execute and file any such Confirmatory Assignments, Notices
of Assignment and any ancillary documents relating thereto.
SECTION 9. TITLE TO COLLATERAL, ETC. The Company is the owner of the
Collateral free from any adverse liEn, security interest or other encumbrance,
except for the security interest created by this Agreement and other liens
permitted by the Credit Agreement. None of the Collateral constitutes, or is the
proceeds of, "farm products" as defined in Section 9-109(3) of the Uniform
Commercial Code of the Commonwealth of Massachusetts.
<PAGE> 88
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SECTION 10. CONTINUOUS PERFECTION. The Company's place of business or,
if more than one, chief executive office is indicated on the Perfection
Certificate delivered by the Company to the Collateral Agent herewith (the
"Perfection Certificate"). The Company will not change the same, or the name,
identity or corporate structure of the Company in any manner, without providing
at least 30 days' prior written notice to the Collateral Agent. The Collateral,
to the extent not delivered to the Collateral Agent pursuant to Section 2(b),
will be kept at those locations listed on the Perfection Certificate and the
Company will not remove the Collateral (except to the extent that equipment
which consists of titled vehicles is moved in the ordinary course of business)
from such locations, without providing at least 30 days' prior written notice to
the Collateral Agent.
SECTION 11. NO LIENS. Except for the security interest herein granted
and liens permitted by the Credit Agreement, the Company shall be the owner of
the Collateral free from any lien, security interest or other encumbrance, and
the Company shall defend the same against all claims and demands of all persons
at any time claiming the same or any interests therein adverse to the Collateral
Agent or any of the Banks. The Company shall not pledge, mortgage or create, or
suffer to exist a security interest in the Collateral in favor of any person
other than the Collateral Agent, for the benefit of the Banks and the Collateral
Agent, except for liens permitted by the Credit Agreement.
SECTION 12. NO TRANSFERS. The Company will not sell or offer to sell or
otherwise transfer the CollateraL or any interest therein except as permitted by
the Credit Agreement.
SECTION 13. INSURANCE.
(a) The Company will maintain with financially sound and reputable
insurers such insurance with respect to its properties and business as is
required to be maintained under the Credit Agreement. In addition, all property
insurance with respect to the Collateral shall be payable to the Collateral
Agent as loss payee under a "standard" or "New York" loss payee clause for the
benefit of the Banks and the Collateral Agent.
(b) The proceeds of any property insurance in respect of any casualty
loss of any of the Collateral shall, subject to the rights, if any, of other
parties with a prior interest in the property covered thereby, (i) so long as no
Default or condition which would, with either or both the giving of notice or
the lapse of time, result in a Default has occurred and is continuing and to the
extent that the amount of such proceeds is less than $100,000, be disbursed to
the Company for direct application by the Company solely to the repair or
replacement of the Company's property so damaged or destroyed and (ii) in all
other circumstances, be held by the Collateral Agent as cash collateral for the
Obligations of the Company. The Collateral Agent may, at its sole option,
disburse from time to time all or any part of such proceeds so held as cash
collateral, upon such terms and conditions as the Collateral Agent may
reasonably prescribe, for direct application by the Company solely to the repair
or replacement of the Company's property so damaged or destroyed, or the
Collateral Agent may, if a Default has occurred and is continuing, apply all or
any part of such proceeds to the Obligations with the Aggregate Loan Limit (if
not then terminated) being reduced by the amount so applied to the Obligations.
<PAGE> 89
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(c) All such policies of insurance shall provide for at least thirty
days' prior written cancellation notice to the Collateral Agent. In the event of
failure by the Company to provide and maintain insurance as herein provided, the
Collateral Agent may, at its option, provide such insurance and charge the
amount thereof to the Company. The Company shall furnish the Collateral Agent
with certificates of insurance and, upon the request of the Collateral Agent,
policies evidencing compliance with the foregoing insurance provisions.
SECTION 14. MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW. The Company
will keep the Collateral in good order and repair (ordinary wear and tear
excepted) and will not use the same in violation of law or any policy of
insurance thereon and will take all other necessary and appropriate steps
(including, but not limited to, defending any of the patents, copyrights,
trademarks, service marks, tradenames or logos, and any registrations thereof
which constitute Collateral, against any infringement thereof or any opposition
or other adversary action or proceeding when the defense of such patents,
copyrights, trademarks, service marks, tradenames or logos has been determined
to be necessary and appropriate in the business judgment of the Company) to
preserve the value thereof and the goodwill, business and assets associated
therewith or appurtenant thereto. The Collateral Agent, or its designee, may
inspect the Collateral at any reasonable time, wherever located provided that so
long as no Default or condition which would, with either or both the giving of
notice or the lapse of time, result in a Default has occurred and is continuing,
the Collateral Agent shall give reasonable notice to the Company of such
inspection. The Company will pay promptly when due all taxes, assessments,
governmental charges and levies upon the Collateral or incurred in connection
with the use or operation of such Collateral or incurred in connection with this
Agreement.
SECTION 15. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
(a) In its discretion, the Collateral Agent may discharge taxes and
other encumbrances at any time levied or placed on any of the Collateral, make
repairs thereto and pay any necessary filing fees. The Company agrees to
reimburse the Collateral Agent on demand for any and all expenditures so made.
The Collateral Agent shall have no obligation to the Company to make any such
expenditures, nor shall the making thereof relieve the Company of any default.
The Collateral Agent shall inform the Company before incurring any such expense.
(b) Anything herein to the contrary notwithstanding, the Company shall
remain liable under each contract or agreement comprised in the Collateral to be
observed or performed by the Company thereunder. Neither the Collateral Agent
nor any Bank shall have any obligation or liability under any such contract or
agreement by reason of or arising out of this Agreement or the receipt by the
Collateral Agent or any Bank of any payment relating to any of the Collateral,
nor shall the Collateral Agent or any Bank be obligated in any manner to perform
any of the obligations of the Company under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Collateral Agent or any Bank in respect of the Collateral or as
to the sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Collateral Agent
<PAGE> 90
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or to which the Collateral Agent or any Bank may be entitled at any time or
times. The Collateral Agent's sole duty with respect to the custody, safe
keeping and physical preservation of the Collateral in its possession, under
Section 9-207 of the Uniform Commercial Code of the CommonwEalth of
Massachusetts or otherwise, shall be to deal with such Collateral in the same
manner as the Collateral Agent deals with similar property for its own account.
SECTION 16. SECURITIES AND DEPOSITS. The Collateral Agent may at any
time after the occurrence and durinG the continuance of a Default, at its
option, transfer to itself or any nominee any securities constituting
Collateral, receive any income thereon and hold such income as additional
Collateral or apply it to the Obligations. Whether or not any Obligations are
due, after the occurrence and during the continuance of a Default, the
Collateral Agent may demand, sue for, collect, or make any settlement or
compromise which it deems desirable with respect to the Collateral. Regardless
of the adequacy of Collateral or any other security for the Obligations, any
deposits or other sums at any time credited by or due from the Collateral Agent
or any Bank to the Company may at any time be applied to or set off against any
of the Obligations as provided in the Guaranty.
SECTION 17. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS. If a
Default shall have occurred and be continuing the Company shall, at the request
of the Collateral Agent, notify account debtors on accounts and chattel paper of
the Company and obligors on instruments for which the Company is an obligee of
the security interest of the Collateral Agent in any such account, chattel paper
or instrument and that payment thereof is to be made directly to the Collateral
Agent or to any financial institution designated by the Collateral Agent as the
Collateral Agent's agent therefor, and the Collateral Agent may itself, if a
Default shall have occurred and be continuing, without notice to or demand upon
the Company, so notify account debtors and obligors. After the making of such a
request or the giving of any such notification (provided the same has also been
sent to the Company), the Company shall hold any proceeds of collection of
accounts, chattel paper and instruments received by the Company as trustee for
the Collateral Agent, for the benefit of the Banks and the Collateral Agent,
without commingling the same with other funds of the Company and shall turn the
same over to the Collateral Agent in the identical form received, together with
any necessary endorsements or assignments. The Collateral Agent shall apply the
proceeds of collection of accounts, chattel paper and instruments received by
the Collateral Agent to the Obligations as provided in the Intercreditor
Agreement, such proceeds to be immediately entered after final payment in cash
or solvent credits of the items giving rise to them.
SECTION 18. NO FURTHER ACTIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body or other person that has not been received, taken or made is
required for the grant by the Company of the security interests granted hereby
or for the execution, delivery or performance of this Agreement by the Company,
or, except for (i) the filing of financing statements and continuation
statements with respect thereto, (ii) the delivery of the instruments, chattel
paper and share certificates referred to in Section 2(b) hereof, (iii) the
presentation to the Departments of Motor Vehicles of the applications for title
referred to in Section 6(d) hereof, at the times required in Section 6(d)
hereof, and (iv) the execution and delivery of the Patent Collateral Assignment
and Security Agreements referred to in Section 7 hereof and the filing of
<PAGE> 91
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such instruments at the times provided herein, and the execution and delivery of
the Confirmatory Assignments and Notices of Assignment referred to in Section 8
hereof, at the times required in Section 8 hereof, for (A) the perfection and
maintenance of the security interests hereunder (including the first priority
nature of such security interests), or (B) the exercise by the Collateral Agent
of the rights or the remedies in respect of the Collateral pursuant to this
Agreement (other than the authorization and direction of the requisite Banks
pursuant to the terms of the Intercreditor Agreement).
SECTION 19. FURTHER ASSURANCES. The Company, at its own expense, shall
do, make, execute and deliver all such additional and further acts, things,
deeds, assurances and instruments as the Collateral Agent may reasonably require
more completely to vest in and assure to the Collateral Agent and the Banks
their respective rights hereunder or in any of the Collateral, including,
without limitation, (a) executing, delivering and, where appropriate, filing
financing statements and continuation statements under the Uniform Commercial
Code, (b) obtaining governmental and other third party consents and approvals,
(c) obtaining waivers from mortgagees and landlords and (d) taking all actions
required by Sections 8-313 and 8-321 of the Uniform Commercial Code, as
applicable in each relevant jurisdiction, with respect to certificated and
uncertificated securities.
SECTION 20. POWER OF ATTORNEY.
(a) The Company hereby irrevocably constitutes and appoints the
Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorneys-in-fact with full irrevocable
power and authority in the place and stead of the Company or in the Collateral
Agent's own name, for the purpose of carrying out the terms of this Agreement,
to take any and all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, hereby
gives said attorneys the power and right, on behalf of the Company, without
notice to or assent by the Company, to do the following:
(i) upon the occurrence and during the continuance of a
Default generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral in such manner
as is consistent with the Uniform Commercial Code of the Commonwealth
of Massachusetts and as fully and completely as though the Collateral
Agent were the absolute owner thereof for all purposes, and to do at
the Company' expense, at any time, or from time to time, all acts and
things which the Collateral Agent deems necessary to protect, preserve
or realize upon the Collateral and the Collateral Agent's security
interest therein, in order to effect the intent of this Agreement, all
as fully and effectively as the Company might do, including, without
limitation, (A) upon written notice to the Company, the exercise of
voting rights with respect to voting securities, which rights may be
exercised, if the Collateral Agent so elects, with a view to causing
the liquidation in a commercially reasonable manner of assets of the
issuer of any such securities and (B) the execution, delivery and
recording, in connection with any sale or other disposition of any
Collateral, of the endorsements, assignments or other instruments of
conveyance or transfer with respect to such Collateral; and
<PAGE> 92
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(ii) to file such financing statements with respect hereto,
with or without the Company's signature, or a photocopy of this
Agreement in substitution for a financing statement, as the Collateral
Agent may deem appropriate and to execute in the Company's name such
financing statements and continuation statements which may require the
Company's signature.
(b) To the extent permitted by law, the Company hereby ratifies all
that said attorneys shall lawfully do or cause to be done by virtue hereof. This
power of attorney is a power coupled with an interest and shall be irrevocable.
(c) The powers conferred on the Collateral Agent hereunder are solely
to protect the interests of the Collateral Agent and the Banks in the Collateral
and shall not impose any duty upon the Collateral Agent to exercise any such
powers. The Collateral Agent shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be responsible to the
Company for any act or failure to act, except for the Collateral Agent's own
gross negligence or willful misconduct.
SECTION 21. REMEDIES. (a) If a Default shall have occurred and be
continuing, the Collateral Agent may uPon written instruction of the Banks in
accordance with the Intercreditor Agreement, without notice to or demand upon
the Company, declare this Agreement to be in default, and the Collateral Agent
shall thereafter have in any jurisdiction in which enforcement hereof is sought,
in addition to all other rights and remedies, the rights and remedies of a
secured party under the Uniform Commercial Code, including, without limitation,
the right to take possession of the Collateral, and for that purpose the
Collateral Agent may, so far as the Company can give authority therefor, enter
upon any premises on which the Collateral may be situated and remove the same
therefrom and in addition, the Collateral Agent shall thereafter have the
following rights and remedies (to the extent permitted by applicable law) in any
jurisdiction in which enforcement is sought:
(i) if the Collateral Agent so elects and gives notice of such
election to the Company, the Collateral Agent may vote any or all
securities which constitute Collateral whether or not the same shall
have been transferred into its name or the name of its nominee or
nominees) for any lawful purpose, including, without limitation, if the
Collateral Agent so elects, for the liquidation of the assets of the
issuer thereof, and give all consents, waivers and ratifications in
respect of such securities and otherwise act with respect thereto as
though it were the outright owner thereof (the Company hereby
irrevocably constituting and appointing the Collateral Agent the proxy
and attorney-in-fact of the Company, with full power of substitution,
to do so); and
(ii) the Collateral Agent may cause all or any part of the
securities held by it to be transferred into its name or the name of
its nominee or nominees, if it has not already done so.
The Company recognizes that the Collateral Agent may be unable to
effect a public sale of the securities which constitute Collateral by reason of
certain prohibitions contained
<PAGE> 93
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in the Securities Act of 1933, as amended, but may be compelled to resort to one
or more private sales thereof to a restricted group of purchasers. The Company
recognizes that any such private sales may be at prices and other terms less
favorable to the seller than if sold at public sales and that such private sales
shall not by reason thereof be deemed not to have been made in a commercially
reasonable manner. The Collateral Agent shall be under no obligation to delay a
sale of any security for the period of time necessary to permit the issuer of
such securities to register such securities for public sale under the Securities
Act of 1933, as amended, even if the issuer would agree to do so.
(b) The Collateral Agent may in its discretion require the Company to
assemble all or any part of the Collateral at such location or locations within
the state(s) of the Company's principal office(s) or at such other locations as
the Collateral Agent may designate. Unless the Collateral is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, the Collateral Agent shall give to the Company at least five
Business Days' prior written notice of the time and place of any public sale of
Collateral or of the time after which any private sale or any other intended
disposition is to be made. The Company hereby acknowledges that five Business
Days' prior written notice of such sale or sales shall be reasonable notice. In
addition, the Company waives any and all rights that it may have to a judicial
hearing in advance of the enforcement of any of the Collateral Agent's rights
hereunder, including, without limitation, its right following a Default to take
immediate possession of the Collateral and to exercise its rights with respect
thereto.
SECTION 22. NO WAIVER, ETC. The Company waives demand, notice, protest,
notice of acceptance of this Agreement, notice of loans made, credit extended,
Collateral received or delivered or other action taken in reliance hereon and
all other demands and notices of any description; provided that the Company
shall be sent copies of any notices sent by the Collateral Agent to account
debtors, it being understood that the Collateral Agent shall not be liable for
any failure to send any such copy. With respect to both the Obligations and the
Collateral, the Company assents to any extension or postponement of the time of
payment or any other indulgence, to any substitution, exchange or release of
Collateral, to the addition or release of any party or person primarily or
secondarily liable, to the acceptance of partial payment thereon and the
settlement, compromising or adjusting of any thereof, all in such manner and at
such time or times as the Collateral Agent may deem advisable. The Collateral
Agent shall have no duty as to the collection or protection of the Collateral or
any income thereon, nor as to the preservation of rights against prior parties,
nor as to the preservation of any rights pertaining thereto beyond the safe
custody thereof as set forth in Section 15(b). The Collateral Agent shalL not be
deemed to have waived any of its rights upon or under the Obligations or the
Collateral unless such waiver shall be in writing and signed by the Collateral
Agent with the consent of the Majority Banks. No delay or omission on the part
of the Collateral Agent in exercising any right shall operate as a waiver of
such right or any other right. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion. All rights
and remedies of the Collateral Agent with respect to the Obligations or the
Collateral, whether evidenced hereby or by any other instrument or papers, shall
be cumulative and may be exercised singularly, alternatively, successively or
concurrently at such time or at such times as the Collateral Agent deems
expedient.
<PAGE> 94
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SECTION 23. MARSHALLING. Neither the Collateral Agent nor any Bank
shall be required to marshal any present or future collateral security
(including but not limited to this Agreement and the Collateral) for, or other
assurances of payment of, the Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of the rights of the Collateral Agent hereunder and of the Collateral Agent
or any Bank in respect of such collateral security and other assurances of
payment shall be cumulative and in addition to all other rights, however
existing or arising. To the extent that it lawfully may, the Company hereby
agrees that it will not invoke any law relating to the marshalling of collateral
which might cause delay in or impede the enforcement of the Collateral Agent's
rights under this Agreement or under any other instrument creating or evidencing
any of the Obligations or under which any of the Obligations is outstanding or
by which any of the Obligations is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, the Company hereby irrevocably
waives the benefits of all such laws.
SECTION 24. PROCEEDS OF DISPOSITIONS; EXPENSES. The Company shall pay
to the Collateral Agent on demand Any and all reasonable expenses, including
reasonable attorneys' fees and disbursements, incurred or paid by the Collateral
Agent in protecting, preserving or enforcing the Collateral Agent's rights under
or in respect of any of the Obligations or any of the Collateral. After
deducting all of said expenses, the residue of any proceeds of collection or
sale of the Obligations or Collateral shall, to the extent actually received in
cash, be applied to the payment of the Obligations in accordance with Section
4(f) of the Intercreditor Agreement, with proper allowance being made for any
Obligations not then due. Upon the final payment and satisfaction in full of all
of the Obligations and after making any payments required by Section 9-504(1)(c)
of the Uniform Commercial Code of the Commonwealth of Massachusetts, any excess
shall be returned to the Company or its successors, and the Company shall remain
liable for any deficiency in the payment of the Obligations.
SECTION 25. OVERDUE AMOUNTS. Until paid, all amounts due and payable by
the Company hereunder shall be a debt secured by the Collateral and shall bear,
whether before or after judgment, interest from and after the date on which
written demand therefor shall have been sent to the Company, at the rate of
interest for overdue principal set forth in the Credit Agreement.
SECTION 26. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE TO CONFLICTS OR CHOICE OF LAW). The Company
agrees that any suit for the enforcement of this Agreement may be brought in the
courts of the Commonwealth of Massachusetts or any federal court sitting therein
and consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Company by mail at the address
specified in the Credit Agreement. The Company hereby waives any objection that
it may now or hereafter have to the venue of any such suit or any such court or
that such suit is brought in an inconvenient court.
<PAGE> 95
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SECTION 27. MISCELLANEOUS. The headings of each section of this
Agreement are for convenience only and shall not define or limit the provisions
thereof. This Agreement and all rights and obligations hereunder shall be
binding upon the Company and its respective successors and assigns, and shall
inure to the benefit of the Collateral Agent, the Banks and their respective
successors and assigns. If any term of this Agreement shall be held to be
invalid, illegal or unenforceable, the validity of all other terms hereof shall
in no way be affected thereby, and this Agreement shall be construed and be
enforceable as if such invalid, illegal or unenforceable term had not been
included herein. The Company acknowledges receipt of a copy of this Agreement.
SECTION 28. TERM OF AGREEMENT. (a) Notwithstanding any other provision
of this Agreement, this Agreement shall terminate and the Company shall be
entitled to the return, at the Company's expense, of such Collateral in the
possession or control of the Collateral Agent either (i) upon delivery of a
letter addressed to the Collateral Agent and signed by each of the Banks
specifying that the Banks have received evidence satisfactory to them that (A)
all litigation against HGC and HGAS resulting from or relating to the
acquisition in 1984 of certain assets of the airport ground services business of
Innotech Aviation Limited has been fully and finally dismissed (and such
dismissal is not appealable) or settled in full, (B) HGC and HGAS have satisfied
in full all of their payment obligations, if any, with respect to such
litigation, (C) the payment thereof has not resulted in the occurrence of any
Default or condition which would, with either or both the giving of notice or
lapse of time, result in a Default, and (D) no Default or condition which would,
with either or both the giving of notice or lapse of time, result in a Default
then exists or (ii) upon the indefeasible payment and performance of the
Obligations in full.
(b) Upon the delivery of a letter addressed to the Collateral Agent
signed by the US Banks specifying that the US Banks have received evidence that
the disposition of any of the Collateral is permitted by the Credit Agreement,
the Collateral Agent shall execute and deliver to the Company such releases with
respect to the lien hereof as the Company may reasonably request with respect to
such Collateral.
IN WITNESS WHEREOF, intending to be legally bound, the Company has
caused this Agreement to be duly executed as of the date first above written.
[INSERT NAME]
By:___________________________________
Title:
Accepted:
THE FIRST NATIONAL BANK OF BOSTON,
AS COLLATERAL AGENT
By:___________________________________
Title:
<PAGE> 96
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CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF ____________)
) ss
COUNTY OF ___________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of ______________, 19__, personally appeared to me
known personally, and who, being by me duly sworn, deposes and says that he/she
is the __________________ of _______________, and that said instrument was
signed and sealed on behalf of said corporation by authority of its Board of
Directors, and said ___________________ acknowledged said instrument to be the
free act and deed of said corporation.
________________________________
Notary Public
My Commission Expires:
<PAGE> 97
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EXHIBIT A
FORM OF CONFIRMATORY ASSIGNMENT OF CONTRACT
This ASSIGNMENT, dated as of ___________, is by [_________] (the
"Debtor") in favor of The First National Bank of Boston (the "Collateral Agent")
as agent for itself, and certain lenders (the "Lenders").
WHEREAS, the Debtor is party to Contract No. ________ dated ___________
between the Debtor and ____________________ (the "Contract"); and
WHEREAS, the Debtor and the Collateral Agent have entered into a
certain Security Agreement, dated as of [________] (the "Security Agreement"),
pursuant to which the Debtor has granted to the Collateral Agent, for the
benefit of the Lenders, a security interest in certain assets of the Debtor,
including all of the Debtor's rights in and to all moneys due or to become due
under the Contract, to secure the Obligations referred to in the Security
Agreement;
NOW, THEREFORE, the Debtor hereby confirms, acknowledges and agrees
that, pursuant to and subject to the terms of the Security Agreement, the Debtor
hereby assigns, transfers, pledges and grants to the Agent for the benefit of
the Lenders a security interest in all of the Debtor's right, title and interest
in and to all moneys due or to become due under the Contract.
EXECUTED as of the date first above written.
Attest: [INSERT NAME]
_____________________________ By:____________________________
[Secretary or Assistant Title:
Secretary]
[Corporate Seal]
<PAGE> 98
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EXHIBIT B
FORM OF
NOTICE OF ASSIGNMENT
The First National Bank of Boston
Date: __________________
To: [Contracting Official or Head of
Agency, Surety on any bond
applicable to the contract
and Disbursing Official]
Re: Payments to:
Contract Number:
Made by the United States of America
Department:
Division:
For:
Dated:
Ladies and Gentlemen:
This has reference to Contract No. ________ dated _______, entered into
between [contractor's name and address] (the "Contractor") and [government
agency, name of office and address], for [describe nature of contract].
Money due or to become due under the contract described above have been
assigned to the undersigned under the provisions of the Assignment of Claims Act
of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C. 15.
A true copy of the instrument of assignment executed by the Contractor
on [date] is attached to the original notice.
Payments due or to become due under this contract should be made to the
undersigned assignee.
<PAGE> 99
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Please return to the undersigned the three enclosed copies of this
notice with appropriate notations showing the date and hour of receipt, and
signed by the person acknowledged receipt on behalf of the addressee.
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
as collateral agent for the banks under
that certain Security Agreement dated as
of [_________]
By:___________________________________
Authorized Official
100 Federal Street
Boston, MA 02110
ACKNOWLEDGMENT
Receipt is acknowledged of the above notice and a copy of the
instrument of assignment. These were received at ____a.m./p.m. on
_______________, 19 _ .
________________________________
Signature
Title:
On Behalf of: [Name and Title of
Addressee of Notice]
<PAGE> 100
EXHIBIT E
FORM OF AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT, dated as of December 28, 1992
and amended and restated as of _________________, 1996, between each of Hudson
General Corporation ("HGC"), a Delaware corporation having its principal place
of business at 111 Great Neck Road, Great Neck, New York 11021, and Hudson
General LLC (the "Company"), a Delaware limited liability company having its
principal place of business at 111 Great Neck Road, Great Neck, New York 11021,
and The First National Bank of Boston, 100 Federal Street, Boston, Massachusetts
02110, as agent (the "Collateral Agent") for the Banks (as defined below).
WHEREAS, HGC has entered into a Revolving Credit and Term Loan
Agreement, dated as of November 25, 1992, as amended (as so amended, the
"Original Credit Agreement"), with The First National Bank of Boston, European
American Bank, The Chase Manhattan Bank, N.A. (each singly, a "US Bank" and
collectively, the "US Banks"), and The First National Bank of Boston as agent
(the "US Agent"); and
WHEREAS, pursuant to that certain Guaranty dated February 3, 1993 (the
"Original Guaranty") in favor of ABN AMRO Bank Canada and The Chase Manhattan
Bank of Canada (collectively, the "Canada Banks") and the Canadian Agent (as
defined below), HGC has guaranteed all of the obligations of Hudson General
Aviation Services Inc./Societe de Services Hudson General (Aviation) Inc.
("HGAS") to the Canada Banks and the Canadian Agent under a Revolving Credit
Agreement, dated as of November 25, 1992, as amended (as amended and in effect
from time to time, the "HGAS Credit Agreement"), among HGAS, the Canada Banks
and The Chase Manhattan Bank of Canada as successor agent (the "Canadian
Agent"), and certain promissory notes executed and delivered in connection
therewith; and
WHEREAS, each of HGC, Hudson Aviation Services, Inc. (the "MA
Subsidiary") and Hudson Aviation Services, Inc. California (the "CA Subsidiary")
and the Collateral Agent are parties to Security Agreements, each dated as of
December 28, 1992 (collectively the "Original Security Agreements"), pursuant to
which each of HGC, the MA Subsidiary and the CA Subsidiary has granted to the
Collateral Agent a security interest in and lien on certain of its assets to
secure such entity's Obligations as defined in the Original Security Agreement
to which such entity is a party; and
WHEREAS, HGC has formed the Company and wishes to transfer to the
Company, subject to the Collateral Agent's liens and security interests,
substantially all of the assets of HGC's aviation services business (the
"Aviation Services Business"), including, without limitation, the assets of
certain of its Subsidiaries (including the assets of the MA Subsidiary and the
CA Subsidiary) which are actively engaged in the Aviation Services Business and
the stock of HGAS; and
<PAGE> 101
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WHEREAS, the Company wishes to assume, and become jointly and severally
liable with HGC for, all of HGC's obligations under the Original Credit
Agreement and to assume all of HGC's obligations under the Original Guaranty;
and
WHEREAS, HGC, the Company, the US Banks and the US Agent have entered
into an Amended and Restated Revolving Credit Agreement, dated as of November
25, 1992 and amended and restated as of the date hereof (as amended and in
effect from time to time, the "Credit Agreement"), to amend and restate the
Original Credit Agreement in its entirety in order to reflect the transfer by
HGC and its Subsidiaries, subject to the Collateral Agent's liens and security
interests, of the Aviation Services Business to the Company and the Company's
agreement to become jointly and severally liable for HGC's obligations under the
Original Credit Agreement and to make certain other changes to the terms and
provisions of the Original Credit Agreement; and
WHEREAS, HGC, the US Banks and the US Agent have entered into a
Revolving Credit Agreement, dated as of the date hereof (as amended and in
effect from time to time, the "HGC Credit Agreement"), pursuant to which the US
Banks have agreed to make loans or otherwise to extend credit to HGC; and
WHEREAS, the Company has entered into an Amended and Restated Unlimited
Guaranty, dated February 3, 1993 and amended and restated on the date hereof (as
amended and in effect from time to time, the "Company Guaranty"), and accepted
and agreed to by HGC, the Canada Banks and the Canadian Agent, to amend and
restate the Original Guaranty in its entirety in order to reflect the Company's
agreement to assume all of HGC's obligations thereunder; and
WHEREAS, it is a condition precedent to (i) the US Banks' making any
loans or otherwise extending credit to the Company under the Credit Agreement,
(ii) the US Banks' making any loans or otherwise extending any credit to HGC
under the HGC Credit Agreement, and (iii) the Canada Banks' making any loans or
otherwise extending credit to HGAS under the HGAS Credit Agreement that each of
HGC and the Company executes and delivers to the Collateral Agent, for the
benefit of the Banks (as defined below) and the Collateral Agent, an amended and
restated security agreement in substantially the form hereof; and
WHEREAS, each of HGC and the Company wishes to continue the security
interests granted to the Collateral Agent under the Original Security
Agreements, for the benefit of the Banks and the Collateral Agent, as herein
provided; and
WHEREAS, the Collateral Agent, the US Banks, the US Agent, the Canada
Banks and the Canadian Agent have entered into an Amended and Restated
Intercreditor Agreement (as amended and in effect from time to time, the
"Intercreditor Agreement"), dated as of November 25, 1992 and amended and
restated as of the date hereof, in order to set forth their respective rights in
and to the security interests continued hereunder;
<PAGE> 102
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NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree that the Original Security
Agreement shall be amended and restated in its entirety as set forth herein and
shall be in full force and effect as provided herein.
SECTION 1. DEFINITIONS. For purposes hereof, (a) the term "Banks" shall
mean (i) the US Banks, (ii) the Canada Banks, (iii) the US Agent, (iv) the
Canadian Agent and (v) the successors and assigns of the foregoing, (b) the term
"Obligations" shall have the meaning set forth in Section 3 hereof, (c) the term
"Debtors" shall mean HGC and the Company collectively and the term "Debtor"
shall mean each of HGC and the Company individually, and (d) the term "Default"
shall mean, with respect to the Company, a Default as defined in the Credit
Agreement and, with respect to HGC, a Default as defined in the HGC Credit
Agreement or, if the HGC Release Date has not occurred, the Credit Agreement.
All other capitalized terms used herein without definitions shall have the
respective meanings provided therefor in the Credit Agreement. All terms defined
in the Uniform Commercial Code of the Commonwealth of Massachusetts and used
herein shall have the same definitions herein as specified therein.
SECTION 2. GRANT OF SECURITY INTEREST.
(a) Each of the Debtors hereby grants to the Collateral Agent, for the
benefit of the Banks and the Collateral Agent, to secure the payment and
performance in full of all of such Debtor's Obligations (as defined below), a
continuing security interest in and so pledges and assigns to the Collateral
Agent, for the benefit of the Banks and the Collateral Agent, the following
properties, assets and rights of such Debtor, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof
(all of the same being hereinafter called the "Collateral"):
(i) all accounts of every kind and nature whether now owned or
hereafter acquired by such Debtor, including accounts receivable, all
instruments pertaining thereto, all security and guaranties with
respect thereto, all rights of such Debtor pertaining to goods giving
rise thereto, including the right of stoppage in transit, and all
security interests, liens and pledges, whether voluntary or
involuntary, securing the account debtors' obligations to such Debtor
thereunder, and all contract rights (to the extent that such rights are
to the payment of money), rights to the payment of money, chattel
paper, documents, instruments (including certificated securities) and
uncertificated securities, in each case whether now owned or hereafter
acquired by such Debtor;
(ii) all inventory (other than any fuel), raw materials and
work in progress, in each case whether now owned or hereafter acquired
by such Debtor;
(iii) all general intangibles now owned or hereafter acquired
by such Debtor, including, without limitation, license fees, patents,
patent applications, trademarks, trademark applications, trade names,
copyrights, copyright
<PAGE> 103
-4-
applications, rights to sue and recover for past infringement of
patents, trademarks and copyrights, computer programs, computer
software, engineering drawings, service marks, customer lists,
goodwill, and all recorded data of any kind or nature, regardless of
the medium of recording including, without limitation, all software,
writings, plans, specifications and schematics (other than any general
intangibles relating to contracts except as expressly granted herein);
(iv) all equipment now owned or acquired by such Debtor after
the date hereof and all related equipment, parts and accessions and
additions with respect thereto and tires thereon which are now owned or
hereafter acquired, and all substitutions and replacements which are
now owned or hereafter acquired by such Debtor; and
(v) all proceeds, including, without limitation, insurance
refund claims and all other insurance claims and proceeds, with respect
to any of the foregoing.
Notwithstanding the foregoing, the term "Collateral" shall not include:
(A) any property, asset or right of a Debtor described in
clauses (i), (ii) and (iii) above to the extent that such property,
asset or right of such Debtor is subject to any legally binding
contract provision restricting the pledge or assignment of such
property, right or asset as contemplated herein;
(B) any of the shares of capital stock of the Subsidiaries of
a Debtor;
(C) certificated and uncertificated securities owned by a
Debtor (other than of any Subsidiary of such Debtor) provided, that if
the market value of all such securities owned by such Debtor exceeds
$50,000 in the aggregate then all such certificated and uncertificated
securities owned by such Debtor (other than of any Subsidiary of such
Debtor) shall constitute Collateral;
(D) with respect to the Company, all intercompany notes and
instruments executed and delivered by, and all receivables and rights
to the payment of money due from, HGAS to the Company and all security
granted by HGAS to the Company with respect thereto;
(E) any of the equipment now owned by a Debtor which is
specifically identified on Schedule 1 attached hereto (except as set
forth to the contrary in Section 6(a) hereof);
(F) any equipment hereafter acquired by a Debtor either (x)
with financing provided by a purchase money lender to the extent
permitted by Paragraph 5.13(f) of the Credit Agreement or Paragraph
5.11(f) of the HGC Credit Agreement, as applicable, or (y) for purposes
of fulfilling such Debtor's obligations under any contract with an
account debtor which by its terms prohibits such Debtor from subjecting
any of the equipment identified to such
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contract to any lien, which equipment of such Debtor shall have been
identified in a supplement to Schedule 1 attached hereto delivered to
the Collateral Agent together with a certificate of such Debtor
certifying that such equipment has been so financed or has been so
identified with such a contract;
(G) any royalties or other rights received by a Debtor with
respect to mineral rights now owned by such Debtor; and
(H) the copyright owned by the Company on the video tape
titled "Guideway Bus Systems-Video Tape", and the Company's rights to
the service mark of "Snowlift".
(b) Pursuant to the terms hereof, each of the Debtors has endorsed,
assigned and delivered to the Collateral Agent all negotiable or non-negotiable
instruments (including certificated securities) and chattel paper which
constitute Collateral pledged by such Debtor hereunder, together with stock
powers or other appropriate instruments of transfer or assignment duly executed
in blank as the Collateral Agent may have specified. In the event that either of
the Debtors shall, after the date of this Agreement, acquire any other
negotiable or non-negotiable instruments (including certificated securities but
excluding checks received by a Debtor in the ordinary course of its business in
connection with the collection of its accounts) or chattel paper which
constitute Collateral pledged by such Debtor hereunder, such Debtor shall
forthwith endorse, assign and deliver the same to the Collateral Agent,
accompanied by such stock powers or other instruments of transfer or assignment
duly executed in blank as the Collateral Agent may from time to time specify. To
the extent that any such securities are uncertificated, appropriate book-entry
transfers reflecting the pledge of such securities created hereby have been or,
in the case of uncertificated securities which constitute Collateral hereafter
acquired by a Debtor, will at the time of such acquisition be, duly made for the
account of the Collateral Agent or one or more nominees of the Collateral Agent
with the issuer of such securities or other appropriate book-entry facility or
financial intermediary, with the Collateral Agent having at all times the right
to obtain definitive certificates (in the Collateral Agent's name or in the name
of one or more nominees of the Collateral Agent) where the issuer customarily or
otherwise issues certificates, all to be held as Collateral hereunder. Each of
the Debtors hereby acknowledges that the Collateral Agent may, in its
discretion, appoint one or more financial institutions to act as the Collateral
Agent's agent in holding in custodial accounts instruments or other financial
assets in which the Collateral Agent is granted a security interest hereunder,
including, without limitation, certificates of deposit and other instruments
evidencing short term obligations.
SECTION 3. OBLIGATIONS SECURED. (a) The Collateral pledged by the
Company hereunder constitutes and will constitute continuing security for (i)
all of the obligations of each of HGC and the Company to the US Banks and the US
Agent under or in relation to the Credit Agreement, the promissory notes
executed and delivered by HGC and the Company to the US Banks in connection
therewith and the other Loan Documents, as such instruments are originally
executed or as modified, amended, restated, supplemented or extended, (ii) all
of the obligations of the Company to the Canada Banks and the Canadian Agent
under or in relation to the Company Guaranty,
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as such guaranty is originally executed or as modified, amended, restated,
supplemented or extended, and (iii) all obligations of the Company to the Banks
arising out of any extension, refinancing or refunding of any of the foregoing
obligations, whether such obligations are now existing or hereafter acquired or
arising, direct or indirect, joint or several, absolute or contingent, due or to
become due, matured or unmatured, liquidated or unliquidated, arising by
contract, operation of law or otherwise.
(b) The Collateral pledged by HGC hereunder constitutes and will
constitute continuing security for (i) all obligations of HGC to the US Banks
and the US Agent under or in relation to the HGC Credit Agreement, the
promissory notes executed and delivered by HGC to the US Banks in connection
therewith and the other Loan Documents (as defined in the HGC Credit Agreement),
as such instruments are originally executed or as modified, amended, restated,
supplemented or extended, (ii) until the HGC Release Date has occurred, all of
the obligations of HGC to the US Banks and the US Agent under or in relation to
the Credit Agreement, the promissory notes executed and delivered by HGC and the
Company to the US Banks in connection therewith and the other Loan Documents, as
such instruments are originally executed or as modified, amended, restated,
supplemented or extended, and (iii) all obligations of HGC to the Banks arising
out of any extension, refinancing or refunding of any of the foregoing
obligations, whether such obligations are now existing or hereafter acquired or
arising, direct or indirect, joint or several, absolute or contingent, due or to
become due, matured or unmatured, liquidated or unliquidated, arising by
contract, operation of law or otherwise.
(c) The obligations referred to in clause (a) and clause (b) hereof
shall be referred to herein, collectively, as the "Obligations".
SECTION 4. CONCERNING ACCOUNTS AND CHATTEL PAPER. Each of the Debtors
represents and warrants to the Collateral Agent that it keeps or causes to be
kept, and covenants with the Collateral Agent that it shall keep or cause to be
kept, separate records of accounts, chattel paper and instruments which are
complete and accurate in all material respects. Each of the Debtors covenants
and agrees that from time to time upon the request of the Collateral Agent, it
shall deliver to the Collateral Agent a list of the names, addresses, face
value, and dates of invoice(s) for each account debtor obligated on any account
or chattel paper and for each obligor on instruments for which such Debtor is an
obligee, along with such additional information with respect to its accounts,
chattel paper and instruments as the Collateral Agent reasonably may request.
Each of the Debtors covenants with the Collateral Agent that, except with
respect to any renewal of any contract existing on the date hereof which
restricts such assignment, it shall use its reasonable efforts to enter into
contracts with account debtors which do not restrict the assignment by such
Debtor of any of its property, assets or rights of the kind described in
Section 2(a)(i) hereof with respect to such contract.
SECTION 5. CONCERNING SECURITIES. (a) Any sums or other property paid
or distributed upon or with respect to any securities which constitute
Collateral pledged by a Debtor hereunder, whether by dividend or redemption or
upon the liquidation or dissolution of the issuer thereof or otherwise, shall,
except to the limited extent
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provided in Section 5(b), be paid over and delivered to the Collateral Agent to
be held by the Collateral Agent, for the benefit of the Banks and the Collateral
Agent, as security for the payment and performance in full of all of the
Obligations of such Debtor. In case, pursuant to the recapitalization or
reclassification of the capital of the issuer thereof or pursuant to the
reorganization thereof, any distribution of capital shall be made on or in
respect of any of the securities which constitute Collateral pledged by a Debtor
hereunder or any property shall be distributed upon or with respect to any of
such securities, the property so distributed shall be delivered to the
Collateral Agent, for the benefit of the Banks and the Collateral Agent, to be
held by it as security for the Obligations of such Debtor. Except to the limited
extent provided in Section 5(b), all sums of money and property paid or
distributed in respect of any securities which constitute Collateral pledged by
a Debtor hereunder, whether as a dividend or upon such a liquidation,
dissolution, recapitalization or reclassification or otherwise, that are
received by such Debtor shall, until paid or delivered to the Collateral Agent,
be held in trust for the Collateral Agent, for the benefit of the Banks and the
Collateral Agent, as security for the payment and performance in full of all of
the Obligations of such Debtor.
(b) So long as no Default with respect to such Debtor shall have
occurred and be continuing, a Debtor shall be entitled to receive all cash
dividends paid in respect of any securities which constitute Collateral pledged
by such Debtor hereunder, to vote such securities and to give consents, waivers
and ratifications in respect of such securities; provided, however, that no vote
shall be cast or consent, waiver or ratification given by a Debtor if the effect
thereof would impair any of such securities or be inconsistent with or result in
any violation of any of the provisions of the Credit Agreement, any of the other
Loan Documents, the HGC Credit Agreement, any of the other Loan Documents (as
defined in the HGC Credit Agreement) or the Company Guaranty, as applicable. All
such rights of a Debtor to receive cash dividends shall cease in case a Default
with respect to such Debtor shall have occurred and be continuing. All such
rights of a Debtor to vote and give consents, waivers and ratifications with
respect to any securities which constitute Collateral pledged by such Debtor
hereunder shall, at the Collateral Agent's option, as evidenced by the
Collateral Agent's notifying such Debtor of such election, cease in case a
Default with respect to such Debtor shall have occurred and be continuing.
SECTION 6. CONCERNING EQUIPMENT. (a) Each of the Debtors represents and
warrants to the Collateral Agent and covenants with the Collateral Agent that
the equipment of such Debtor identified on Schedule 1 attached hereto (as such
schedule may be supplemented from time to time by such Debtor in accordance with
Section 2(a)(F) hereof) was and will be either acquired by such Debtor (i) with
financing provided by a purchase money lender to the extent permitted by
Paragraph 5.13(f) of the Credit Agreement or Paragraph 5.11(f) of the HGC Credit
Agreement, as applicable, or (ii) for purposes of fulfilling such Debtor's
obligations under any contract with an account debtor which by its terms
prohibits such Debtor from subjecting any of the equipment identified with such
contract to any lien. Any equipment identified on Schedule 1 attached hereto
which was not either acquired by a Debtor (i) with the financing provided by a
purchase money lender to the extent permitted by Paragraph 5.13(f) of the Credit
Agreement or Paragraph 5.11(f) of the HGC Credit Agreement, as
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applicable, or (ii) for the purposes of fulfilling such Debtor's obligations
under any contract with an account debtor which by its terms prohibits such
Debtor from subjecting such equipment identified with such contract to any lien,
shall be deemed to be Collateral provided by such Debtor hereunder. The
aggregate net book value of all equipment of the Debtors identified on Schedule
1 attached hereto, as of the Effective Date, does not exceed $2,500,000.
(b) Each of the Debtors covenants with the Collateral Agent that,
except with respect to any renewal of any contract existing on the date hereof
which prohibits such assignment, it shall use its reasonable efforts to enter
into contracts with account debtors which do not prohibit such Debtor from
subjecting any of the equipment identified with such contracts to any lien,
encumbrance or assignment.
(c) Each of the Debtors represents and warrants to the Collateral Agent
and covenants with the Collateral Agent that (i) Collateral provided by such
Debtor for which motor vehicle or any other certificate of title is required is
listed on Schedule 2 attached hereto, and such Collateral is titled in the
jurisdictions located in the United States of America listed on Schedule 2
attached hereto and will remain titled in such jurisdictions, provided that such
Debtor may retitle any such Collateral for which motor vehicle or any other
certificate of title is required in another jurisdiction located in the United
States of America provided that the retitling of such Collateral is reflected in
the revised Schedule 2 next delivered to the Collateral Agent pursuant to the
terms hereof; and (ii) Collateral provided by such Debtor for which no
certificate of title is required, but for which registration under motor vehicle
laws is required, is registered in the jurisdictions located in the United
States of America listed on Schedule 2 and will remain registered in such
jurisdictions, provided that such Debtor may terminate any such registration
which is no longer required under applicable law and may reregister any such
Collateral in a different or the same jurisdiction provided that such
reregistration is reflected in the revised Schedule 2 next delivered to the
Collateral Agent pursuant to the terms hereof. Each Debtor shall deliver to the
Collateral Agent, concurrently with each delivery of the compliance certificate
pursuant to Paragraph 5.2(f) of the Credit Agreement, a revised Schedule 2
reflecting equipment acquired by such Debtor after the date hereof and, if any
equipment has been retitled or reregistered after the date hereof in accordance
with the terms of this Agreement, the jurisdiction in which such equipment has
been retitled or reregistered.
(d) Each of the Debtors covenants with the Collateral Agent that if a
Default with respect to such Debtor shall have occurred and be continuing, such
Debtor shall, within 30 days of the request of the Collateral Agent, deliver to
the Collateral Agent all certificates of title and related applications for
title for all Collateral provided by such Debtor for which motor vehicle or any
other certificate of title is required, endorsed by such Debtor to reflect the
security interest granted hereunder to the Collateral Agent.
SECTION 7. CONCERNING PATENTS AND TRADEMARKS. (a) Except as set forth
in Section 2(a)(H) hereof, each of the Debtors represents and warrants to the
Collateral Agent that, as of the date hereof, such Debtor does not have any
right to and is not entitled to the benefits of any patents, trademarks, service
marks, tradenames or logos. If either of the Debtors shall acquire rights to any
trademarks, trade names, logos, service
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marks or patentable inventions, or becomes entitled to the benefit of any patent
or trademark or service mark registration application, or application for any
reissue, division, continuation, renewal, extension or continuation-in-part of
any patent, any improvement on any patent, or any trademark or service mark
registration after the date hereof, within 15 days after acquiring such rights,
such Debtor shall execute and deliver to the Collateral Agent as a supplement to
this Agreement a Patent Collateral Assignment and Security Agreement
satisfactory to the Collateral Agent in all respects and the provisions of this
Agreement shall automatically apply thereto. Such Debtor shall provide to the
Collateral Agent all information reasonably requested by the Collateral Agent
and reasonably necessary to perfect the Collateral Agent's security interest in
such trademark, trade name, logo, service mark and patent registrations and
applications. Neither of the Debtors will enter into any agreements outside of
the ordinary course of its business affecting any of its trademarks, trade
names, logos, service marks or patents acquired after the date hereof without
the prior written consent of the Collateral Agent. Each Debtor grants to the
Collateral Agent the right upon the occurrence of a Default with respect to such
Debtor to sue for any infringement (past, present or future) of such Debtor's
patent, trademark, trade name, logo, or service mark rights and/or to join such
Debtor as a nominal party plaintiff in any trademark, service mark, trade name,
logo or patent infringement suit.
(b) Except as set forth in Section 2(a)(H) hereof, each of the Debtors
represents and warrants to the Collateral Agent that as of the date hereof, such
Debtor does not own or have any right to any copyrights which are registered
with the United States Copyright Office. If either Debtor acquires copyright
rights or such rights accrue to either Debtor after the date hereof, the
provisions of this Agreement shall automatically apply thereto. Each of the
Debtors will give written notice to the Collateral Agent of any federal
copyright registration or application obtained or filed after the date hereof.
Each of the Debtors shall provide to the Collateral Agent all information
reasonably requested by the Collateral Agent and reasonably necessary to perfect
the Collateral Agent's security interest in such copyright registrations and
applications. Neither of the Debtors will enter into any agreements outside of
the ordinary course of its business affecting any of its copyrights acquired
after the date hereof without the prior written consent of the Collateral Agent.
Each of the Debtors grants to the Collateral Agent the right upon the occurrence
and continuance of a Default with respect to such Debtor to sue for any
infringement (past, present or future) of such Debtor's copyright rights and/or
to join such Debtor as a nominal party plaintiff in any copyright infringement
suit.
SECTION 8. GOVERNMENT CONTRACTS. If a Default shall have occurred and
be continuing with respect to a Debtor, such Debtor shall upon the request of
the Collateral Agent, execute all such documents, and take all such actions, as
the Collateral Agent shall determine to be necessary or appropriate from time to
time under the Federal Assignment of Claims Act of 1940, as amended, in order to
confirm and assure to the Collateral Agent its rights under this Agreement with
respect to any and all Collateral consisting of such Debtor's rights to moneys
due or to become due under any contracts or agreements with or orders from the
United States government or any agency or department thereof, the assignment of
which is not prohibited by such contract or agreement (collectively, "Government
Receivables"). Without limiting the
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generality of the foregoing, each of the Debtors agrees that (i) within three
Business Days after such request from the Collateral Agent, it shall execute and
deliver to the Collateral Agent a confirmatory assignment substantially in the
form of Exhibit A attached hereto (a "Confirmatory Assignment") with respect to
each of its Government Receivables existing on the date of such request, and
(ii) within ten Business Days after the creation of any new Government
Receivable after the date of such request from the Collateral Agent, it shall
execute and deliver to the Collateral Agent a Confirmatory Assignment with
respect to such Government Receivable. Each of the Debtors hereby irrevocably
authorizes the Collateral Agent, or its designee, at such Debtor's expense, to
file with the United States government (or the appropriate agency or
instrumentality thereof) a notice of each such assignment of a Government
Receivable substantially in the form of Exhibit B attached hereto (a "Notice of
Assignment"), to which a copy of the relevant Confirmatory Assignment may be
attached, and appoints the Collateral Agent as such Debtor's attorney-in-fact to
execute and file any such Confirmatory Assignments, Notices of Assignment and
any ancillary documents relating thereto.
SECTION 9. TITLE TO COLLATERAL, ETC. Each of the Debtors is the owner
of the Collateral provided by it hereunder free from any adverse lien, security
interest or other encumbrance, except for the security interest created by this
Agreement and other liens permitted by the Credit Agreement or, with respect to
HGC, the HGC Credit Agreement. None of the Collateral constitutes, or is the
proceeds of, "farm products" as defined in Section 9-109(3) of the Uniform
Commercial Code of the Commonwealth of Massachusetts.
SECTION 10. CONTINUOUS PERFECTION. Each of the Debtors' place of
business or, if more than one, chief executive office is indicated on the
Perfection Certificate delivered by such Debtor to the Collateral Agent herewith
(the "Perfection Certificate"). Neither of the Debtors will change the same, or
its name, identity or structure in any manner, without providing at least 30
days' prior written notice to the Collateral Agent. The Collateral provided by
each Debtor, to the extent not delivered to the Collateral Agent pursuant to
Section 2(b), will be kept at those locations listed on the Perfection
Certificate of such Debtor and such Debtor will not remove such Collateral
(except to the extent that equipment which consists of titled vehicles is moved
in the ordinary course of business) from such locations, without providing at
least 30 days' prior written notice to the Collateral Agent.
SECTION 11. NO LIENS. Except for the security interest herein granted
and liens permitted by the Credit Agreement or, with respect to the HGC, the HGC
Credit Agreement, each of Debtors shall be the owner of the Collateral provided
by it hereunder free from any lien, security interest or other encumbrance, and
each of the Debtors shall defend the same against all claims and demands of all
persons at any time claiming the same or any interests therein adverse to the
Collateral Agent or any of the Banks. Neither of the Debtors shall pledge,
mortgage or create, or suffer to exist a security interest in the Collateral
provided by it hereunder in favor of any person other than the Collateral Agent,
for the benefit of the Banks and the Collateral Agent, except for liens
permitted by the Credit Agreement or, with respect to HGC, the HGC Credit
Agreement.
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SECTION 12. NO TRANSFERS. Neither of the Debtors will sell or offer to
sell or otherwise transfer any of the Collateral provided by such Debtor
hereunder or any interest therein except as permitted by the Credit Agreement
or, with respect to HGC, the HGC Credit Agreement.
SECTION 13. INSURANCE.
(a) Each of the Debtors will maintain with financially sound and
reputable insurers such insurance with respect to its properties and business as
is required to be maintained under the Credit Agreement or, with respect to HGC,
the HGC Credit Agreement. In addition, all property insurance with respect to
the Collateral shall be payable to the Collateral Agent as loss payee under a
"standard" or "New York" loss payee clause for the benefit of the Banks and the
Collateral Agent.
(b) The proceeds of any property insurance in respect of any casualty
loss of any of the Collateral shall, subject to the rights, if any, of other
parties with a prior interest in the property covered thereby, (i) so long as no
Default with respect to a Debtor or condition which would, with either or both
the giving of notice or the lapse of time, result in a Default with respect to a
Debtor has occurred and is continuing and to the extent that the amount of such
proceeds is less than $100,000, be disbursed to such Debtor for direct
application by such Debtor solely to the repair or replacement of such Debtor's
property so damaged or destroyed and (ii) in all other circumstances, be held by
the Collateral Agent as cash collateral for the Obligations of such Debtor. The
Collateral Agent may, at its sole option, disburse from time to time all or any
part of such proceeds so held as cash collateral, upon such terms and conditions
as the Collateral Agent may reasonably prescribe, for direct application by the
applicable Debtor solely to the repair or replacement of such Debtor's property
so damaged or destroyed, or the Collateral Agent may, if a Default with respect
to such Debtor has occurred and is continuing, apply all or any part of such
proceeds to the Obligations of such Debtor with the Aggregate Loan Limit (as
defined in the Credit Agreement or, with respect to HGC, the HGC Credit
Agreement) (if not then terminated) being reduced by the amount so applied to
such Obligations.
(c) All such policies of insurance shall provide for at least thirty
days' prior written cancellation notice to the Collateral Agent. In the event of
failure by either of the Debtors to provide and maintain insurance as herein
provided, the Collateral Agent may, at its option, provide such insurance and
charge the amount thereof to such Debtor. Each of the Debtors shall furnish the
Collateral Agent with certificates of insurance and, upon the request of the
Collateral Agent, policies evidencing compliance with the foregoing insurance
provisions.
SECTION 14. MAINTENANCE OF COLLATERAL; COMPLIANCE WITH LAW. Each of the
Debtors will keep the Collateral provided by it hereunder in good order and
repair (ordinary wear and tear excepted) and will not use the same in violation
of law or any policy of insurance thereon and will take all other necessary and
appropriate steps (including, but not limited to, defending any of the patents,
copyrights, trademarks, service marks, tradenames or logos, and any
registrations thereof which constitute
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such Collateral, against any infringement thereof or any opposition or other
adversary action or proceeding when the defense of such patents, copyrights,
trademarks, service marks, tradenames or logos has been determined to be
necessary and appropriate in the business judgment of such Debtor) to preserve
the value thereof and the goodwill, business and assets associated therewith or
appurtenant thereto. The Collateral Agent, or its designee, may inspect the
Collateral at any reasonable time, wherever located provided that so long as no
Default with respect to such Debtor or condition which would, with either or
both the giving of notice or the lapse of time, result in a Default with respect
to such Debtor has occurred and is continuing, the Collateral Agent shall give
reasonable notice to the applicable Debtor of such inspection. Each of the
Debtors will pay promptly when due all taxes, assessments, governmental charges
and levies upon the Collateral provided by such Debtor or incurred in connection
with the use or operation of such Collateral or incurred in connection with this
Agreement.
SECTION 15. COLLATERAL PROTECTION EXPENSES; PRESERVATION OF COLLATERAL.
(a) In its discretion, the Collateral Agent may discharge taxes and
other encumbrances at any time levied or placed on any of the Collateral, make
repairs thereto and pay any necessary filing fees. Each of the Debtors agrees to
reimburse the Collateral Agent on demand for any and all expenditures so made.
The Collateral Agent shall have no obligation to either of the Debtors to make
any such expenditures, nor shall the making thereof relieve either of the
Debtors of any default. The Collateral Agent shall inform the applicable Debtor
before incurring any such expense.
(b) Anything herein to the contrary notwithstanding, each of the
Debtors shall remain liable under each contract or agreement comprised in the
Collateral to be observed or performed by such Debtor thereunder. Neither the
Collateral Agent nor any Bank shall have any obligation or liability under any
such contract or agreement by reason of or arising out of this Agreement or the
receipt by the Collateral Agent or any Bank of any payment relating to any of
the Collateral, nor shall the Collateral Agent or any Bank be obligated in any
manner to perform any of the obligations of either of the Debtors under or
pursuant to any such contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by the Collateral Agent or any Bank in
respect of the Collateral or as to the sufficiency of any performance by any
party under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment of any
amounts which may have been assigned to the Collateral Agent or to which the
Collateral Agent or any Bank may be entitled at any time or times. The
Collateral Agent's sole duty with respect to the custody, safe keeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Uniform Commercial Code of the Commonwealth of Massachusetts or
otherwise, shall be to deal with such Collateral in the same manner as the
Collateral Agent deals with similar property for its own account.
SECTION 16. SECURITIES AND DEPOSITS. The Collateral Agent may at any
time after the occurrence and during the continuance of a Default with respect
to a Debtor, at its option, transfer to itself or any nominee any securities
constituting Collateral pledged by such Debtor, receive any income thereon and
hold such income as additional Collateral of such Debtor or apply it to the
Obligations of such Debtor. Whether or not
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any Obligations of a Debtor are due, after the occurrence and during the
continuance of a Default with respect to such Debtor, the Collateral Agent may
demand, sue for, collect, or make any settlement or compromise which it deems
desirable with respect to the Collateral provided by such Debtor. Regardless of
the adequacy of Collateral provided by such Debtor or any other security for the
Obligations of such Debtor, any deposits or other sums at any time credited by
or due from the Collateral Agent or any Bank to a Debtor may at any time be
applied to or set off against any of the Obligations of such Debtor as provided
in the Credit Agreement, the HGC Credit Agreement or the Company Guaranty, as
applicable.
SECTION 17. NOTIFICATION TO ACCOUNT DEBTORS AND OTHER OBLIGORS. If a
Default with respect to a Debtor shall have occurred and be continuing such
Debtor shall, at the request of the Collateral Agent, notify account debtors on
accounts and chattel paper of such Debtor and obligors on instruments for which
such Debtor is an obligee of the security interest of the Collateral Agent in
any such account, chattel paper or instrument and that payment thereof is to be
made directly to the Collateral Agent or to any financial institution designated
by the Collateral Agent as the Collateral Agent's agent therefor, and the
Collateral Agent may itself, if a Default with respect to a Debtor shall have
occurred and be continuing, without notice to or demand upon such Debtor, so
notify account debtors and obligors. After the making of such a request or the
giving of any such notification (provided the same has also been sent to the
applicable Debtor), such Debtor shall hold any proceeds of collection of
accounts, chattel paper and instruments received by such Debtor as trustee for
the Collateral Agent, for the benefit of the Banks and the Collateral Agent,
without commingling the same with other funds of such Debtor and shall turn the
same over to the Collateral Agent in the identical form received, together with
any necessary endorsements or assignments. The Collateral Agent shall apply the
proceeds of collection of accounts, chattel paper and instruments received by
the Collateral Agent to the Obligations of the Debtors as provided in the
Intercreditor Agreement, or the HGC Credit Agreement, as applicable, such
proceeds to be immediately entered after final payment in cash or solvent
credits of the items giving rise to them.
SECTION 18. NO FURTHER ACTIONS. No authorization, approval or other
action by, and no notice to or filing with, any governmental authority or
regulatory body or other person that has not been received, taken or made is
required for the grant by each of the Debtors of the security interests granted
hereby or for the execution, delivery or performance of this Agreement by each
of the Debtors, or, except for (a) the filing of financing statements and
continuation statements with respect thereto, (b) the delivery of the
instruments, chattel paper and share certificates referred to in Section 2(b)
hereof, (c) the presentation to the Departments of Motor Vehicles of the
applications for title referred to in Section 6(d) hereof, at the times required
in Section 6(d) hereof, and (d) the execution and delivery of the Patent
Collateral Assignment and Security Agreements referred to in Section 7 hereof
and the filing of such instruments at the times provided herein, and the
execution and delivery of the Confirmatory Assignments and Notices of Assignment
referred to in Section 8 hereof, at the times required in Section 8 hereof, for
(A) the perfection and maintenance of the security interests hereunder
(including the first priority nature of such security interests), or (B) the
exercise by the Collateral Agent of the rights or the remedies in respect of the
Collateral pursuant to this Agreement
<PAGE> 113
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(other than the authorization and direction of the requisite Banks pursuant to
the terms of the Intercreditor Agreement or the HGC Credit Agreement, as
applicable).
SECTION 19. FURTHER ASSURANCES. Each of the Debtors, at its own
expense, shall do, make, execute and deliver all such additional and further
acts, things, deeds, assurances and instruments as the Collateral Agent may
reasonably require more completely to vest in and assure to the Collateral Agent
and the Banks their respective rights hereunder or in any of the Collateral,
including, without limitation, (a) executing, delivering and, where appropriate,
filing financing statements and continuation statements under the Uniform
Commercial Code, (b) obtaining governmental and other third party consents and
approvals, (c) obtaining waivers from mortgagees and landlords and (d) taking
all actions required by Sections 8-313 and 8-321 of the Uniform Commercial Code,
as applicable in each relevant jurisdiction, with respect to certificated and
uncertificated securities.
SECTION 20. POWER OF ATTORNEY.
(a) Each of the Debtors hereby irrevocably constitutes and appoints the
Collateral Agent and any officer or agent thereof, with full power of
substitution, as its true and lawful attorneys-in-fact with full irrevocable
power and authority in the place and stead of such Debtor or in the Collateral
Agent's own name, for the purpose of carrying out the terms of this Agreement,
to take any and all appropriate action and to execute any and all documents and
instruments that may be necessary or desirable to accomplish the purposes of
this Agreement and, without limiting the generality of the foregoing, hereby
gives said attorneys the power and right, on behalf of such Debtor, without
notice to or assent by such Debtor, to do the following:
(i) upon the occurrence and during the continuance of a
Default with respect to such Debtor generally to sell, transfer,
pledge, make any agreement with respect to or otherwise deal with any
of the Collateral provided by such Debtor in such manner as is
consistent with the Uniform Commercial Code of the Commonwealth of
Massachusetts and as fully and completely as though the Collateral
Agent were the absolute owner thereof for all purposes, and to do at
such Debtor's expense, at any time, or from time to time, all acts and
things which the Collateral Agent deems necessary to protect, preserve
or realize upon such Collateral and the Collateral Agent's security
interest therein, in order to effect the intent of this Agreement, all
as fully and effectively as such Debtor might do, including, without
limitation, (A) upon written notice to such Debtor, the exercise of
voting rights with respect to voting securities, which rights may be
exercised, if the Collateral Agent so elects, with a view to causing
the liquidation in a commercially reasonable manner of assets of the
issuer of any such securities and (B) the execution, delivery and
recording, in connection with any sale or other disposition of any such
Collateral, of the endorsements, assignments or other instruments of
conveyance or transfer with respect to such Collateral; and
(ii) to file such financing statements with respect hereto,
with or without such Debtor's signature, or a photocopy of this
Agreement in substitution for
<PAGE> 114
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a financing statement, as the Collateral Agent may deem appropriate and
to execute in such Debtor's name such financing statements and
continuation statements which may require each of such Debtor's
signature.
(b) To the extent permitted by law, each of the Debtors hereby ratifies
all that said attorneys shall lawfully do or cause to be done by virtue hereof.
This power of attorney is a power coupled with an interest and shall be
irrevocable.
(c) The powers conferred on the Collateral Agent hereunder are solely
to protect the interests of the Collateral Agent and the Banks in the Collateral
and shall not impose any duty upon the Collateral Agent to exercise any such
powers. The Collateral Agent shall be accountable only for the amounts that it
actually receives as a result of the exercise of such powers and neither it nor
any of its officers, directors, employees or agents shall be responsible to
either of the Debtors for any act or failure to act, except for the Collateral
Agent's own gross negligence or willful misconduct.
SECTION 21. REMEDIES. (a) If a Default shall have occurred and be
continuing with respect to a Debtor, the Collateral Agent may upon written
instruction of the Banks in accordance with the Intercreditor Agreement or the
HGC Credit Agreement, as applicable, without notice to or demand upon such
Debtor, declare this Agreement to be in default, and the Collateral Agent shall
thereafter have in any jurisdiction in which enforcement hereof is sought, in
addition to all other rights and remedies, the rights and remedies of a secured
party under the Uniform Commercial Code, including, without limitation, the
right to take possession of the Collateral provided by such Debtor, and for that
purpose the Collateral Agent may, so far as such Debtor can give authority
therefor, enter upon any premises on which such Collateral may be situated and
remove the same therefrom and in addition, the Collateral Agent shall thereafter
have the following rights and remedies (to the extent permitted by applicable
law) in any jurisdiction in which enforcement is sought:
(i) if the Collateral Agent so elects and gives notice of such
election to such Debtor, the Collateral Agent may vote any or all
securities which constitute Collateral pledged by such Debtor whether
or not the same shall have been transferred into its name or the name
of its nominee or nominees) for any lawful purpose, including, without
limitation, if the Collateral Agent so elects, for the liquidation of
the assets of the issuer thereof, and give all consents, waivers and
ratifications in respect of such securities and otherwise act with
respect thereto as though it were the outright owner thereof (each
Debtor hereby irrevocably constituting and appointing the Collateral
Agent the proxy and attorney-in-fact of such Debtor, with full power of
substitution, to do so); and
(ii) the Collateral Agent may cause all or any part of the
securities held by it to be transferred into its name or the name of
its nominee or nominees, if it has not already done so.
Each of the Debtors recognizes that the Collateral Agent may be unable
to effect a public sale of the securities which constitute Collateral by reason
of certain
<PAGE> 115
-16-
prohibitions contained in the Securities Act of 1933, as amended, but may be
compelled to resort to one or more private sales thereof to a restricted group
of purchasers. Each of the Debtors recognizes that any such private sales may be
at prices and other terms less favorable to the seller than if sold at public
sales and that such private sales shall not by reason thereof be deemed not to
have been made in a commercially reasonable manner. The Collateral Agent shall
be under no obligation to delay a sale of any security for the period of time
necessary to permit the issuer of such securities to register such securities
for public sale under the Securities Act of 1933, as amended, even if the issuer
would agree to do so.
(b) The Collateral Agent may in its discretion require a Debtor to
assemble all or any part of the Collateral provided by such Debtor at such
location or locations within the state(s) of such Debtor's principal office(s)
or at such other locations as the Collateral Agent may designate. Unless such
Collateral is perishable or threatens to decline speedily in value or is of a
type customarily sold on a recognized market, the Collateral Agent shall give to
the applicable Debtor at least five Business Days' prior written notice of the
time and place of any public sale of Collateral provided by such Debtor or of
the time after which any private sale or any other intended disposition is to be
made. Each of the Debtors hereby acknowledges that five Business Days' prior
written notice of such sale or sales shall be reasonable notice. In addition,
each of the Debtors waives any and all rights that it may have to a judicial
hearing in advance of the enforcement of any of the Collateral Agent's rights
hereunder, including, without limitation, its right following a Default with
respect to such Debtor to take immediate possession of the Collateral provided
by such Debtor and to exercise its rights with respect thereto.
SECTION 22. NO WAIVER, ETC. Each of the Debtors waives demand, notice,
protest, notice of acceptance of this Agreement, notice of loans made, credit
extended, Collateral received or delivered or other action taken in reliance
hereon and all other demands and notices of any description; provided that each
of the Debtors shall be sent copies of any notices sent by the Collateral Agent
to account debtors, it being understood that the Collateral Agent shall not be
liable for any failure to send any such copy. With respect to both the
Obligations and the Collateral of a Debtor, such Debtor assents to any extension
or postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of Collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payment thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the Collateral Agent
may deem advisable. The Collateral Agent shall have no duty as to the collection
or protection of the Collateral or any income thereon, nor as to the
preservation of rights against prior parties, nor as to the preservation of any
rights pertaining thereto beyond the safe custody thereof as set forth in
Section 15(b). The Collateral Agent shall not be deemed to have waived any of
its rights upon or under the Obligations or the Collateral of either Debtor
unless such waiver shall be in writing and signed by the Collateral Agent with
the consent of the appropriate Banks. No delay or omission on the part of the
Collateral Agent in exercising any right shall operate as a waiver of such right
or any other right. A waiver on any one occasion shall not be construed as a bar
to or waiver of any right on any future occasion. All rights and remedies of the
Collateral Agent
<PAGE> 116
-17-
with respect to the Obligations or the Collateral of either Debtor, whether
evidenced hereby or by any other instrument or papers, shall be cumulative and
may be exercised singularly, alternatively, successively or concurrently at such
time or at such times as the Collateral Agent deems expedient.
SECTION 23. MARSHALLING. Neither the Collateral Agent nor any Bank
shall be required to marshal any present or future collateral security
(including but not limited to this Agreement and the Collateral) for, or other
assurances of payment of, the Obligations of either Debtor or any of them or to
resort to such collateral security or other assurances of payment in any
particular order, and all of the rights of the Collateral Agent hereunder and of
the Collateral Agent or any Bank in respect of such collateral security and
other assurances of payment shall be cumulative and in addition to all other
rights, however existing or arising. To the extent that it lawfully may, each of
the Debtors hereby agrees that it will not invoke any law relating to the
marshalling of collateral which might cause delay in or impede the enforcement
of the Collateral Agent's rights under this Agreement or under any other
instrument creating or evidencing any of the Obligations of such Debtor or under
which any of the Obligations of such Debtor is outstanding or by which any of
the Obligations of such Debtor is secured or payment thereof is otherwise
assured, and, to the extent that it lawfully may, each of the Debtors hereby
irrevocably waives the benefits of all such laws.
SECTION 24. PROCEEDS OF DISPOSITIONS; EXPENSES. Each of the Debtors
shall pay to the Collateral Agent on demand any and all reasonable expenses,
including reasonable attorneys' fees and disbursements, incurred or paid by the
Collateral Agent in protecting, preserving or enforcing the Collateral Agent's
rights under or in respect of any of the Obligations of such Debtor or any of
the Collateral provided by such Debtor. After deducting all of said expenses,
the residue of any proceeds of collection or sale of the Obligations of such
Debtor or Collateral of such Debtor shall, to the extent actually received in
cash, be applied to the payment of the Obligations of such Debtor in accordance
with Section 4(f) of the Intercreditor Agreement or Paragraph 10(e) of the HGC
Credit Agreement, as applicable, with proper allowance being made for any
Obligations of such Debtor not then due. Upon the final payment and satisfaction
in full of all of the Obligations of a Debtor and after making any payments
required by Section 9-504(1)(c) of the Uniform Commercial Code of the
Commonwealth of Massachusetts, any excess shall be returned to such Debtor or
its successors, and such Debtor shall remain liable for any deficiency in the
payment of the Obligations of such Debtor.
SECTION 25. OVERDUE AMOUNTS. Until paid, all amounts due and payable by
a Debtor hereunder shall be a debt secured by the Collateral provided by such
Debtor and shall bear, whether before or after judgment, interest from and after
the date on which written demand therefor shall have been sent to such Debtors,
at the rate of interest for overdue principal set forth in the Credit Agreement.
SECTION 26. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT IS
INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
(EXCLUDING THE LAWS APPLICABLE
<PAGE> 117
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TO CONFLICTS OR CHOICE OF LAW). Each of the Debtors agrees that any suit for the
enforcement of this Agreement may be brought in the courts of the Commonwealth
of Massachusetts or any federal court sitting therein and consents to the
non-exclusive jurisdiction of such court and to service of process in any such
suit being made upon such Debtor by mail at the address specified in the Credit
Agreement. Each of the Debtors hereby waives any objection that it may now or
hereafter have to the venue of any such suit or any such court or that such suit
is brought in an inconvenient court.
SECTION 27. MISCELLANEOUS. The headings of each section of this
Agreement are for convenience only and shall not define or limit the provisions
thereof. This Agreement and all rights and obligations hereunder shall be
binding upon each of Debtors and its respective successors and assigns, and
shall inure to the benefit of the Collateral Agent, the Banks and their
respective successors and assigns. If any term of this Agreement shall be held
to be invalid, illegal or unenforceable, the validity of all other terms hereof
shall in no way be affected thereby, and this Agreement shall be construed and
be enforceable as if such invalid, illegal or unenforceable term had not been
included herein. Each of the Debtors acknowledges receipt of a copy of this
Agreement.
SECTION 28. TERM OF AGREEMENT. (a) Notwithstanding any other provision
of this Agreement, this Agreement shall terminate and a Debtor shall be entitled
to the return, at such Debtor's expense, of the Collateral provided by such
Debtor in the possession or control of the Collateral Agent either (i) upon
delivery of a letter addressed to the Collateral Agent and signed by each of the
Banks specifying that the Banks have received evidence satisfactory to them that
(A) all litigation against HGC and HGAS resulting from or relating to the
acquisition in 1984 of certain assets of the airport ground services business of
Innotech Aviation Limited has been fully and finally dismissed (and such
dismissal is not appealable) or settled in full, (B) HGC and HGAS have satisfied
in full all of their payment obligations, if any, with respect to such
litigation, (C) the payment thereof has not resulted in the occurrence of any
Default with respect to such Debtor or condition which would, with either or
both the giving of notice or lapse of time, result in a Default with respect to
such Debtor, and (D) no Default with respect to such Debtor or condition which
would, with either or both the giving of notice or lapse of time, result in a
Default with respect to such Debtor then exists or (ii) upon the indefeasible
payment and performance of the Obligations of such Debtor in full.
(b) Upon the delivery of a letter addressed to the Collateral Agent
signed by the US Banks specifying that the US Banks have received evidence that
the disposition of any of the Collateral is permitted by the Credit Agreement or
the HGC Credit Agreement, as applicable, the Collateral Agent shall execute and
deliver to the appropriate Debtor such releases with respect to the lien hereof
as such Debtor may reasonably request with respect to such Collateral.
<PAGE> 118
-19-
IN WITNESS WHEREOF, intending to be legally bound, each of the HGC and
the Company has caused this Agreement to be duly executed as of the date first
above written.
HUDSON GENERAL CORPORATION
By:__________________________________
Title:
HUDSON GENERAL LLC
By:__________________________________
Title:
Accepted:
THE FIRST NATIONAL BANK OF BOSTON,
as Collateral Agent
By:________________________________
Title:
<PAGE> 119
-20-
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF __________)
) ss
COUNTY OF _________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of ______________, 1996, personally appeared
________________ to me known personally, and who, being by me duly sworn,
deposes and says that he/she is the __________________ of Hudson General
Corporation, and that said instrument was signed and sealed on behalf of said
corporation by authority of its Board of Directors, and said ___________________
acknowledged said instrument to be the free act and deed of said corporation.
______________________________
Notary Public
My Commission Expires:
<PAGE> 120
-21-
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OR STATE OF ________)
) ss
COUNTY OF _______________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of ______________, 1996, personally appeared
_____________ to me known personally, and who, being by me duly sworn, deposes
and says that he/she is the __________________ of Hudson General LLC, and that
said instrument was signed on behalf of said limited liability company by
authority of its Board of Member Representatives, and said ___________________
acknowledged said instrument to be the free act and deed of said limited
liability company.
______________________________
Notary Public
My Commission Expires:
<PAGE> 121
-22-
EXHIBIT A
FORM OF CONFIRMATORY ASSIGNMENT OF CONTRACT
This ASSIGNMENT, dated as of ________, is by [____________] (the
"Debtor") in favor of The First National Bank of Boston (the "Collateral Agent")
as collateral agent for itself, and certain banks (the "Banks").
WHEREAS, the Debtor is party to Contract No. ___________ dated
__________ between the Debtor and ____________ (the "Contract"); and
WHEREAS, the Debtor and the Collateral Agent have entered into a
certain Amended and Restated Security Agreement, dated as of December 28, 1992
and amended and restated as of [_____________] (the "Security Agreement"),
pursuant to which the Debtor has granted to the Collateral Agent, for the
benefit of the Banks, a security interest in certain assets of the Debtor,
including all of the Debtor's rights in and to all money due or to become due
under the Contract, to secure the Obligations referred to in the Security
Agreement;
NOW, THEREFORE, the Debtor hereby confirms, acknowledges and agrees
that, pursuant to and subject to the terms of the Security Agreement, the Debtor
hereby assigns, transfers, pledges and grants to the Collateral Agent for the
benefit of the Banks a security interest in all of the Debtor's right, title and
interest in and to all moneys due or to become due under the Contract.
EXECUTED as of the date first above written.
Attest: [INSERT NAME]
______________________________ By:______________________________
[Secretary or Assistant Title:
Secretary]
<PAGE> 122
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EXHIBIT B
FORM OF
NOTICE OF ASSIGNMENT
The First National Bank of Boston
Date: __________________
To: [Contracting Official or Head of
Agency, Surety on any bond
applicable to the contract
and Disbursing Official]
Re: Payments to:
Contract Number:
Made by the United States of America
Department:
Division:
For:
Dated:
Ladies and Gentlemen:
This has reference to Contract No. _________ dated ________, entered
into between [contractor's name and address] (the "Contractor") and [government
agency, name of office and address], for [describe nature of contract].
Money due or to become due under the contract described above have been
assigned to the undersigned under the provisions of the Assignment of Claims Act
of 1940, as amended, 31 U.S.C. 3727, 41 U.S.C. 15.
A true copy of the instrument of assignment executed by the Contractor
on [date] is attached to the original notice.
Payments due or to become due under this contract should be made to the
undersigned assignee.
<PAGE> 123
-24-
Please return to the undersigned the three enclosed copies of this
notice with appropriate notations showing the date and hour of receipt, and
signed by the person who acknowledged receipt on behalf of the addressee.
Very truly yours,
THE FIRST NATIONAL BANK OF BOSTON
as collateral agent for the banks
under that certain Amended and
Restated Security Agreement dated as
of December 28, 1992 and amended and
restated as of _______________
By: _____________________________________
Authorized Official
100 Federal Street
Boston, MA 02110
ACKNOWLEDGMENT
Receipt is acknowledged of the above notice and a copy of the
instrument of assignment. These were received at _____ a.m./p.m. on
____________, 19___.
____________________________________
Signature
Title:
On Behalf of: [Name and Title of
Addressee of Notice]
<PAGE> 124
EXHIBIT F
[LETTERHEAD OF HUDSON GENERAL CORPORATION]
June 1, 1996
The Persons Set Forth on
Schedule I Hereto
Re: Hudson General Corporation and Hudson General LLC
Ladies and Gentlemen:
I am Vice President-General Counsel of Hudson General Corporation,
a Delaware corporation ("HGC"), and of Hudson General LLC, a Delaware limited
liability company (the "Company"), and have acted as counsel for HGC and the
Company in connection with the execution and delivery by HGC and the Company of
the Amended and Restated Revolving Credit Agreement, dated as of November 25,
1992 and amended and restated as of June 1, 1996 (the "Restated Credit
Agreement") among HGC, the Company, The First National Bank of Boston ("FNB"),
in its individual capacity, European American Bank ("EAB"), The Chase Manhattan
Bank, N.A. ("Chase", and collectively with FNB and EAB, the "Banks"), and The
First National Bank of Boston, as agent for the Banks (the "Agent"), the Amended
and Restated Security Agreement, dated as of December 28, 1992 and amended and
restated as of June 1, 1996 ( the "Restated Security Agreement") among HGC, the
Company and The First National Bank of Boston, as collateral agent (the
"Collateral Agent"), and certain other agreements, instruments and documents
related to the Restated Credit Agreement. This opinion is being delivered
pursuant to Paragraph 4A.4 of the Restated Credit Agreement and Paragraph 26(e)
of the Second Amendment, dated as of June 1, 1996 to the Aviation Revolving
Credit Agreement. Capitalized terms used and not otherwise defined herein shall
have the same meanings herein as in the Restated Credit Agreement.
In rendering the opinions set forth herein, I have examined
originals or copies, certified or otherwise identified to my satisfaction, of
the following:
(a) the Revolving Credit and Term Loan Agreement, dated as of
November 25, 1992 (the "Original Credit Agreement"), among HGC, the Banks and
the Agent;
(b) the Restated Credit Agreement;
(c) the Restated Revolving Credit Notes, each dated as of June 1,
1996, issued by HGC and the Company to the respective Banks (each a "Note" and
collectively, the "Notes");
<PAGE> 125
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 2
(d) the Revolving Credit Agreement, dated as of June 1, 1996 (the
"HGC Credit Agreement"), among HGC, the Banks and the Agent named therein (the
"HGC Credit Agreement Secured Parties");
(e) the Revolving Credit Agreement, dated as of November 25, 1992
and amended as of March 15, 1995 and June 1, 1996 (the "Aviation Credit
Agreement"), among Aviation, ABN Amro Bank Canada, The Chase Manhattan Bank of
Canada, in its individual capacity (and collectively with ABN Amro Bank Canada,
the "Canadian Banks"), and The Chase Manhattan Bank of Canada, as agent for the
Canadian Banks (the "Canadian Agent");
(f) the Amended and Restated Unlimited Guaranty, dated as of
February 3, 1993 (the "Original Guaranty") and amended and restated as of June
1, 1996, from the Company and acknowledged by HGC to the Canadian Banks and the
Canadian Agent (the "Restated Guaranty");
(g) the HGC Security Agreement, dated as of December 28, 1992 (the
"Original Security Agreement"), between HGC and the Collateral Agent;
(h) the Restated Security Agreement;
(i) my opinion, dated December 28, 1992 (the "Original Opinion"),
delivered pursuant to paragraph 5.7 of the Original Credit Agreement;
(j) my opinion, dated March 15, 1993 (the "Aviation Opinion"),
delivered pursuant to paragraph 4.7 of the Aviation Credit Agreement;
(k) the Amended and Restated Intercreditor Agreement, dated as of
November 25, 1992 and amended and restated as of June 1, 1996 (the
"Intercreditor Agreement"), among the Banks, the Agent, the Collateral Agent,
the Canadian Banks, the Canadian Agent and acknowledged and consented to by HGC
and the Company;
(l) the Amended and Restated Assignment, Postponement and
Subordination and Intercreditor Agreement, dated as of February 1, 1993 and
amended and restated as of June 1, 1996 (the "Postponement Agreement"), among
the Company, Aviation, the Canadian Banks and the Canadian Agent;
(m) certified copies of the Certificate of Incorporation and
By-Laws of HGC;
(n) certified copies of the Certificate of Formation of the
Company and the Company's Limited Liability Company Agreement (collectively, the
"LLC Documents") ;
(o) a certified copy of certain resolutions of the Board of
Directors of HGC adopted on May 17, 1996;
<PAGE> 126
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 3
(p) a certified copy of certain resolutions of the Members of the
Company adopted on May 17, 1996;
(q) unfiled, but signed copies of financing statements naming
Hudson General LLC, as debtor, and The First National Bank of Boston, as
Collateral Agent, as secured party, which I understand will be filed within ten
(10) days of the transfer of the security interest recited therein in the
offices of the Secretary of State of the State of New York and Nassau, Queens
and Suffolk Counties, New York (such filing offices, the "Filing Offices" and
such financing statements, the "Financing Statements");
(r) the Perfection Certificate of each of HGC (the "HGC Perfection
Certificate") and the Company (the "Company Perfection Certificate" and together
with the HGC Perfection Certificate, the "Perfection Certificates");
(s) certificates from public officials in the State of Delaware
and in the jurisdictions listed on Schedule II hereto (such jurisdictions, other
than the State of Delaware, collectively the "Foreign Jurisdictions") as to the
good standing of HGC or the Company, as indicated in Schedule II, in each such
jurisdiction; and
(t) such other documents as I have deemed necessary or appropriate
as a basis for the opinions set forth below.
In my examination I have assumed the genuineness of all
signatures, including indorsements (other than those on behalf of HGC and the
Company, with all of which I am familiar), the legal capacity of natural
persons, the authenticity of all documents submitted to me as originals, the
conformity to original documents of all documents submitted to me as certified,
conformed or photostatic copies, and the authenticity of the originals of such
copies. As to any facts material to this opinion which I did not independently
establish or verify, I have relied upon statements and representations of
officers and other representatives of HGC, the Company and others.
Unless otherwise indicated, references in this opinion to the
"Relevant UCC" shall mean the Uniform Commercial Code as in effect on the date
hereof in each of the State of New York and the Commonwealth of Massachusetts.
References to the "New York UCC" shall mean the Uniform Commercial Code as in
effect on the date hereof in the State of New York and references to the "Mass.
UCC" shall mean the Uniform Commercial Code as in effect on the date hereof in
the Commonwealth of Massachusetts. The Restated Credit Agreement, the Notes, the
Restated Guaranty, the Intercreditor Agreement, the Postponement Agreement and
the Restated Security Agreement shall hereinafter be referred to as the "Loan
Documents". The Agent, the Collateral Agent, the Banks, the HGC Credit Agreement
Secured Parties, the Canadian Banks and the Canadian Agent shall hereinafter be
referred to as the "Secured Parties".
I am admitted to the Bar in the State of New York, and I express
no opinion as to the laws of any jurisdiction other than (i) the laws of the
State of New York, (ii) the General
<PAGE> 127
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 4
Corporation Law of the State of Delaware, (iii) the Limited Liability Company
Act of the State of Delaware, (iv) the federal laws of the United States of
America, other than such federal laws which relate to the creation and
perfection of security interests or the assignment of rights, including without
limitation, the Federal Assignment of Claims Act of 1940, as amended, (v) the
Mass. UCC to the extent necessary to express the opinions set forth in
paragraphs 8 and 10 hereof, and (vi) based solely on the certificates of public
officials of each Foreign Jurisdiction, the laws of each such Foreign
Jurisdiction, with respect to my opinion as to HGC's and the Company's, as
applicable, qualification to do business and good standing in each such Foreign
Jurisdiction. Each of the Loan Documents provides that it is governed by, and to
be construed in accordance with, the laws of the Commonwealth of Massachusetts,
United States of America and, in the case of the Postponement Agreement, the
laws of the Province of Ontario, Canada. For purposes of my opinion with respect
to the laws of the Commonwealth of Massachusetts, I have assumed with your
consent and without any inquiry that the applicable laws of the Commonwealth of
Massachusetts are the same as those of the State of New York.
My opinions are also subject to the following qualifications:
(a) each of the Loan Documents (other than the Notes) has been
duly authorized, executed and delivered by the applicable Secured Parties and is
enforceable against such parties in accordance with its terms;
(b) enforcement of the Loan Documents may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law);
(c) certain of the remedial provisions contained in the Restated
Security Agreement and in the Restated Guaranty, including waivers, with respect
to the exercise of remedies against the collateral may be unenforceable in whole
or in part, but the inclusion of such provisions does not affect the validity of
the Restated Security Agreement and the Restated Guaranty, and each of the
Restated Security Agreement and the Restated Guaranty taken as a whole, together
with applicable law, contains adequate provisions for the practical realization
of the benefits of the security created thereby;
(d) enforcement of the Restated Security Agreement may be subject
to the terms of instruments, leases, contracts or other agreements among HGC and
the Company, as applicable, and the other parties to such agreements, the rights
of such other parties and any claims or defenses of such other parties against
HGC and the Company arising under or outside such agreements; and
(e) I express no opinion as to the effect on the opinions
expressed herein of (i) the compliance or non-compliance of any party (other
than HGC and the Company) to the Loan Documents with any state, federal or other
laws or regulations applicable to them, (ii) the legal or regulatory status or
the nature of the business of any of the Secured Parties, (iii) the sale or
other disposition by any of the Secured Parties of all or any portion of any
securities pledged by HGC or
<PAGE> 128
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 5
or the Company (which will require compliance with applicable federal and state
securities laws) or (iv) any fraudulent transfer or similar laws.
Based upon the foregoing and subject to the limitations,
qualifications, exceptions and assumptions set forth herein, I am of the opinion
that:
1. HGC is a corporation which has been duly incorporated and
is subsisting and in good standing under the laws of the State of Delaware, and
has all requisite corporate power to own its property and conduct its business
as now conducted and as presently contemplated. The Company is a limited
liability company which has been duly formed and is validly existing and in good
standing under the laws of the State of Delaware, and has all requisite power to
own its property and conduct its business as now conducted and as presently
contemplated.
2. To the best of my knowledge, HGC is duly qualified and in
good standing as a foreign corporation and is duly authorized to do business in
each jurisdiction where the nature of its properties or its business requires
such qualification except for the State of Alabama. To the best of my knowledge,
the Company is duly qualified and in good standing as a foreign entity and is
duly authorized to do business in each jurisdiction where the nature of its
properties or its business requires such qualification.
3. The execution and delivery by HGC of the Loan Documents
to which it is a party, and the performance by HGC of its obligations under such
Loan Documents, are within the corporate authority of HGC, have been duly
authorized by proper corporate proceedings, will not contravene any provision of
HGC's Certificate of Incorporation or By-Laws, or contravene any provision of,
or result in the creation of any mortgage, lien, pledge, charge, security
interest or other encumbrance upon any of the property of HGC (other than liens
created under or permitted by the terms of the Loan Documents) under, any other
agreement, instrument or undertaking binding upon HGC or any property of HGC,
and do not conflict with or result in any breach or contravention of any
provision of any law, statute, rule or regulation to which HGC is subject or any
judgment, order, writ, injunction, license or permit applicable to HGC. HGC has
duly executed and delivered each of the Loan Documents to which it is a party.
4. The execution and delivery by the Company of the Loan
Documents to which it is a party, and the performance by the Company of its
obligations under such Loan Documents, are within the authority of the Company,
have been duly authorized by proper proceedings, will not contravene any
provision of the Company's LLC Documents, or contravene any provision of, or
result in the creation of any mortgage, lien, pledge, charge, security interest
or other encumbrance upon any of the property of the Company (other than liens
created under or permitted by the terms of the Loan Documents) under, any other
agreement, instrument or undertaking binding upon the Company or any property of
the Company, and do not conflict with or result in any breach or contravention
of any provision of any law, statute, rule or regulation to which the Company is
subject or any judgment, order, writ, injunction, license or permit applicable
to the Company. The Company has duly executed and delivered each of the Loan
Documents to which it is a party.
<PAGE> 129
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 6
5. Each of the Loan Documents to which it is a party (other
than the Postponement Agreement) constitutes the valid and legally binding
obligation of HGC and the Company, enforceable against each in accordance with
its terms. With respect to the foregoing, I express no opinion, however, as to
rights to indemnification and rights of contribution provided for in any of the
Loan Documents to the extent such rights are violative of federal or state
securities laws, rules or regulations or public policy.
6. To the best of my knowledge, except as described in
Schedule 3.8 to each of the Restated Credit Agreement and the Aviation Revolving
Credit Agreement, there is no litigation pending or threatened against the
Company or Aviation before any court, tribunal or administrative agency or board
which is of a substantial amount and which, if adversely determined, might
reasonably be expected to materially adversely affect the ability of the Company
or Aviation to perform its respective obligations under the Loan Documents to
which it is a party, or in respect of the Revolving Credit Loans (or in the case
of Aviation, in respect of the Aviation Revolving Credit Agreement or the
Restated Revolving Credit Notes to be issued thereunder or in respect of the
Revolving Credit Loans to be made thereunder), after taking into account any
applicable insurance coverage.
7. The execution and delivery by each of HGC and the Company
of each of the Loan Documents to which it is a party, and the performance by HGC
and the Company of their respective obligations under each of such Loan
Documents, each in accordance with its terms, do not require any approval or
consent of, or filing with, any governmental or other agency or authority except
for (a) approvals, consents and filings specified in the Loan Documents, and (b)
those already obtained or made. Notwithstanding the foregoing, except as
expressly set forth in paragraphs 8,9,10 and 11, I express no opinion as to the
validity, perfection or priority of any security interest created by the
Restated Security Agreement.
8. The provisions of the Restated Security Agreement are
effective to create, in favor of the Collateral Agent for the benefit of the
Secured Parties to secure the Obligations (as defined in the Restated Security
Agreement), a valid security interest under the Mass. UCC in the Company's
rights in that portion of the Collateral described therein which is subject to
Article 9 of the Mass. UCC (the "Article 9 Collateral").
9. The Financing Statements are in appropriate form for
filing in each of the Filing Offices under the New York UCC. With respect to
that portion of the Article 9 Collateral as to which the filing of a financing
statement in the State of New York is a permissible method of perfection under
the New York UCC (the "UCC Filing Collateral") the security interest in favor of
the Collateral Agent for the benefit of the Secured Parties in the UCC Filing
Collateral which is described in the Financing Statements will be perfected upon
the filing of the Financing Statements in the respective Filing Offices.
My opinions with respect to the security interest of the
Collateral Agent for the benefit of the Secured Parties in the Collateral are
subject to the following qualifications:
<PAGE> 130
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 7
(a) The security interest opinions are limited to Article 9
of the Relevant UCC, and therefore such opinions do not address (i) laws of
jurisdictions other than the State of New York and the Commonwealth of
Massachusetts, and of the State of New York and of the Common wealth of
Massachusetts except for Article 9 of the Relevant UCC, (ii) collateral of a
type not subject to Article 9 of the Relevant UCC, and (iii) under Section 9-103
of the Relevant UCC, what law governs perfection of the security interests
granted in the collateral covered by this opinion. In addition, as noted above,
I have assumed without any inquiry that the Mass. UCC is identical in all
respects to the New York UCC;
(b) I call to your attention that under the Relevant UCC,
events occurring subsequent to the date hereof may affect any security interest
subject to the Relevant UCC including, but not limited to, factors of the type
identified in Section 9-306 with respect to proceeds; Section 9-402 with respect
to changes in name, structure and corporate identity of the debtor; Section
9-103 with respect to changes in the location of the collateral and the location
of the debtor; Section 9-316 with respect to subordination agreements; Section
9-403 with respect to continuation statements; and Sections 9-307, 9-308 and
9-309 with respect to subsequent purchasers of the collateral. In addition,
actions taken by a secured party (e.g., releasing or assigning the security
interest, delivering possession of the collateral to the debtor or another
person and voluntarily subordinating a security interest) may affect the
validity, perfection or priority of a security interest;
(c) I express no opinion with respect to the priority of the
security interest of the Collateral Agent for the benefit of the Secured Parties
in any of the Collateral;
(d) in the case of chattel paper, accounts or general
intangibles, I call to your attention that the security interest of the
Collateral Agent for the benefit of the Secured Parties may be subject to the
rights of account debtors, claims and defenses of account debtors and the terms
of agreements with account debtors;
(e) in the case of goods, I express no opinion regarding the
security interest of the Collateral Agent for the benefit of the Secured Parties
in any goods which are (i) an accession to, or commingled or processed with
other goods to the extent that the security interest of the Collateral Agent for
the benefit of the Secured Parties is limited by Section 9-314 or 9-315 of the
Relevant UCC or (ii) subject to a certificate of title or a document of title;
(f) I express no opinion regarding the security interest of
the Collateral Agent for the benefit of the Secured Parties in any items which
are subject to a statute, regulation or treaty of the United States of America
which provides for a national or international registration or a national or
international certificate of title for the perfection of a security interest
therein or which specifies a place of filing different from the place specified
in the New York UCC for filing to perfect such security interest;
(g) I express no opinion regarding the security interest of
the Collateral Agent for the benefit of the Secured Parties in any of the
collateral consisting of claims against any government or governmental agency
(including without limitation the United States of America or
<PAGE> 131
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 8
any state thereof or any agency or department of the United States of America or
any state thereof);
(h) in the case of any instrument, chattel paper, account or
general intangible which is itself secured by other property, I express no
opinion with respect to the rights of the Collateral Agent for the benefit of
the Secured Parties in and to such underlying property;
(i) I have assumed that the collateral is and will be
located at the locations set forth in the Perfection Certificates;
(j) I express no opinion with respect to any of the
collateral consisting of goods which are or are to become fixtures, equipment
used in farming operations, or farm products, or accounts or general intangibles
arising from or relating to the sale of farm products by a farmer, consumer
goods, crops growing or to be grown, timber to be cut or minerals or the like
(including oil and gas), accounts subject to subsection 5 of Section 9-103 of
the Relevant UCC, or an owner ship interest evidenced by certificates of stock
or other instruments and a leasehold evidenced by a proprietary lease, or either
of the foregoing, from a corporation or partnership formed for the purpose of
cooperative ownership of real estate; and
(k) I express no opinion regarding the security interest of
the Collateral Agent for the benefit of the Secured Parties in any copyrights,
patents, trademarks, service marks or other intellectual property, the proceeds
thereof or any rights (including accounts or general intangibles) with respect
to the lease, license or use thereof.
10. The amendment and restatement of each of the
Original Credit Agreement, the Original Security Agreement and the Original
Guaranty by the Restated Credit Agreement, the Restated Security Agreement and
the Restated Guaranty, respectively, do not, of them selves, adversely affect
the validity under Article 9 of the Mass. UCC, of the security interest of the
Collateral Agent for the benefit of the Secured Parties in the Collateral (as
defined in the Original Security Agreement) under the Original Security
Agreement, and after giving affect to such amendment and restatement of the
Original Credit Agreement, the Original Security Agreement and the Original
Guaranty, the security interest of the Collateral Agent for the benefit of the
Secured Parties in the Collateral (as defined in the Original Security
Agreement) subject to Article 9 of the Mass. UCC will be entitled to the same
status as a valid security interest to which it would otherwise have been
entitled immediately prior to giving effect to such amendment and restatement of
the Original Credit Agreement, the Original Security Agreement and the Original
Guaranty.
11. The amendment and restatement of each of the
Original Credit Agreement, the Original Security Agreement and the Original
Guaranty by the Restated Credit Agreement, the Restated Security Agreement and
the Restated Guaranty, respectively, do not, of them selves, adversely affect
the perfection under the New York UCC, of the security interest of the
Collateral Agent for the benefit of the Secured Parties in the Collateral (as
defined in the Original Security
<PAGE> 132
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 9
Agreement) under the Original Security Agreement, and after giving effect to
such amendment and restatement of the Original Credit Agreement, the Original
Security Agreement and the Original Guaranty, the security interest of the
Collateral Agent for the benefit of the Secured Parties in the Collateral (as
defined in the Original Security Agreement) subject to the New York UCC will be
entitled to the same status as a perfected security interest to which it would
otherwise have been entitled immediately prior to giving effect to such
amendment and restatement of the Original Credit Agreement, the Original
Security Agreement and the Original Guaranty.
My opinions in paragraphs 10 and 11 are subject to the following
qualifications:
(a) The security interest opinions are limited to Article 9 of the
Relevant UCC, and therefore such opinions do not address (i) laws of
jurisdictions other than the State of New York and the Commonwealth of
Massachusetts, and of the State of New York and of the Commonwealth of
Massachusetts except for Article 9 of the Relevant UCC and (ii) collateral of a
type not subject to Article 9 of the Relevant UCC. In addition, as noted above,
I have assumed without any inquiry that the Mass. UCC is identical in all
respects to the New York UCC;
(b) I have assumed that none of the Original Security Agreement,
the Original Credit Agreement or the Original Guaranty have been amended,
modified or supplemented prior to the date hereof (other than in the case of the
Original Credit Agreement, with respect to the First Amendment thereto, dated as
of August 31, 1993, the Second Amendment thereto, dated as of December 28, 1993
and the Third Amendment thereto, dated as of March 15, 1995) and that no rights
pursuant thereto have been released, waived or modified by any actions of the
parties thereto subsequent to December 28, 1992, the date of the Original
Opinion and subsequent to March 15, 1993, the date of the Aviation Opinion;
(c) I have assumed that the actions specified, assumed or relied
upon in the Original Opinion and the Aviation Opinion with respect to the
collateral have been taken and that all of the facts and conditions specified,
assumed or relied upon in such opinions remain correct; and
(d) I express no opinion with respect to the priority of the
security interests for the benefit of the Secured Parties in any of the
Collateral.
12. To the best of my knowledge, without having made any
special investigation other than obtaining the lien search reports certified
pursuant to the Perfection Certificates delivered in connection with the
Restated Security Agreement, except for the liens permitted by paragraph 5.13 of
the Restated Credit Agreement or otherwise permitted by the Banks under the
Restated Credit Agreement, each of HGC and the Company has good and merchantable
title to all of its properties, assets and rights of every name and nature now
purported to be owned by it, free from all defects, liens, charges and
encumbrances whatsoever, except that I express no opinion with respect to any
properties, assets or rights to the extent that the transfer or assignment
thereof requires the consent of a third party which has not been obtained.
<PAGE> 133
The Persons Set Forth on
Schedule I Hereto
June 1, 1996
Page 10
13. The Notes constitute "Superior Indebtedness" under the
Indenture, dated as of July 1, 1986 (the "Indenture") between HGC and Chemical
Bank Delaware, as trustee (the "Trustee") as amended by the First Supplemental
Indenture, dated as of April 22, 1996, among HGC, the Company and the Trustee,
relating to HGC's 7% Convertible Subordinated Debentures Due 2011 (the
"Debentures"). The Notes are entitled to the benefits of the provisions of such
Indenture which subordinate such Debentures to "Superior Indebtedness".
This opinion is being furnished only to you and is solely for your
benefit, and is not to be used, circulated, relied upon or otherwise referred to
for any other purpose without my prior written consent, provided that the HGC
Credit Agreement Secured Parties on the date hereof may rely on this opinion on
order of the date hereof.
Very truly yours,
/s/ Noah E. Rockowitz
Noah E. Rockowitz
Vice President & General Counsel
<PAGE> 134
Schedule I
The First National Bank of Boston
100 Federal Street
Boston, MA 02110
European American Bank
1 EAB Plaza
Uniondale, NY 11555
The Chase Manhattan Bank, N.A.
135 Pinelawn Street
Melville, NY 11747
The Chase Manhattan Bank of Canada
Suite 1600
150 King Street West
Toronto, Ontario
M5H 1J9
ABN Amro Bank Canada
Suite 860
2000 Peel Street
Montreal, Quebec
H3A 2W5
Meighen Demers
Merril Lynch Canada Tower
Suite 1100
200 King Street West
Toronto, Ontario
M5H 3T4
Fraser & Beatty
1 First Canadian Place
Toronto, Ontario
M5X 1B2
<PAGE> 135
Schedule II
Foreign Jurisdictions of HGC and the Company
HGC:
New York
Company:
New York
Massachusetts
Florida
Illinois
California
Maryland
Texas
Virginia
New Jersey
Utah
<PAGE> 136
HUDSON GENERAL LLC
EXISTING LETTERS OF CREDIT
SCHEDULE 1.12
<TABLE>
<CAPTION>
L/C No. Amount Billed To Issued To
------- ------ --------- ---------
<S> <C> <C> <C>
50073004 $1,200,007 7/1/96 Hartford Specialty
50086018 1,820,000 7/1/96 National Union Fire Insurance
50086830 5,000 12/31/96 Metropolitan Dade County
50102270 25,000 7/25/96 Defense Finance and Accounting Services
----------
Total $3,050,007
==========
</TABLE>
<PAGE> 137
HUDSON GENERAL LLC
SUBSIDIARIES
SCHEDULE 3.1
<TABLE>
<CAPTION>
Percentage
Jurisdiction of
of Capital
Incorporation Stock Owned
------------- -----------
<S> <C> <C>
Hudson General Aviation Services Inc. Canada 100%
150947 Canada Inc. (1) Canada 100%
</TABLE>
(1) Owned by Hudson General Aviation Services Inc.
<PAGE> 138
HUDSON GENERAL LLC
LITIGATION
SCHEDULE 3.8
1. Texaco Canada Inc. (now McColl-Frontenac Inc.) v. Petro-Canada Inc.,
Hudson General Aviation Services Inc. and Hudson General Corporation
In 1988, Texaco Canada Inc. ("Texaco") (now McColl-Frontenac Inc.)
instituted a lawsuit in the Supreme Court of Ontario, Canada against HGC,
Aviation and Petro-Canada Inc., the corporation which supplied aviation fuel for
Aviation's fixed base operations. The suit's allegations, as amended, are that
the defendants interfered with contractual and fiduciary relations, conspired to
injure, and induced the breach of a fuel supply agreement between Texaco and
Innotech Aviation Limited ("Innotech") in connection with the purchase by
Aviation from Innotech in 1984 of certain assets of Innotech's airport ground
services business. The suit seeks compensatory and punitive damages totaling
$110,000,000 (Canadian) plus all profits earned by the defendants subsequent to
the alleged breach. The trial of this suit commenced on May 6, 1996 and is
anticipated to be lengthy. Innotech (which due to a name change is now called
Aerospace Realties (1986) Limited ("Aerospace")) had agreed to defend and
indemnify HGC and Aviation against claims of whatever nature asserted in
connection with, arising out of or resulting from the fuel supply agreement with
Texaco. By a letter dated February 15, 1996, HGC was notified by Aerospace that
Aerospace has entered into a liquidation phase and can no longer defray the cost
of defending this lawsuit or pay for any damages resulting therefrom. HGC's
management believes, and counsel for HGC and Aviation has advised based on
available facts, that HGC and Aviation will successfully defend this action.
2. Michael and Kerri Balletta, Melody and Jeffrey Gross, James and Bari
Rodgers v. Russell Worrell, et. al.
These three lawsuits, which have been consolidated, were commenced in
1991 by the parents of three children and allege that the children were sexually
abused by the driver and matron of a school bus operated by Valley Transit
("Valley") used to transport handicapped children to special schools under
contract with the County of Nassau, N.Y. (the "County"). Besides the driver and
matron, the defendants include Valley, the County, the local school district of
each child and HGC. HGC provides management services to the County with respect
to the County's program to transport handicapped school children, but does not
itself operate the transportation services. The lawsuits seek a total of
$150,000,000 of compensatory and $150,000,000 of punitive damages.
The alleged intentional torts (which were not committed by HGC) and
punitive damages may not be covered by insurance. In the Management Services
Agreement between HGC and the County, the County has agreed to indemnify HGC,
and to cause the transportation contractor to indemnify HGC, against claims
arising out of or in connection with the conduct or operation of the
transportation services and any acts of the contractor and its employees. The
insurance company for Valley is defending HGC pursuant to an insurance policy
under which HGC is an additional insured.
<PAGE> 139
HUDSON GENERAL LLC
ENVIRONMENTAL NOTICES
SCHEDULE 3.18(b)
1. Salt Lake City-County Health Department Notice of Violation and Order
of Compliance HDWQR 21/2-14-91
This Notice and Order results from a spill on February 13, 1991 of
approximately 4,500 gallons of jet fuel at the Company's fuel farm at Salt Lake
City International Airport. The spill occurred when the driver of an
unaffiliated company's fuel delivery truck overfilled one of the Company's fuel
storage tanks. No fine or other penalty has been assessed against the Company.
HGC took immediate action to remove surface contamination and is
cooperating with the Salt Lake City Airport authorities in the environmental
investigation to determine the impact of the spill on subsurface soil and ground
water. HGC brought a lawsuit against the fuel delivery company which caused the
spill.
2. Vancouver International Airport Authority
Aviation is in the process of cleaning up soil contaminated by two
leaking underground waste oil tanks on one of its former leaseholds at Vancouver
International Airport, which tanks were negligently installed by a preceding
leaseholder. Aviation has reserved its rights against this leaseholder.
3. Massport Environmental Claim
In April 1994, a law firm representing the Massachusetts Port Authority
("Massport") sent a letter (the "Original Demand") to thirty-seven (37)
companies, including HGC, notifying the addressees that Massport believed that
they were liable for contamination of soil and groundwater at Logan
International Airport in East Boston, Massachusetts (the "Airport"). Massport
claimed that it was performing response actions at the Airport, and stated that
it was seeking "contribution, reimbursement and payment of an equitable share of
the costs of past, current and future response actions undertaken by
Massport...".
The Original Demand identified twenty-four (24) spills of fuel, oil and
hydraulic fluid at various places at the Airport which allegedly had been caused
by HGC between January 1982 and September 1992. In addition, the Original Demand
proposed a settlement by which HGC would pay a per capita share of past response
costs (such share to be a minimum of $311,761) and agree to pay a per capita
share of all future response costs or undertake to perform all necessary future
response actions at locations where it had releases.
<PAGE> 140
HUDSON GENERAL LLC
ENVIRONMENTAL NOTICES
SCHEDULE 3.18(b)
In July 1994, HGC responded to the Original Demand, raising numerous
objections to Massport's allegations and requesting considerable additional
information in Massport's possession.
Following an informational meeting held by Massport in September 1994
for all parties which had received the Original Demand, Massport sent a letter
dated October 5, 1994 to HGC (the "Massport Proposal") clarifying its position
and proposing a greatly reduced settlement payment. The Massport Proposal first
proposed a cash-out payment by HGC for past response costs of $29,968 in respect
of a reduced total of twenty-two (22) spills. (By contrast, Massport alleged a
grand total of 2,462 spills at the Airport since 1953.) The Massport Proposal
further limited Massport's claim against HGC for future response costs to three
sites where HGC allegedly had a total of only ten (10) spills. The proposed
settlement in respect of these future response costs was $526,154, bringing
Massport's aggregate settlement proposal to $556,122.
After obtaining additional information from Massport, HGC responded to
the Massport Proposal by letter dated January 20, 1995, reiterating objections
made previously and stating additional objections. However, HGC offered to pay
Massport $75,000 in return for a complete release and a mutually acceptable
settlement agreement that would include indemnification by Massport against any
claims brought against HGC by any other party, including government agencies.
HGC did not hear further from Massport until it received a letter dated
March 5, 1996 (the "Massport 1996 Letter") in which Massport stated that it had
now identified a grand total of 2,593 spills at the Airport prior to March 9,
1994. The Massport 1996 Letter proposed a revised cash-out payment by HGC for
past response costs of $32,334, and expanded Massport's claim against HGC for
future response costs to a total of twenty-seven (27) spills at five (5) sites.
Massport's proposed settlement in respect of these future response costs totaled
$1,500,347, for an aggregate settlement demand of $1,532,681.
HGC is considering how it will respond to the new Massport proposal.
4. Notices Referred to in Paragraph 3.18(b) of this Agreement Relating to
Violations, Claims, Proceedings and Other Matters Which Have Been Concluded.
<PAGE> 141
HUDSON GENERAL LLC
UNDERGROUND STORAGE TANKS
SCHEDULE 3.18(c)
<TABLE>
<CAPTION>
BRANCH LOCATION CAPACITY/GALLONS
- ------ -------- ----------------
<S> <C> <C>
U.S.
JFK Building 69 4,000
4,000
350
EWR Julia Street 5,000
LAX Imperial Highway 10,000
10,000
500
HOU Fuel Farm 20,000
20,000
20,000
20,000
20,000
BOS Delta Fuel Farm Twelve (12)
(operated @ 30,000
for
Delta)
CANADA
Toronto Maintenance 500
Calgary Maintenance 200
</TABLE>
<PAGE> 142
HUDSON GENERAL LLC
SCHEDULE OF INSURANCE
SCHEDULE 3.19
<TABLE>
<CAPTION>
POLICY TYPE LIMITS DEDUCTIBLE
- ----------- ------ ----------
<S> <C> <C>
Commercial Blanket Bond $ 3Mill $25,000
Airport Liability 500Mill 10,000(PD)
Excess Auto * 25Mill 0
Directors & Officers Liability 10Mill 5-100,000
Excess Directors & Officers Liability 10Mill 0
Fiduciary Liability 4Mill 1,000
General/Auto Liability 2Mill 500,000
Worker's Compensation (U.S.) Statutory 500,000
Worker's Compensation (Canada) Statutory 0
Pollution Liability 2Mill 100,000
Property - Primary 10Mill 50/100,000(PP/Real)
Property - Excess 10Mill 0
Cargo Legal Liability * 25Mill 10,000
Warehouseman's LL (JFK) 20Mill 50,000
Warehouseman's LL (Orlando) 5Mill 2,500
Contractor's Environmental Impairment Liability 10Mill 100,000
General/Auto Liability (Buses) 1Mill 50,000
General/Auto Liability Excess (Buses) 1Mill 0
* Included under Airport Liability Policy.
</TABLE>
<PAGE> 143
HUDSON GENERAL LLC
SCHEDULE OF INDEBTEDNESS
SCHEDULE 5.12(a)
<TABLE>
<S> <C>
7% Convertible Subordinated Debentures due 2011............. $28,901,000
Amended and Restated Revolving Credit Agreement
dated as of November 25, 1992 as amended and
restated as of June 1, 1996................................. 0
</TABLE>
<PAGE> 144
SCHEDULE 5.12(h)
TERMS OF SUBORDINATION
1. "Senior Debt" as defined with respect to the Subordinated Debt shall
mean the Obligations and all fees, costs, enforcement expenses
(including legal fees and disbursements), collateral protection
expenses and other reimbursement or indemnity obligations created or
evidenced by the Credit Agreement or any of the other Loan Documents or
any prior, concurrent, or subsequent notes, instruments or agreements
of indebtedness, liabilities or obligations of any type or form
whatsoever relating thereto in favor of the Agent or any of the Banks.
"Senior Debt" shall expressly include any and all interest accruing or
out of pocket costs or expenses incurred after the date of any filing
by or against the Company of any petition under the federal Bankruptcy
Code or any other bankruptcy, insolvency or reorganization act
regardless of whether the Agent's or any Bank's claim therefor is
allowed or allowable in the case or proceeding relating thereto.
2. The Subordinated Debt shall be subordinated and the payment thereof
shall be deferred until the full and final payment in cash of the
Senior Debt. Notwithstanding the immediately preceding sentence, the
Company shall be permitted to pay, and HGC shall be permitted to
receive, any regularly scheduled payment of interest or principal on
the Subordinated Debt so long as at the time of such payment, or after
giving effect thereto, no Default or event which, with notice or lapse
of time or both, would constitute a Default has occurred and is
continuing or would occur after giving effect thereto.
3. HGC will not assert, collect or enforce the Subordinated Debt or any
part thereof or take any action to foreclose or realize upon the
Subordinated Debt or any part thereof or enforce any of the documents
evidencing the Subordinated Debt except (a) in each such case as
necessary, so long as no Default or event which, with notice or lapse
of time or both, would constitute a Default has occurred and is then
continuing or would occur after giving effect thereto, to collect any
sums expressly permitted to be paid by the Company to HGC or (b) to the
extent that the commencement of a legal action may be required to toll
the running of any applicable statute of limitation. Until the Senior
Debt has been finally paid in full in cash, HGC will not have any right
of subrogation, reimbursement, restitution, contribution or indemnity
whatsoever from any assets of the Company or any guarantor of or
provider of collateral security for the Senior Debt. HGC will also
waive any and all rights with respect to marshalling.
4. At any meeting of creditors of the Company or in the event of any case
or proceeding, voluntary or involuntary, for the distribution, division
or application of all or part of the assets of the Company or the
proceeds thereof, whether such case or proceeding be for the
liquidation, dissolution or winding up of the Company or its business,
a receivership, insolvency or bankruptcy case or proceeding, an
assignment for the benefit of creditors or a proceeding by or against
the Company for relief under the federal Bankruptcy Code or any other
<PAGE> 145
-2-
bankruptcy, reorganization or insolvency law or any other law relating
to the relief of debtors, readjustment of indebtedness, reorganization,
arrangement, composition or extension or marshalling of assets or
otherwise, the Agent will be irrevocably authorized at any such meeting
or in any such proceeding to receive or collect any cash or other
assets of the Company distributed, divided or applied by way of
dividend or payment, or any securities issued on account of any
Subordinated Debt, and apply such cash to or to hold such other assets
or securities as collateral for the Senior Debt, and to apply to the
Senior Debt any cash proceeds of any realization upon such other assets
or securities that the Agent in its discretion elects to effect, until
all of the Senior Debt shall have been paid in full in cash, rendering
to HGC any surplus to which HGC is then entitled.
At any such meeting of creditors or in the event of any such case or
proceeding, HGC shall retain the right to vote and otherwise act with
respect to the Subordinated Debt (including, without limitation, the
right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension),
provided that HGC, in its capacity as a subordinated creditor of the
Company, shall not vote with respect to any such plan or take any other
action in any way so as to contest (i) the validity of any Senior Debt
or any collateral therefor or guaranties thereof, (ii) the relative
rights and duties of any holders of any Senior Debt established in any
instruments or agreements creating or evidencing any of the Senior Debt
with respect to any of such collateral or guaranties or (iii) the
Company's obligations and agreements set forth in the Credit Agreement
and the other Loan Documents.
5. HGC will hold in trust and immediately pay over to the Agent in the
same form of payment received, with appropriate endorsements, for
application to the Senior Debt, any cash amount that the Company pays
to HGC with respect to the Subordinated Debt, or as collateral for the
Senior Debt any other assets of the Company that HGC may receive with
respect to the Subordinated Debt, in each case except with respect to
payments expressly permitted hereunder.
<PAGE> 146
HUDSON GENERAL LLC
SCHEDULE OF LIENS
SCHEDULE 5.13
Pursuant to a certain agreement with the Port Authority of New York and New
Jersey, the Port Authority has the right to purchase certain motor coaches
(buses) upon the conditions set forth in such agreements.
Pursuant to certain agreements with USAir, America West and Southwest Airlines
(the "Airlines"), the Airlines have the right to purchase certain hydrant
fueling carts upon the conditions set forth in such agreements.
<PAGE> 147
HUDSON GENERAL LLC
SCHEDULE OF INVESTMENTS AND CONTINGENT LIABILITIES
SCHEDULE 5.15
<TABLE>
<S> <C>
Note receivable related to the sale of certain
property in Fort Lauderdale, Florida...................... $ 212,000 (1)
Note receivable related to the sale of the FBO
located at Long Island MacArthur Airport.................. $2,458,368 (1)
Letter of Credit drawn on Royal Bank of Canada in
favor of Vancouver Airport Authority...................... $ 100,000 (2)
</TABLE>
On the Books of:
(1) Hudson General LLC
(2) Hudson General Aviation Services Inc. - in Canadian dollars.
<PAGE> 1
EXHIBIT 4.5(b)
First Supplemental Indenture dated as of April 22, 1996 among the Registrant,
Hudson General LLC and Chemical Bank Delaware to Indenture dated as of
July 1, 1986.
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of April 22, 1996,
among Hudson General Corporation, a corporation duly organized and existing
under the laws of the State of Delaware (the "Company", which term includes any
successor corporation under the Indenture hereinafter referred to), Hudson
General LLC, a limited liability company duly organized and existing under the
laws of the State of Delaware (the "LLC", which term includes any successor
corporation under the Indenture hereinafter referred to and, together with the
Company, the "Issuers") and Chemical Bank Delaware, a Delaware banking
corporation (the "Trustee", which term includes any successor trustee under the
Indenture hereinafter referred to).
WITNESSETH:
WHEREAS, for its lawful corporate purposes, the Company duly
authorized the issue of its 7% Convertible Subordinated Debentures Due 2011 (the
"Debentures") and, to provide the terms and conditions upon which the Debentures
were to be authenticated, issued and delivered, the Company duly authorized the
execution of an indenture, dated as of July 1, 1986 (the "Existing Indenture",
and the Existing Indenture, as it may from time to time be supplemented or
amended by one or more additional indentures supplemental thereto entered into
pursuant to the applicable provisions thereof, being hereinafter called the
"Indenture"); and
WHEREAS, there were issued under the Existing Indenture
Debentures in the aggregate principal amount of $30,000,000; and
WHEREAS, the Company proposes to transfer substantially all of
the assets of its aviation services business to the LLC (the "Transfer"); and
WHEREAS, the Transfer would violate Section 12.01 of the
Existing Indenture but for the execution and delivery of a supplemental
indenture providing that the LLC assume the due and punctual payment of the
principal of, and premium, if any, and interest on all the Debentures, according
to their tenor, and the due and punctual performance and observance of all the
covenants and conditions of the Indenture to be performed by the Company; and
<PAGE> 3
WHEREAS, the LLC desires in and by this First Supplemental
Indenture, pursuant to and as contemplated by Section 12.01 and 11.01 of the
Existing Indenture, to assume such obligations; and
WHEREAS, all acts and things necessary to make this First
Supplemental Indenture a valid agreement of the Company and the LLC, in
accordance with its terms, have been done;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE
WITNESSETH:
That, for and in consideration of the premises and of the sum
of one dollar duly paid to it by the Trustee at the execution of these presents,
the receipt whereof is hereby acknowledged, the Company and the LLC covenant and
agree with the Trustee for the equal and proportionate benefit of the respective
holders from time to time of the Debentures, as follows:
ARTICLE 100
Assumption of Obligations of the Company; Acknowledgment of the Company; Joint
and Several Obligations.
Section 101. Assumption of Obligations of the Company.
Pursuant to Section 12.01 of the Existing Indenture, the LLC hereby expressly
assumes the due and punctual payment of the principal of, and premium, if any,
and interest on all the Debentures, according to their tenor, and the due and
punctual performance and observance of all the covenants and conditions of the
Indenture to be performed by the Company.
Section 102. Acknowledgment of the Company. The Company hereby
expressly acknowledges that it remains liable as a co-obligor together with the
LLC with respect to the obligations set forth in Section 101 above and that,
upon conversion of the Debentures, holders will remain entitled to receive
Common Stock of the Company.
Section 103. Joint and Several Obligations. The Company and
the LLC acknowledge that their obligations under the Indenture and the
Debentures are joint and several.
2
<PAGE> 4
ARTICLE 200
Debenture Legend
Section 201. Form of Legend. After the provisions of this
First Supplemental Indenture become operative pursuant to Section 307 below, the
Trustee may continue to use certificates for the Debentures in the form set
forth in the Existing Indenture, which Debenture certificates may be legended
substantially to the following effect:
HUDSON GENERAL LLC, A LIMITED LIABILITY COMPANY DULY ORGANIZED AND
EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE ("HUDSON LLC"), HAS
EXPRESSLY ASSUMED, PURSUANT TO THE TERMS OF A FIRST SUPPLEMENTAL
INDENTURE, DATED AS OF APRIL __, 1996, BETWEEN HUDSON GENERAL
CORPORATION, A CORPORATION DULY ORGANIZED AND EXISTING UNDER THE LAWS
OF THE STATE OF DELAWARE ("HUDSON GENERAL"), HUDSON LLC AND CHEMICAL
BANK DELAWARE, AS TRUSTEE, AS A CO-OBLIGOR THE DUE AND PUNCTUAL PAYMENT
OF THE PRINCIPAL OF, AND PREMIUM, IF ANY, AND INTEREST ON ALL THE
DEBENTURES, ACCORDING TO THEIR TENOR, AND THE DUE AND PUNCTUAL
PERFORMANCE AND OBSERVANCE OF ALL THE COVENANTS AND CONDITIONS OF THE
INDENTURE TO BE PERFORMED BY HUDSON GENERAL.
ARTICLE 300
Sundry Provisions
Section 301. Instruments to be Read Together. This First
Supplemental Indenture is an indenture supplemental to and in implementation of
the Existing Indenture, and said Existing Indenture and this First Supplemental
Indenture shall henceforth be read together.
Section 302. Confirmation. The Existing Indenture as amended
and supplemented by this First Supplemental Indenture is in all respects
confirmed and preserved.
Section 303. Terms Defined. (a) Except as provided in this
First Supplemental Indenture, all capitalized terms used herein shall have the
same meanings set forth in the Existing Indenture, it being understood
3
<PAGE> 5
that, except as provided in this Section 303, the term "Company", as used in the
Existing Indenture, shall refer to both of the Issuers unless the context
requires otherwise.
(b) Notwithstanding subsection (a) of this Section 303, the
term "Company," as used in (i) the definition of "Common Stock" in Section 1.01
of the Existing Indenture, (ii) the fifth and seventh sentences of Section 4.02
(other than references to notice contained in such seventh sentence) and the
first paragraph of Section 4.09 of the Existing Indenture, (iii) Sections 4.04,
4.05, 4.06 and 4.08 of the Existing Indenture, and (iv) the new definition of
"Board of Directors" in subsection (d) of this Section 303, shall refer to
Hudson General Corporation (and not Hudson General LLC) until any successor
corporation shall have become such with respect to Hudson General Corporation
after the date hereof pursuant to the applicable provisions of the Indenture,
and thereafter "Company" shall mean such successor corporation.
(c) Notwithstanding subsection (a) of this Section 303, in (i)
the definition of "Superior Indebtedness" in Section 1.01 of the Existing
Indenture, (ii) Sections 12.01 and 12.02 of the Existing Indenture, and (iii)
Article Sixteen of the Existing Indenture, the term "Company" shall refer to
either Hudson General Corporation or Hudson General LLC, as the case may be, but
not both, until any successor corporation shall have become such with respect to
Hudson General Corporation or Hudson General LLC, as the case may be, after the
date hereof pursuant to the applicable provisions of the Indenture, and
thereafter "Company" shall mean such successor corporation.
(d) The term "Board of Directors" in Section 1.01 of the
Existing Indenture is hereby replaced by a new definition of such term to be
included in Section 1.01 of the Indenture, which new definition shall read in
its entirety as follows:
Board of Directors:
The term "Board of Directors" shall mean the board of
directors of the Company or the member board of the LLC (or a board of
directors of any corporate successor to the LLC), as the case may be,
4
<PAGE> 6
or any committee of either of such Boards duly authorized to act
hereunder.
Section 304. Subordination. Nothing contained in Article
Sixteen of the Existing Indenture, as modified by this First Supplemental
Indenture, will prevent either the Company or the LLC from making any payment on
account of principal of (or premium, if any) or interest on the Debentures,
including any purchase of Debentures, if (i) an event of default with respect to
the Superior Indebtedness of the other Issuer, or (ii) a dissolution or
winding-up or total or partial liquidation or reorganization of the other
Issuer, whether voluntary or involuntary or in bankruptcy, insolvency,
receivership or other proceedings, shall have occurred and be continuing, unless
(x) one or more events specified in clauses (i) or (ii) above shall have
occurred with respect to both Issuers or (y) any Debenture is declared due and
payable pursuant to Article Seven of the Existing Indenture before the date
specified therein as the fixed date on which the principal thereof is due and
payable. Nothing contained in Article Sixteen of the Existing Indenture, as
modified by this First Supplemental Indenture, will require, in the case of an
event referred to in clause (ii) above with respect to one Issuer and not the
other, the payment in full of the Superior Indebtedness of such other Issuer
before Debentureholders or the Trustee can receive or retain any assets paid or
distributed in respect of the Debentures (for principal, premium, if any, or
interest) by or with respect to such first Issuer in connection with such event.
Section 305. Corporate Seal. Notwithstanding the provisions of
Section 2.04 of the Existing Indenture, as long as the LLC has no corporate
seal, Debentures signed in the name and on behalf of the LLC need not be under a
corporate seal.
Section 306. Immunity. Section 14.01 of the Existing Indenture
is hereby amended to grant the same immunity to members and member
representatives of the LLC as was granted to stockholders and directors of the
Company.
Section 307. Effectiveness. This First Supplemental
Indenture shall become a legally effective and binding instrument upon the
execution and delivery hereof
5
<PAGE> 7
by all parties hereto but the provisions hereof shall only become operative upon
the date on which the Transfer occurs. The Company agrees to provide the Trustee
with prompt written notice of the occurrence of the Transfer.
Section 308. Notices. Any notice or demand which by any
provision of the Indenture is required or permitted to be given or served by the
Trustee or by the holders of Debentures on the LLC may be given or served in the
manner specified in Section 15.03 of the Existing Indenture to the same address
specified pursuant thereto for the Company.
Section 309. Governing Law. This First Supplemental Indenture
shall be deemed to be a contract made under the laws of the State of New York,
and for all purposes shall be construed in accordance with the laws of said
State.
Section 310. Execution in Counterparts. This First
Supplemental Indenture may be executed in any number of counterparts, each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
Section 311. Recitals. The recitals of fact contained herein
shall be taken as the statements of the Company and the LLC, and the Trustee
assumes no responsibility for the correctness of the same. The Trustee makes
no representations as to the validity or adequacy
6
<PAGE> 8
of this First Supplemental Indenture or the due execution hereof by the Company
and the LLC.
IN WITNESS WHEREOF, Hudson General Corporation has caused this
First Supplemental Indenture to be signed and acknowledged by its President and
its corporate seal to be affixed hereunto and the same to be attested by its
Secretary or an Assistant Secretary, Hudson General LLC has caused this First
Supplemental Indenture to be signed and acknowledged by its President and the
same to be attested by its Secretary or an Assistant Secretary, and Chemical
Bank Delaware has caused this First Supplemental Indenture to be signed and
acknowledged by one of its Senior Trust Officers or Trust Officers and its
corporate seal to be affixed hereunto and the same to be attested by its
Secretary or an Assistant Secretary, as of the day and year first written above.
HUDSON GENERAL CORPORATION
By /s/ Jay B. Langner
-----------------------------------
Name: Jay B. Langner
Title: President
Attest:
/s/ (Signature Illegible)
- ----------------------
Secretary
[SEAL]
HUDSON GENERAL LLC
By /s/ Jay B. Langner
-----------------------------------
Name: Jay B. Langner
Title: President
Attest:
/s/ (Signature Illegible)
- ----------------------
Secretary
7
<PAGE> 9
CHEMICAL BANK DELAWARE
By /s/ John J. Cashin
--------------------------------------
Name: John J. Cashin
Title: Senior Trust Officer
Attest:
/s/ (Signature Illegible)
- ----------------------
Secretary
[SEAL]
8
<PAGE> 10
STATE OF NEW YORK)
) ss.:
COUNTY OF NASSAU )
On the 19th day of April, in the year 1996, before me
personally came Jay B. Langner, to me known, who, being by me duly sworn, did
depose and say that he resides at 51 Pinesbridge Road, Ossining, New York 10562;
that he is President of HUDSON GENERAL CORPORATION, one of the entities
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
/s/ Jeanne Leeds
---------------------------
Notary Public
[Notarial Seal]
9
<PAGE> 11
STATE OF NEW YORK)
) ss.:
COUNTY OF NASSAU )
On the 19th day of April, in the year 1996, before me
personally came Jay B. Langner, to me known, who, being by me duly sworn, did
depose and say that he resides at 51 Pinesbridge Road, Ossining, New York 10562;
that he is President of HUDSON GENERAL LLC, one of the entities described in and
which executed the above instrument; and that he signed his name thereto by
authority of the members of said limited liability company.
/s/ Jeanne Leeds
---------------------------
Notary Public
[Notarial Seal]
10
<PAGE> 12
STATE OF Delaware )
) ss.:
COUNTY OF New Castle)
On the 22nd day of April, in the year 1996, before me
personally came John J. Cashin, to me known, who, being by me duly sworn, did
depose and say that he resides at 20 McCarthy Dr., Chadds Ford, PA 19317; that
he is Senior Trust Officer of CHEMICAL BANK DELAWARE, one of the entities
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
/s/ Karen M. Garber
-------------------------------
Notary Public
[Notarial Seal]
11
<PAGE> 1
EXHIBIT 4.5(c)
Notice of Redemption and Expiration of Conversion Privilege dated June 3, 1996
relating to the Registrant's 7% Convertible Subordinated Debentures Due 2011.
<PAGE> 2
HUDSON GENERAL CORPORATION
HUDSON GENERAL LLC
NOTICE OF REDEMPTION
and
EXPIRATION OF CONVERSION PRIVILEGE
7% Convertible Subordinated Debentures Due 2011
(CUSIP No. 443784 AB 9)
REDEMPTION DATE: JULY 22, 1996
CONVERSION PRIVILEGE EXPIRES: JULY 22, 1996
NOTICE IS HEREBY GIVEN that Hudson General Corporation (the "Company")
and Hudson General LLC (the "LLC") have elected to call for redemption on July
22, 1996 (the "Redemption Date"), pursuant to Article Three of the Indenture,
dated as of July 1, 1986 (the "Indenture"), between the Company and Chemical
Bank Delaware, a Delaware banking corporation (the "Trustee"), as amended by the
First Supplemental Indenture, dated as of April 22, 1996, among the Company, the
LLC and the Trustee, $15,825,000 aggregate principal amount of their outstanding
7% Convertible Subordinated Debentures Due 2011 (the "Debentures") at a
redemption price of 100% of the principal amount thereof, together with accrued
and unpaid interest thereon of $1.36 per $1,000 principal amount of Debentures
from July 15, 1996 to the Redemption Date, for a total redemption price of
$1,001.36 for each $1,000 principal amount of Debentures (the "Redemption
Price"). The interest payment on the Debentures due on July 15, 1996 shall be
payable in the usual manner.
The debenture numbers of the Debentures to be redeemed in whole or in
part and the respective principal amounts thereof to be redeemdd are as follows:
<TABLE>
<CAPTION>
Debenture Principal Amount Debenture Principal Amount
Number to be Redeemed Number to be Redeemed
- --------- ---------------- --------- ----------------
<S> <C> <C> <C>
RU-251 22,000 RU-296 56,000
RU-252 53,000 RU-304 113,000
RU-265 41,000 RU-305 108,000
RU-268 56,000 RU-306 118,000
RU-269 57,000 RU-307 112,000
RU-276 47,000 RU-308 106,000
</TABLE>
1
<PAGE> 3
<TABLE>
<CAPTION>
Debenture Principal Amount Debenture Principal Amount
Number to be Redeemed Number to be Redeemed
- --------- ---------------- ---------- ----------------
<S> <C> <C> <C>
RU-309 114,000 RU-442 203,000
RU-310 108,000 RU-451 31,000
RU-311 102,000 RU-459 11,000
RU-312 109,000 RU-464 12,000
RU-313 116,000 RU-468 1,000
RU-314 111,000 RU-479 38,000
RU-315 102,000 RU-483 2,391,000
RU-316 107,000 RU-484 2,510,000
RU-317 111,000 RU-485 2,221,000
RU-318 111,000 RU-505 5,000
RU-319 118,000 RU-506 1,000
RU-320 111,000 RU-537 6,000
RU-322 97,000 RU-538 4,000
RU-323 117,000 RU-555 4,000
RU-324 114,000 RU-565 1,090,000
RU-325 127,000 RU-566 53,000
RU-326 116,000 RU-567 53,000
RU-328 123,000 RU-568 60,000
RU-329 104,000 RU-569 48,000
RU-330 114,000 RU-570 54,000
RU-331 121,000 RU-571 61,000
RU-332 104,000 RU-572 53,000
RU-333 104,000 RU-573 59,000
RU-334 121,000 RU-574 48,000
RU-335 113,000 RU-575 54,000
RU-336 106,000 RU-585 32,000
RU-337 113,000 RU-588 14,000
RU-338 108,000 RU-700 26,000
RU-339 111,000 RU-704 2,000
RU-340 116,000 RU-713 2,000
RU-353 96,000 RU-716 2,000
RU-366 268,000 RU-717 4,000
RU-373 280,000 RU-721 26,000
RU-388 1,000 RU-722 29,000
RU-412 2,000 RU-723 28,000
RU-413 160,000 RU-724 23,000
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
DEBENTURE PRINCIPAL AMOUNT DEBENTURE PRINCIPAL AMOUNT
NUMBER TO BE REDEEMED NUMBER TO BE REDEEMED
- --------- ---------------- --------- ----------------
<S> <C> <C> <C>
RU-725 12,000 RU-753 13,000
RU-726 12,000 RU-755 6,000
RU-727 14,000 RU-783 33,000
RU-728 12,000 RU-797 1,304,000
RU-739 1,000 RU-798 2,000
RU-744 51,000 RU-799 15,000
RU-746 22,000 RU-800 1,000
RU-751 23,000
</TABLE>
The Debentures or portions thereof called for redemption are
convertible into shares of common stock, $1.00 par value, of the Company (the
"Common Stock") at the conversion price and in the manner described below until
the close of business on the Redemption Date. No payment or adjustment will be
made on conversion for interest accrued on the Debentures surrendered for
conversion or for dividends on Common Stock delivered on such conversion. In
addition, Debentures surrendered for conversion during the period from the close
of business on July 1, 1996 (the record date for the July 15, 1996 interest
payment on the Debentures) to the opening of business on July 15, 1996 must be
accompanied by payment of funds equal to the interest payable on July 15, 1996
on the principal amount of such Debentures being converted. From and after the
close of business on the Redemption Date, Debentures or portions thereof called
for redemption shall no longer be deemed outstanding, notwithstanding that any
such Debentures shall not have been surrendered for cancellation, and all rights
with respect to such Debentures or portions thereof, including accrual of
interest, shall forthwith cease and terminate except the right of holders to
receive, upon surrender for their certificates, payment of the Redemption Price.
ALTERNATIVES AVAILABLE TO HOLDERS OF DEBENTURES CALLED FOR REDEMPTION
1. Conversion of Debentures into Common Stock. The Debentures or
portions thereof listed above are convertible until the close of business on the
Redemption Date into shares of 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). No fractional
shares of Common Stock will be issued upon conversion but, in lieu thereof, the
Company will pay in cash an amount equal to the applicable fraction of the
current market price of the Common Stock on the day of conversion. If more than
one Debenture is surrendered for conversion at one time by the same holder, the
number of full shares issued upon conversion thereof shall be computed on the
basis of the aggregate principal amount of the Debentures, or specified portions
thereof to be converted, so surrendered.
3
<PAGE> 5
The Common Stock is traded on the American Stock Exchange under the
symbol "HGC." Holders of Debentures or portions thereof called for redemption
who are considering exercising their right to convert are encouraged to obtain
copies of the available filings made by the Company under the Securities
Exchange Act of 1934, as amended, copies of which can be reviewed at the offices
of the Securities and Exchange Commission or the American Stock Exchange.
ON MAY 31, 1996, THE CLOSING PRICE PER SHARE OF THE COMMON STOCK ON THE
AMERICAN STOCK EXCHANGE WAS $38.50 PER SHARE. BASED UPON THE CURRENT MARKET
PRICE, THE MARKET VALUE OF THE COMPANY'S COMMON STOCK (AND CASH FOR ANY
FRACTIONAL SHARE) INTO WHICH THE DEBENTURES OR PORTIONS THEREOF CALLED FOR
REDEMPTION ARE CONVERTIBLE IS GREATER THAN THE REDEMPTION PRICE OF THE
DEBENTURES. SO LONG AS THE MARKET PRICE OF THE COMPANY'S COMMON STOCK REMAINS
ABOVE $32.75 PER SHARE, HOLDERS OF DEBENTURES CALLED FOR REDEMPTION WHO ELECT TO
CONVERT WILL RECEIVE UPON CONVERSION COMMON STOCK (AND CASH FOR ANY FRACTIONAL
SHARE) HAVING A MARKET VALUE GREATER THAN THE REDEMPTION PRICE. HOLDERS OF
DEBENTURES CALLED FOR REDEMPTION ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS
FOR THE COMMON STOCK. THE DEADLINE FOR CONVERSION OF THE DEBENTURES OR PORTIONS
THEREOF CALLED FOR REDEMPTION IS THE CLOSE OF BUSINESS ON THE REDEMPTION DATE.
2. Redemption of Debentures Called for Redemption on July 22, 1996. Any
Debentures or portions thereof called for redemption which have not been
received by the paying agent, or which have been received by the paying agent
with instructions to redeem such Debentures, by the close of business on the
Redemption Date, will be redeemed on the Redemption Date at the Redemption
Price. From and after the close of business on the Redemption Date, Debentures
or portions thereof called for redemption shall no longer be deemed outstanding,
notwithstanding that any certificate therefor shall not have been surrendered
for cancellation, and all rights with respect to such Debentures, including
accrual of interest, shall forthwith cease and terminate on the Redemption Date,
except the right of holders of such Debentures to receive, upon surrender of
their Debentures, payment of the Redemption Price.
On or after the Redemption Date, upon surrender of a Debenture to be
redeemed in part only, a new Debenture or Debentures will be issued in principal
amount equal to the unredeemed portion of such surrendered Debenture.
3. Sale of Debentures. Holders of Debentures called for redemption may
sell such Debentures in the open market through usual brokerage facilities or
otherwise. Holders of Debentures who wish to sell their Debentures should
consult with their own advisers regarding if and when they should sell their
Debentures.
4
<PAGE> 6
DELIVERY OF DEBENTURES
Chemical Bank will act as paying agent and conversion agent for the
purpose of receiving Debentures tendered for redemption or conversion. Delivery
of Debentures to Chemical Bank for either such purpose may be made as follows:
If by Mail: Chemical Bank
c/o Texas Commerce Bank
Corporate Trust Services
P.O. Box 219052
Dallas, Texas 75221-9052
If by Hand: Chemical Bank
Corporate Trust Securities Window
55 Water Street, Second Floor
Room 234 - North Building
New York, New York 10041
If by Courier: Chemical Bank
c/o Texas Commerce Bank
Corporate Trust Services
1201 Main Street, 18th Floor
Dallas, Texas 75202
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING DEBENTURES, IS AT
THE ELECTION AND RISK OF THE HOLDER. IF DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE CERTIFIED OR REGISTERED MAIL, INSURED, RETURN RECEIPT
REQUESTED. IN THE CASE OF CONVERSION OF DEBENTURES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY TO THE CONVERSION AGENT BY THE CLOSE OF
BUSINESS ON THE REDEMPTION DATE. SINCE IT IS THE TIME OF RECEIPT BY THE
CONVERSION AGENT, NOT THE TIME OF MAILING, THAT DETERMINES WHETHER THE
DEBENTURES HAVE BEEN PROPERLY TENDERED FOR CONVERSION, SUFFICIENT TIME SHOULD BE
ALLOWED FOR DELIVERY.
5
<PAGE> 7
MANNER OF CONVERSION
TO CONVERT DEBENTURES CALLED FOR REDEMPTION INTO COMMON STOCK, THE
HOLDER MUST SURRENDER SUCH DEBENTURES PRIOR TO THE CLOSE OF BUSINESS ON THE
REDEMPTION DATE, WHETHER BY MAIL, HAND OR COURIER, TO THE CONVERSION AGENT AT
ONE OF ITS ADDRESSES SET FORTH ABOVE. THE DEBENTURES MUST BE ACCOMPANIED BY
WRITTEN NOTICE OF ELECTION TO CONVERT (WHICH MAY BE IN THE FORM SET FORTH ON THE
REVERSE OF THE DEBENTURES). IF THE NOTICE OF ELECTION IS SIGNED BY A PARTY OTHER
THAN THE REGISTERED HOLDER OF THE DEBENTURES, SUCH DEBENTURES MUST ALSO BE
ACCOMPANIED BY A WRITTEN INSTRUMENT OR INSTRUMENTS OF TRANSFER IN A FORM
SATISFACTORY TO THE COMPANY. IN ADDITION, DEBENTURES SURRENDERED FOR CONVERSION
DURING THE PERIOD FROM THE CLOSE OF BUSINESS ON JULY 1, 1996 (THE RECORD DATE
FOR THE JULY 15, 1996 INTEREST PAYMENT ON THE DEBENTURES) TO THE OPENING OF
BUSINESS ON JULY 15, 1996 MUST BE ACCOMPANIED BY PAYMENT OF FUNDS EQUAL TO THE
INTEREST PAYABLE ON JULY 15, 1996 ON THE PRINCIPAL AMOUNT OF SUCH DEBENTURES
BEING CONVERTED. THE CONVERSION PRIVILEGE EXPIRES AT THE CLOSE OF BUSINESS ON
THE REDEMPTION DATE.
THE DEBENTURES CALLED FOR REDEMPTION MAY BE CONVERTED INTO COMMON STOCK
ONLY BY DELIVERY OF THE DEBENTURES TO THE CONVERSION AGENT AT ONE OF ITS
ADDRESSES SET FORTH ABOVE PRIOR TO THE CLOSE OF BUSINESS ON THE REDEMPTION DATE.
ANY DEBENTURES CALLED FOR REDEMPTION WHICH HAVE NOT BEEN RECEIVED BY THE PAYING
AGENT, OR WHICH HAVE BEEN RECEIVED BY THE PAYING AGENT WITH INSTRUCTIONS TO
REDEEM SUCH DEBENTURES, BY THAT TIME WILL BE REDEEMED ON THE REDEMPTION DATE AT
THE REDEMPTION PRICE. SINCE IT IS THE TIME OF RECEIPT BY THE CONVERSION AGENT,
NOT THE TIME OF MAILING, THAT DETERMINES WHETHER THE DEBENTURES HAVE BEEN
PROPERLY TENDERED FOR CONVERSION, SUFFICIENT TIME SHOULD BE ALLOWED FOR
DELIVERY.
MANNER OF REDEMPTION
To receive the Redemption Price for any Debenture being redeemed, the
holder thereof must surrender the Debentures to the paying agent at one of its
addresses set forth above.
6
<PAGE> 8
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The payment of the proceeds on redemption of the Debentures or portions
thereof called for redemption, and the payment, if any, of cash proceeds paid in
lieu of the issuance of fractional shares of Common Stock on the conversion of
the Debentures, may be subject to U.S. information reporting and backup
withholding at the rate of 31% unless such holder (a) comes within certain
exempt categories and, when required, demonstrates that status or (b) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A holder of Debentures who does not provide the
Company with his correct taxpayer identification number may be subject to
penalties imposed by the Internal Revenue Service. Any amount withheld under the
backup withholding rules will be creditable against the holder's Federal income
tax liability. Therefore, unless such an exemption exists and is proved in a
manner satisfactory to the Company, each Debentureholder should complete, sign
and provide a Substitute Form W-9, so as to provide the information and
certification necessary to avoid backup withholding.
EACH HOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF CONVERSION OR REDEMPTION TO SUCH
HOLDER, INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND
OTHER TAX LAWS.
TRANSFER POWERS; TRANSFER TAXES
If a certificate evidencing shares of Common Stock or a check is to be
issued in a name other than that of the registered owner of Debentures, the
Debentures must be properly endorsed or be accompanied by appropriate bond
powers properly executed by the registered holder(s) so that such endorsement or
bond powers are signed exactly as the name(s) of the registered holder(s)
appear(s) on the Debentures, and the signature(s) must be properly guaranteed by
a bank, trust company, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agent's Medallion Program. If certificates evidencing shares of Common Stock
issued upon conversion are to be registered in the name of any person other than
the registered holder of the Debentures, or if tendered Debentures are to be
paid to any person other than the person in whose name such Debentures are
registered, the amount of any transfer taxes (whether imposed on the registered
holder or such person) payable on account of the transfer to such person shall
be borne by the registered holder or such person and such amount shall be
deducted from the Redemption Price (if arising in connection with the redemption
of Debentures), and shares of Common Stock shall not be issued to such person
(if arising in connection with the conversion of Debentures), unless in each
case satisfactory evidence of the payment of such taxes, or exemption therefrom,
is submitted.
7
<PAGE> 9
GENERAL
A copy of this Notice of Redemption and Expiration of Conversion
Privilege has been sent to all holders of record of the Debentures whose
Debentures have been called for redemption. Additional copies of such documents
may be obtained from Chemical Bank at its 55 Water Street, New York, New York
address set forth above.
HUDSON GENERAL CORPORATION
HUDSON GENERAL LLC
Dated: June 3, 1996
8
<PAGE> 1
EXHIBIT 4.5 (d)
Notice of Redemption and Expiration of Conversion Privilege dated August 5, 1996
relating to the Registrant's 7% Convertible Subordinated Debentures Due 2011
<PAGE> 2
HUDSON GENERAL CORPORATION
HUDSON GENERAL LLC
NOTICE OF REDEMPTION
and
EXPIRATION OF CONVERSION PRIVILEGE
7% Convertible Subordinated Debentures Due 2011
(CUSIP No. 443784 AB 9)
REDEMPTION DATE: September 4, 1996
CONVERSION PRIVILEGE EXPIRES: September 4, 1996
NOTICE IS HEREBY GIVEN that Hudson General Corporation (the "Company")
and Hudson General LLC (the "LLC") have elected to call for redemption on
September 4, 1996 (the "Redemption Date"), pursuant to Article Three of the
Indenture, dated as of July 1, 1986 (the "Indenture"), between the Company and
Chase Manhattan Bank Delaware (formerly known as Chemical Bank Delaware), a
Delaware banking corporation (the "Trustee"), as amended by the First
Supplemental Indenture, dated as of April 22, 1996, among the Company, the LLC
and the Trustee, all of their outstanding 7% Convertible Subordinated Debentures
Due 2011 (the "Debentures") at a redemption price of 100% of the principal
amount thereof, together with accrued and unpaid interest thereon of $9.53 per
$1,000 principal amount of Debentures from July 15, 1996 to the Redemption Date,
for a total redemption price of $1,009.53 for each $1,000 principal amount of
Debentures (the "Redemption Price").
The Debentures are convertible into shares of common stock, $1.00 par
value, of the Company (the "Common Stock") at the conversion price and in the
manner described below until the close of business on the Redemption Date. No
payment or adjustment will be made on conversion for interest accrued on the
Debentures surrendered for conversion or for dividends on Common Stock delivered
on such conversion. From and after the close of business on the Redemption Date,
the Debentures shall no longer be deemed outstanding, notwithstanding that any
Debentures shall not have been surrendered for cancellation, and all rights with
respect to the Debentures, including accrual of interest, shall forthwith cease
and terminate except the right of holders to receive, upon surrender for their
certificates, payment of the Redemption Price.
ALTERNATIVES AVAILABLE TO HOLDERS OF DEBENTURES
1. Conversion of Debentures into Common Stock. The Debentures are
convertible until the close of business on the Redemption Date into shares of
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). No fractional shares of Common Stock will be
issued upon conversion but, in lieu thereof, the Company will pay in cash an
amount equal to the applicable fraction of the current market price of the
Common Stock on the day of conversion. If more than one Debenture is surrendered
for conversion at one time by the same holder, the number of full shares issued
upon
<PAGE> 3
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Debentures, or specified portions thereof to be converted, so
surrendered.
The Common Stock is traded on the American Stock Exchange under the
symbol "HGC." Holders of Debentures who are considering exercising their right
to convert are encouraged to obtain copies of the available filings made by the
Company under the Securities Exchange Act of 1934, as amended, copies of which
can be reviewed at the offices of the Securities and Exchange Commission or the
American Stock Exchange.
ON AUGUST 2, 1996, THE CLOSING PRICE PER SHARE OF THE COMMON STOCK ON
THE AMERICAN STOCK EXCHANGE WAS $33 PER SHARE. BASED UPON THE CURRENT MARKET
PRICE, THE MARKET VALUE OF THE COMPANY'S COMMON STOCK (AND CASH FOR ANY
FRACTIONAL SHARE) INTO WHICH THE DEBENTURES ARE CONVERTIBLE IS GREATER THAN THE
REDEMPTION PRICE OF THE DEBENTURES. SO LONG AS THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK REMAINS ABOVE $32.75 PER SHARE, HOLDERS OF DEBENTURES WHO ELECT TO
CONVERT WILL RECEIVE UPON CONVERSION COMMON STOCK (AND CASH FOR ANY FRACTIONAL
SHARE) HAVING A MARKET VALUE GREATER THAN THE REDEMPTION PRICE. HOLDERS OF
DEBENTURES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK.
THE DEADLINE FOR CONVERSION OF THE DEBENTURES IS THE CLOSE OF BUSINESS ON THE
REDEMPTION DATE.
2. Redemption of Debentures on September 4, 1996. Any Debentures which
have not been received by the paying agent, or which have been received by the
paying agent with instructions to redeem such Debentures, by the close of
business on the Redemption Date, will be redeemed on the Redemption Date at the
Redemption Price. From and after the close of business on the Redemption Date,
the Debentures shall no longer be deemed outstanding, notwithstanding that any
certificate therefor shall not have been surrendered for cancellation, and all
rights with respect to the Debentures, including accrual of interest, shall
forthwith cease and terminate on the Redemption Date, except the right of
holders of the Debentures to receive, upon surrender of their Debentures,
payment of the Redemption Price.
3. Sale of Debentures. Holders of Debentures may sell such Debentures
in the open market through usual brokerage facilities or otherwise. Holders of
Debentures who wish to sell their Debentures should consult with their own
advisers regarding if and when they should sell their Debentures.
DELIVERY OF DEBENTURES
The Chase Manhattan Bank will act as paying agent and conversion agent
for the purpose of receiving Debentures tendered for redemption or conversion.
Delivery of Debentures to The Chase Manhattan Bank for either such purpose may
be made as follows:
If by Mail: The Chase Manhattan Bank
c/o Texas Commerce Bank
Corporate Trust Services
P.O. Box 219052
Dallas, Texas 75221-9052
2
<PAGE> 4
If by Hand: The Chase Manhattan Bank
Corporate Trust Securities Window
55 Water Street, Second Floor
Room 234 - North Building
New York, New York 10041
If by Courier: The Chase Manhattan Bank
c/o Texas Commerce Bank
Corporate Trust Services
1201 Main Street, 18th Floor
Dallas, Texas 75202
THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING DEBENTURES, IS AT
THE ELECTION AND RISK OF THE HOLDER. IF DELIVERY IS BY MAIL, IT IS RECOMMENDED
THAT HOLDERS USE CERTIFIED OR REGISTERED MAIL, INSURED, RETURN RECEIPT
REQUESTED. IN THE CASE OF CONVERSION OF DEBENTURES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY TO THE CONVERSION AGENT BY THE CLOSE OF
BUSINESS ON THE REDEMPTION DATE. SINCE IT IS THE TIME OF RECEIPT BY THE
CONVERSION AGENT, NOT THE TIME OF MAILING, THAT DETERMINES WHETHER THE
DEBENTURES HAVE BEEN PROPERLY TENDERED FOR CONVERSION, SUFFICIENT TIME SHOULD BE
ALLOWED FOR DELIVERY.
MANNER OF CONVERSION
TO CONVERT DEBENTURES INTO COMMON STOCK, THE HOLDER MUST SURRENDER THE
DEBENTURES PRIOR TO THE CLOSE OF BUSINESS ON THE REDEMPTION DATE, WHETHER BY
MAIL, HAND OR COURIER, TO THE CONVERSION AGENT AT ONE OF ITS ADDRESSES SET FORTH
ABOVE. THE DEBENTURES MUST BE ACCOMPANIED BY WRITTEN NOTICE OF ELECTION TO
CONVERT (WHICH MAY BE IN THE FORM SET FORTH ON THE REVERSE OF THE DEBENTURES).
IF THE NOTICE OF ELECTION IS SIGNED BY A PARTY OTHER THAN THE REGISTERED HOLDER
OF THE DEBENTURES, SUCH DEBENTURES MUST ALSO BE ACCOMPANIED BY A WRITTEN
INSTRUMENT OR INSTRUMENTS OF TRANSFER IN A FORM SATISFACTORY TO THE COMPANY. THE
CONVERSION PRIVILEGE EXPIRES AT THE CLOSE OF BUSINESS ON THE REDEMPTION DATE.
THE DEBENTURES MAY BE CONVERTED INTO COMMON STOCK ONLY BY DELIVERY OF
THE DEBENTURES TO THE CONVERSION AGENT AT ONE OF ITS ADDRESSES SET FORTH ABOVE
PRIOR TO THE CLOSE OF BUSINESS ON THE REDEMPTION DATE. ANY DEBENTURES WHICH HAVE
NOT BEEN RECEIVED BY THE PAYING AGENT, OR WHICH HAVE BEEN RECEIVED BY THE PAYING
AGENT WITH INSTRUCTIONS TO REDEEM SUCH DEBENTURES, BY THAT TIME WILL BE REDEEMED
ON THE REDEMPTION DATE AT THE REDEMPTION PRICE. SINCE IT IS THE TIME OF RECEIPT
BY THE CONVERSION AGENT, NOT THE TIME OF MAILING, THAT DETERMINES WHETHER THE
DEBENTURES HAVE BEEN PROPERLY TENDERED FOR CONVERSION, SUFFICIENT TIME SHOULD BE
ALLOWED FOR DELIVERY.
3
<PAGE> 5
MANNER OF REDEMPTION
To receive the Redemption Price for any Debenture being redeemed, the
holder thereof must surrender the Debentures to the paying agent at one of its
addresses set forth above.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The payment of the proceeds on redemption of the Debentures, and the
payment, if any, of cash proceeds paid in lieu of the issuance of fractional
shares of Common Stock on the conversion of the Debentures, may be subject to
U.S. information reporting and backup withholding at the rate of 31% unless such
holder (a) comes within certain exempt categories and, when required,
demonstrates that status or (b) provides a correct taxpayer identification
number, certifies as to no loss of exemption from backup withholding and
otherwise complies with applicable requirements of the backup withholding rules.
A holder of Debentures who does not provide the Company with his correct
taxpayer identification number may be subject to penalties imposed by the
Internal Revenue Service. Any amount withheld under the backup withholding rules
will be creditable against the holder's Federal income tax liability. Therefore,
unless such an exemption exists and is proved in a manner satisfactory to the
Company, each Debentureholder should complete, sign and provide a Substitute
Form W-9, so as to provide the information and certification necessary to avoid
backup withholding.
EACH HOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES OF CONVERSION OR REDEMPTION TO SUCH HOLDER,
INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL AND OTHER TAX
LAWS.
TRANSFER POWERS; TRANSFER TAXES
If a certificate evidencing shares of Common Stock or a check is to be
issued in a name other than that of the registered owner of Debentures, the
Debentures must be properly endorsed or be accompanied by appropriate bond
powers properly executed by the registered holder(s) so that such endorsement or
bond powers are signed exactly as the name(s) of the registered holder(s)
appear(s) on the Debentures, and the signature(s) must be properly guaranteed by
a bank, trust company, broker, dealer, credit union, savings association or
other entity which is a member in good standing of the Securities Transfer
Agent's Medallion Program. If certificates evidencing shares of Common Stock
issued upon conversion are to be registered in the name of any person other than
the registered holder of the Debentures, or if tendered Debentures are to be
paid to any person other than the person in whose name such Debentures are
registered, the amount of any transfer taxes (whether imposed on the registered
holder or such person) payable on account of the transfer to such person shall
be borne by the registered holder or such person and such amount shall be
deducted from the Redemption Price (if arising in connection with the redemption
of Debentures), and shares of Common Stock shall not be issued to such person
(if arising in connection with the conversion of Debentures), unless in each
case satisfactory evidence of the payment of such taxes, or exemption therefrom,
is submitted.
4
<PAGE> 6
General
A copy of this Notice of Redemption and Expiration of Conversion
Privilege has been sent to all holders of record of the Debentures. Additional
copies of such documents may be obtained from The Chase Manhattan Bank at its 55
Water Street, New York, New York address set forth above.
HUDSON GENERAL CORPORATION
HUDSON GENERAL LLC
Dated: August 5, 1996
5
<PAGE> 1
EXHIBIT 10.9*
Description of Executive Incentive Program adopted by the Compensation
Committee of the Board of Directors on
December 1, 1993, as amended on May 17, 1996.
<PAGE> 2
Exhibit 10.9
DESCRIPTION OF
EXECUTIVE INCENTIVE PROGRAM
ADOPTED BY THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS ON
DECEMBER 1, 1993, AS AMENDED MAY 17, 1996
1. Beginning with respect to the Company's fiscal year ending June 30, 1994
a bonus pool is to be established based on the earnings before interest
and taxes of the Company's aviation services business ("Aviation
Earnings") for each fiscal year.
2. Aviation Earnings are to be reduced by an amount equal to the Company's
average investment in the aviation services business for the applicable
fiscal year multiplied by 12% (the "Hurdle").
3. The bonus pool is to be equal to the excess, if any, of Aviation
Earnings over the Hurdle (the "Bonus Base") multiplied by 15%.
4. There will be a maximum annual bonus pool of $1,000,000 ($1,500,000
effective commencing with respect to the fiscal year ending June 30,
1996) paid in respect of any fiscal year.
5. If the Company, on a consolidated basis (including the accrual or funding
of any payments to be made under the Executive Incentive Program), was
not profitable for the fiscal year under review, the Board of Directors
may either establish a bonus pool for such fiscal year or carry over the
Bonus Base, if any, for such fiscal year.
6. The bonus pool is to be made available to all senior executive of the
Company (excluding the current Chief Executive Officer, Jay B. Langner)
(currently eight executives) who are not eligible for other bonus
compensation.
7. If the Bonus Base is negative in any fiscal year, the negative Bonus Base
must be recouped before there is a bonus pool for a subsequent fiscal
year.
8. The Board of Directors has the flexibility to adjust the funding formula
or measures in the Program, but would do so only after careful thought.
It is not expected that the funding formula would be adjusted during a
fiscal year with respect to that fiscal year.
9. Individual awards will be determined subjectively by the Compensation
Committee of the Board of Directors and be paid shortly after the
Company's audited financial results are publicly issued.
<PAGE> 1
EXHIBIT 11
Computations of Earnings Per Share Information Primary and Fully Diluted
<PAGE> 2
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
PRIMARY - EARNINGS
BEFORE CUMULATIVE EFFECT OF CHANGE
IN THE METHOD OF ACCOUNTING FOR INCOME TAXES
<TABLE>
<CAPTION>
Year Ended June 30,
1996 1995 1994
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
Earnings before cumulative effect of change in the method
of accounting for income taxes for computing earnings
per share - primary.................................................... $10,466 $4,593 $7,310
======= ====== ======
Weighted average number of common and
common equivalent shares outstanding................................... 1,180 1,245 1,247
======= ====== ======
Earnings before cumulative effect of change in the method
of accounting for income taxes per common and common
equivalent share - primary.............................................. $ 8.87 $ 3.69 $ 5.86
======= ====== ======
</TABLE>
<PAGE> 3
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
PRIMARY - NET EARNINGS
<TABLE>
<CAPTION>
Year Ended June 30,
1996 1995 1994
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net earnings for computing earnings per share - primary................ $10,466 $4,593 $7,760
======= ====== ======
Weighted average number of common and
common equivalent shares outstanding.................................. 1,180 1,245 1,247
======= ====== ======
Net earnings per common and common equivalent
share - primary....................................................... $ 8.87 $ 3.69 $ 6.22
======= ====== ======
</TABLE>
<PAGE> 4
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
FULLY DILUTED - EARNINGS BEFORE
CUMULATIVE EFFECT OF CHANGE IN THE METHOD
OF ACCOUNTING FOR INCOME TAXES
<TABLE>
<CAPTION>
Year Ended June 30,
1996 1995 1994
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
Earnings before cumulative effect of change in the method of
accounting for income taxes for computing
earnings per share - primary ........................................ $10,466 $4,593 $7,310
Reduction of interest expense less applicable income taxes assuming
conversion of 7% convertible subordinated debentures due 2011........ 1,032 1,137 1,137
------- ------ ------
Earnings before extraordinary item and cumulative effect
of change in the method of accounting for income taxes
for computing earnings per share - fully diluted ..................... $11,498 $5,730 $8,447
======= ====== ======
Weighted average number of common
and common equivalent shares outstanding.............................. 1,186 1,260 1,249
Addition from assumed conversion as of the beginning of
each period of the 7% convertible subordinated debentures
outstanding at the end of each period................................. 884 885 886
------- ------ ------
Weighted average number of common and common equivalent shares
outstanding on a fully diluted basis ................................ 2,070 2,145 2,135
------- ------ ------
Earnings before cumulative effect of change in the method
of accounting for income taxes per common and common
equivalent share - fully diluted...................................... $ 5.56 $ 2.67 $3.96
======= ====== ======
</TABLE>
<PAGE> 5
HUDSON GENERAL CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE INFORMATION
FULLY DILUTED - NET EARNINGS
<TABLE>
<CAPTION>
Year Ended June 30,
1996 1995 1994
---- ---- ----
(in thousands, except per share amounts)
<S> <C> <C> <C>
Net earnings for computing earnings per share - primary................ $10,466 $4,593 $7,760
Reduction of interest expense less applicable income taxes assuming
conversion of 7% convertible subordinated debentures due 2011........ 1,032 1,137 1,137
------- ------ ------
Net earnings for computing earnings per share - fully diluted........ $11,498 $5,730 $8,897
======= ====== ======
Weighted average number of common and common equivalent shares
outstanding ......................................................... 1,186 1,260 1,249
Addition from assumed conversion as of the beginning of each period
of the 7% convertible subordinated debentures outstanding at the
end of each period .................................................. 884 885 886
------- ------ ------
Weighted average number of common and common equivalent shares
outstanding on a fully diluted basis ................................ 2,070 2,145 2,135
------- ------ ------
Net earnings per common and common equivalent share-fully diluted .... $ 5.56 $ 2.67 $ 4.17
======= ====== ======
</TABLE>
<PAGE> 1
EXHIBIT 13
The Registrant's 1996 Annual Report to Shareholders, which report, except for
those portions thereof which are expressly incorporated by reference in this
filing, is furnished for the information of the Commission and is not to be
deemed to be filed as part of this filing.
<PAGE> 2
[HUDSON GENERAL LOGO]
Pride in our people
[graphic] Hudson
General
Corporation
[graphic]
35th
Anniversary
1996
Annual Report
<PAGE> 3
CONTENTS
Letter to Our Shareholders ...................................... 1
Aviation Services ............................................... 4
Land Development ................................................ 8
Management's Discussion and Analysis of Financial Condition and
Results of Operation ............................................ 9
Selected Consolidated Financial Data ............................ 12
Consolidated Financial Statements ............................... 13
Notes to Consolidated Financial Statements ...................... 17
Independent Auditors' Report .................................... 24
Corporate Information ............................. Inside Back Cover
<PAGE> 4
Letter to OUR shareholders
FELLOW SHAREHOLDERS:
As we celebrate the thirty-fifth and most exciting year of Hudson General
Corporation (the Corporation), we dedicate the 1996 Annual Report to our
employees. Throughout this Report you will find pictures of some of the men and
women who have made the success of your company possible. Without these
individuals and the thousands more who work with us, the accomplishments of this
past year would not have been achieved.
[picture of Peter Bluth and Jay B. Langner]
PETER BLUTH, Managing Director of JAY B. LANGNER, Chief Executive Officer
Lufthansa Airport and Ground Services of Hudson General Corporation
The year was highlighted by a momentous event in the Corporation's history.
On May 31, 1996, Jay B. Langner, Chief Executive Officer of the Corporation, and
Peter Bluth, Managing Director of Lufthansa Airport and Ground Services GmbH
(LAGS), a wholly owned subsidiary of Deutsche Lufthansa AG, signed agreements
(pictured above) to complete a landmark transaction between the Corporation and
LAGS. In accordance with these agreements, effective June 1, 1996, the
Corporation transferred substantially all of the assets and liabilities of its
aviation services business (the Aviation Business) to Hudson General LLC (Hudson
LLC), a newly-formed limited liability company. Hudson LLC also assumed, as
co-obligor with the Corporation, all of the Corporation's obligations on the
entire outstanding balance ($28.9 million) of the Corporation's 7% Convertible
Subordinated Debentures (the Debentures).
LAGS acquired a 26% interest in Hudson LLC for a price of approximately
$23.7 million. Approximately $7.8 million of this price was deferred, $5.2
million of which remains subject to potential downward adjustment based on
future earnings of the Aviation Business. The Corporation retained a 74%
interest in Hudson LLC. As part of the transaction, LAGS received an option,
exercisable until October 1, 2000, to increase its equity interest in Hudson LLC
from 26% up to a maximum of 49%. LAGS and its affiliates are prohibited from
acquiring an interest in the Corporation.
1
<PAGE> 5
In connection with our transaction with LAGS, the Corporation has extended
and amended its bank credit agreements. We now have a $6.0 million line of
credit with significantly reduced restrictions on dividend payments. In
addition, Hudson LLC has a revolving credit agreement with a bank commitment of
$18.0 million.
With the availability of the proceeds from the LAGS transaction, in June
1996 we called for redemption on July 22, 1996, $15.8 million of Debentures. On
July 22, 1996, $13.6 million of Debentures were converted into the Corporation's
common stock and $2.2 million of Debentures were redeemed. On August 5, 1996 the
remaining outstanding balance of the Debentures was called for redemption on
September 4, 1996. Of these Debentures $12.5 million principal amount were
converted and $.2 million were redeemed. Hudson LLC issued a subordinated note
to the Corporation for $26.4 million representing the principal amount of
Debentures that were converted into shares of the Corporation's common stock.
Hudson LLC is obligated to transfer $13.4 million to the Corporation,
representing the difference between the proceeds from the LAGS transaction and
the funds used to redeem the Debentures, as the initial payment under its
subordinated note to the Corporation.
While our transaction with LAGS created great excitement during fiscal 1996,
so did the Corporation's financial results. Net earnings for the fiscal year
ended June 30, 1996 were $10.5 million compared with $4.6 million in fiscal
1995. Revenues for the fiscal year ended June 30, 1996 were $157.7 million
compared with $135.5 million in fiscal 1995. As many of you know, our snow
removal and de-icing services can have a significant impact on the results of
the Aviation Business. During fiscal 1996, the northeastern United States
experienced record snow falls and as a result, both earnings and revenues
benefited from the increased
[picture of Ina Mika,]
INA MIKA, Management Information Systems
28 YEARS OF SERVICE
need for the Corporation's winter related services. In addition, we are pleased
that the results of our non-winter related activities improved from the previous
fiscal year.
The aviation industry which we serve continues to seek more efficient ways
to operate. To this end, airlines have formed alliances which seem to change
continually. Depending on the alliance, business may be gained or lost depending
on which airline alliance partner determines who will furnish the ground
services we offer. However, airline outsourcing continues to provide us with
opportunities as airlines accelerate their efforts to cut costs. The
U.S.-Canadian Open Skies Agreement has also proven beneficial. The benefits of
additional flights have been especially noticeable in Vancouver where a new
international terminal recently opened.
Understandably, not all the news is positive. In February 1996, we lost
through competitive bidding a contract under which we had
2
<PAGE> 6
operated ground transportation information kiosks at JFK and LaGuardia airports
in New York since 1989. However, the pluses far outweighed the minuses in fiscal
1996. We were able to expand our fueling operations in Boston and our cargo
handling services at JFK, and we opened a new station in Edmonton. We were also
able to expand our glycol recovery services from Canada to the U.S. beginning
with a pilot project in Baltimore. Overall we are encouraged by the progress of
our core aviation services business.
In Hawaii, results in fiscal 1996 were once again disappointing due to a
lack of sales activity at our real estate joint venture project. Some sales
contracts have been signed recently, and we are beginning to see a firming of
sales prices for the land parcels at Kohala Ranch. On a positive note, the
reorganization plan of our joint venture partner, Oxford First Corporation,
enabled that company to bring itself current with respect to advances owed by it
to the joint venture. Oxford First has also resumed making its 50% share of
advances to the joint venture. We encourage each of you who plans to be in
Hawaii to visit Kohala Ranch and experience its magnificent beauty firsthand.
Reflecting the growth of the Corporation and the formation of Hudson
General LLC, on September 13, 1996, Michael Rubin was elected President of
Hudson General Corporation and Paul R. Pollack was elected President of Hudson
General LLC. Jay B. Langner will continue to serve as Chairman of the Board
and Chief Executive Officer. We believe these changes will provide for an
effective management team as Hudson General continues to progress towards the
year 2000.
In closing, we must once again thank our employees, as well as our
customers, vendors and shareholders, for their continued support. A special
thank you goes to Donald S. Croot, Vice President--Canadian Operations. Don has
been with Hudson General since 1968, when we
[picture of George Brown]
GEORGE BROWN, Skycap/Wheelchair
25 YEARS OF SERVICE
acquired our Canadian operations, and will be retiring in December. Don has been
greatly responsible for both the quality of services provided and excellent
results in Canada. We will miss his loyalty and dedication and wish him well in
retirement.
Sincerely,
/s/ Jay B. Langner
Jay B. Langner
Chairman of the Board and
Chief Executive Officer
/s/ Michael Rubin
Michael Rubin
President and Principal Financial Officer
/s/ Paul R. Pollack
Paul R. Pollack
Executive Vice President and Chief Operating Officer
3
<PAGE> 7
Proud of OUR employees
[picture of Chester Tomlinson]
Chester Tomlinson, Fuel Management
7 years of service
[picture of Larry Turner and Gholam Nami]
Larry Turner, Bus Transportation Gholam Nami, Bus Transportation
18 years of service 18 years of service
AVIATION SERVICES
Hudson General Corporation through its ownership interest in Hudson LLC
provides a broad range of services to the aviation industry at twenty-four (24)
airports throughout the United States and Canada. These services include
aircraft ground handling; aircraft fueling; fuel management; ground
transportation; snow removal; cargo warehousing; and sale, leasing and
maintenance of ground support equipment.
Aircraft ground handling services are provided to domestic and international
airlines, and include: aircraft marshaling; loading and off-loading of baggage,
freight and commissary items; passenger ticketing; porter and wheelchair
services; aircraft cleaning; de-icing; ramp sweeping and glycol recovery; water
and lavatory service; maintenance and service checks; weight and balance; cargo
and mail handling; aircraft pushbacks; ground power and air-conditioning.
4
<PAGE> 8
[picture of Ray DiGianvittorio]
Ray DiGianvittorio, Ground Handling
22 years of service
[picture of Angela Torres]
Angela Torres, Cabin Grooming
6 years of service
5
<PAGE> 9
[picture of Asim Gader]
Asim Gader, De-icing/Glycol Recovery
10 years of service
Aircraft fueling services are offered through contract fueling, fuel
management and retail sales of fuel. Contract fueling services are provided to
airlines and fuel suppliers by delivery of fuel from airport storage facilities
into commercial aircraft. Fuel management services consists of functioning as
the out-sourced fuel procurement department responsible for managing the
sourcing, negotiation, purchase, payment, supply and distribution of fuel both
domestically and internationally for scheduled and charter passenger and cargo
airlines.
Ground transportation services are provided for airline passengers and
airport employees through Hudson LLC operated airport shuttle bus systems. These
operations also include operation and maintenance of passenger boarding bridges
and specialized airfield passenger transport vehicles. Besides its
airport-related transportation services, Hudson LLC provides transportation
management services for various governmental agencies and authorities.
Snow removal services are performed at airports in the northeastern and
midwestern United States under contracts with airport operators and airlines
serving these airports. Snow removal services are also performed at several
seaport facilities.
Hudson LLC also operates one of the newest and most technologically advanced
airport perishables center in the United States for cargo requiring a
climate-controlled environment.
6
<PAGE> 10
Maintenance services are provided for ground support, cargo handling, ground
transportation and other airport related equipment. In addition, building
maintenance services are provided at both terminal and hangar facilities. In
Salt Lake City, hangar facilities and tie-down services are offered to the
general aviation community including corporate and private aircraft owners.
As Hudson General Corporation completes its thirty-fifth year, it continues
to meet the service challenges of the aviation industry. Through the efforts
and commitment of its employees, Hudson General is dedicated to its customers'
satisfaction.
[picture of Nadir Ali]
Nadir Ali,
Ground Support Equipment Maintenance
27 years of service
[picture of John Hames]
John Hames, Snow Clearing
25 years of service
7
<PAGE> 11
[picture of Max D'Souga]
Max D'Souga, Passenger Handling
25 years of service
LAND DEVELOPMENT
Hudson General Corporation is a 50% partner in a joint venture to develop
approximately 4,000 contiguous acres of land situated in the North Kohala
District on the Island of Hawaii. The Project is being developed in four
successive phases. Substantially all of the parcels in Phases I and II, which
comprise approximately 2,100 acres of the Project, have been sold. Phase III
consists of 100 five acre parcels, with 86 parcels remaining available for sale.
During fiscal 1992, the County of Hawaii passed an ordinance pursuant to
which, after the obtaining of subdivision approvals, Phase IV could be developed
into 1,490 units. The validity of this ordinance has been challenged in a
lawsuit brought by two local residents of Hawaii, and development of Phase IV
must await the ultimate outcome of this litigation.
[picture of Tom Slattery]
Tom Slattery, Intoplane Fueling
22 years of service
8
<PAGE> 12
Hudson General Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED WITH FISCAL 1995
Effective June 1, 1996, the Corporation consummated a transaction (the
Transaction) in which a third party acquired a 26% interest in the Corporation's
aviation services business (the Aviation Business). As part of the Transaction,
the Corporation transferred substantially all of the assets and liabilities of
the Aviation Business to Hudson General LLC (Hudson LLC), a newly formed limited
liability company (see Notes 1 and 2). Effective June 1, 1996, the Corporation
has accounted for its interest in Hudson LLC under the equity method of
accounting. As a result, the fiscal 1996 consolidated statements of earnings of
the Corporation contain the operating results of the Aviation Business on a
consolidated basis for eleven months and under the equity method of accounting
for one month. The table below summarizes the combined revenues, costs and
expenses and operating results for fiscal 1996 (including the Aviation Business
for June 1996) and compares them with fiscal 1995 amounts. The Corporation's
equity interest in the earnings of the Aviation Business for the month of June
1996 is included in "Equity in earnings of Hudson General LLC" in the
accompanying consolidated statements of earnings. The table and related
management's discussion are intended to provide a presentation and analysis of
fiscal 1996 and 1995 results on a comparable basis.
<TABLE>
<CAPTION>
Hudson
General Hudson
Corporation LLC Combined
Fiscal June Fiscal Fiscal
1996 1996 1996 1995
---------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
Revenues ............................. $157,718 $12,313 $170,031 $135,453
Costs and expenses:
Operating .......................... 113,744 9,259 123,003 106,070
Depreciation and amortization ...... 7,165 673 7,838 7,528
Selling, general &
administrative ................... 16,755 1,317 18,072 14,306
Interest ........................... 239 168 407 559
---------------------------------------------------------
Total costs and expenses ............. 137,903 11,417 149,320 128,463
Earnings before equity in earnings
(loss) of investees and provision
(benefit) for income taxes ......... $ 19,815 $ 896 $ 20,711 $ 6,990
---------------------------------------------------------
</TABLE>
Revenues increased from $135.5 to $170.0 million, an increase of $34.6
million, or 25.5%. The increase reflects higher: (i) snow removal revenues of
$14.0 million as a result of record snowfalls in the northeast; (ii) ground
handling service revenues of $18.2 million due primarily to expanded services to
new and existing customers and to higher sales of de-icing fluid; (iii) domestic
aircraft fueling revenues of $4.3 million resulting primarily from expanded
intoplane fueling services and retail sales of fuel at existing locations; and
(iv) revenues due to the effect of fluctuation in the average rates of exchange
used in translating Canadian revenues to their U.S. dollar equivalent. Partially
offsetting the revenue increases were lower: (i) aircraft fueling and hangar
rental revenues in Canada of $2.3 million as a result of the cessation of
operations of the Corporation's Canadian fixed base operations (FBO's) on
October 31, 1994; and (ii) ground transportation revenues of $1.0 million due
primarily to the loss of contracts to operate information kiosks and specialized
airfield passenger transport vehicles.
Costs and expenses increased from $128.5 to $149.3 million, an increase of
$20.9 million, or 16.2%. Operating costs increased $16.9 million, or 16.0%. The
increase was attributable to higher: (i) snow removal costs; (ii) labor and
related costs associated with expanded ground handling operations and domestic
aircraft fueling services; (iii) cost of sales of de-icing fluid; (iv) fuel
costs associated with higher volumes of retail fuel sales and internal fuel
usage in the U.S.; and (v) the effect of fluctuation in the average rates of
exchange used in translating Canadian costs to their U.S. dollar equivalent.
Partially offsetting the increases were lower costs as a result of: (i) the loss
of contracts to operate ground transportation information kiosks and specialized
airfield passenger transport vehicles; (ii) the positive trending of workers'
compensation insurance claims; and (iii) the cessation of operations of the
Corporation's Canadian FBO's.
Depreciation and amortization expenses increased from $7.5 to $7.8 million,
an increase of $.3 million, or 4.1%. The increase is due to additional
depreciation in the current year due mainly to purchases of ground handling
equipment. Partially offsetting the increase is the absence in fiscal 1996 of
accelerated amortization of the remaining carrying value of leasehold
improvements made to a hangar facility at a domestic airport location in the
prior year (the Accelerated Amortization) (see Note 5).
Selling, general and administrative expenses increased from $14.3 to $18.1
million, an increase of $3.8 million, or 26.3%, due primarily to the recording
of higher provisions relating to the Corporation's bonus and retirement plans
and to stock appreciation rights as a result of increases in the market price of
the Corporation's common stock.
Earnings before equity in earnings (loss) of investees and provision
(benefit) for income taxes increased from $7.0 to $20.7 million, an increase of
$13.7 million, due primarily to improved results from snow removal, ground
handling (including higher sales of de-icing fluid) and domestic aircraft
fueling operations. Adding to the increase was the absence of the Accelerated
Amortization, a decrease in workers' compensation insurance costs and the
elimination of operating losses associated with the Corporation's Canadian
FBO's. Partially offsetting the increases were higher selling, general and
administrative expenses as described above.
Snow removal and aircraft de-icing services are seasonal in nature. The
results of these operations are normally reflected in the second and third
quarters of the fiscal year, and fluctuate depending upon the severity of the
winter season.
Results of aircraft ground handling operations fluctuate depending upon the
flight activity and schedules of customers and the ability to deploy equipment
and manpower in the most efficient manner to service such customers.
The Corporation's 50% share of losses from its real estate joint venture in
Hawaii (the Venture) increased from $2.7 to $3.0 million, an increase of $.3
million, or 10.0%. The increase in the Venture's loss is due mainly to higher
interest expense-net due mainly to higher balances of partner advances payable.
In addition, the Venture's interest income decreased as a result of the
reduction in mortgage receivables. As is usual for companies with land
development operations, the contribution to future results from such operations
will fluctuate depending upon land sales closed in each reported period.
The Corporation's provision (benefit) for income taxes increased from a
benefit of $.4 million to a provision of $7.2 million, an increase of $7.5
million. The increase primarily reflects: (i) increased pre-tax earnings in the
U.S. and Canada; (ii) the Corporation's recognition of a provision of $.8
million for income taxes associated with the anticipated repatriation of
Canadian earnings; and (iii) a decrease of $.3 million in fiscal 1996 compared
with fiscal 1995 of the recognition of deferred tax assets resulting from a
reevaluation of the operating results of the Corporation's Canadian subsidiary
(see Note 8).
9
<PAGE> 13
Hudson General Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(Continued)
The state of the North American aviation industry has resulted in increased
competitive pressures on the pricing of aviation services and in the exploration
of alliances between major commercial airline carriers. While these factors may
have an adverse effect, several airlines have begun to outsource services to
independent aviation service companies. This trend, as well as the Open Skies
Agreement between the United States and Canada, which provides increased access
to airlines to fly between these bordering countries, has provided additional
opportunities for Hudson LLC. The Corporation is unable, at this time, to
evaluate the full impact of these factors.
The compliance with federal, state and local provisions which have been
enacted or adopted regulating the discharge of materials into the environment
did not have a material effect upon the Corporation's or Hudson LLC's capital
expenditures or results of operations for fiscal 1996 and 1995, or competitive
position. However, the federal government and many state and local governments
have enacted or proposed legislation and regulations with respect to storage
facilities for fuel, petroleum-based products and chemicals, the disposal of
hazardous waste materials, storm water discharges, and financial responsibility
for possible liability exposures relating to fuel storage facilities. Compliance
with such legislation and regulations has resulted in expenditures by the
Corporation, including expenditures for the testing, decommissioning and/or
replacement of certain of its fuel and de-icing fluid storage facilities, and
the cleanup of fuel spills. The Corporation was and Hudson LLC is presently
engaged in several such decommissioning and cleanup projects, and it is
anticipated that additional such expenditures, the amount of which is presently
not expected to be material, will be required.
In addition, airport authorities are coming under increasing pressure to
cleanup previous contamination at their facilities, and are seeking financial
contributions from airport tenants and companies which operate at their
airports. The Corporation cannot predict at this time the amount, if any, that
it or Hudson LLC may be required to pay in connection with such airport
authority initiatives.
The Corporation is required to adopt in fiscal 1997 Statement of Financial
Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." SFAS No. 121
requires, among other things, that long-lived assets held and used by an entity
be reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Corporation's
management does not believe that the adoption of SFAS No. 121 will have a
material impact on the Corporation's consolidated financial position or results
of operations.
FISCAL 1995 COMPARED WITH FISCAL 1994
Revenues decreased from $142.1 to $135.5 million, a decrease of $6.6
million, or 4.7%. The decrease reflects lower: (i) snow removal revenues of
$14.2 million due mainly to the mild winter weather during fiscal 1995; (ii)
aircraft fueling and hangar rental revenues in Canada of $6.2 million due to
lower volumes of retail fuel sales and the expiration on October 31, 1994 of the
Corporation's subleases at its Canadian FBO's; and (iii) revenues due to the
effect of fluctuation in the average rates of exchange used in translating
Canadian revenues to their U.S. dollar equivalent. Partially offsetting the
revenue decreases were higher: (i) ground handling service revenues (net of
decreased sales volumes of de-icing fluid) of $7.1 million due primarily to
expanded services to new and existing customers and to a new contract to provide
various winter related aircraft ground handling services at Terminal 1 in
Toronto's Lester B. Pearson International Airport; (ii) domestic aircraft
fueling revenues of $5.2 million resulting primarily from expanded intoplane
fueling services at new and existing locations; (iii) ground transportation
revenues of $1.6 million due mainly to expanded services to existing customers;
and (iv) building maintenance revenues of $.8 million due primarily to expanded
services to new and existing customers in the U.S.
Costs and expenses were substantially unchanged at $128.5 million in fiscal
1995 as compared with $128.6 million in fiscal 1994. Operating costs decreased
by $.4 million, or .3%. The decrease was attributable to lower: (i) snow removal
costs due to the mild winter weather in the U.S.; (ii) fuel and facility rental
costs related to the Corporation's Canadian FBO's; and (iii) the effect of
fluctuation in the average rates of exchange used in translating Canadian costs
to their U.S. dollar equivalent. Partially offsetting the decreases were higher:
(i) domestic labor and related costs due primarily to expanded services to new
and existing customers; (ii) equipment rental costs due to expanded intoplane
fueling services; (iii) labor and related costs associated with ground handling
operations in Canada due primarily to expanded services to new and existing
customers; and (iv) domestic maintenance associated with expansion of the
Corporation's fleet of equipment.
Depreciation and amortization expenses increased from $7.0 to $7.5 million,
an increase of $.5 million, or 6.9%. The increase was due primarily to the
Accelerated Amortization.
Selling, general and administrative expenses increased from $13.8 to $14.3
million, an increase of $.5 million, or 3.6%, due mainly to higher facility,
personnel and related costs associated with the Corporation's expanded
operations as noted above.
Interest expense decreased from $1.3 to $.6 million, a decrease of $.7
million, or 56.4%, due mainly to lower average outstanding borrowings and the
increase in the Corporation's accrual of interest on its advances to the
Venture.
Earnings before equity in earnings (loss) of investees, provision (benefit)
for income taxes and cumulative effect of change in the method of accounting for
income taxes decreased from $13.5 to $7.0 million, a decrease of $6.5 million,
or 48.3%, due primarily to reduced results from snow removal operations and
lower sales volumes of de-icing fluid due mainly to the mild winter weather; the
Accelerated Amortization; and higher selling, general and administrative
expenses as described above. Partially offsetting the decreases were improved
results from domestic aircraft fueling and ground transportation operations and
lower interest expense.
The Corporation's 50% share of losses from the Venture increased from $1.8
to $2.7 million, an increase of $.9 million, or 52.5%. The increase in the
Venture's losses is due mainly to the cessation of interest capitalization by
the Venture on Phase IV of the Project as of July 1, 1994.
The Corporation's provision (benefit) for income taxes decreased from a
provision of $4.4 million to a benefit of $.4 million, a decrease of $4.8
million. The decrease reflects lower federal and state tax provisions totaling
$3.5 million due to decreased pre-tax earnings in the U.S., and the recognition
in fiscal 1995 of $1.3 million of deferred tax assets resulting from a
reevaluation of the operating results of the Corporation's Canadian subsidiary
(see Note 8).
10
<PAGE> 14
LIQUIDITY AND CAPITAL EXPENDITURES AND COMMITMENTS
The Corporation's recurring sources of liquidity are funds provided from
Hudson LLC and bank lines of credit. As a result of the Transaction, Hudson LLC
will pay to the Corporation an overhead fee equal to the sum of 3% of Hudson
LLC's consolidated domestic and 1% of Hudson LLC's consolidated Canadian
revenues. It is currently anticipated that approximately $3.0 million of the
Corporation's overhead will not be allocated to Hudson LLC on an annual basis.
In addition, the Corporation is expected to receive distributions from Hudson
LLC annually in an amount substantially equal to 50% of domestic and 10% of
Canadian pre-tax earnings from the Aviation Business, as defined, multiplied by
the Corporation's respective equity interest in Hudson LLC. Furthermore, the
Corporation is entitled to receive the balance of trade receivables retained and
net advances made by the Corporation on behalf of Hudson LLC in June 1996 in the
aggregate amount of $7.2 million. Finally, to the extent that Debentures are
converted into shares of the Corporation's common stock, Hudson LLC will be
indebted to the Corporation. Hudson LLC is obligated to repay such debt to the
Corporation as follows: (i) to the extent that proceeds received by Hudson LLC
at the closing of the Transaction were not used to redeem Debentures; (ii) to
the extent that deferred payments made by LAGS are received by Hudson LLC (see
Note 2); (iii) $500,000 on July 15, 1997; and (iv) $1,500,000 on July 15, 1998
and on each July 15th thereafter until the entire principal balance is
satisfied. Pursuant to a Revolving Credit Agreement (the Credit Agreement), with
a group of banks dated June 1, 1996, the Corporation may borrow funds (including
outstanding letters of credit) up to a limit of $6.0 million until June 30, 1999
at which time the Credit Agreement terminates. There were no direct borrowings
or letters of credit outstanding at June 30, 1996.
In fiscal 1996, 1995 and 1994, net cash provided by operating activities was
$25.5, $19.7 and $16.4 million, respectively. Capital expenditures net of
proceeds from the sale of property and equipment were $12.9, $9.9 and $9.2
million in fiscal 1996, 1995 and 1994, respectively. The majority of capital
expenditures were made in respect of the Aviation Business and as such the
majority of future capital expenditures are expected to be made by Hudson LLC.
Net cash advanced to the Venture was $.8, $1.7 and $.9 million in fiscal 1996,
1995 and 1994, respectively. Net cash advanced (including the effect of trade
receivables retained by the Corporation) to Hudson LLC was $7.2 million for the
month of June 1996. Net cash used by financing activities was $.6, $2.2 and $5.7
million for fiscal 1996, 1995 and 1994, respectively. Cash and cash equivalents
were $12.7, $12.6 and $6.7 million at June 30, 1996, 1995 and 1994,
respectively.
During fiscal 1995, the Board of Directors approved the repurchase of up to
150,000 shares of the Corporation's common stock from time to time in either
open market or privately negotiated transactions. As of June 30, 1996, the
Corporation had repurchased 114,300 shares of its common stock in the open
market for an aggregate purchase price of $2.0 million pursuant to this
authorization (see Note 9).
During fiscal 1992, the County of Hawaii passed an ordinance pursuant to which
the Venture, after subdivision approvals are obtained, would be able to develop
Phase IV of the project into 1,490 units. Pursuant to such ordinance, the
Venture is required to expend approximately $2.3 million for public
infrastructural improvements and in lieu payments. Shortly after passage of the
ordinance, a lawsuit against the County of Hawaii was filed by two local
residents of Hawaii (Plaintiffs) seeking to invalidate such ordinance on various
grounds including that the ordinance was adopted without following State of
Hawaii procedure relating to the preparation of an Environmental Impact
Statement. During fiscal 1993, the Judge in this action granted Plaintiffs'
motion for partial summary judgment without indicating any effect on Phase IV
zoning. The County and the Venture have appealed this ruling. The appeal was
heard before the Hawaii Supreme Court in March 1994, and because of an existing
backlog in its caseload, the Court has not rendered a decision. The Venture
cannot, at this time, determine the impact of the Court's ruling on the timing
of development of Phase IV or the expenditures related thereto.
The Joint Venture Agreement provides that the Corporation and its partner in
the Venture, Oxford Kohala, Inc. (the Partner) are obligated to make equal
advances of any of the Venture's required fundings. It is anticipated that the
Venture's capital commitments will be funded by cash flow from its operations
and advances from the Corporation and the Partner. It is expected that any
advances which the Corporation may be required to make to the Venture will be
provided from the Corporation's cash flow and lines of credit. Pursuant to the
Credit Agreement the Corporation may advance up to $2.0 million to the Venture
in any fiscal year or up to $5.0 million during the term of the Credit
Agreement, net of any distributions received from the Venture by the Corporation
during such periods. At present, it is anticipated that the advances required to
meet the obligations of the Venture will not exceed the limits set forth in the
Credit Agreement.
At June 30, 1996, the Venture had commitments (in addition to the
commitments noted above) aggregating $3.3 million for project expenditures.
Included in this amount is $1.7 million for the construction of water well
equipment and a reservoir by June 30, 1999. It is expected that the majority of
funds for the Venture's other commitments will be expended subsequent to fiscal
1997.
The Partner is a subsidiary of Oxford First Corporation (Oxford First). On
October 13, 1994, Oxford First filed for reorganization under Chapter 11 of the
Bankruptcy Code. Pursuant to an order of the Bankruptcy Court, Oxford First
(through its subsidiary, The Oxford Finance Companies, Inc.) was permitted to
transfer certain amounts to the Partner. The amounts so authorized were not
sufficient to allow the Partner to make its full share of required advances. The
Corporation opted to make additional advances (the Additional Advances) to cover
the Partner's funding deficiency. During November 1995, the Partner resumed
making advances, and in January 1996, the Partner repaid to the Corporation the
entire amount of the Additional Advances of $.7 million together with interest
thereon. In addition, pursuant to an amended reorganization plan which was
approved by the Bankruptcy Court on September 7, 1995, Oxford First is permitted
to transfer funds to the Partner in an aggregate amount not to exceed $750,000
in each of the calendar years 1996 and 1997 (exclusive of the repayment of the
Additional Advances). The Corporation, at present, is unable to determine
whether such permitted transfers will be sufficient in order for the Partner to
make its share of future advances to the Venture or whether Oxford First will
receive permission from the Bankruptcy Court to transfer additional funds to the
Partner, if required. The Partner has advanced $675,000 to the Venture during
the first eight months of calendar 1996. Should the Partner be unable to make
its share of future advances to the Venture, the Corporation has the option to
make further advances on behalf of the Partner (subject to its right of
reimbursement) necessary up to the limits set forth in the Credit Agreement. The
Partner did not file for reorganization under Chapter 11 of the Bankruptcy Code.
During fiscal 1996, the Corporation made net advances of $.8 million to the
Venture.
The extent to which advances to the Venture will be required in the future,
as well as the timing of the return to the Corporation of the advances made by
it, will depend upon the amount of sales generated by the Venture, the terms
upon which parcels are sold, expenses incurred in the planning and development
of future phases of the Project and the ability of the Partner to fund its
obligations under the Joint Venture Agreement.
It is expected that the sources of the Corporation's liquidity, as noted
above, will provide sufficient funding to allow the Corporation to meet its
liquidity requirements.
11
<PAGE> 15
Hudson General Corporation and Subsidiaries
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Years Ended June 30,
-------------------------------------------------------------------------------
1996(a) 1995 1994 1993 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues......................................... $ 157,718 $ 135,453 $ 142,075 $ 132,186 $ 126,744
Earnings (loss) before extraordinary items and
cumulative effect of change in the method of
accounting for income taxes.................... 10,466 4,593 7,310 (2,045)(b) 1,128
Earnings (loss) per share before extraordinary
items and cumulative effect of change in the
method of accounting for income taxes:
Primary....................................... 8.87 3.69 5.86 (1.65) .90
Fully diluted................................. 5.56 2.67 3.96 (1.65) 1.06
Net earnings (loss).............................. 10,466 4,593 7,760 (2,180)(b) 2,005(c)
Net earnings (loss) per share:
Primary....................................... 8.87 3.69 6.22 (1.75) 1.60
Fully diluted................................. 5.56 2.67 4.17 (1.75) 1.47
Total assets..................................... 48,776 87,568 77,889 72,414 79,038
Long-term obligations less current maturities.... -- 29,000 29,000 32,700 34,800
Stockholders' equity............................. 43,895 21,616 19,223 12,141 15,066
Capital expenditures............................. 13,158 10,806 9,815 5,786 7,359
Cash dividends per common share.................. .50 .50 -- -- --
-------------------------------------------------------------------------------
</TABLE>
(a) As a result of a transaction with Lufthansa Airport and Ground Services GmbH
(see Note 2), effective June 1, 1996, the Corporation's interest in its
aviation services business is accounted for under the equity method.
(b) Includes $4,287 of accelerated amortization of leasehold rights related to
the Corporation's Canadian Fixed Base Operations, which the Corporation
ceased operating during fiscal 1995.
(c) Includes extraordinary tax benefit from net operating loss carryforwards of
$800.
<TABLE>
<CAPTION>
FISCAL 1996 Fiscal 1995
------------------------------------------------
Market Price Range* High Low High Low
------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter................................................................... 24 20 20 15 1/8
Second Quarter.................................................................. 34 1/4 23 5/8 18 3/8 15 7/8
Third Quarter................................................................... 43 3/8 33 16 3/4 15 3/4
Fourth Quarter.................................................................. 43 3/8 34 3/8 20 1/2 16
</TABLE>
* The range of per share closing prices of the Corporation's common stock on
the American Stock Exchange in each fiscal quarter from July 1, 1994 through
June 30, 1996.
At June 30, 1996, there were 224 record holders of the Corporation's common
stock.
12
<PAGE> 16
Hudson General Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------
1996 1995 1994
------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C>
Revenues.............................................................................. $157,718 $135,453 $142,075
------------------------------------------
Costs and expenses:
Operating........................................................................... 113,744 106,070 106,424
Depreciation and amortization....................................................... 7,165 7,528 7,042
Selling, general & administrative................................................... 16,755 14,306 13,806
Interest--net....................................................................... 239 559 1,283
------------------------------------------
Total costs and expenses.......................................................... 137,903 128,463 128,555
------------------------------------------
Earnings before equity in earnings (loss) of investees, provision (benefit)
for income taxes and cumulative effect of change in the method of
accounting for income taxes ........................................................ 19,815 6,990 13,520
Equity in earnings of Hudson General LLC.............................................. 855 - -
Equity in loss of Kohala Joint Venture................................................ (3,021) (2,747) (1,801)
------------------------------------------
Earnings before provision (benefit) for income taxes and cumulative effect of
change in the method of accounting for income taxes................................. 17,649 4,243 11,719
Provision (benefit) for income taxes.................................................. 7,183 (350) 4,409
------------------------------------------
Earnings before cumulative effect of change in the method of accounting for
income taxes ....................................................................... 10,466 4,593 7,310
Cumulative effect of change in the method of accounting for income taxes.............. - - 450
------------------------------------------
Net earnings.......................................................................... $ 10,466 $ 4,593 $ 7,760
==========================================
Earnings per share, primary:
Earnings before cumulative effect of change in the method of accounting for
income taxes ..................................................................... $ 8.87 $ 3.69 $ 5.86
Cumulative effect of change in the method of accounting for income taxes............ - - .36
------------------------------------------
Net earnings........................................................................ $ 8.87 $ 3.69 $ 6.22
==========================================
Earnings per share, fully diluted:
Earnings before cumulative effect of change in the method of accounting for
income taxes ..................................................................... $ 5.56 $ 2.67 $ 3.96
Cumulative effect of change in the method of accounting for income taxes............ - - .21
------------------------------------------
Net earnings........................................................................ $ 5.56 $ 2.67 $ 4.17
==========================================
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 17
Hudson General Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30,
-----------------------------------
1996 1995
-----------------------------------
(in thousands)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents............................................................. $ 12,701 $ 12,613
Accounts and notes receivable-net..................................................... 238 14,457
Advances to Hudson General LLC........................................................ 7,233 -
Inventory............................................................................. - 936
Prepaid expenses and other assets..................................................... 302 876
Deferred income taxes................................................................. - 4,602
-----------------------------------
Total current assets.......................................................... 20,474 33,484
Property, equipment and leasehold rights at cost, less accumulated
depreciation and amortization......................................................... 3,428 33,864
Investment in Hudson General LLC......................................................... 8,738 -
Investment in Kohala Joint Venture-net................................................... 15,420 16,065
Long-term receivables-net................................................................ - 2,585
Other assets-net......................................................................... 716 770
Excess cost over fair value of net assets acquired....................................... - 800
-----------------------------------
$ 48,776 $ 87,568
===================================
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable...................................................................... $ 471 $ 12,305
Income taxes payable.................................................................. - 1,557
Accrued expenses and other liabilities................................................ 3,648 21,233
-----------------------------------
Total current liabilities..................................................... 4,119 35,095
-----------------------------------
Long-term debt, subordinated............................................................. - 29,000
Deferred income taxes.................................................................... 762 1,857
-----------------------------------
Total noncurrent liabilities.................................................. 762 30,857
-----------------------------------
Stockholders' Equity:
Serial preferred stock (authorized 100,000 shares
of $1 par value)-none outstanding............................................... - -
Common stock (authorized 7,000,000 shares of $1 par value)-
issued 1,277,401 and 1,253,802 shares........................................... 1,277 1,254
Paid in capital....................................................................... 18,033 6,759
Retained earnings..................................................................... 26,595 16,707
Equity adjustments from foreign currency translation.................................. - (1,483)
Treasury stock, at cost, 114,300 and 96,600 shares.................................... (2,010) (1,621)
-----------------------------------
Total stockholders' equity.................................................... 43,895 21,616
-----------------------------------
$ 48,776 $ 87,568
===================================
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 18
Hudson General Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the Years Ended June 30, 1996, 1995 and 1994
--------------------------------------------------------------------------------------
Common Stock Equity
Issued Adjustments from
--------------------- Paid in Retained Foreign Currency Treasury Stockholders'
Shares Amounts Capital Earnings Translation Stock Equity
--------------------------------------------------------------------------------------
(in thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1993................... 1,242,802 $1,243 $ 6,607 $ 4,956 $ (665) $ - $12,141
Common stock issued in connection with
exercise of stock options............ 8,000 8 110 - - - 118
Equity adjustment from foreign
currency translation................. - - - - (796) - (796)
Net earnings........................... - - - 7,760 - - 7,760
-------------------------------------------------------------------------------------
Balance, June 30, 1994................... 1,250,802 1,251 6,717 12,716 (1,461) - 19,223
Common stock issued in connection with
exercise of stock options............ 3,000 3 42 - - - 45
Dividends ($.50 per share)............. - - - (602) - - (602)
Equity adjustment from foreign
currency translation................. - - - - (22) - (22)
Purchase of treasury stock............. - - - - - (1,621) (1,621)
Net earnings........................... - - - 4,593 - - 4,593
-------------------------------------------------------------------------------------
Balance, June 30, 1995................... 1,253,802 1,254 6,759 16,707 (1,483) (1,621) 21,616
Common stock issued in connection with
exercise of stock options............ 16,000 16 249 - - - 265
Dividends ($.50 per share)............. - - - (578) - - (578)
Equity adjustment from foreign
currency translation................. - - - - 13 - 13
Effect of equity infusion in
Hudson General LLC--net............... - - 10,783 - 1,470 - 12,253
Purchase of treasury stock............. - - - - - (389) (389)
Conversion of convertible subordinated
debentures........................... 7,599 7 242 - - - 249
Net earnings........................... - - - 10,466 - - 10,466
-------------------------------------------------------------------------------------
Balance, June 30, 1996................... 1,277,401 $1,277 $18,033 $26,595 $ - $(2,010) $43,895
=====================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE> 19
Hudson General Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------------
1996 1995 1994
----------------------------------------
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings ....................................................... $ 10,466 $ 4,593 $ 7,760
Adjustments to reconcile net earnings before cumulative effect of
change in the method of accounting for income taxes to net cash
provided by operating activities:
Depreciation and amortization .................................. 7,165 7,528 7,042
Provision for losses on accounts receivable-net ................ 362 178 160
Increase (decrease) in deferred income taxes ................... (1,090) 149 (272)
Equity in earnings of Hudson General LLC ....................... (855) -- --
Equity in loss of Kohala Joint Venture ......................... 3,021 2,747 1,801
Accrual of interest income on Kohala Joint Venture advances .... (1,604) (1,471) (947)
Gain on sale of equipment ...................................... (139) (454) (133)
Change in other current assets and liabilities:
Accounts and notes receivable ................................ 2,845 5 (2,797)
Inventory-net ................................................ (135) (31) (121)
Prepaid expenses and other assets ............................ (369) 215 129
Deferred income taxes ........................................ 2,342 (1,656) (1,489)
Accounts payable ............................................. 892 3,650 1,261
Income taxes payable ......................................... 165 333 575
Accrued expenses and other liabilities ....................... 1,785 3,136 3,123
Decrease in other assets ....................................... 54 92 155
Decrease in long-term receivables-net .......................... 522 553 23
Other-net ...................................................... 37 127 130
----------------------------------------
Net cash provided by operating activities .................... 25,464 19,694 16,400
Cash flows from investing activities: ----------------------------------------
Purchases of property, equipment and leasehold rights .............. (13,158) (10,806) (9,815)
Proceeds from sale of property and equipment ....................... 244 935 648
Advances to Hudson General LLC ..................................... (7,233) -- --
Advances to Kohala Joint Venture-net ............................... (772) (1,720) (870)
Net cash transferred to Hudson General LLC upon formation .......... (3,002) -- --
Fees related to transfer of assets to Hudson General LLC ........... (825) -- --
----------------------------------------
Net cash used by investing activities ........................ (24,746) (11,591) (10,037)
----------------------------------------
Cash flows from financing activities:
Proceeds from issuance of common stock ............................. 335 45 118
Cash dividends paid ................................................ (578) (602) --
Purchase of treasury stock ......................................... (389) (1,621) --
Proceeds from borrowings ........................................... -- -- 500
Principal repayments of borrowings ................................. -- -- (6,333)
----------------------------------------
Net cash used by financing activities ........................ (632) (2,178) (5,715)
----------------------------------------
Effect of exchange rate changes on cash ............................... 2 (39) (297)
----------------------------------------
Net increase in cash and cash equivalents ............................. 88 5,886 351
Cash and cash equivalents at beginning of year ........................ 12,613 6,727 6,376
----------------------------------------
Cash and cash equivalents at end of year .............................. $ 12,701 $ 12,613 $ 6,727
========================================
</TABLE>
See accompanying notes to consolidated financial statements.
16
<PAGE> 20
Hudson General Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION: The consolidated financial statements include the
accounts of Hudson General Corporation and the subsidiaries for which it
exercises effective control (the Corporation). All material intercompany
accounts and transactions have been eliminated in consolidation. Kohala Joint
Venture, a land development venture in Hawaii in which the Corporation has a 50%
interest (the Venture), is accounted for under the equity method of accounting
(see Note 3). Effective June 1, 1996, the Corporation consummated a transaction
(the Transaction) in which a third party, Lufthansa Airport and Ground Services
GmbH (LAGS), acquired a 26% interest in the Corporation's aviation services
business (the Aviation Business). As part of the Transaction, the Corporation
transferred substantially all of the assets and liabilities of the Aviation
Business to Hudson General LLC (Hudson LLC), a newly-formed limited liability
company (see Note 2). LAGS received a 26% interest in Hudson LLC. At the same
time, the Corporation, Hudson LLC and LAGS USA Inc., a wholly owned subsidiary
of LAGS (LAGS USA), entered into a Limited Liability Company Agreement effective
June 1, 1996 (the LLC Agreement). Due to the provisions in the LLC Agreement,
effective June 1, 1996, the Corporation has accounted for its interest in Hudson
LLC under the equity method of accounting. As a result, the fiscal 1996
consolidated statements of earnings of the Corporation contain the operating
results of the Aviation Business on a consolidated basis for eleven months and
under the equity method of accounting for one month. The Corporation's
consolidated balance sheet as of June 30, 1996 includes the Corporation's
investment in Hudson LLC. As a result of the Corporation's transfer (as noted
above) of substantially all of the Aviation Business assets and liabilities to
Hudson LLC, such assets and liabilities are not reflected in the Corporation's
accompanying consolidated balance sheets as of June 30, 1996. The Corporation's
stockholders' equity was increased by $12,253,000 in June 1996 as a result of
the Corporation's equity interest in Hudson LLC's capital transactions.
DESCRIPTION OF BUSINESS: The Corporation through its ownership interest in
Hudson LLC provides a broad range of aviation services to the aviation industry
at twenty-four (24) airports throughout the United States and Canada. These
services include aircraft ground handling; aircraft de-icing; aircraft fueling;
fuel management; ground transportation; snow removal; cargo warehousing; and
sale, leasing and maintenance of ground support equipment.
INVENTORIES: Inventories were carried at the lower of average cost
or market.
DEPRECIATION AND AMORTIZATION: Depreciation of property and equipment is
provided on the straight-line method over their estimated useful lives.
Leasehold rights were amortized over the original and anticipated renewal terms
of the underlying leases.
EXCESS COST OVER FAIR VALUE OF NET ASSETS ACQUIRED: The excess cost over fair
value of net assets acquired, net of accumulated amortization of $1,188,000 at
June 30, 1995, was amortized on a straight-line basis over periods not to exceed
forty years.
INCOME TAXES: Effective July 1, 1993, the Corporation adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes",
which requires the use of the liability method of accounting for deferred income
taxes (see Note 8).
FINANCIAL INSTRUMENTS: The Corporation believes that the book values of its
monetary assets and liabilities approximate fair values as a result of the
short-term nature of such assets and liabilities.
FOREIGN CURRENCY TRANSLATION: The financial position and results of operations
of the Corporation's Canadian operations were measured using local currency as
the functional currency. Assets and liabilities were translated into U.S.
dollars at year-end rates of exchange, and revenues and expenses were translated
at the average rates of exchange for the year. Gains or losses resulting from
translating foreign currency financial statements were accumulated as a separate
component of stockholders' equity.
STATEMENTS OF CASH FLOWS: For purposes of the consolidated statements of cash
flows, the Corporation considers all securities with an original maturity of
three months or less at the date of acquisition to be cash equivalents. The
changes in specified asset and liability accounts in the accompanying
consolidated statements of cash flows for fiscal 1996 are exclusive of the
effect of the transfer of specified assets and liabilities of the Aviation
Business to Hudson LLC. In fiscal 1996, 1995 and 1994 income taxes (net of
refunds) of $5,064,000, $362,000 and $4,677,000, respectively, were paid.
Interest of $2,030,000, $2,030,000 and $2,241,000 was paid in fiscal 1996, 1995
and 1994, respectively.
USE OF ESTIMATES: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EARNINGS PER SHARE: Primary earnings per common and common equivalent share have
been computed based upon the weighted average number of shares of common stock
outstanding and dilutive common stock equivalents assumed outstanding during the
respective years. The weighted average number of shares used in computing
primary earnings per common and common equivalent share was 1,179,841, 1,245,122
and 1,246,889 in fiscal 1996, 1995 and 1994, respectively. Fully diluted
earnings per common and common equivalent share have been computed based upon
the assumption that the Corporation's convertible debentures are converted into
common shares at the beginning of each period in which their effect is dilutive
and that the related interest expense that would not have been incurred had
conversion taken place, net of applicable taxes, is added back to net earnings.
The weighted average number of common and common equivalent shares used in
computing fully diluted earnings per share in fiscal 1996, 1995 and 1994 was
2,069,617, 2,145,175 and 2,134,789, respectively.
RECLASSIFICATIONS: Certain reclassifications of fiscal 1995 and 1994 balances
have been made to conform with the fiscal 1996 presentation.
2. INVESTMENT IN HUDSON GENERAL LLC
Effective June 1, 1996, pursuant to the terms of a Unit Purchase and Option
Agreement dated February 27, 1996 (the Purchase Agreement) between the
Corporation and LAGS, a German corporation and an indirect wholly-owned
subsidiary of Deutsche Lufthansa AG(Lufthansa), the Corporation transferred
substantially all of the assets and liabilities of the Aviation Business to
Hudson LLC. In exchange for the transfer of such assets and liabilities and the
assumption by Hudson LLC, as co-obligor with the Corporation, of all of the
Corporation's 7% convertible subordinated debentures, the Corporation received a
74% interest in Hudson LLC. In addition, Hudson LLC sold LAGS a 26% interest in
Hudson LLC, for a purchase price of $23,686,000 in cash (after certain
adjustments), of which $15,848,000 was paid at the closing. The
17
<PAGE> 21
Hudson General Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
remaining portion of the purchase price of $7,838,000 (the Deferred Payment) is
to be paid in three annual installments (together with accrued interest from
January 1, 1996 at a rate of 11% per annum), expected to be paid in September
1996, 1997 and 1998, and is subject to potential downward adjustment based on
the future earnings of the Aviation Business. The earnings of the Aviation
Business in fiscal 1996 were sufficient for Hudson LLC to earn the full portion
of the Deferred Payment due in September 1996 of $2,650,000, plus interest
thereon. The Purchase Agreement also provided for the grant to LAGS of an option
(the LAGS Option), exercisable on October 1 of each year from 1996 through 2000,
effective as of the preceding July 1, pursuant to which LAGS may increase its
equity ownership in Hudson LLC from 26% to a maximum of 49%, for a price based
on a formula related to the average earnings of the Aviation Business over the
four fiscal years preceding the exercise of the option, subject to certain
minimum and maximum amounts.
The LLC Agreement stipulates that the Corporation and LAGS USA will share
profits and losses in the same proportion as their respective equity interests
in Hudson LLC, except that the Corporation is entitled to all interest earned on
the Deferred Payment and LAGS USA will not share in any pre-tax earnings, as
defined, of the Aviation Business in excess of $14,690,000 and $15,863,000 in
fiscal 1997 and 1998, respectively. In addition, Hudson LLC's net earnings in
June 1996 were allocated 100% to the Corporation.
In June 1996, primarily as a result of the Corporation retaining certain trade
receivables, the Corporation made net advances of $7,233,000 on behalf of Hudson
LLC. Such balance remained outstanding at June 30, 1996 and is expected to be
repaid to the Corporation by Hudson LLC (together with accrued interest at a
rate of 5.18%).
Pursuant to the LLC Agreement: (i) the Corporation will continue to manage
the Aviation Business and will be entitled to charge Hudson LLC an overhead fee
equal to the sum of 3% of Hudson LLC's consolidated domestic revenues and 1% of
Hudson LLC's consolidated Canadian revenues; and (ii) there will be a Member
Board on which the Corporation has three votes and LAGS USA has two votes. The
LLC Agreement allows either Member to veto certain major transactions or any
reduction in distributions stipulated in the LLC Agreement. The LLC Agreement
provides that distributions will be paid annually in an amount at least equal
to 50% of domestic and 10% of Canadian pre-tax earnings, as defined, from the
Aviation Business.
The summary consolidated balance sheet for Hudson LLC as of June 30, 1996 (in
thousands) is as follows:
<TABLE>
<S> <C>
Cash and cash equivalents............................ $19,269
Accounts and notes receivable-net.................... 18,055
Other current assets................................. 2,317
-------
Total current assets............................... 39,641
Property, equipment and leasehold rights at cost,
less accumulated depreciation and amortization..... 37,442
Other assets-net..................................... 3,641
-------
$80,724
=======
Accounts payable..................................... $15,104
Accrued expenses and other liabilities............... 18,085
Advances from Hudson General Corporation............. 7,233
-------
Total current liabilities.......................... 40,422
Long-term debt, subordinated......................... 28,751
Members' equity...................................... 11,551
-------
$80,724
=======
</TABLE>
Summary results of operations for Hudson LLC for the month of June 1996 (in
thousands) are as follows:
<TABLE>
<S> <C>
Revenues............................................. $12,313
-------
Operating costs...................................... 9,259
Depreciation and amortization........................ 673
Selling, general & administrative costs.............. 1,317
Interest............................................. 168
-------
Total costs and expenses........................... 11,417
Earnings before provision for foreign income taxes... 896
Provision for foreign income taxes................... 41
-------
Net earnings $ 855
=======
</TABLE>
The Corporation's share of Hudson LLC's results is shown as "Equity in
earnings of Hudson General LLC" in the accompanying consolidated statements of
earnings.
3. INVESTMENT IN KOHALA JOINT VENTURE
The Venture was formed to acquire, develop and sell approximately 4,000
contiguous acres of land in Hawaii (the Project). The Project is being developed
in four successive phases. The first two phases, containing approximately 2,100
acres, have been developed and substantially sold. The third phase, containing
approximately 550 acres, has also been developed and has 86 parcels available
for sale. The fourth phase has yet to be developed, except to the extent common
improvements (main roadway, water wells, etc.) have been completed. During
fiscal 1992, the County of Hawaii passed an ordinance pursuant to which the
Venture, after subdivision approvals are obtained, would be able to develop
Phase IV into 1,490 units. Shortly after passage of the ordinance, a lawsuit
against the County of Hawaii was filed by two local residents of Hawaii
(Plaintiffs) seeking to invalidate such ordinance on various grounds including
that the ordinance was adopted without following State of Hawaii procedure
relating to the preparation of an Environmental Impact Statement. During fiscal
1993, the Judge in this action granted Plaintiffs' motion for partial summary
judgment without indicating any effect on Phase IV zoning. The County and the
Venture have appealed this ruling. The appeal was heard before the Hawaii
Supreme Court in March 1994, and because of an existing backlog in its caseload,
the Court has not rendered a decision. The Venture cannot, at this time,
determine the impact of the Court's ruling on the timing of development of Phase
IV or the expenditures related thereto.
The Corporation's partner in the Venture is Oxford Kohala, Inc. (the Partner),
a wholly owned subsidiary of Oxford First Corporation (Oxford First). Under the
Restated Joint Venture Agreement dated April 29, 1981, as amended (the
Agreement), the partners have agreed to make equal advances to the Venture for
all costs necessary for the orderly development of the land and to share profits
equally. The Corporation's total advances (including accrued interest) at June
30, 1996 and 1995 were $25,110,000 and $22,565,000, respectively.
On October 13, 1994, Oxford First filed for reorganization under Chapter 11 of
the Bankruptcy Code. Pursuant to an order of the Bankruptcy Court, Oxford First
(through its subsidiary, The Oxford Finance Companies, Inc.) was permitted to
transfer certain amounts to the Partner. The amounts so authorized were not
sufficient to allow the Partner to make its full share of required advances. The
Corporation opted to make additional advances (the Additional Advances) to cover
18
<PAGE> 22
Hudson General Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
the Partner's funding deficiency. During November 1995, the Partner resumed
making advances, and in January 1996, the Partner repaid to the Corporation the
entire amount of the Additional Advances of $702,000 together with $37,000 of
interest thereon. In addition, pursuant to an amended reorganization plan which
was approved by the Bankruptcy Court on September 7, 1995, Oxford First is
permitted to transfer funds to the Partner in an aggregate amount not to exceed
$750,000 in each of the calendar years 1996 and 1997 exclusive of the repayment
of the Additional Advances. The Corporation, at present, is unable to determine
whether such permitted transfers will be sufficient in order for the Partner to
make its share of future advances to the Venture or whether Oxford First will
receive permission from the Bankruptcy Court to transfer additional funds to the
Partner, if required. The Partner advanced $675,000 to the Venture during the
first eight months of calendar 1996. Should the Partner be unable to make its
share of future advances to the Venture, the Corporation has the option to make
further advances on behalf of the Partner (subject to its right of
reimbursement) necessary up to the limits set forth in the Credit Agreement (see
Note 7). The Partner did not file for reorganization under Chapter 11 of the
Bankruptcy Code. During fiscal 1996, the Corporation made net advances of
$772,000 to the Venture.
During fiscal 1991, the Venture entered into agreements with banks pursuant to
which $8,797,000 of the Venture's mortgage receivables were sold. An additional
sale of $3,148,000 of mortgage receivables to a bank was completed during fiscal
1992. On April 30, 1996, the Venture repurchased $1,373,000 of such mortgage
receivables which represented the entire outstanding balance thereof. Since the
Venture had accounted for these transactions as financing arrangements, the
unpaid balance of the mortgage receivables in the amount of $2,826,000 is shown
as "Notes payable" in the consolidated balance sheet of the Venture at June 30,
1995.
The Corporation accrues interest income on its advances to the Venture at the
rate agreed to by the Partners (currently 1% below prime). The Corporation
defers recognition of such interest income to the extent that such interest rate
exceeds the Corporation's weighted average cost of funds. At June 30, 1996 and
1995, the amount of deferred interest income was $2,028,000 and $1,859,000,
respectively. The Corporation will recognize deferred interest income when
additional distributions or payments related to the Venture, if any, are made to
the Corporation. Interest income accrued by the Corporation for fiscal 1996 and
1995 was $1,604,000 and $1,471,000, respectively.
The summary consolidated balance sheets for the Venture as of June 30, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------
(in thousands)
<S> <C> <C>
Cash and equivalents........................ $ 267 $ 89
Land and development costs (including capitalized
interest of $6,706,000 and $6,736,000).... 26,710 26,863
Mortgages, accounts and notes receivable.... 5,212 7,732
Foreclosed real estate-net.................. 2,200 2,395
Other assets-net............................ 2,325 2,461
----------------
$ 36,714 $39,540
================
Notes payable............................... $ 576 $ 3,402
Partner advances and accrued interest
payable................................... 50,220 44,048
Accounts payable and accrued expenses....... 1,292 1,422
Partners' deficit........................... (15,374) (9,332)
-----------------
$ 36,714 $39,540
=================
</TABLE>
Summary results of operations for the Venture for the fiscal years ended June
30, 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------
(in thousands)
<S> <C> <C> <C>
Net sales........................ $ 677 $ 504 $ 536
-------------------------
Cost of sales.................... 365 191 163
Selling, general and
administrative costs........... 2,953 2,852 2,797
Interest-net..................... 3,401 2,956 1,178
-------------------------
Net loss......................... $(6,042) $(5,495) $(3,602)
=========================
</TABLE>
As a partnership, the Venture is not subject to federal or state income taxes.
The Corporation's portion of the Venture's results is shown as "Equity in loss
of Kohala Joint Venture" in the accompanying consolidated statements of
earnings.
4. SUPPLEMENTAL FINANCIAL STATEMENT INFORMATION
Accounts, notes and long-term receivables-net at June 30, 1996 and 1995
consisted of the following:
<TABLE>
<CAPTION>
1996 1995
--------------
(in thousands)
<S> <C> <C>
Rental and service fees receivable .................. $ 238 $13,905
Note receivable ..................................... -- 2,941
Equipment rental contracts and other notes receivable
(less unearned finance income of $59,000 in 1995) . -- 196
------- -------
238 17,042
Less: current portion (net of allowance for
doubtful accounts of $1,579,000 in 1995) .......... 238 14,457
------- -------
Long-term portion ................................... $ -- $ 2,585
=====================
</TABLE>
On January 6, 1994, the Corporation assigned its leases and ceased operations
at Long Island MacArthur Airport in Islip, New York (LIMA) where the Corporation
had provided ground handling and fueling services to commercial airlines and
related fixed base operation services to general aviation aircraft. At the
closing, the Corporation was paid $150,000 in cash and received a promissory
note from the purchaser of its leases in the amount of $3,750,000, payable over
seven years with interest at the rate of 7%. The outstanding balance of the note
receivable at June 30, 1995 was $2,941,000. The promissory note is secured by
the assigned leases and other assets located at LIMA. This transaction did not
have a material effect on the Corporation's consolidated financial position or
results of operations.
The Corporation through its ownership interest in Hudson LLC provides various
services at airports throughout the United States and Canada. The Corporation
grants credit to customers based upon an analysis of its customers' financial
position and then-existing conditions in the aviation industry. Six of the
Corporation's customers had individual balances outstanding greater than 5%, and
aggregating 48%, of accounts receivable-net at June 30, 1995. During the three
fiscal years ended June 30, 1996 certain airline customers of the Corporation
filed for protection under the bankruptcy laws or ceased operations. Bad debt
expenses were $362,000, $178,000 and $160,000 for fiscal 1996, 1995 and 1994,
respectively.
19
<PAGE> 23
Hudson General Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
Accrued expenses and other liabilities at June 30, 1996 and 1995 consisted of
the following:
<TABLE>
<CAPTION>
1996 1995
---------------------
(in thousands)
<S> <C> <C>
Salaries and wages ........... $ 2,172 $ 5,353
Interest ..................... 767 956
Insurance .................... -- 6,022
Operating expenses payable ... -- 3,176
Customer advances and deposits -- 1,739
Retirement plan costs ........ 333 835
Other ........................ 376 3,152
---------------------
$ 3,648 $21,233
=====================
</TABLE>
Maintenance and repair expenses were $7,536,000, $7,400,000 and $6,540,000 for
fiscal 1996, 1995 and 1994, respectively.
Interest income (excluding interest charged to the Venture) included in
revenues was $618,000, $615,000 and $374,000 for fiscal 1996, 1995 and 1994,
respectively.
5. PROPERTY, EQUIPMENT AND LEASEHOLD RIGHTS
The number of years over which major classes of assets are being depreciated
and amortized, and the costs and the related accumulated depreciation and
amortization thereof at June 30, 1996 and 1995 are set forth below:
<TABLE>
<CAPTION>
Estimated
Useful Lives 1996 1995
------------- ----- ----
(in thousands)
<S> <C> <C> <C>
Operating equipment ......................................... 2-12 $ 8,318 $ 70,232
Leasehold rights ............................................ 25 -- 2,400
Buildings ................................................... 14-20 -- 1,458
Office furnishings and equipment ............................ 3-10 669 3,193
Leasehold improvements ...................................... 2-28 216 5,829
-----------------------------
9,203 83,112
Accumulated depreciation and amortization ................... (5,775) (49,248)
--------------------
$ 3,428 $ 33,864
====================
</TABLE>
At June 30, 1996, the Corporation leased operating equipment to Hudson LLC
with a net book value of $3,099,000.
Due to an early lease termination in fiscal 1995, the Corporation accelerated
the amortization of the remaining carrying value of leasehold improvements made
to a hangar facility at a domestic airport location in the amount of $744,000.
Such amount is included in "Depreciation and amortization" in the accompanying
consolidated statements of earnings.
6. CANADIAN OPERATIONS
The consolidated financial statements include: assets of $12,301,000 and
$14,895,000, and net assets of $7,655,000 and $8,866,000, at the end of fiscal
1995 and 1994, respectively; and revenues of $38,080,000, $34,376,000 and
$40,144,000; and earnings of $3,166,000, $3,352,000 and $1,717,000 in fiscal
1996, 1995 and 1994, respectively, related to the Corporation's Canadian
operations.
7. LONG-TERM DEBT
Pursuant to a Revolving Credit Agreement with a group of banks dated June 1,
1996 (the Credit Agreement), the Corporation may borrow funds (including
outstanding letters of credit) up to a limit of $6,000,000 until June 30, 1999
at which time the Credit Agreement terminates. There were no direct borrowings
or letters of credit outstanding under the Credit Agreement at June 30, 1996.
The Credit Agreement provides the Corporation with the option of selecting a
rate of interest at either the base rate or 1 3/8% above the LIBO rate, as
defined.
The Credit Agreement requires that the Corporation meet certain financial
covenants and allows the Corporation to pay dividends or purchase, redeem or
retire its stock so long as such financial covenants are met. Pursuant to the
Credit Agreement, the Corporation may advance up to $2,000,000 to the Venture in
any fiscal year or up to $5,000,000 during the term of the Credit Agreement, net
of any distributions received from the Venture by the Corporation during such
periods. Since the inception of the Credit Agreement the Corporation has not
increased its net advances to the Venture. The Corporation has granted the banks
a security interest in all of its membership units of Hudson LLC.
In connection with the Transaction, the revolving credit agreement that the
Corporation had with a group of banks dated November 25, 1992, as amended, was
amended and restated as of June 1, 1996, and Hudson LLC assumed and agreed to
become jointly and severally liable for any obligations thereunder (the LLC
Credit Agreement). At June 30, 1995, there were no direct borrowings and
$3,655,000 of outstanding letters of credit. The Corporation is a co-obligor
under the LLC Credit Agreement in an amount equal to the balance of outstanding
Debentures (see below). Pursuant to the LLC Credit Agreement, Hudson LLC may
borrow funds (including outstanding letters of credit) up to a limit of
$18,000,000 (the LLC Limit) until September 30, 1998. At such time and at the
end of each subsequent quarter, the LLC Limit will be reduced by one-sixteenth
of the LLC Limit that was in effect on June 30, 1998 until June 30, 2002, at
which time the LLC Credit Agreement terminates. The Corporation has granted a
security interest to the banks in substantially all of its assets (excluding its
interest in the Venture).
In July 1986 the Corporation issued $30,000,000 of 7% convertible subordinated
debentures due 2011 (the Debentures). In connection with the Transaction,
effective June 1, 1996, Hudson LLC assumed the obligations of the Debentures and
the Corporation remained as a co-obligor. The Debentures are convertible at any
time prior to maturity, unless previously redeemed, into shares of the
Corporation's common stock at a conversion price of $32.75 per share (see Note
9), subject to adjustment in certain events. Interest on the Debentures is
payable semi-annually in January and July. The Debentures are redeemable at any
time at the option of the Corporation or Hudson LLC, in whole or in part, at
100.7% of the principal amount thereof until July 15, 1996 and thereafter at
par. The Debentures are subject to a mandatory sinking fund, beginning in July
1997, in annual installments of $1,500,000, which will retire 70% of the
Debentures prior to maturity. The Corporation previously repurchased $1,000,000
of the Debentures. In addition, as of June 30, 1996, $249,000 principal amount
of the Debentures had been converted into shares of the Corporation's common
stock. Such repurchased and converted amounts may, at the Corporation's and
Hudson LLC's discretion, be used to meet sinking fund obligations. The
Debentures are subordinate to all superior debt as defined in the indenture. At
June 30, 1996 and 1995 there were $28,751,000 and $29,000,000, respectively, of
the Debentures outstanding.
20
<PAGE> 24
Hudson General Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
On June 3, 1996, $15,825,000 aggregate principal amount of the Debentures was
called for redemption on July 22, 1996. On July 22, 1996, $2,166,000 of the
Debentures were redeemed, with the $13,659,000 balance having been converted
into shares of the Corporation's common stock on or prior to such redemption
date. In addition, on August 5, 1996 the balance of outstanding Debentures
(approximately $12,800,000) were called for redemption on September 4, 1996. On
September 4, 1996, $242,000 of the Debentures were redeemed, with the
$12,520,000 balance having been converted into shares of the Corporation's
common stock on or prior to such redemption date. At September 5, 1996 no
Debentures remained outstanding.
To the extent that the Debentures were converted into shares of the
Corporation's common stock, Hudson LLC will, on a subordinated basis (as
defined), be indebted to the Corporation. Hudson LLC is obligated to repay such
debt to the Corporation as follows: (i) to the extent that proceeds received by
Hudson LLC at the closing of the Transaction were not used to redeem Debentures;
(ii) to the extent that deferred payments made by LAGS are received by Hudson
LLC (see Note 2); (iii) $500,000 on July 15, 1997; and (iv) $1,500,000 on July
15, 1998 and on each July 15th thereafter until the entire principal balance is
satisfied.
8. INCOME TAXES
Provision (benefit) for income taxes consisted of the following for the years
ended June 30, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------
(in thousands)
<S> <C> <C> <C>
Federal:
Current........................... $3,415 $ 847 $3,855
Deferred.......................... 1,485 (137) (946)
Foreign:
Current........................... 324 - -
Deferred.......................... 449 (1,300) -
State:
Current........................... 789 313 1,791
Deferred.......................... 721 (73) (291)
------------------------
$7,183 $ (350) $4,409
========================
</TABLE>
A reconciliation of the provision (benefit) for income taxes to the amount
computed by applying the statutory federal income tax rate to earnings before
provision (benefit) for income taxes and cumulative effect of change in the
method of accounting for income taxes for the years ended June 30, 1996, 1995
and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------
(in thousands)
<S> <C> <C> <C>
Tax at federal statutory rate ............................... $6,001 $ 1,442 $3,984
Increase (decrease) in income taxes resulting from:
Reevaluation of valuation allowance ....................... (960) (1,300) --
Utilization of foreign net operating loss carry-
forwards and depreciation differences ................... -- (804) (752)
Foreign tax differential .................................. 395 204 168
State income taxes, net of Federal income
tax effect .............................................. 997 158 990
Provision for future repatriation of
Canadian earnings ....................................... 750 -- --
Other--net ................................................ -- (50) 19
----------------------------
Provision (benefit) for income taxes ........................ $7,183 $ (350) $4,409
============================
</TABLE>
Deferred tax assets (liabilities) are comprised of the following as of June
30, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
-------------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Reserves for doubtful accounts, claims, etc ............... $ 264 $ 860
Retirement plans ............................................ -- 368
Property, equipment and leasehold rights,
principally depreciation--foreign ......................... -- 2,235
Accrued insurance ........................................... -- 2,099
-------------------
Current deferred tax assets ............................. 264 5,562
-------------------
State income taxes ........................................ 137 618
Difference in the Venture's book and tax year-end ......... 554 545
-------------------
Noncurrent deferred tax assets .......................... 691 1,163
-------------------
955 6,725
Valuation allowance ....................................... -- (960)
-------------------
Net deferred tax assets ................................. 955 5,765
===================
Deferred tax liabilities:
Difference between book and tax carrying value
of Hudson LLC.............................. .............. (65) -
Property, equipment and leasehold rights,
principally depreciation--domestic.......... ............. (407) (2,463)
Provision for future repatriation of Canadian earnings (750) -
Interest capitalized on financial statements. .............. (495) (557)
---------------------
Noncurrent deferred tax liabilities...... .............. (1,717) (3,020)
---------------------
Net deferred tax assets (liabilities).... .............. $ (762) $ 2,745
=====================
</TABLE>
Effective July 1, 1993, the Corporation adopted SFAS No. 109, "Accounting for
Income Taxes", and has reported the cumulative effect of the change in the
method of accounting for income taxes in the consolidated statement of earnings
for fiscal 1994, without restating prior period financial statements.
SFAS No. 109 requires a change from the deferred method under APB Opinion 11
to the asset and liability method of accounting for income taxes. Under the
asset and liability method of SFAS No. 109, deferred income taxes are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred taxes of a change in tax rates is
recognized in income in the period that includes the enactment date.
Under SFAS No. 109, a valuation allowance is provided when it is more likely
than not that some portion or all of the deferred tax assets will not be
realized. At July 1, 1993, the Corporation provided a 100% valuation allowance
for the net operating loss carryforwards and depreciation differences relating
to its Canadian operations since realization of the related deferred tax assets
was uncertain at that time. The net change in the valuation allowance for fiscal
1996 and 1995 was a decrease of $960,000 and $2,104,000, respectively. The
decrease reflects: (i) the tax effect resulting from utilization of a portion of
the Corporation's Canadian depreciation differences to offset its provision for
foreign income taxes in the amount of $804,000 for fiscal 1995; and (ii) the
recognition of $960,000 and $1,300,000 for fiscal 1996 and 1995, respectively,
of deferred tax assets resulting from a review of prior Canadian operating
results and anticipation of future Canadian earnings, which together with
cessation of operations of the Corporation's Canadian fixed base operations,
made the realization of additional Canadian depreciation differences more likely
than not.
21
<PAGE> 25
Hudson General Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
As a result of the Transaction, $852,000 of deferred tax assets related to the
Corporation's Canadian subsidiary were transferred to Hudson LLC on June 1, 1996
and the Corporation will no longer be required to provide for or reflect foreign
taxes in its consolidated financial statements. In addition, at June 30, 1996,
the Corporation's deferred tax assets and liabilities relating to Hudson LLC
appear as a separate item within deferred taxes. Due to anticipation by the
Corporation of the future repatriation of Canadian earnings, the Corporation has
provided in fiscal 1996 for U.S. income taxes of $750,000.
For tax purposes, the Corporation will receive a pass-through of its share of
taxable income or loss from Hudson LLC and will provide for and pay federal and
state taxes on its share of the income or loss of Hudson LLC.
9. COMMON STOCK
(a) The Corporation's 1981 Non-Qualified Stock Option and Stock Appreciation
Rights Plan (the Plan) provided for the issuance of non-qualified stock options
(Options) to key employees. In connection with these Options, the Board of
Directors' Stock Option and Appreciation Rights Committee (the Committee) could
also grant stock appreciation rights (Rights) exercisable in lieu of the
Options, and/or limited rights (Limited Rights) exercisable under certain
circumstances in lieu of the Options. No further Options or Rights may be
granted under the Plan. The exercise price of outstanding Options under the Plan
is the fair market value (as defined in the Plan) of the shares of the
Corporation's common stock on the date of grant.
Activity in Options during fiscal 1996 and 1995 was as follows:
<TABLE>
<S> <C>
Outstanding June 30, 1994............................ 71,600
Exercised ($14.79 per share)......................... (3,000)
Canceled ($14.79 per share).......................... (6,500)
Canceled ($19.07 per share).......................... (600)
-------
Outstanding June 30, 1995............................ 61,500
Exercised ($14.79 per share)......................... (10,000)
Exercised ($19.07 per share)......................... (1,900)
Canceled ($19.07 per share).......................... (200)
-------
Outstanding June 30, 1996............................ 49,400
=======
</TABLE>
Limited Rights were also granted in conjunction with Options granted in May
1990 and June 1991 of which 45,000 ($14.79 per share) and 4,400 ($19.07 per
share) were outstanding at June 30, 1996. At June 30, 1996 the aggregate Option
price and quoted market value of Corporation stock subject to outstanding
Options were $749,000 and $1,748,000, respectively. All outstanding Options and
Rights were granted with a term of ten years and are currently exercisable.
The Committee was also authorized to grant additional separate stock
appreciation rights (Independent Rights), which are not connected with any
Option.
Activity in Independent Rights during fiscal 1996 and 1995 was as follows:
<TABLE>
<S> <C>
Outstanding June 30, 1995 and 1994................... 18,000
Exercised ($17.32 per share)......................... (18,000)
-------
Outstanding June 30, 1996............................ -
=======
</TABLE>
(b) The Corporation's 1981 Incentive Stock Option (ISO) and Stock Appreciation
Rights Plan (the Plan) provided for the issuance of ISO's to key employees. The
fair market value, as defined, at the date of grant, for which an individual may
have been awarded ISO's, was limited to $100,000 per calendar year. No further
ISO's may be granted under the Plan. The exercise price of all ISO's outstanding
under the Plan is one hundred percent (100%) of the fair market value (as
defined in the Plan) of the shares of the Corporation's common stock on the date
of grant.
The Committee was also authorized to grant Rights and/or Limited Rights in
conjunction with ISO's granted under the Plan. In all material respects, Rights
and Limited Rights granted under the ISO Plan operate in a manner identical to
Rights and Limited Rights granted under the 1981 Non-Qualified Stock Option and
Stock Appreciation Rights Plan.
Activity in ISO's (and Rights) during fiscal 1996 and 1995 was as follows:
<TABLE>
<S> <C>
Outstanding June 30, 1994............................ 51,900
Canceled ($17.00 per share).......................... (2,000)
Canceled ($19.88 per share).......................... (1,100)
------
Outstanding June 30, 1995............................ 48,800
Exercised ($17.00 per share)......................... (36,000)
Exercised ($19.88 per share)......................... (4,100)
Canceled ($19.88 per share).......................... (400)
-------
Outstanding June 30, 1996............................ 8,300
=======
</TABLE>
Limited Rights were also granted in conjunction with ISO's granted in June
1991 of which 8,300 ($19.88 per share) were outstanding at June 30, 1996. At
June 30, 1996 the aggregate ISO price and quoted market value of Corporation
stock subject to outstanding ISO's were $165,000 and $294,000, respectively. All
outstanding ISO's were granted with a term of ten years and are currently
exercisable.
(c) Common Stock Reserved: Common shares were reserved for issuance at June
30, 1996 as follows:
<TABLE>
<S> <C>
Conversion of convertible debentures................. 877,893
Exercise of incentive stock options-1981 Plan........ 8,300
Exercise of non-qualified stock options-1981 Plan.... 49,400
-------
Total.............................................. 935,593
=======
</TABLE>
(d) In April 1995, the Board of Directors approved the repurchase of up to
150,000 shares of the Corporation's common stock from time to time in either
open market or privately negotiated transactions. As of June 30, 1996 the
Corporation had repurchased 114,300 shares in the open market for an aggregate
purchase price of $2,010,000 pursuant to this authorization.
10. RETIREMENT PLANS
The Corporation maintains a 401(k) Profit Sharing Plan (the Plan) covering
substantially all of its domestic employees not subject to collective bargaining
agreements. Each year the Corporation contributes to the Plan a discretionary
contribution and makes a matching contribution equal to 25% of the Compensation
(as defined in the Plan) that each participant elects to defer (up to 5% of the
participant's Compensation) and contribute to the Plan. During fiscal 1996, 1995
and 1994, the Corporation contributed $798,000, $845,000 and $635,000,
respectively, to the Plan representing employer matching and discretionary
contributions.
22
<PAGE> 26
During fiscal 1995, the Corporation established a Group Registered Retirement
Savings Plan (RRSP) covering substantially all of its Canadian employees not
subject to collective bargaining agreements. Under the RRSP the Corporation
contributes a discretionary contribution. During fiscal 1996 and 1995, the
Corporation contributed $79,000 and $61,000, respectively, to the RRSP.
Net expense related to the Corporation's retirement plans was $877,000,
$701,000 and $844,000 for fiscal 1996, 1995 and 1994, respectively.
11. COMMITMENTS AND CONTINGENCIES
(A) LEASES
Minimum rental payments for future fiscal years under non-cancelable operating
leases are: $395,000 in 1997; $404,000 in 1998; $413,000 in 1999; $421,000 in
2000; $430,000 in 2001; and $662,000 thereafter.
Total rental expense incurred amounted to $5,740,000, $6,592,000 and
$7,237,000 for fiscal 1996, 1995 and 1994 (excluding sublease income amounting
to $517,000, $1,337,000 and $3,411,000 in fiscal 1996, 1995 and 1994),
respectively.
(B) LITIGATION
In 1988, Texaco Canada Inc. (Texaco) (now known as McColl-Frontenac Inc.)
instituted a lawsuit (the Texaco Lawsuit) in the Supreme Court of Ontario,
Canada against the Corporation, the Corporation's Canadian subsidiary (now owned
by Hudson LLC) and Petro-Canada Inc. (the corporation which supplied aviation
fuel for the Corporation's Canadian fixed base operations). The Texaco Lawsuit's
allegations, as amended, are that the defendants interfered with contractual and
fiduciary relations, conspired to injure, and induced the breach of a fuel
supply agreement between Texaco and Innotech Aviation Limited (Innotech) in
connection with the purchase by the Corporation from Innotech in 1984 of certain
assets of Innotech's airport ground services business. The Texaco Lawsuit seeks
compensatory and punitive damages totaling $110,000,000 (Canadian)
(approximately $80,000,000 (U.S.)) plus all profits earned by the defendants
subsequent to the alleged breach. The trial, which began in May 1996, has been
adjourned until January 1997.
Innotech (which due to a name change is now called Aerospace Realties (1986)
Limited (Aerospace)) had agreed to defend and indemnify the Corporation against
claims of whatever nature asserted in connection with, arising out of or
resulting from the fuel supply agreement with Texaco. By a letter dated February
15, 1996, the Corporation was notified by Aerospace that Aerospace has entered
into a liquidation phase and can no longer defray the cost of defending the
Texaco Lawsuit or pay for any damages resulting therefrom.
The Corporation has agreed to indemnify and hold harmless Hudson LLC, LAGS and
each affiliate of LAGS against all losses related to the Texaco Lawsuit. The
Corporation's management believes, and counsel for the Corporation has advised
based on available facts, that the Corporation will successfully defend this
action.
12. RELATED PARTY TRANSACTION
Since February 1988, the Corporation has engaged an investment banking firm of
which a director of the Corporation is affiliated to render certain investment
banking services. The agreement pursuant to which such services are to be
rendered expires in March 1997. In connection with the Transaction, such
investment banking firm was paid $517,000 for services rendered in fiscal 1996.
If the LAGS Option is exercised, such investment banking firm will be entitled
to a fee of 2% of the option price.
13. QUARTERLY FINANCIAL DATA (Unaudited)
The following table sets forth unaudited quarterly financial information for
fiscal 1996 and 1995:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter (a)
-----------------------------------------------------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C>
1996
Revenues............................................................ $34,193 $41,052 $56,510 $25,963
Gross profit........................................................ 5,515 8,675 16,361 6,633
Net earnings........................................................ 480 2,395 6,059 1,532
Earnings per share, primary:
Net earnings...................................................... $ .41 $ 2.04 $ 5.10 $ 1.28
==================================================
Earnings per share, fully diluted:
Net earnings...................................................... $ .37 $ 1.30 $ 3.06 $ .83
==================================================
1995
Revenues............................................................ $31,348 $33,177 $37,953 $32,975
Gross profit........................................................ 4,446 5,296 7,008 5,397
Net earnings........................................................ 235 633 3,474(b) 251
Earnings per share, primary:
Net earnings...................................................... $ .19 $ .50 $ 2.76 $ .21
==================================================
Earnings per share, fully diluted:
Net earnings...................................................... $ .19 $ .43 $ 1.75 $ .21
==================================================
</TABLE>
(a) As a result of the Transaction (see Note 2), effective June 1, 1996 the
Corporation's interest in the Aviation Business is accounted for under the
equity method.
(b) Includes the recognition of $1,300 of deferred tax assets
(see Note 8).
23
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
[KPMG PEAT MARWICK LLP LETTERHEAD]
The Stockholders and Board of Directors
Hudson General Corporation
We have audited the accompanying consolidated balance sheets of Hudson General
Corporation and subsidiaries as of June 30, 1996 and 1995 and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three year period ended June 30, 1996. These
consolidated financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Hudson
General Corporation and subsidiaries at June 30, 1996 and 1995 and the results
of their operations and their cash flows for each of the years in the three year
period ended June 30, 1996, in conformity with generally accepted accounting
principles.
As discussed in the notes to the consolidated financial statements, the
Corporation adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," on a prospective basis in fiscal 1994.
KPMG PEAT MARWICK LLP
- -------------------------------------
Jericho, New York August 16, 1996, except for Note 7, which is as of September
5, 1996
24
<PAGE> 28
CORPORATE INFORMATION
DIRECTORS
Jay B. Langner
Chairman
Milton H. Dresner
Developer, Builder
and Private Investor
Edward J. Rosenthal
Vice Chairman
Cramer Rosenthal McGlynn, Inc.
Hans H. Sammer
Consultant, Retired Director,
Investment Banking Group
Prudential Securities Incorporated
Richard D. Segal
Chairman and Chief Executive Officer
Seavest Inc.
Stanley S. Shuman
Executive Vice President
and Managing Director
Allen & Company Incorporated
TRANSFER AGENT AND REGISTRAR
First National Bank of Boston
100 Federal Street
Boston, Massachusetts 02110
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
One Jericho Plaza
Jericho, New York 11753
SHARES LISTED
Common--
American Stock Exchange
(Symbol: HGC)
10-K AVAILABLE
The Annual Report, on Form 10-K, as filed with the Securities and Exchange
Commission, is available to stockholders without charge upon written request to:
Secretary
Hudson General Corporation
111 Great Neck Road
Great Neck, New York 11021
CORPORATE OFFICERS
Jay B. Langner
Chairman of the Board
and Chief Executive Officer
Michael Rubin
President and
Principal Financial Officer
Paul R. Pollack
Executive Vice President
and Chief Operating Officer;
President, Hudson General LLC
Fernando DiBenedetto
Senior Vice President--Operations
Raymond J. Rieder
Senior Vice President
and Chief Marketing Officer;
Executive Vice President, Hudson General LLC
Donald S. Croot
Vice President--
Canadian Operations
Rocco Daloia
Vice President--Maintenance and Facilities
Barry I. Regenstein
Vice President and Controller
Noah E. Rockowitz
Vice President, General Counsel and Secretary
Henry A. Satinskas
Vice President--Transportation Services
DIVISIONAL OFFICERS
United States
Salvatore J. Altizio, Jr.
Regional Vice President
David L. Finch
Vice President--
Contract Services
Frederick C. Knapp, Jr.
Vice President--Fuel Services and Planning
Bert J. Smith
Vice President--Airport Operations
Gary D. Watson
Regional Vice President
David M. Ziolkowski
Regional Vice President
Canada
Thomas D. Culp
Vice President--Marketing
Audrey J. Laurin
Vice President and Controller
Denis A. A. Lawn
Vice President--Operations
CORPORATE HEADQUARTERS
111 Great Neck Road
Great Neck, New York 11021
(516) 487-8610
United States Locations
Baltimore-Washington
International Airport
Fort Lauderdale/Hollywood
International Airport
Houston
Ellington Field
William P. Hobby Airport
JFK International Airport
LaGuardia Airport
Logan International Airport
Los Angeles International Airport
Miami International Airport
Newark International Airport
O'Hare International Airport
Orlando International Airport
Salt Lake City International Airport
Washington National Airport
Canadian Locations
Administrative Offices
100 Alexis Nihon, Suite 400
Ville St. Laurent, Quebec
H4M 2N9
(514) 748-2277
Calgary International Airport
Edmonton International Airport
Halifax International Airport
Montreal International Airport
(Dorval)
Montreal International Airport
(Mirabel)
Ottawa International Airport
St. John's International Airport
Toronto International Airport
Vancouver International Airport
Winnipeg International Airport
<PAGE> 29
[HUDSON GENERAL LOGO]
HUDSON GENERAL CORPORATION
111 Great Neck Road
P.O. Box 355
Great Neck, New York 11022
<PAGE> 1
EXHIBIT 21
Subsidiaries of the Registrant
<PAGE> 2
EXHIBIT 21
HUDSON GENERAL CORPORATION
SUBSIDIARIES
<TABLE>
<CAPTION>
Jurisdiction
of
Incorporation
-------------
<S> <C>
Hudson Aviation Services, Inc. California California
Hudson General Coach Lines, Inc. California
Hudson Aviation Services, Inc. Delaware Delaware
Hudson Aviation Services, Inc. Massachusetts
Hudson Aviation Services-Oakland, Inc. California
Hudson Kohala Inc. Delaware
Hudson General LLC (74% owned) Delaware
Hudson General Leasing Corporation Delaware
Hudson General Aviation Services, Inc. Canada
</TABLE>
<PAGE> 1
EXHIBIT 23
Consent of KPMG Peat Marwick LLP, the Corporation's independent auditors, to the
incorporation by reference into the Corporation's Registration Statement on Form
S-8, as amended, Registration No. 2-75137
<PAGE> 2
Independent Auditors' Consent
Board of Directors
Hudson General Corporation:
We consent to the incorporation by reference in the Registration Statement (No.
2-75137) on Form S-8 of Hudson General Corporation of our report dated August
16, 1996, except for note 7 which is as of September 5, 1996, relating to the
consolidated balance sheets of Hudson General Corporation and subsidiaries as of
June 30, 1996 and 1995 and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1996 which report is incorporated by reference in the June
30, 1996 annual report on Form 10-K of Hudson General Corporation, our report
dated September 5, 1996, relating to the financial statement schedule of Hudson
General Corporation for each of the years in the three-year period ended June
30, 1996, our report dated August 16, 1996, except for note 6, which is as of
September 5, 1996, relating to the consolidated balance sheet of Hudson General
LLC and subsidiaries as of June 30, 1996 and the related consolidated statements
of earnings, members' equity and cash flows and related financial statement
schedule for the period June 1 (inception) to June 30, 1996, and our report
dated August 16, 1996 relating to the consolidated balance sheets of Kohala
Joint Venture and subsidiary as of June 30, 1996 and 1995 and the related
consolidated statements of operations and partners' deficit, and cash flows and
related financial statement schedule for each of the years in the three-year
period ended June 30, 1996 which reports appear in the June 30, 1996 annual
report on Form 10-K of Hudson General Corporation.
Our report relating to the consolidated financial statements of Hudson General
Corporation refers to a change in the method of accounting for income taxes.
KPMG PEAT MARWICK LLP
Jericho, New York
September 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 12701
<SECURITIES> 0
<RECEIVABLES> 238
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 20474
<PP&E> 3428
<DEPRECIATION> 0
<TOTAL-ASSETS> 48776
<CURRENT-LIABILITIES> 4119
<BONDS> 0
0
0
<COMMON> 1277
<OTHER-SE> 42618
<TOTAL-LIABILITY-AND-EQUITY> 48776
<SALES> 157718
<TOTAL-REVENUES> 157718
<CGS> 113744
<TOTAL-COSTS> 137903
<OTHER-EXPENSES> 16755
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 239
<INCOME-PRETAX> 17649
<INCOME-TAX> 7183
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10466
<EPS-PRIMARY> 8.87
<EPS-DILUTED> 5.56
</TABLE>
