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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
September 13, 1996 (August 29, 1996)
Mercury Air Group, Inc.
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(Exact name of registrant as specified in its charter)
New York 1-7134 11-1800515
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(State or other (Commission (IRS employer
jurisdiction of file number) identification no.)
incorporation)
5456 McConnell Avenue, Los Angeles, California 90066
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
310-827-2737
Page 1 of 59 sequentially numbered pages.
Index to exhibits is located on sequentially numbered page 4.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
(a) (i) General. On August 29, 1996, Mercury Air Group, Inc. (the "Company"),
acquired certain assets from Raytheon Aircraft Services, Inc. ("RAS"). Such
assets were used by RAS in its business of selling, leasing, maintaining and
servicing Beech aircraft, through authorized Beech service centers, at a chain
of fixed-base operations ("FBOs") located throughout the country. The Company
purchased certain assets of RAS at the following locations: Ontario,
California (Ontario International Airport); Atlanta, Georgia (Hartsfield
International Airport); Atlanta, Georgia (Peachtree-Dekalb Airport); Corpus
Christi, Texas (Corpus Christi International Airport); and Dallas, Texas
(Addison Airport). The assets were acquired pursuant to the terms and
provisions of an Asset Purchase Agreement dated as of April 8, 1996 (the "Asset
Purchase Agreement").
(ii) Description of Purchase Price. Pursuant to the Asset Purchase
Agreement, the purchase price was $8,293,697, of which $4,393,697 was paid in
cash and of which the remainder of $3,900,000 was in the form of a negotiable
promissory note (the "Negotiable Promissory Note"). The Negotiable Promissory
Note is payable over a term of 32 quarters, accrues interest at the prime rate,
and is secured by mortgages on certain of the leaseholds acquired by the
Company. The purchase price was based on arms-length negotiations between the
parties. The cash portion of the purchase price was paid out of the Company's
working capital.
(iii) Incorporation by Reference. Set forth above is a brief
description of certain terms of the Asset Purchase Agreement and the Negotiable
Promissory Note. Any description or disclosure made in this Current Report on
Form 8-K with respect to the Asset Purchase Agreement and the Negotiable
Promissory Note is qualified in its entirety by reference to the Asset Purchase
Agreement which is Exhibit 2.1 hereto and the Negotiable Promissory Note which
is Exhibit 4.1 hereto, respectively, and incorporated by reference herein. The
Company will furnish supplemental copies of the exhibits and schedules to the
Asset Purchase Agreement to the Securities and Exchange Commission upon
request.
(b) Information Regarding Assets Acquired.
The assets acquired were utilized by RAS in its business of selling,
leasing, maintaining and servicing Beech aircraft. The Company intends to
discontinue such use, and to use such assets instead for the following
purposes: (i) providing petroleum products, and cargo and aviation services,
through the Company's own sales and work force, to international and domestic
commercial airlines, general aviation and U.S. Government aircraft; and (ii)
leasing back space of certain of the FBOs to RAS. The Company did not acquire,
as part of the transaction, any rights to become an authorized Beech service
center.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA
FINANCIAL INFORMATION, AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Not Applicable.
(b) Pro Forma Financial Information.
Not Applicable.
(C) Exhibits.
See "Index to Exhibits."
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Mercury Air Group, Inc.
Date: September 13, 1996 By: /s/ Seymour Kahn
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Chairman of the Board and
Chief Executive Officer
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INDEX TO EXHIBITS
<TABLE>
<S> <C>
Exhibit 2.1 Asset Purchase Agreement, dated as of April 8, 1996, by and
between Raytheon Aircraft Services, Inc. and Mercury Air
Group, Inc.
Exhibit 2.2 Amendment Letter to Asset Purchase Agreement, dated as of
August 29, 1996, by and between Raytheon Aircraft Services,
Inc. and Mercury Air Group, Inc.
Exhibit 4.1 Negotiable Promissory Note, dated as of June 21, 1996, from
Mercury Air Group, Inc. to Raytheon Aircraft Services, Inc.
Exhibit 4.2 Legend Agreement, dated as of August 29, 1996 between
Mercury Air Group, Inc. and Raytheon Aircraft Services,
Inc.
</TABLE>
4
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EXHIBIT 99.2.1
ASSET PURCHASE AGREEMENT
BETWEEN
RAYTHEON AIRCRAFT SERVICES INC.
AND
MERCURY AIR GROUP, INC.
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INDEX
<TABLE>
<CAPTION>
Article Page
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<S> <C> <C>
I ACQUISITION OF ASSETS 1
II ASSUMPTION OF LIABILITIES 2
III PURCHASE PRICE 3
IV CONDITIONS TO CLOSING 5
V CLOSING 7
VI CONDITION OF ASSETS 9
VII INDEMNIFICATIONS 9
VIII REPRESENTATIONS AND WARRANTIES BY RAS 12
IX REPRESENTATIONS AND WARRANTIES BY MERCURY 16
X PUBLIC DISCLOSURE 17
XI SALES, PURCHASE, OR USE TAX 17
XII COVENANTS OF RAS AND MERCURY 18
XIII DEFAULT BY MERCURY 20
XIV RECORDS 21
XV AMENDMENTS TO REPRESENTATIONS AND 22
WARRANTIES AND EXHIBITS
XVI MISCELLANEOUS 22
SIGNATURES 25
</TABLE>
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<TABLE>
<CAPTION>
Exhibits
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<S> <C>
A LEASES
B LIST OF RAS ASSETS
C EXCLUDED ASSET LIST
D SUBLEASES
E CONTINUING CONTRACTS
F RAS SCHEDULE OF EXCEPTIONS
G PURCHASE PRICE ADJUSTMENT SCHEDULE
H PURCHASE PRICE ALLOCATION SCHEDULE
I KEY CUSTOMER LIST
</TABLE>
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made and entered into
effective as of the date of its execution by the last of the parties hereto to
execute the same ("Effective Date"), by and between Raytheon Aircraft Services,
Inc., a Kansas corporation ("RAS"), and Mercury Air Group, Inc., a New York
corporation ("Mercury").
W I T N E S S E T H:
WHEREAS, RAS owns an interest in certain real estate leases, with
improvements, fixtures and personal property located at the airports in Corpus
Christi, Texas; Addison, Texas; Ontario, California; Peachtree DeKalb, Georgia;
Hartsfield, Georgia; and Bedford, Massachusetts ("Airports"); and
WHEREAS, RAS is a fixed base operator, providing fuel and line
services, and operating aircraft repair and service facilities at the Airports;
and
WHEREAS, Mercury desires to purchase RAS's interest in certain real
estate leases, improvements, fixtures and personal property located at the
Airports and to provide fuel and line services at the Airports; and
WHEREAS, RAS desires to sell the foregoing assets to Mercury.
NOW, THEREFORE, for and in receipt of good and valuable consideration,
including the mutual covenants, promises and agreements of the parties
hereinafter contained, it is agreed as follows:
I. ACQUISITION OF ASSETS
A. Subject to the provisions contained in this Agreement, RAS
agrees to sell and assign to Mercury and Mercury agrees to purchase and acquire
all right, title and interest of RAS in, to and under (1) the Lease Agreements
and any amendments thereto between RAS and the respective lessors at the
Airports (collectively the "Leases" as identified in Exhibit "A"), (2)
subleases between RAS and third persons at the Airports (collectively the
"Subleases" as identified in Exhibit "D") and (3) all obligations, rights and
interests of RAS in, to and under the
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contracts (collectively the "Continuing Contracts" as identified in Exhibit
"E"). Exhibits D and E will be provided within ten (10) working days after
execution of this Agreement.
B. Subject to the provisions contained in this Agreement, RAS
agrees to sell, transfer, assign and convey and Mercury agrees to purchase and
acquire all right, title and interest of RAS in and to the specific assets
(identified in Exhibit "B") utilized in RAS fuel and line service businesses
(the "Asset Related Activities") at the Airports, excluding assets utilized,
sold or otherwise depleted in the normal course of RAS's business prior to the
Closing Date and including any similar assets acquired in the normal course of
business subsequent to the execution of this Agreement and prior to the Closing
Date (collectively the "Assets"). Mercury would not acquire an interest in any
of the RAS assets specifically identified on Exhibit "C" (collectively, the
"Excluded Assets"). The Assets, Leases, Subleases and Continuing Contracts are
sometimes referred to herein collectively as the "Purchased Assets".
II. ASSUMPTION OF LIABILITIES
A. Mercury assumes all liabilities accruing after the Closing
Date which arise under the Leases, Subleases and Continuing Contracts
(collectively, hereinafter the "Transferred Contracts") as follows:
1. Mercury agrees to assume all obligations and amounts
accruing after the Closing Date under the Subleases and Continuing Contracts
listed and described on Exhibits D and E provided, however, that Mercury shall
not assume any obligation or liability required by the terms of such Subleases
or Continuing Contracts to be discharged prior to the Closing, arising out of a
breach or default by RAS under such Subleases or Continuing Contracts prior to
the Closing or arising as a result of the Closing except such of those
obligations Mercury specifically agrees to assume; and
2. Mercury agrees to assume all obligations and amounts
accruing after the Closing Date under the Leases with the respective Lessors at
the Airports; provided, however, that Mercury shall not assume any obligation
or liability required by the terms of such Leases to be discharged prior to the
Closing, arising out of a breach or default by RAS under such Leases prior to
the Closing or arising as a result of the Closing except such of those
obligations Mercury specifically agrees to assume.
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B. Mercury shall not assume or otherwise be liable for the
payment, performance or discharge of any debt, liability or obligation, whether
known, unknown, contingent or otherwise, of RAS or otherwise affecting the
Purchased Assets, except as expressly set forth herein. Without limiting the
generality of the foregoing, Mercury expressly does not assume or agree to pay
or perform any obligations, duties, responsibilities or liabilities of RAS that
now exist or may arise in the future with respect to matters occurring prior to
the Closing: (1) to employees or former employees of RAS, to any of their
beneficiaries, heirs or assignees or the Pension Benefit Guaranty Corporation
or any similar organization, arising out of: (a) such employees' or former
employees' employment by RAS (including obligations with respect to employee
salaries); (b) such employees' or former employees' participation in employee
benefit plans of RAS (including obligations, duties, responsibilities or
liabilities arising under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")); (c) the transactions contemplated by this Agreement; (d)
the Congressional Omnibus Budget Reconciliation Act or "COBRA"; or (e) any
other labor relations laws; (2) as a result of income, profit, franchise,
sales, real or personal property tax laws or other similar tax laws; (3) as a
result of claims under express or implied warranty or for personal injuries,
property damage or actual or consequential or punitive damages relating to
products or services sold by RAS or otherwise arising out of an action taken or
omitted by RAS or any of its officers, directors, employees, affiliates or
agents taken or omitted; or (4) under any statute, rule or regulation,
including, but not limited to, civil rights, health, safety, labor,
discrimination and environmental regulations and rules.
III. PURCHASE PRICE
The purchase price ("Purchase Price") to be paid to RAS for the
Purchased Assets shall be calculated as set forth in Article III., Subsection
A, and shall be payable to RAS by Mercury as set forth in Article III.,
Subsections B. and C.:
A. Mercury shall pay RAS, on the Closing Date, the sum of Nine
Million U.S. Dollars ($9,000,000) for the Purchased Assets;
PLUS:
1. The value, on the Closing Date, of aviation fuel inventory
that RAS has at the Airports ("Fuel"). The value of such
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Fuel shall be determined separately for each Airport and shall be the Fuel
supplier's per gallon price set forth in such supplier's last invoice to RAS
for the relevant Airport immediately prior to the Closing Date, plus taxes and
applicable Airport flowage fees paid or owed by RAS upon delivery of said fuel
into storage, times the number of gallons of Fuel for the relevant Airport;
2. The value, on the Closing Date, of oil owned by RAS
at the Airports. The value of such oil shall be determined separately for each
Airport and shall be the supplier's per unit price set forth in such supplier's
last invoice to RAS for the relevant Airport immediately prior to the Closing
Date, times the number of units of oil for the relevant Airport;
3. A prorated amount equal to the rent prepaid by RAS
under the Leases at the Airports which rent applies to periods after the
Closing Date;
MINUS
4. A prorated amount equal to the personal and real
property taxes assessed against the Leases and Purchased Assets at the Airports
for periods before the Closing Date;
5. A prorated amount equal to all rent prepaid to RAS by
its tenants under subleases and any amounts prepaid to RAS by virtue of other
contracts assumed by Mercury with respect to periods, services to be rendered,
or goods to be provided after the Closing Date;
6. An amount equal to all cash security deposits held by
RAS in connection with subleases of the Leases at the Airports;
7. An amount equal to one-half of all recording, escrow
and other closing costs. Mercury agrees to pay for any title insurance it
obtains.
As of the Closing Date, RAS shall prepare a schedule reflecting the calculation
of the Purchase Price adjustments set forth in Article III, Subsection A,
Clauses 1 through 7 (the "Purchase Price Adjustment Schedule" as identified in
Exhibit "G").
B. The Purchase Price shall be paid to RAS in the form of a cash
payment in the amount of Four Million Three Hundred Fifty Thousand Dollars
($4,350,000.00) at the Closing Date ("Cash
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Payment"). The Cash Payment shall be paid by Mercury to RAS by wire transfer
to the financial institution of RAS's choice or by cashier's check payable at
the location of RAS's choice on the Closing Date.
C. The balance of the Purchase Price remaining after the payment
of the Cash Payment ("Unpaid Balance") shall be paid to RAS in the form of a
promissory note ("Note") executed by Mercury and with terms and conditions
acceptable to RAS. Interest shall accrue on the Unpaid Balance at an annual
rate equal to the rate from time to time announced by the Bank of America (New
York, N.Y.) as its prime rate of interest (hereinafter "Prime Rate"),
calculated on the basis of a 360-day year, and payable in equal quarterly
installments of principal plus interest over a period of thirty-two (32)
calendar quarters. Such rate shall be adjusted on the first business day of
each calendar quarter (i.e, January 1, April 1, July 1 and October 1) to
reflect any increase or decrease in the Prime Rate as of that date. All
payments of principal and interest under the Note shall be due and payable to
RAS on or before the first day of each quarter, commencing the first day of the
first quarter immediately following the Closing Date and shall be first applied
toward the payment of any interest then accrued.
The Note shall be executed by Mercury and shall be secured by
mortgages on the leasehold interests covered by the Leases in form or substance
acceptable to RAS ("Financing Documents") which are necessary to provide a
first priority lien or other encumbrances in favor of RAS on all of the Leases,
fixtures and improvements located thereon. The Purchased Assets in which RAS
shall be given a first priority lien or other encumbrance are hereinafter
referred to as the "Collateral". Mercury agrees that following and during the
continuance of an Event of Default, reference Article XIII, and at RAS's
option, RAS may exercise the conditional assignment of the Leases and all
subleases and rents related to such Leases to RAS. The terms and conditions
contained in the Note and Financing Documents shall include without limitation,
an insurance provision wherein Mercury shall (i) insure the Collateral in an
amount not less than the Note obligation, (ii) obtain liability insurance and
(iii) name RAS as an additional insured until payment of the Note. The
Financing Documents shall contain other terms and conditions satisfactory to
RAS and approved by Mercury prior to the Closing Date.
D. Mercury and RAS agree that the Purchase Price hereunder shall
be agreed upon prior to closing and allocated as set forth on
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Exhibit H and further agree to report the sale of the Purchased Assets for all
federal and state tax purposes in accordance with such agreed upon allocation.
Mercury shall provide a draft of Exhibit H to RAS no less than five (5) working
days prior to Closing.
IV. CONDITIONS TO CLOSING
A. The obligations of RAS under this Agreement are subject to the
satisfaction of RAS, on or before the Closing Date, of each of the following
conditions:
1. The representations and warranties of Mercury
contained herein shall be true in all material respects as of the Closing Date
with the same effect as though such representations and warranties had been
made at and as of the Closing Date.
2. Mercury shall have duly performed and complied with
all agreements and conditions required herein to be performed or satisfied by
Mercury on or before the Closing Date.
3. RAS shall have received the items required to be
delivered to RAS at the Closing pursuant to Article V and Mercury shall have
otherwise complied with the terms and conditions set forth in Article V.
4. RAS's Board of Directors shall have approved this
Agreement and the transactions contemplated hereby and RAS shall have received
from Mercury a legal opinion by in-house counsel that all necessary corporate
action on the part of Mercury has been taken to authorize this Agreement and
the transactions contemplated hereby.
B. The obligations of Mercury under this Agreement are subject to
the satisfaction of Mercury, on or before the Closing Date, of each of the
following conditions:
1. The representations and warranties of RAS contained
herein shall be true in all material respects as of the Closing Date with the
same effect as though such representations and warranties had been made at and
as of the Closing Date.
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2. RAS shall have duly performed and complied with all
agreements and conditions required herein to be performed or satisfied by RAS
on or before the Closing Date.
3. Mercury shall have received the items required to be
delivered to Mercury at the Closing pursuant to Article V and RAS shall have
otherwise complied with the terms and conditions set forth in Article V.
4. Mercury's Board of Directors shall have approved this
Agreement and the transactions contemplated hereby and Mercury shall have
received from RAS a legal opinion of in-house counsel that all necessary
corporate action on the part of RAS and Raytheon Aircraft Company has been
taken to authorize this Agreement and the transactions contemplated hereby.
5. Marine Midland Business Loans, Inc. shall have given
its written and unconditional consent to the transactions contemplated by this
Agreement no later than fifteen (15) working days after RAS provides Exhibits
D, E, and F as well as the items referenced in Article VIII to Mercury.
6. There shall have been no damage, destruction or loss
(whether or not covered by insurance) materially adversely affecting the
Purchased Assets or the Asset Related Activities.
7. Mercury shall have negotiated acceptable leases with
Phillips Petroleum for fuel trucks. RAS shall utilize its best efforts to
assist Mercury with the negotiation of fuel truck leases with Phillips
Petroleum.
8. Mercury shall have completed its environmental due
diligence, including, without limitation, the preparation by a consultant(s)
selected by Mercury and RAS of an environmental report(s) with respect to the
real property subject to the Leases after soil sampling and such other tests as
the parties shall require, and Mercury shall be satisfied in its sole
discretion with the results of such due diligence.
9. Mercury shall have completed its accounting,
financial, legal, operational and business due diligence with results
acceptable to Mercury in its sole discretion. Said due diligence shall be
completed no later than ten (10) working days after RAS provides Exhibits D, E,
and F as well as the items referenced in Article VIII to Mercury.
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10. Each of the relevant governmental bodies having
authority with respect to the Airports (the "Airport Authorities") shall have
consented in a writing in form and substance reasonably acceptable to Mercury
to the assignment of the Leases and the Financing Documents; each of the
Airport Authorities shall have executed and delivered to Mercury an estoppel
certificate in form and substance reasonably acceptable to Mercury confirming
that the Leases are in full force and effect, that RAS has not failed to pay
amounts due under the Leases, that RAS is not in default under the Leases, that
there are no accrued but unpaid liabilities under the Leases and such other
matters as Mercury shall reasonably request. In addition, each of the Airport
Authorities shall have approved operating permits so that Mercury is authorized
to operate on each of the relevant Airports.
In the event each of the Airport Authorities has not consented to the
assignment for the relevant Airport, the parties agree to use their best
efforts to negotiate a mutually acceptable agreement relating to these
Airports.
C. In the event, notwithstanding the best efforts required above,
the conditions contained in this Article are not satisfied prior to the Closing
Date or an earlier date specified herein, then, unless otherwise agreed in
writing by mercury and RAS, this Agreement shall terminate and be of no further
force or effect. Upon such termination, neither party hereto shall have any
obligation to the other than with respect to breaches of this Agreement
occurring prior to the date of such termination.
V. CLOSING
A. Closing of the transactions contemplated by this Agreement
shall be at such place as the parties may agree upon in writing, at 9:00 a.m.
(CST) on May 15, 1996 or as otherwise agreed to by the parties in writing
("Closing Date").
B. On the Closing Date, Mercury shall provide to RAS:
1. The Cash Payment.
2. The Note and the Financing Documents.
3. A duly executed counterpart of an assignment and
assumption agreement (the "Assignment Agreement") pursuant to which
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RAS shall assign to Mercury, and Mercury shall assume, all rights and
obligations, pursuant to the Leases, Subleases and the Continuing Contracts in
accordance with the terms of this Agreement.
4. A sublease for the space at the Addison, Texas
Airport currently occupied by RAS's service department pursuant to which RAS
will continue to operate its service, avionics and parts departments at such
Airport through December 31, 1997 (the "Addison Sublease") , in form and
substance acceptable to RAS.
C. On the Closing Date, RAS shall provide to Mercury:
1. Such assignments, bills of sale, lease assignments
(if available), assumption agreements and other documents containing terms and
provisions of this Agreement as the parties deem necessary and appropriate to
transfer, assign and convey the Purchased Assets.
2. A duly executed counterpart of the Assignment
Agreement.
3. Certificates of title duly executed for transfer (i)
to any vehicles for which title is certificated comprising a part of the
Purchased Assets, and (ii) to any other of the Purchased Assets for which any
other governmental agency maintains a similar registry of title.
4. Complete and detailed schedules listing all Purchased
Assets.
5. The Addison Sublease in form and substance acceptable
to Mercury.
D. The Closing Date may be extended upon the mutual written
consent of the parties hereto.
VI. CONDITION OF ASSETS
A. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN WRITING IN THIS
AGREEMENT, THE PURCHASED ASSETS ARE SOLD "AS IS AND WITH ALL FAULTS" AND RAS
HAS MADE AND MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY NATURE WHATSOEVER,
DIRECTLY OR INDIRECTLY, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY
REPRESENTATIONS OR WARRANTIES REGARDING THE SUITABILITY. DURABILITY, DESIGN,
FITNESS
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FOR USE AND/OR MERCHANTABILITY OF THE PURCHASED ASSETS, OR ANY PART THEREOF, FOR
THE PURPOSE AND USE OF MERCURY, OR OTHERWISE.
VII. INDEMNIFICATIONS
A. Mercury shall defend, hold harmless and indemnify RAS and its
employees, agents, successors and assigns, shareholders, officers, and
directors against and in respect of any and all losses, costs, claims, demands,
liabilities, damages, judgments, including, without limitation, interest,
penalties, costs of defense and reasonable attorneys' fees, which arise out of,
result from or relate to:
1. Mercury's breach of or failure to perform any of
Mercury's representations, warranties, covenants or obligations set forth in
this Agreement or by reason of any act or omission of Mercury after the Closing
Date that constitutes a breach or default under, or a failure to perform, any
obligation, duty, or liability of Mercury pursuant to this Agreement or any
agreement or instrument entered into by mercury in connection herewith; and/or
2. any liability, indebtedness, claim or obligation or
responsibility arising out of the Purchased Assets resulting from events
occurring after the Closing Date; including, without limitation any liability
for damage to persons or property arising from incidents which occur after the
Closing Date as a consequence of the condition of the Lease premises or
Purchased Assets prior to or after the Closing Date; and/or
3.(i) any release of a hazardous substance as defined in
sections 101(22) and 101(14) of CERCLA; or
(ii) petroleum (including crude oil or any fraction
thereof) placed into, on, from or upon the
Leased Premises; or
(iii) any contamination of the soil or groundwater or
damage to the environment or natural resources of the
Leased Premises or to third party property, whether
arising under CERCLA or other statutes and
regulations, or common law; or
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(iv) any toxic, explosive or otherwise dangerous material
or hazardous substances which have been buried
beneath, concealed within or released into, on, upon,
or from the Leased Premises;
(collectively referred to hereinafter as "Damages"), to the extent such Damages
were caused by the negligent or willful acts of Mercury, its contractors,
subcontractors, agents, employees, licensees or permittees.
B. RAS shall defend, hold harmless and indemnify Mercury and its
employees, agents, successors and assigns, shareholders, officers, and
directors against and in respect of any and all losses, costs, claims, demands,
liabilities, damages, judgments, including, without limitation, interest,
penalties, costs of defense and reasonable attorneys' fees, which arise out of,
result from or relate to:
1. RAS's breach of or failure to perform any of RAS's
representations, warranties, covenants or obligations set forth in this
Agreement or by reason of any act or omission of RAS after the Closing Date
that constitutes a breach or default under, or a failure to perform any
obligation, duty, or liability of RAS pursuant to this Agreement or any
agreement or instrument entered into by RAS in connection herewith; and/or
2. any liability, indebtedness, claim or obligation or
responsibility arising out of the Purchased Assets and resulting from events
occurring prior to the Closing Date and provided that such liability does not
arise from any damage to person or property arising from incidents which occur
after the Closing Date and which incidents arise as a consequence of the
condition of the Lease premises or Purchased Assets prior to or after the
Closing Date, and/or
3. any liability, indebtedness, claim, obligation or
responsibility of RAS accruing prior to closing which is not expressly assumed
by Mercury pursuant to Article II, and/or
4.(i) any release of a hazardous substance as defined in
sections 101(22) and 101(14) of CERCLA; or
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(ii) petroleum (including crude oil or any fraction
thereof) placed into, on, from or upon the
Leased Premises; or
(iii) any contamination of the soil or groundwater or
damage to the environment or natural resources of the
Leased Premises or to third party property, whether
arising under CERCLA or other statutes and
regulations, or common law; or
(iv) any toxic, explosive or otherwise dangerous material
or hazardous substances which have been buried
beneath, concealed within or released into, on, upon,
or from the Leased Premises;
(collectively referred to hereinafter as "Damages"), to the extent such Damages
were caused by the negligent or willful acts of RAS, its contractors,
subcontractors, agents, employees, licensees or permittees.
C. The provisions of this Article VII, Subsection A., Clause (3)
and Article VII, Subsection B., Clause (4) shall control over any other general
provision contained in this Agreement and be the exclusive provisions relating
to Mercury's and RAS's obligations to indemnify, defend and hold harmless one
and other with respect to Damages as defined in those subsections.
D. The obligations and liabilities of RAS and Mercury with
respect to damages resulting from the assertion of liability by one party
against the other pursuant to this Article VII shall be subject to the
following terms and conditions:
1. The indemnified party shall give prompt written
notice to the indemnifying party of any claim which might give rise to a claim
by the indemnified party against the indemnifying party based on the indemnity
agreements contained in Article VII stating the nature and basis of said claims
and the amounts thereof, to the extent known.
2. In the event any action, suit or proceeding is
brought against the indemnified party with respect to which the indemnifying
party may have liability under the indemnity agreements contained in Article
VII, the action, suit or proceeding
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shall, upon the written acknowledgment by the indemnifying party that it is
obligated to indemnify under such indemnity agreement, be defended (including
all proceedings on appeal or for review which counsel for the indemnified party
shall deem appropriate) by the indemnifying party. Legal counsel employed by
the indemnifying party in connection with any such action, suit or proceeding
shall be approved in advance by the party to be indemnified, which approval
shall not be unreasonably withheld. The indemnified party shall have the right
to employ its own counsel in any such case, but the fees and expenses of such
counsel shall be at the indemnified party's own expense, unless (i) the
employment of such counsel and the payment of such fees and expenses both shall
have been specifically authorized by the indemnifying party in connection with
the defense of such action, suit or proceeding, or, (ii) such indemnified party
shall have reasonably concluded and specifically notified the indemnifying
party that there may be a specific defense available to it which is different
from or additional to those available to the indemnifying party or that such
action, suit or proceeding involves or could have an effect upon matters beyond
the scope of the indemnity agreements contained in Article VII, in which event,
the indemnifying party to the extent made necessary by such defense, shall not
have the right to direct the defense of such action, suit or proceeding on
behalf of the indemnified party. In such case, only that portion of such fees
and expenses reasonably related to matters covered by the indemnity agreements
contained in Article VII hereof shall be borne by the indemnifying party.
Unless the indemnified party is directing its own defense, it shall be kept
fully informed of such action, suit or proceeding at all stages thereof by the
indemnifying party. The indemnifying party shall make available to the
indemnified party and its attorneys and accountants all books, records and
files of the indemnifying party relating to such proceedings or litigation, and
the parties hereto agree to render to each other such assistance as they may
reasonably require of each other in order to ensure the proper and adequate
defense of any such action, suit or proceeding.
3. Neither RAS nor Mercury shall make any settlement of
any claims for which indemnification is sought pursuant to this Article VII
without the prior written consent of the other, which consent shall not be
unreasonably withheld or delayed, unless such settlement involves a complete
release of such claim and the party making the settlement pays all amounts
necessary to settle such claim and releases all rights against the other party
with respect to such claim (whether for indemnification or otherwise).
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VIII. REPRESENTATIONS AND WARRANTIES BY RAS
Except as set forth on the RAS Schedule of Exceptions attached hereto
as Exhibit F, RAS represents and warrants to Mercury at time of closing as
follows:
A. RAS is a corporation duly organized and validly existing under
the laws of the State of Kansas and is qualified to do business under the laws
of each of the states where the Airports are located.
B. RAS has taken, or will take prior to the Closing Date, all
necessary and proper corporate action to authorize and approve this Agreement
and the other documents and transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not and does not violate any provision of any judicial
or governmental decree, order or judgment to which RAS is a party or by which
the Purchased Assets are bound, nor conflict with or result in a breach of, or
constitute a default under the Articles of Incorporation or Bylaws of RAS or
any material agreement or instrument to which RAS is a party or by which it or
the Purchased Assets are bound. This Agreement and the other documents to be
delivered at the Closing will constitute the legal, valid and binding
obligations of RAS enforceable in accordance with their terms.
C. RAS owns and has and, following the Closing, Mercury will own
and have good, indefeasible and marketable title to the Purchased Assets,
whether real, personal, mixed, tangible or intangible, free and clear of
restrictions on or conditions to transfer or assignment, except as specifically
set forth in this Agreement and the related documents and free and clear of any
mortgages, deeds of trust, liens, pledges, charges, encumbrances, equities,
claims, easements, rights of way, covenants, conditions or restrictions, other
than (i) those disclosed in Exhibit F, RAS Schedule of Exceptions, (ii) the
lien of current taxes not yet due and payable, (iii) minor matters that in the
aggregate are not material in amount and do not materially detract from or
interfere with the present or intended use of the Purchased Assets, (iv) the
requirement that the lessors approve assignment of the Leases, (v) those
arising as a consequence of any liabilities of Mercury, and (vi) those required
to be, but not filed of public record and which are unknown to RAS.
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<PAGE> 18
D. There are no claims for brokerage commissions or finders' fees
in connection with the transactions contemplated by this Agreement resulting
from any action taken by RAS or its officers, directors, stockholders,
employees or agents.
E. The Transferred Contracts, as listed on Exhibits "A", "D" and
"E" attached hereto, together with such additional contracts which are not
being transferred as are described on Exhibit F, are all material contracts,
agreements, commitments and understandings, either oral or written (including,
without limitation, employment agreements, sales commission or other sales
compensation agreements, leases, subleases and service contracts), to which RAS
is a party which affect the Asset Related Activities at the Airports or the
Purchased Assets; provided, however, that such lists do not contain references
to contracts relating to the borrowing of money to the extent that the
Purchased Assets will not be subject to any lien securing such borrowing as of
the Closing Date and obligations under such contract will not be assumed by
Mercury at the Closing. RAS has furnished to Mercury true and correct copies
of all such written Transferred Contracts and true and correct summaries of all
such oral agreements. All such Transferred Contracts are currently in full
force and effect and constitute legal, valid and binding obligations of the
parties thereto, enforceable in accordance with their respective terms against
the parties thereto. As of the Closing Date, RAS will not have assigned its
rights under the Transferred Contracts. RAS is not, and to the best of RAS's
knowledge, each other party to the Transferred Contracts is not, in default
under, and no events have occurred which would constitute (with the giving of
notice, the passage of time or otherwise) a default by RAS or any of the other
parties to such Transferred Contracts which default would have a material
adverse affect on the Purchased Assets or the financial results or operations
of the Asset Related Activities at the Airports. All rental charges and other
amounts due to the Airport Authorities under the Leases are current. All
rental charges and other amounts due to RAS under the Subleases are no later
than ninety (90) days past due.
F. There is not pending, or, to the knowledge of RAS, threatened,
any suit, action, arbitration, or legal, administrative or other proceeding, or
governmental investigation against or affecting RAS's business operations at
the Airports, the Purchased Assets or the transactions contemplated hereby
which, if decided adversely, would materially adversely affect the Purchased
Assets or the Asset Related Activities or the ability of RAS to transfer
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<PAGE> 19
the Purchased Assets to Mercury in accordance with the terms and conditions of
this Agreement.
G. RAS will furnish within ten (10) working days of execution of
this Agreement to Mercury: (i) true and correct copies of all of the
environmental reports and audits prepared with respect to the real property
subject to the Leases (the "Real Property") during the period while RAS owned
and operated a fixed base business at the Airports ("RAS's Tenure"); (ii) true
and correct copies of its permits to operate underground storage and fuel
dispensing facilities as issued by the relevant governmental authorities; and
(iii) true and correct copies of all work orders and invoices for work
performed on fuel tanks located on the Real Property during RAS's tenure. The
representations and warranties contained in Section 2.3 of the Environmental
Audit Agreement (as hereinafter defined) are true and correct.
H. RAS has furnished to Mercury a true and correct list
containing the names, dates of hire, salaries/hourly wages and positions for
all line, general and administrative employees of RAS at the Airports. Except
as disclosed on Exhibit F, RAS does not maintain or sponsor, nor is RAS
required to make any contribution to, any pension, profit sharing, thrift,
retirement, medical, hospitalization, vision, dental, life, disability,
deferred compensation, bonus, fringe benefit, savings or other incentive,
severance, insurance or other similar plan, agreement, arrangement or
understanding (collectively, the "Employee Benefit Plans"). Copies of summary
plan descriptions for all such Employee Benefit Plans have been provided to
mercury. To the best of RAS's knowledge, there are no on-going attempts to
unionize any of RAS's employees at the Airports and no such employees are
represented by a union or are covered by a collective bargaining agreement.
I. Each of the Instruments ( as hereinafter defined) is a valid
and subsisting Instrument under all applicable laws, rules and regulations and
is in full force and effect. There is no Instrument, individually or in the
aggregate, used, held for use in or necessary for the operation of the Asset
Related Activities at the Airports which is not presently held by RAS. RAS is
in compliance with the terms of each Instrument. No event has occurred that,
with notice or lapse of time or both, would constitute a violation or default
under any instrument whereby the other party thereto would be entitled to
terminate such Instrument or to assess a fine or penalty against RAS. For
purposes of this Agreement, the term "Instrument" shall mean (i) certificates
issued
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by any governmental authority relating to the operation of the Asset Related
Activities at the Airports; (ii) construction permits and certificates of
occupancy; (iii) federal, state, county and municipal permits, orders,
variances, exemptions, approvals, consents, licenses and other authorizations;
and (iv) all other approvals, permits, licenses, consents and authorizations
required for the lawful ownership, construction, installation, possession and
operation of the Asset Related Activities at the Airports and the Purchased
Assets.
J. The Asset Related Activities at the Airports have been and are
being conducted in all respects in compliance with all applicable federal,
state, or local laws, regulations, rulings or orders (including, but not
limited to, any of the foregoing relating to employment discrimination, civil
rights, occupational safety, handicap access and environmental protection).
RAS has not received any written governmental notice of any violation of any
such law, regulation, rule or order.
K. RAS has provided Mercury with true and correct copies of its
fuel flowage and gross receipt statements as filed with the relevant Airport
Authorities for the period from January 1, 1995 through December 31, 1995,
reflecting the gallons of fuel sold by RAS and revenues on which RAS paid a
percentage fee at the Airports during such period. Such statements accurately
reflect the gallons of fuel sold and revenues earned by RAS during such period
and were prepared in accordance with RAS's books and records. In addition, RAS
has provided Mercury with its fuel sales records for each customer who
purchased fuel in the month of March 1996 at the Airports. Such fuel sales
records truly and accurately reflect the actual number of gallons sold to each
customer of RAS at the Airports during such month and the actual prices charged
by RAS to each customer at the Airports during each such month. RAS has
provided Mercury with its current rent roll for each of the Airports reflecting
the name of the respective tenants; a description of the facility rented and
rent charged; and a description of the security deposit (if any) held by RAS
under each Sublease.
L. Exhibit I is a true and correct list of the three (3) largest
customers of RAS at each airport by monthly revenue during the month of March
1996 after excluding service rendered and sold by RAS which are not part of the
Asset Related Activities (customers identified on Exhibit I are hereinafter
referred to as "Key Customers"). Exhibit I identifies for each Key Customer
the
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types of services rendered or goods sold by RAS at each Airport during the
month of March 1996 and revenue attributable to sales to such customer during
each month at each Airport. To the best of RAS's knowledge, none of the Key
Customers intends to terminate its contracts or leases with, cease or reduce
its buying of goods or services from or request a rate reduction from RAS or
has notified RAS that it will take any such action as a result of the sale of
the Purchased Assets to Mercury.
M. RAS has provided Mercury a true and correct listing of the
current rental payments for the Leases.
N. RAS is successor in interest to Beechcraft West, Hedrick
Beechcraft, Inc. and United Beechcraft, Inc. Beech Holdings, Inc. is the
parent company of RAS.
O. The Purchase Price Adjustment Schedule provided at Closing
will be consistent with RAS's books and records and otherwise accurate.
Each representation and warranty of RAS shall survive the Closing and the
transfer of the Purchased Assets, notwithstanding any investigations made by
Mercury. For purposes of this Agreement, any item which involves in excess of
$20,000 in the aggregate or contract which involves the payment of in excess of
$20,000 shall be deemed material; provided, however, that the definition of
materiality for purposes of the asset list provided in Exhibit B shall be
$5,000.
IX. REPRESENTATIONS AND WARRANTIES BY MERCURY
Mercury represents and warrants to RAS as follows:
A. Mercury is a corporation organized and validly existing under
the laws of the State of New York and is qualified to do business in the State
of California.
B. Mercury has taken, or will take prior to the Closing Date, all
necessary and proper corporate action to authorize and approve this Agreement
and the other documents and transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby will not and does not violate any provision of any judicial
or governmental decree, or order or judgment, to which Mercury is a
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party, nor conflict with or result in a breach of, or constitute a default
under the Articles of Incorporation or Bylaws of Mercury or any material
agreements or instrument to which Mercury is a party or by which it is bound.
This Agreement and the other documents to be delivered at Closing will
constitute the legal, valid and binding obligation of Mercury, enforceable in
accordance with their terms.
C. Other than a finder's fee payable to Everen Securities, Inc.,
there are no claims for brokerage commissions or finders' fees in connection
with the transactions contemplated by this Agreement resulting from any action
taken by Mercury or its officers, directors, stockholders, employees or agents.
Mercury is responsible to pay said finder's fee and shall hold harmless RAS
from any claims regarding the same.
Each representation and warranty of Mercury shall survive the Closing.
X. PUBLIC DISCLOSURE
The parties have agreed to jointly prepare and issue a press release
regarding this Agreement and the transactions contemplated hereby to be issued
as soon as practicable following the signing of this Agreement. Other than such
joint release, neither party to this Agreement will make any public disclosure
or publicity release pertaining to the existence of this Agreement or to the
subject matter or terms and conditions contained herein without the consent of
the other party. Notwithstanding the foregoing, each party shall be permitted
to make such disclosures to governmental agencies as the respective party's
counsel shall deem necessary to maintain compliance with and prevent violation
of applicable Federal or State laws.
XI. SALES, PURCHASE, OR USE TAX
Any sales, purchase, or use tax under the laws of the states of Texas,
California, Georgia and Massachusetts, or of any county, city or subdivision
thereof which may be payable by reason of the sale of all or any portion of the
Purchased Assets, shall be borne by Mercury, and Mercury agrees to reimburse
RAS on demand for any such tax in the event such tax is assessed against RAS.
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XII. COVENANTS OF RAS AND MERCURY
A. RAS agrees that from the date hereof to the Closing Date, RAS
shall, except to the extent that Mercury shall otherwise give its written
consent: (i) operate the Asset Related Activities at the Airports substantially
as now operated and only in the ordinary course of business; (ii) maintain all
Purchased Assets in customary repair, order and condition, reasonable wear and
tear excepted; (iii) comply with the terms of the Transferred Contracts
(including paying all amounts due through the Closing Date); (iv) not agree to
amend the provisions of any of the Transferred Contracts; (v) not incur a
liability or obligation outside the ordinary course of business which will
affect the Asset Related Activities at the Airports or the Purchased Assets;
(vi) use its best efforts to minimize the fuel inventory on hand on the Closing
Date; (vii) not dispose of the Purchased Assets outside of the ordinary course
of business; and (viii) promptly advise Mercury of the occurrence of any event
which would make any representation or warranty contained in this Agreement
untrue or inaccurate in any material respect at any time from the date hereof
through the Closing Date.
B. RAS shall use its best efforts to cause each of the conditions
to closing specified in Article VI to occur, to deliver each of the items
required to be delivered by RAS pursuant to Article VI and to comply with and
fulfill all of its obligations, covenants and agreements required to be
performed by it prior to the Closing Date; provided, however, that the
foregoing requirement shall in no way restrict RAS's Board of Directors or
Raytheon Aircraft Company from properly exercising fiduciary duties or
otherwise considering whether or not to approve this Agreement and the
transactions contemplated hereby.
C. Mercury shall use its best efforts to cause each of the
conditions to closing specified in Article V to occur, to deliver each of the
items required to be delivered by Mercury pursuant to Article VI and to comply
with and fulfill all of its obligations, covenants and agreements required to
be performed by it prior to the Closing Date; provided, however, that the
foregoing requirement shall in no way restrict Mercury's Board of Directors
from properly exercising its fiduciary duties in considering whether or not to
approve this Agreement and the transactions contemplated hereby.
D. RAS agrees that from the date of this Agreement through the
completion of Mercury's due diligence ten working days after RAS provides
Exhibits D, E, and F as well as the items referenced
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in Article VIII, Mercury through its employees, representatives and agents
shall be given reasonable access, during regular business hours, to the books,
records, properties, assets and employees of the Asset Related Activities at
the Airports in order to make such investigations as Mercury deems necessary or
advisable.
E. For a period ending five (5) years after the Closing Date, RAS
shall not directly or indirectly (individually or for, with or through any
other person, corporation or entity) compete with the Asset Related Activities
at the Airports. Notwithstanding the foregoing, RAS shall be entitled to
engage in aviation service businesses without restriction at locations other
than the Airports.
F. During the term of this Agreement, RAS will not solicit,
initiate or encourage any acquisition proposal with respect to the Asset
Related Activities at the Airports (an "Acquisition Proposal"). During the
term of this Agreement, RAS will not enter into any agreement or contractual
commitment with respect to an Acquisition Proposal, whether or not such
agreement or contract is secondary and conditioned upon termination of this
Agreement.
G. As of the Closing Date, RAS will terminate all of its line,
general and administrative employees at the Airports and will pay each employee
all wages, salaries, commissions, bonuses, accrued vacations, and any other
benefit or claim which is due or owing to any employee at the time of closing.
RAS agrees that prior to the Closing Date it will allow Mercury to take
applications on any current line, general and administrative RAS employees at
the Airports, and to interview any of these RAS employees for prospective
employment in Mercury's organization after closing. Mercury agrees that it
will employ all of RAS's line, general, and administrative employees for a
minimum period of six months subject to Mercury's right to terminate any such
employee for cause in a manner consistent with Mercury's practices in its other
operations. These employees will be paid at date of hire the same rate of pay
the employee was receiving prior to termination by RAS. They will also receive
credit from Mercury for their length of service with RAS for purposes of
determining their annual vacation accrual; eligibility for sick leave and
health/life insurance; and enrollment and vesting in the Mercury 401(k) Plan
and the Mercury employee stock purchase plan in a manner consistent with the
rules and regulations of Mercury's existing benefit plans.
H. Although the parties hereto agree that the consummation of the
transactions contemplated hereby should not result in an "plant
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closing" or "mass layoff" within the meaning of the Worker Adjustment and
Retraining Act of 1988, Public Law No. 100-379 (the "WARN" Act), the parties
recognize that there is a risk that claims might be asserted thereunder.
Because of this risk that claims might be asserted, RAS hereby agrees to
indemnify and hold harmless Mercury and its directors and officers from and
against liabilities, penalties, costs and expenses (including reasonable
attorney's fees), if any, imposed by the WARN Act arising out of the failure of
RAS to give to its employees notice of the transactions contemplated hereby.
I. RAS shall remove any property it owns which is not being
transferred to Mercury pursuant to this Agreement and which is located on any
of the Airport leaseholds which are the subject of this Agreement within seven
(7) days after the Closing Date.
XIII. DEFAULT BY MERCURY
A. Mercury Default. The parties agree that the occurrence of any
of the following events after the giving of notice (if any) and the lapse of
time (if any) required pursuant to Article XIII, Subsection B. shall constitute
an "Event of Default":
1. Mercury's failure to make any timely payment required
hereunder, or Mercury's failure to make any payment required under the Note and
Financing Documents;
2. Mercury's failure to perform any promise, agreement,
obligation, warranty or covenant made by it herein or in any Note, Financing
Documents or any other agreement;
3. dissolution, termination of existence, cessation of
business in all material respects, insolvency, business failure, inability to
pay debts as they mature, the making of an assignment for the benefit of
creditors, the commencement, by Mercury, of any proceedings under any
bankruptcy or insolvency laws, or the filing against Mercury of any request or
petition for liquidation, reorganization or other similar relief under any
bankruptcy or insolvency laws and the failure to have such proceeding dismissed
within sixty (60) days of filing;
4. appointment of a receiver of any material part or all
of Mercury's assets, if such appointment or proceeding continues for a period
of more than sixty (60) days;
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5. Mercury entering into any transaction that is a
"change of control" as defined in the Mercury Air Group, Inc. Indenture dated
January 30, 1995 and which causes a "rating downgrade" as defined in the same
Indenture.
B. The occurrence and continuance of any of the events
specified in Article XIII, Subsection A., Clause (1) for a period of ten (10)
days following the sending of a written notice of such event to Mercury shall
constitute an "Event of Default". The occurrence and continuance of any of the
events specified in Article XIII, Subsection A., Clause (2) for a period of
thirty (30) days following the sending of a written notice of such event to
Mercury shall constitute an "Event of Default"; provided however, that if any
such event is not reasonably susceptible of cure within such thirty (30) day
period, an Event of Default shall not be deemed to occur if Mercury commences a
cure within such thirty (30) days period and proceeds diligently to complete
such cure no later than sixty (60) days following written notice. The
occurrence of any of the events specified in Article XIII, Subsection A.,
Clauses 3, 4 and 5 shall be deemed an "Event of Default" without notice or
lapse of time.
Should an Event of Default occur, RAS may employ all remedies
allowed by law, including, without limitation, declaring all indebtedness owed
hereunder, as well as any other indebtedness or liability of Mercury owed to
RAS, immediately due and payable. Additionally, RAS may require Mercury to
assemble the Collateral and make it available to RAS at a place to be
designated by RAS which is reasonably convenient to both parties. The
requirements of the Uniform Commercial Code for reasonable notification to
Mercury of the time and place of any proposed public sale of the Collateral or
of the time after which any private sale or other intended disposition of the
Collateral is to be made shall be met if such notice is mailed, postage
prepaid, to Mercury's address, as specified herein, at least ten (10) days
before the time of the sale or disposition. After deduction of all reasonable
expenses incurred in realizing on RAS's security interest, and after the
payment of all payments due under this Agreement, the balance of the proceeds
of sale, if any, may be applied to the payment of any or all other indebtedness
which Mercury owes RAS, regardless of whether such indebtedness is due or not.
Mercury shall be liable for any deficiency in its financial obligation under
this Agreement after application of such proceeds. Mercury agrees to pay the
reasonable attorneys' fees incurred by RAS to repossess the Collateral as well
as the attorneys' fees incurred in pursuing and
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collecting any deficiency. At RAS's option and upon an Event of Default, RAS
may elect to assume the Leases pursuant to the conditional assignment to be
executed and delivered at the Closing.
XIV. RECORDS
Title to all of RAS' records, documents, and papers of every kind and
nature pertaining to the Purchased Assets sold and the Assumed Liabilities
assumed hereunder shall remain in RAS (except any thereof agreed to be sold or
assigned to Mercury hereunder) but any thereof which Mercury may reasonably
require for use in connection with the operation of their business at the six
Airports shall either be delivered to Mercury or made available to it in such
manner as may best meet the respective needs of the parties. In any case, the
party receiving or retaining such records shall make them available to the
other during a period of five (5) years following the Closing Date.
Mercury shall promptly forward to RAS all correspondence, mail,
payments and documents received by Mercury after the Closing Date which relate
to the Purchased Assets sold or Assumed Liabilities assumed hereunder occurring
prior to the Closing Date.
XV. AMENDMENTS TO REPRESENTATIONS AND WARRANTIES AND EXHIBITS
At any time prior to Closing, RAS may amend the representations and
warranties made pursuant to this Agreement, the Exhibits to this Agreement and
the Environmental Audit Agreement. RAS shall submit any amendment to Mercury
and Mercury shall have three (3) working days to review and either accept or
reject the amendments. In the event that Mercury reject an amendment, this
Agreement shall be deemed terminated by the mutual consent of the parties. RAS
shall have no liability for prior representations and warranties or Exhibits
after an amendment.
XVI. MISCELLANEOUS
A. Any formal notice required or allowed hereunder shall be
deemed sufficiently given if personally delivered or sent by certified mail
(return receipt requested) or express mail carrier or telefacsimile to the
party to whom said notice is to be given. Notices sent by certified mail,
return receipt requested, shall be deemed to be served seventy-two (72) hours
after the date said
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notice is postmarked to the addressee, postage prepaid. Notices sent by
express mail carrier shall be deemed to have been served on the day following
the day sent to the addressee subject to confirmation of delivery by the
applicable express mail carrier. Notices sent by telefacsimile shall be deemed
to have been served on the day sent.
Until changed by written notice given by either party to the other,
the addresses of the parties shall be as follows:
1. Raytheon Aircraft Services, Inc.
P.O. Box 2966
Wichita, Kansas 67201
Attention: Vice President - Finance
Telefacsimile: (316) 676-4906
with copies to:
Raytheon Aircraft Company
Attn: Office of General Counsel
9709 East Central
Wichita, Kansas 67206;
Telefacsimile: (316) 676-8422
2. Mercury Air Group, Inc.
5456 McConnell Avenue
Los Angeles, California 90066
Attention: Executive Vice President
Commercial Operations
Telefacsimile: (310) 827-5510
with copies to:
Mercury Air Group, Inc.
5456 McConnell Avenue
Los Angeles, California 90066
Attention: General Counsel
Telefacsimile: (310) 827-5510
or such other address as shall be furnished in writing by either party to the
other.
B. Each party hereby agrees to perform any further acts and to
execute and deliver any documents which may be reasonably necessary to carry
out the provisions of this Agreement.
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C. This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of Kansas, and, the choice of forum for
matters arising out of the Note and Documents shall be in Kansas as set forth
in the Note and Financing Documents.
D. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.
E. The provisions of this Agreement shall be severable, and if
any provision shall be invalid, void or unenforceable, in whole or in part, for
any reason, the remaining provisions shall remain in full force and effect.
Without limiting the generality of the foregoing, in the event that a court
shall determine that the restriction on competition contained in Article XII,
Subsection F. is unenforceable either as to scope, duration or location or in
any other respect, such court shall enforce so much of the restriction as such
court shall deem enforceable.
F. This Agreement, the Environmental Audit Agreement between RAS
and Mercury of even date herewith (the "Environmental Audit Agreement") and
referenced documents contain the entire agreement of the parties and supersedes
any and all prior agreements between the parties, written or oral, with respect
to the transactions contemplated hereby. Except as set forth in Article XV, it
may not be changed or terminated orally but may only be changed by an agreement
in writing signed by the party or parties against whom enforcement of any
waiver, change, modification, extension, discharge or termination is sought.
G. This Agreement may be executed in several counterparts, each
of which, when so executed, shall be deemed to be an original, and such
counterparts shall, together, constitute and be one and the same instrument.
H. Nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation, other than
RAS, and Mercury and their respective successors and assigns, any rights or
remedies under or by reason of any term, provision, condition, undertaking,
warranty, representation or agreement contained in this Agreement.
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I. The provisions, terms and conditions of this Agreement shall
be binding upon and shall inure to the benefit of and be enforceable by the
successors and assigns of RAS and/or Mercury.
J. Whether or not the transactions contemplated by the Agreement
are consummated, except as otherwise set forth herein or in the Environmental
Audit Agreement, RAS and Mercury shall each pay their own fees and expenses
incident to the negotiation, preparation, execution, delivery, and performance
thereof, including, without limitation, the fees and expenses of their
respective counsel, accountants and other experts. RAS shall pay for any title
insurance obtained pursuant to the Financing Documents.
K. In the event of a claim by either party for breach of, or
failure to perform, or any inaccuracy in, any of the representations,
warranties, covenants, or agreements contained in this Agreement, or in any
Schedule, Exhibit, certificate, or other instrument furnished under and
referring to this Agreement, then the prevailing party shall be entitled to be
reimbursed for all costs, fees, and expenses incurred in connection with
prosecuting or defending such claim, including reasonable attorneys' fees.
L. In the event Mercury requires audited financial statements
with respect to the Purchased Assets and the Asset Related Activities for the
1995 fiscal year ended December 31, 1995 confirming the accuracy of the
representations contained in this Agreement, RAS will assist Mercury with the
completion of these statements. Mercury shall pay the costs associated with
this audit.
M. The parties have agreed that the violation of the conditions
contained in Article XII, Subsection E. shall cause irreparable injury to
Mercury and damages which are not reasonably susceptible of measure.
Accordingly, in the event of a violation of Article XII, Subsection E., Mercury
shall be entitled to
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equitable remedies, including, without limitation, injunctive relief.
In consideration of the terms and conditions set forth herein, each party
hereby approves this Agreement as of the day and year set forth below.
RAYTHEON AIRCRAFT SERVICES, INC.
By: /s/ JOHN C. WILLIS
------------------------------
Its: President
------------------------------
Date: 4/8/96
------------------------------
"RAS"
MERCURY AIR GROUP, INC.
By: /s/ KEVIN J. WALSH
------------------------------
Kevin J. Walsh
Its: Executive Vice President
------------------------------
Date: April 8, 1996
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"Mercury"
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EXHIBIT 99.2.2
August 29, 1996
Raytheon Aircraft Services, Inc.
P.O. Box 2966
Wichita, Kansas 67201
Attention: Vice President-Finance
Gentlemen:
Reference is made to the Asset Purchase Agreement, dated as of April
8, 1996, between Raytheon Aircraft Services, Inc., a Kansas corporation ("RAS"),
and Mercury Air Group, Inc. a New York corporation ("Mercury") as heretofore
amended, (the "Agreement"). Capitalized terms used but not defined herein
shall have the meanings specified in the Agreement.
RAS and Mercury hereby agree as follows:
1. Article III is amended by adding at the end of the first full sentence
of the first full paragraph of Subsection C as follows:
The original principal amount of the Note shall be $3,900,000.00;
provided, however, that there shall be the possibility that the principal
amount of the Note will be adjusted upward in the amount of Seven Hundred Fifty
Thousand Dollars ($750,000.00) upon the closing of the Bedford, Massachusetts
facility (the "Bedford Closing"). In the event the parties consummate the
Bedford Closing, RAS shall transfer to Mercury, subject to the terms and
conditions set forth below, the Bedford Massachusetts Leases and related
Assets, Subleases and Continuing Contracts (the "Bedford Purchased Assets"),
and Mercury shall provide RAS with a legend, to be affixed to the Note, to the
effect that, from and after the Bedford Closing, the principal amount of the
Note shall increase to Four Million Six Hundred Fifty Thousand Dollars
($4,650,000.00) and that
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principal and interest payments accruing on the Note shall be reamortized
accordingly.
2. On the Closing Date, the Bedford Purchased Assets shall be deemed
Excluded Assets, until such time as the Bedford Closing occurs and the Closing
shall occur with respect to the remaining Purchased Assets without regard to
satisfaction of the conditions contained herein with respect to the Bedford
Purchased Assets. On or before October 31, 1996, on a date which shall be
mutually acceptable to Mercury and RAS, subject to and following satisfaction
of the conditions to the Bedford Closing set forth below, Mercury shall
purchase the Bedford Purchased Assets, in accordance with the following terms
and conditions, (the date of such purchase is hereinafter referred to as the
"Bedford Closing Date"):
A. Conditions to Closing: The following conditions must be
satisfied prior to the Bedford Closing:
1. RAS and Mercury shall have entered into a letter agreement
pursuant to which the parties will have agreed to a Seven Hundred Fifty
Thousand Dollar ($750,000.00) increase in the principal amount of the Note,
effective as of the Bedford Closing Date, and the Note shall have been legended
to reflect the fact that it is subject to the terms of such agreement.
2. Mercury shall have provided to RAS the Financing Documents
with respect to the Bedford Leases and the assignment and assumption
documentation with respect to the Bedford Purchased Assets, all of which shall
be executed and in form consistent with those utilized on the Closing Date with
respect to the Purchased Assets.
3. RAS shall have provided to Mercury assignment and assumption
documentation and bills of sale with respect to the Bedford Purchased Assets,
all of which shall be executed and in form consistent with those utilized on
the Closing Date with respect to the Purchased Assets.
4. The conditions to Closing set forth in Article IV, Sections A
and B shall continue to be true and correct with respect to the Bedford
Purchased Assets as of the Bedford Closing Date.
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5. Mercury shall additionally be satisfied, in its sole and
absolute discretion, with the environmental conditions affecting the property
subject to the Bedford Leases, and with the amendments to the Bedford Leases
contemplated by that certain Letter Agreement dated as of May 17, 1996 between
Mercury and RAS.
B. Following written agreement between Mercury and RAS that the
conditions to the Bedford Closing set forth in Paragraph 2(A) have all been
satisfied, RAS will provide to Mercury: (1) all contracts (the "Bedford Hangar
Contracts") will respect to repair or construction work at the Bedford,
Massachusetts facility which RAS has entered into since the Closing (the
"Bedford Work"); (2) all records with respect to payment for the Bedford Work;
and (3) an opportunity to review the Bedford Work. Following its reviews,
Mercury shall then indicate in writing to RAS whether it: (i) reasonably
accepts the Bedford Hangar Contracts as representing reasonable and economic
obligations to complete the work required by the Massachusetts Port Authority
("MPA") on the Bedford leaseholds; and (ii) reasonably accepts the payments
made by RAS for Bedford Work as representing reasonable and economic payments
for work in fact completed. In the event that Mercury accepts the Bedford
Hangar Contracts, Mercury will assume any such contracts in connection with the
Bedford Closing. If Mercury accepts both the Bedford Hangar Contracts and the
payments for the Bedford Work, the Bedford Closing shall occur. If Mercury
accepts the payments for the Bedford Work, Mercury shall reimburse RAS for such
payments, in cash, at the Bedford Closing. In the event that Mercury declines
to accept one or more of the Bedford Hangar Contracts, RAS shall have the
option of electing to cause the Bedford Closing to occur; provided, however,
that Mercury will not assume and shall have no liability for any Bedford Hangar
Contract not expressly assumed by Mercury. In the event that Mercury declines
to accept one or more of the payments for the Bedford Work, RAS shall have the
option of electing to cause the Bedford Closing to occur; provided, however,
that Mercury shall have no obligation to reimburse RAS for the payments for the
Bedford Work not expressly assumed by Mercury. In the event the Bedford
Closing occurs, RAS agrees to reimburse Mercury with one-half (1/2) the dollar
amount of any cost for repair and corrective work required to refurbish Hangars
1724 and 1727 at the Bedford facility (the "Hangar Credit") in order to satisfy
the requirements of the MPA as of the Bedford Closing. At the Bedford Closing,
in the event the
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approved Bedford Work payment exceeds the Hangar Credit, Mercury will pay RAS
the difference in cash at the Bedford Closing. If the Hangar Credit exceeds the
cost of the Bedford Work, RAS will pay Mercury the difference, in cash, at the
Bedford Closing. RAS shall have the right to operate the Bedford,
Massachusetts facility, perform the Bedford Work and enter into the Bedford
Hangar Contracts, in its sole discretion, pending the Bedford Closing. RAS
acknowledges that it will not rely on any potential purchase of the Bedford
Purchased Assets in connection with making any decisions related to the
operation of the Bedford facility.
C. Termination with Respect to Bedford Purchased Assets. In the
event that the Bedford Closing has not occurred on or before October 31, 1996,
either party may terminate this Agreement with respect to the Bedford Purchased
Assets and neither party shall have any obligation to purchase or sell the
Bedford Purchased Assets. Notwithstanding the foregoing, in the event that
Mercury determines that the conditions to the Bedford Closing set forth in
Subsection "A", clause "5" above will not be satisfied, Mercury may so inform
RAS and terminate this Agreement with respect to the Bedford Purchased Assets
before October 31, 1996 and neither party shall have any obligation to purchase
or sell the Bedford Purchased Assets. Notwithstanding the foregoing,
termination of this Agreement with respect to the Bedford Purchased Assets
shall not relieve either party for liability for breaches of this Agreement
which may have occurred prior to the termination of this Agreement with respect
to the Bedford Purchased Assets.
3. Article III is hereby amended by adding at the end thereof a new
Subsection "E" which provides as follows:
E. The parties hereto acknowledge that RAS has previously made a
payment in the amount of Twenty-One Thousand Nine Hundred Eighty-Four and
Sixteen Hundredths Dollars ($21,984.16) to Addison Airport of Texas, Inc. for
expenses relating to the Addison, Texas facility. Mercury hereby represents
and warrants that it shall reimburse RAS for one-half (1/2) of this expense, in
the amount of Ten Thousand Nine Hundred Ninety-Two and Eight Hundredths Dollars
($10,992.08). Mercury hereby agrees to make such reimbursement in cash, as an
adjustment to the Purchase Price, at Closing.
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4. Article III is hereby further amended by adding after the new
Subsection "E" a new "F", as follows:
F. The parties hereto acknowledge that Mercury has previously
made a payment to the City of Los Angeles, California (the "City"), for
expenses relating to the Ontario, California facility in the amount of
Forty-One Thousand Two Hundred Seventy-Nine Dollars ($41,279.00) RAS hereby
represents and warrants that, in the event that Mercury has not, at the
expiration of twelve (12) calendar months from and after the Closing, received
reimbursement or rent credit from the City for this amount, RAS will pay to
Mercury one-half of this amount, or Twenty Thousand Six Hundred Thirty-Nine and
Fifty Hundredths Dollars ($20,639.50). Mercury concurrently represents and
warrants that, if at any time following the above-mentioned payment from RAS,
Mercury does receive such reimbursement or rent credit from the City, then
Mercury will refund the amount of RAS's previous payment to RAS or its
designee.
5. Article III is hereby further amended by adding after new Subsection
"F" a new "G", as follows:
G. Mercury and RAS hereby agree that they will each bear one-half
(1/2) the cost of the intangibles tax payable to the State of Georgia in
consideration of the transfer of the Note and related Security Agreement. The
above-referenced division of this cost will be made notwithstanding any
contrary language contained in any Purchase Money Deed To Secure Debt relating
to either one of said facilities. This amount shall initially be paid by RAS,
and the parties will settle accounts at Closing through the prorations as
elsewhere herein described.
6. Article III, is amended by adding the following sentence at the end of
the first full sentence in the second full paragraph of Subsection C as
follows:
Notwithstanding the preceding sentence RAS and Mercury understand and
agree that the Note shall not be secured by a mortgage or any other security
interest on the leasehold interest covered by the Leases at the Ontario,
California facility.
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7. Pursuant to Article III, Subsection D. of the Agreement the parties
hereto have agreed that the Purchase Price will be allocated as set forth in
Exhibit H attached hereto.
8. The June 20, 1996 letter agreement by and between RAS and Mercury
which has been duly signed by both parties is hereby incorporated by reference
and made a formal part of this Agreement as hereinafter modified. A copy of
said letter is attached hereto as Addendum I.
9. Article XII., is amended by adding to the end thereof a new Subsection
"K", as follows:
K. Prior to the Closing Date RAS shall clean and
remediate the area at its Ontario location where empty
petroleum or other type drums have been stored. Said
remediation shall be at RAS's sole cost and expense and shall
be in full compliance with all airport, municipal, county,
state and federal laws, ordinances, rules, regulations,
requirements and directives pertaining thereto.
10. Article I, Subsection B., is amended by providing that the contracts
pursuant to which RAS operates at the Mission Tank Farm at the Addison, Texas
facility and RAS's fuel inventory on hand (excepting herefrom the fuel which
may be in tanker trucks) at Closing at the Addison, Texas facility are to be
included on the list of Excluded Assets.
11. Article XII., is further amended by adding after new Subsection K, a
new Subsection "L", as follows:
L. Prior to the Closing Date RAS shall remediate and
remove all petroleum and/or fuel storage drums at its
Hartsfield location. Said removal shall be at RAS's sole cost
and expense and shall be in full compliance with all airport,
municipal, county, state and federal laws, ordinances, rules,
regulations, requirements and directives pertaining thereto.
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12. Article XII., is further amended by adding after new Subsection L., a
new Subsection "M", as follows:
M. Within ninety (90) days of the Closing Date, RAS
shall be liable to remediate and remove or encapsulate all
asbestos located at its Peachtree DeKalb location. Said
removal shall be at RAS's sole cost and expense and shall be
in full compliance with all airport, municipal, county, state
and federal laws, ordinances, rules, regulations and
requirements pertaining thereto.
13. Notwithstanding anything to the contrary contained in that certain
Letter Agreement dated as of June 20, 1996 by and between RAS and Mercury, the
parties hereto agree to reinstate the method used to calculate the Purchase
Price first set forth in Article III, Subsection A. Both parties agree to
settle accounts in cash, including (1) the $10,992.08 payment from Mercury to
RAS set forth in Article III, Subsection E; and (2) amounts owing from RAS to
Mercury for purchases of jet fuel at the Addison, Texas facility.
14. Article XII., is further amended by adding after new Subsection M a
new Subsection "N" as follows:
N. At or after the Closing Date RAS shall complete the
work described on Addendum II attached hereto to the
satisfaction of the Airport Authority at the Addison, Texas
facility, at RAS's sole cost and expense. This work shall
be done in accordance and compliance with all applicable
airport requirements and all applicable airport, municipal,
federal, county and state laws, ordinances, rules,
regulations, requirements, standards and directives pertaining
thereto.
15. Article XII., is further amended by adding after new Subsection N, a
new Subsection "O", as follows:
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O. Notwithstanding any provision to the contrary herein,
RAS shall defend, hold harmless and indemnify Mercury and its
employees, agents, successors and assigns, stockholders,
officers, and directors against and in respect of any and all
losses, costs, claims, demands, liabilities, judgments,
including without limitation, interest, penalties, cost of
defense and reasonable attorneys, fees, which arise out of,
result from or relate to RAS's obligations under Subsections K
through and including M hereof. This shall be in addition to
and not in lieu of any other indemnification contained
elsewhere in this Agreement. To the extent of any conflict
between this Subsection O and any other indemnification
provision hereof, this Subsection O shall control.
16. Article XVI., is amended by adding after Subsection M, a new
Subsection "N" as follows:
Post Closing Matters. In connection with any work,
activities, construction, repairs, environmental remediation,
other remediation, any and all matters undertaken to be
performed by RAS or RAS's agents, contractors, subcontractors,
employees, licensees and permittees ("RAS Representatives")
after the Closing at the Airport premises which are covered by
this Agreement, the following shall apply. RAS and its
Representatives shall have the right after Closing at
reasonable times and on reasonable notice to enter the
premises controlled by Mercury for the purpose of conducting
the activities described above. RAS shall keep Mercury
promptly informed as to all developments in connection with
the foregoing and agree to coordinate their activities in such
a way as to limit interference with Mercury's operation at the
particular facility. RAS and its Representatives will comply
with all federal, state and local statutes, laws, rules and
regulations in performing services under this Subsection.
RAS's Representatives shall be appropriately qualified and
skilled to perform the services required hereunder and they
will take all steps to insure that the work is undertaken in a
workmanlike manner and in accordance with established
procedures. RAS's Representatives shall procure and
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maintain at their expense, the insurance upon such terms and
conditions as are customarily included for companies in the
same type of business, all subject to the prior review and
approval of Mercury. RAS's representatives shall name Mercury
and its affiliates and their respective officers, agents,
employees and assigns as additional insureds as respects to
said insurance. Mercury shall be provided with a certificate
of insurance prior to the work commencing. RAS and its
Representatives shall indemnify, hold harmless and defend
Mercury its employees, directors, officers, shareholders,
agents and assigns from and against any and all liabilities,
claims, penalties, demands, fines, forfeitures, suits, causes
of action, and the costs and expenses incident thereto
(including, without limitation, cost of defense, settlement
and reasonable attorneys' fees) which Mercury may incur or
become responsible for, or pay out, as a result of death or
bodily injury to any person, damage to any property, adverse
effects on the environment, or any violation of law, arising
directly or indirectly, out of or in connection with RAS and
its Representatives breach of any term or provision of this
Subsection N or any other negligent or willful act or omission
on the part of RAS, or its Representatives in the performance
of this Subsection N. RAS and its Representatives assume all
risk off property loss or damage and of personal injury or
death which they may sustain as a result of service rendered
under this Subsection. As to the foregoing, the particular
indemnification provision found in this subsection shall
control over any conflicting indemnification provision
elsewhere in this Agreement.
17. Article V. Subsection A. is amended by changing the date set forth in
line 3 thereof to "August 29, 1996" in place and stead of "July 3, 1996".
18. Article XIV. is amended by adding after the second paragraph the
following undesignated paragraph:
After the Closing, RAS covenants and agrees to promptly and in good
faith, take all actions and do all things
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necessary to establish Mercury within the chain of legal title in the
public records of the government agency charged with such function, at
each of the six (6) Airports which form the subject matter for this
Agreement, including the execution of all documents and instruments
reasonably requested by Mercury. Any such request by Mercury shall
IPSO FACTO be deemed by the parties hereto to be reasonable if, on the
date of such request, a title report on the subject property, issued
by a title company of national standing and reputation, and subject to
the exceptions and exclusions which are standard within the title
insurance industry, would fail to show Mercury as either (1) the
holder of the leasehold estate for such property or (2) the assignee
of RAS with respect to all leasehold right, title and interest in and
to such property.
19. Article XVI., is further amended by adding after new Subsection N, the
following new Subsection "O", as follows:
O. Beech Holdings, Inc. a Kansas corporation ("BHI"),
owns directly or indirectly all of the issued and outstanding
shares of stock of RAS and presently holds title to certain of
the leasehold interests at the Bedford, Massachusetts and
Addison, Texas facilities and, as such, BHI shall, at the
Closing, and except as modified by the provisions of Article
III. C. hereof, join in the conveyance to Mercury of certain
of the Leases and Assets at said locations. At the Closing
RAS shall cause BHI to execute such instruments of sale,
transfer, assignment, conveyance and delivery, as is required
in order to convey to Mercury good, valid and marketable title
to the Leases and Assets, described in the immediately
preceding sentence. BHI and RAS understand and agree that
each representation, warranty, covenant, condition, agreement
and term used in this Agreement that apply to a Lease or Asset
shall be deemed to apply to any Lease or Asset at the Bedford,
Massachusetts, and Addison, Texas facilities in the name of
BHI to the same extent as all other Leases or Assets covered
by this Agreement. The entire Purchase Price to be paid by
Mercury hereunder shall be paid to RAS and not to BHI.
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20. Article XVI is hereby further amended by adding after new Subsection
0, a new "P", as follows:
P. UNDERTAKING AND INDEMNIFICATION BY RAS.
RAS hereby agrees to remove the following imperfections on
title promptly following the Closing:
1. Hartsfield FBO:
a. Commonwealth Land Title Insurance Company
Commitment No. 96627.0(1), dated as of April 10, 1996, Schedule
B-Section 1, Items 15 and 16.
2. Peachtree/DeKalb FBO:
a. Commonwealth Land Title Insurance Company
Commitment No. 96627.0,dated as of May 3, 1996 Schedule
B-Section 1, Items 10 and 11.
These Items relating to the Peachtree/DeKalb FBO shall be removed
from the applicable title records by no later than September 9, 1996.
Nothing contained in this Subsection shall be construed to limit,
modify or replace any related covenant or indemnity contained in the Agreement.
21. Article V is hereby amended by adding at the end thereof the following
new Subsection "E" as follows:
"Notwithstanding the fact that the transfer of title to the Purchased
Assets shall occur and the Purchase Price shall be paid to RAS following
recording of the various documents described in the letter agreement between
Mercury, RAS and Commonwealth Land Title Company, Mercury and RAS have agreed
Mercury will commence operations at the Ontario, California; Addison, Texas;
Corpus Christi, Texas; Hartsfield, Georgia; and Peachtree, Georgia leaseholds
and that for all other purposes under this Agreement (including, but not
limited to, prorations and/or offsets of certain amounts due from one party to
the other, determination of responsibility for liability and obligations,
application of the indemnification provisions contained herein, and the right
to profit from the operations at the various Airports), the Closing
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shall be deemed to have occurred as of midnight, August 28, 1996 in each of the
time zones where the Purchased Assets are located, or such actual local time,
which will be deemed for purposes hereof to be midnight, August 28, 1996, as
the parties' on-site representatives jointly record the fuel meter readings at
the several Airports."
22. Article III is hereby amended by adding at the end of Subsection "A"
thereof the following:
"Any Airport fees, the payment of which is not settled between Mercury
and RAS through the above-mentioned prorations at Closing, shall be paid
directly by RAS to the several Airports."
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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If the foregoing is acceptable to you, please so indicate by signing in the
space provided below.
Very truly yours,
Mercury Air Group, Inc.
By: /s/ RANDOLPH E. AJER
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Title: Executive Vice President
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Date: August 29, 1996
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Acknowledged and Agreed
Raytheon Aircraft Services Inc.
By: /s/ JOHN C. WILLIS
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Title: President
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Date: August 29, 1996
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EXHIBIT 99.4.1
THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS OF A LETTER AGREEMENT DATED AUGUST
29, 1996 BETWEEN MERCURY AIR GROUP, INC. AND RAYTHEON AIRCRAFT SERVICES, INC.
Principal Sum: U.S. $4,650,000.00
Due Date: ______________________
Done at Wichita, Kansas
NEGOTIABLE PROMISSORY NOTE
On this 21st day of June, 1996, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, MERCURY AIR GROUP,
INC., a New York corporation, with its principal place of business at 5456
McConnell Avenue, Los Angeles, California 90066 (hereinafter "Debtor"),
unconditionally promises to pay to the order of RAYTHEON AIRCRAFT SERVICES,
INC. (hereinafter "Secured Party") or its assigns, the sum of Four Million Six
Hundred Fifty Thousand and 00/100 United States Dollars (U.S. $4,650,000.00)
(hereinafter "Principal Sum"), together with accrued interest at the applicable
Interest Rate specified below and such other charges and fees as herein
provided. This Negotiable Promissory Note is sometimes hereinafter referred to
as the "Promissory Note" or the "Agreement".
FOR SUCH PURPOSES AS HEREINAFTER SPECIFIED, THE "COMMENCEMENT DATE" OF
THIS PROMISSORY NOTE SHALL BE THE DATE THE PARTIES CLOSE THEIR TRANSACTION
UNDER THE ASSET PURCHASE AGREEMENT DATED APRIL 8, 1996. The Principal Sum and
accrued interest shall be repaid by Debtor to Secured Party over a period of
eight (8) years (hereinafter "Financing Term") in accordance with the terms and
subject to the conditions specified below:
1. Interest Rate. In addition to Debtor's repayment of the
Principal Sum, Debtor shall pay interest to Secured Party on the unpaid balance
of the Principal Sum at the applicable rate of interest hereinafter specified.
Debtor's payment of accrued interest shall be made in conjunction with its
quarterly payments of principal as specified below in Section 2. The applicable
rates of interest throughout the Financing Term shall be as follows:
(a) During the eight year (8) year period following the
Commencement Date hereof (Quarters 1 through 32 of the
Financing Term), interest shall accrue on the unpaid balance
of the Principal Sum and be paid by Debtor at an annual rate
equal to the rate from time to time announced by the Bank of
America (New York, N.Y) as its prime rate of interest
(hereinafter "Prime Rate"). The effective rate of interest
shall be adjusted on the first business day of each calendar
year quarter (i.e., January 1, April 1, July 1 and October
1) to reflect any increase or decrease in the Prime Rate as
of that date.
The annual rate of interest applicable hereunder from time to time, as
specified above, is sometimes referred to herein as the "Interest Rate". All
interest shall be calculated on the basis of a 360-day year and actual days
outstanding. Notwithstanding
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anything set forth herein to the contrary, in no event shall the Interest Rate
payable hereunder be higher than the maximum amount permitted under applicable
law.
2. Payment of Principal and Interest. The Principal Sum shall be
repaid by Debtor to Secured Party, together with accrued interest at the
applicable Interest Rate specified above in Section 1, in thirty-two (32)
consecutive quarterly installment payments due in Quarters 1 through 32 of the
Financing Term. The amount of each respective quarterly installment payment is
hereinbelow specified. Debtor's first quarterly installment payment shall be
due and payable on or before the first day of the first calendar quarter
immediately following the Commencement Date hereof (Quarter 1 of the Financing
Term, "Initial Payment Date"). Each subsequent quarterly installment payment
shall be paid by Debtor on the same date of each succeeding calendar quarter.
The final quarterly installment payment shall be due and payable thirty-two
(32) quarters following the Commencement Date of this Promissory Note
(hereinafter "Due Date").
The amount of Debtor's quarterly payments due hereunder during the
Financing Term shall be as follows:
(a) The initial quarterly installment shall be based upon an
amortization, over thirty-two (32) calendar quarters, of the
unpaid balance of the Principal Sum of this Promissory Note,
using the Interest Rate in effect as of the date hereof. From
and after each date on which the Prime Rate shall change (a
"Change Date") following the Initial Payment Date, the amount
of the quarterly installment of principal and interest due on
the first day of the calendar quarter following such Change
Date shall be recalculated using the Interest Rate in effect
on the Change Date and based upon the unpaid balance of the
Principal Sum of this Promissory Note as of the Change Date
and an amortization of thirty-two (32) calendar quarters less
the number of quarters elapsed since the Initial Payment Date.
Such revised amount shall be the new quarterly principal and
interest payment under the Promissory Note beginning as of the
first day of the calendar quarter following such Change Date
and continuing until the first day of the calendar quarter
following the next Change Date. On the Due Date, the Debtor
shall pay to the Secured Party a final installment equal to
the unpaid balance of the Principal Sum then remaining
outstanding, plus all accrued and unpaid interest.
3. Repayment and Prepayment. The aforesaid payments of principal
and interest shall be made to Secured Party at its office in Wichita, Kansas.
All payments shall be due and payable, without demand or notice to Debtor, in
strict accordance with the aforesaid
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quarterly schedule of payments. Any payment due on a non-business day may be
made on the next succeeding business day. Debtor's payments hereunder, when
received, shall be applied first to the payment of accrued and unpaid interest
(computed upon the unpaid balance of the Principal Sum) and any late payment
charges owed as of the date such payment is received by Secured Party (if any),
and the remainder of Debtor's payment shall be applied to payment of the
unpaid Principal Sum. The unpaid Principal Sum and all accrued interest and
late payment charges due hereunder must be paid in full on the Due Date.
Debtor may prepay the unpaid balance of the Principal Sum in part or in full at
any time and without any penalty.
4. Late Payment Charge. In the event Debtor is more than ten
(10) days late in making any payment due hereunder as specified above, a late
payment charge in an amount equal to three percent (3%) of the amount of the
delayed payment shall be assessed against Debtor and added to the amount of the
delayed payment due hereunder for the purpose of defraying Secured Party's
expenses incident to handling the delinquent payment. Any late payment charge
assessed against Debtor shall be immediately due and payable to Secured Party.
The late payment charge shall be in addition to, and not in lieu of, any other
remedy provided to Secured Party in this Agreement for default by Debtor.
5. Secured Transaction. To secure the payment of Debtor's
obligation hereunder and any and all other indebtedness owed by Debtor to
Secured Party (whether now existing or hereafter arising), as well as any
renewals, extensions or changes in the form of said obligation or indebtedness,
Debtor has contemporaneously herewith executed five purchase money Deeds of
Trust (hereinafter "Security Agreement") granting to Secured Party a security
interest in the property described in such Security Agreement. It is
specifically understood and agreed that the leasehold estates owned by Debtor
at Ontario, California shall not be security for this Note.
6. Purpose of Loan. Debtor warrants and represents to Secured
Party that this loan is for business, commercial or agricultural purposes and
not primarily for personal, family or household purposes.
7. Debtor's Default. The parties agree that the occurrence of
any of the following events shall constitute an "Event of Default":
(a) Debtor's failure to make any timely payment of either
principal, interest, late payment charges or any
other amount required to be paid hereunder, or
Debtor's failure to pay any amount required under the
security agreement or Asset Purchase Agreement
between Debtor and Secured Party;
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(b) Debtors failure to perform any promise, agreement,
obligation, warranty or covenant made by it herein or
in the Security Agreement, Asset Purchase Agreement
or any other agreement;
(c) Debtor's failure to maintain the insurance coverage
as specified in the Security Agreement;
(d) any material misrepresentation made by Debtor to
Secured Party in connection with the Security
Agreement or this Agreement;
(e) entry of a money judgment in excess of $750,000
against Debtor, if such judgment is nonappealable and
remains undischarged or unstayed for a period in
excess of sixty (60) days;
(f) dissolution, termination of existence, cessation of
business in all material respects, insolvency,
business failure, inability to pay debts as they
mature, the making of an assignment for the benefit
of creditors, the commencement, by Debtor, of any
proceedings under any bankruptcy or insolvency laws,
or the filing against Mercury of any request or
petition for liquidation, reorganization or other
similar relief under any bankruptcy or insolvency
laws and the failure to have such proceeding
dismissed within sixty (60) days of filing;
(g) appointment of a receiver of any material part or all
of Debtor's assets if such appointment or proceeding
continues for a period of more than sixty (60) days;
(h) Debtor entering into any transaction that is a
"change of control" as defined in the Mercury Air
Group, Inc. Indenture dated January 30, 1995 and
which causes a "rating downgrade" as defined in the
same Indenture;
(i) default in the payment by Debtor of any amount over
$70,000 due and owing to the lessor of any of the
leasehold properties at Corpus Christi, Texas;
Addison, Texas; Ontario, California; Peachtree-DeKalb
in Atlanta, Georgia; Hartsfield in Atlanta, Georgia;
or Bedford, Massachusetts, provided that Debtor has
not disputed in good faith that such amount is due
and owing; or
(j) the declaration of a default by the lessor of any of
the leasehold properties at Corpus Christi, Texas;
Addison, Texas; Ontario, California; Peachtree-DeKalb
in Atlanta, Georgia; Hartsfield in Atlanta, Georgia;
or Bedford, Massachusetts.
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<PAGE> 5
The occurrence and continuance of any of the event specified in Clause (a) for a
period of ten (10) days following the sending of a written notice of such event
to Debtor shall constitute an "Event of Default". The occurrence and
continuance of any of the events specified in Clauses (b), (c), for a period of
thirty (30) days following the sending of a written notice of such event to
Debtor shall constitute and "Event of Default"; provided however that if any
such event is not reasonably susceptible of cure within such thirty (30) day
period, an Event of Default shall not be deemed to occur if Debtor commences a
cure within such thirty (30) day periods and proceeds diligently to complete
such cure no later than sixty (60) days following written notice. The
occurrence of any of the events specified in Clauses (d), (e), (f), (g), (h),
(i) and (j) shall be deemed an "Event of Default" without notice or lapse of
time.
Should an Event of Default occur, Secured Party may employ all remedies allowed
by law, including, without limitation, declaring all indebtedness owed
hereunder, as well as any other indebtedness or liability of Debtor owed to
Secured Party, immediately due and payable. Additionally, Secured Party may
require Mercury to assemble the Collateral and make it available to Secured
Party at a place to be designated by Secured Party which is reasonably
convenient to both parties. The requirements of the Uniform Commercial Code
for reasonable notification to Debtor of the time and place of any proposed
public sale of the Collateral or of the time after which any private sale or
other intended disposition of the Collateral is to be made shall be met if such
notice is mailed, postage prepaid, to Debtor's address, as specified herein, at
least ten (10) days before the time of the sale or disposition. After
deduction of all reasonable expenses incurred in realizing on Secured Party's
security interest, and after the payment of all principal, interest and late
payment charges due under this Agreement, the balance of the proceeds of sale,
if any, may be applied to the payment of any or all other indebtedness which
Debtor owes Secured Party, regardless of whether such indebtedness is due or
not. Debtor shall be liable for any deficiency in its financial obligation
under this Agreement after application of such proceeds. Debtor agrees to pay
the reasonable attorneys' fees incurred by Secured Party to repossess the
Collateral as well as the attorneys' fees incurred in pursuing and collecting
any deficiency. At Secured Party's option and upon and Event of Default,
Secured Party may elect to assume the real estate leases described in Clause
(k) pursuant to the conditional assignment to be executed and delivered by
Debtor to Secured Party.
8. Obligation to Make Payments. Debtor acknowledges and agrees
that its obligation to make all payments due and owing under the provisions
hereof shall be absolute and unconditional and to the extent permitted by
applicable law shall not be affected by any circumstance whatsoever, including,
without limitation (a) any setoff, counterclaim, defense or other right which
Debtor may have
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<PAGE> 6
against Secured Party or any other person or entity for any reason whatsoever;
(b) any defect in the title, condition, design, operation or fitness for use
of, or any damage to or loss or destruction of the Collateral identified above,
or any interference, interruption or cessation in or prohibition of the use or
possession thereof by Debtor for any reason whatsoever, including, without
limitation, any such interference, interruption, cessation or prohibition
resulting from the act of any governmental authority; (c) any liens or rights
of others with respect to the Collateral; (d) the invalidity or
unenforceability or lack of due authorization of this Agreement or any lack of
right, power or authority of Debtor or Secured Party to enter into this
Agreement; (e) any insolvency, bankruptcy, reorganization or similar
proceedings by or against Debtor or any other person or entity; or (f) any
other cause whether similar or dissimilar to the foregoing, any present or
future law notwithstanding, it being the intention of the parties hereto that
all payments being payable by Debtor hereunder shall continue to be payable in
all events in the manner and at the time provided herein. Such payments shall
not be subject to any abatement, setoff or reduction for any reason whatsoever,
including any present of future claims by Debtor against Secured Party under
this Agreement or otherwise. To the extent permitted by applicable law, Debtor
hereby waives any rights which it may now have or which may be conferred upon
it, by statute or otherwise, to terminate, cancel, quit or surrender this
Agreement except in accordance with the terms hereof.
9. Waivers. Debtor hereby waives any requirements pertaining to
presentment, demand for payment, notice of dishonor, and except to the extent
specifically set forth in Section 7 hereof, all other notices or demands in
connection with the delivery, acceptance, performance or default of this
Promissory Note. No waiver of any covenant, warranty or condition of this
Agreement, nor of any breach or default hereunder, shall be effective for any
purpose whatsoever unless such waiver is in writing and signed by an officer of
Secured Party. It is expressly agreed that Secured Party's waiver of any
breach or default by Debtor shall constitute a waiver only as to such
particular breach or default and not a waiver of any future breach or default.
10. Legal, Valid, Binding and Enforceable Obligation. Debtor
represents and warrants to Secured Party that this Promissory Note, upon
execution and delivery, will constitute the legal, valid and binding obligation
of Debtor and shall be enforceable in accordance with its terms. Debtor agrees
to furnish Secured Party with written legal opinions, satisfactory in form and
substance to Secured Party, verifying the aforesaid representation and
warranty.
11. Changes of Address. Debtor shall immediately notify Secured
Party in writing of any change of address from that shown in this Agreement.
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<PAGE> 7
12. GOVERNING LAW AND FORUM CHOICE. THIS AGREEMENT WAS MADE AND
ENTERED INTO IN THE STATE OF KANSAS AND THE LAW GOVERNING THIS TRANSACTION
SHALL BE THAT OF THE STATE OF KANSAS AS IT MAY FROM TIME TO TIME EXIST. THE
LAW OF THE STATE OF KANSAS SHALL APPLY TO ANY AND ALL MATTERS ARISING FROM OR
RELATED TO THIS AGREEMENT AND TRANSACTION, INCLUDING ANY ACTIONS UNDERTAKEN BY
SECURED PARTY SHOULD AN "EVENT OF DEFAULT" OCCUR, AND ALL OTHER REMEDIES WHICH
MAY BE AVAILABLE INCLUDING SEEKING A DEFICIENCY JUDGMENT AGAINST DEBTOR. THE
PARTIES AGREE THAT ANY LEGAL PROCEEDING BASED UPON THE PROVISIONS OF THIS
AGREEMENT SHALL BE BROUGHT EXCLUSIVELY IN EITHER THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF KANSAS AT WICHITA, KANSAS, OR IN THE EIGHTEENTH
JUDICIAL DISTRICT COURT OF SEDGWICK COUNTY, KANSAS, TO THE EXCLUSION OF ALL
OTHER COURTS AND TRIBUNALS. NOTWITHSTANDING THE ABOVE, IN THE EVENT AN "EVENT
OF DEFAULT" SHOULD OCCUR, SECURED PARTY (AT ITS SOLE OPTION) MAY INSTITUTE A
LEGAL PROCEEDING IN ANY JURISDICTION AS MAY BE APPROPRIATE IN ORDER FOR SECURED
PARTY TO OBTAIN POSSESSION OF AND FORECLOSE UPON THE COLLATERAL. THE PARTIES
HEREBY CONSENT AND AGREE TO BE SUBJECT TO THE JURISDICTION OF THE AFORESAID
COURTS IN SUCH PROCEEDINGS.
13. Enforceability. The provisions of this Agreement shall be
severable and, if any provisions are for any reason determined to be invalid,
void or unenforceable, in whole or in part, the remaining provisions shall
remain in full force and effect; provided that the purpose of the remaining
valid, effective and enforceable provisions is not frustrated; and provided
further that no party is substantially and materially prejudiced thereby.
14. Assignability. Secured Party shall have the absolute right to
assign, transfer or sell any of its rights under this Promissory Note to any
party of its choosing upon giving written notice thereof to Debtor. Debtor may
not assign or delegate any of its rights or obligations hereunder without the
prior written consent of Secured Party.
15. Binding Agreement. All obligations of Debtor hereunder shall
bind the heirs, legal representatives, successors and assigns of Debtor. If
there be more than one Debtor hereunder, their liabilities shall be joint and
several. All rights of Secured Party hereunder shall inure to the benefit of
its successors and assigns.
16. Entire Agreement. This Agreement and the Security Agreement
constitute the entire agreement between and among the parties with respect to
the subject matter hereof. There are no verbal understandings, agreements,
representations or warranties between the parties which are not expressly set
forth herein. This Agreement shall not be changed orally, but only in writing
signed by the parties hereto.
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<PAGE> 8
17. Notices. Any formal notice required or allowed hereunder
shall be deemed sufficiently given if personally delivered or sent by certified
mail (return receipt requested) or express mail carrier or telefacsimile to the
party to whom said notice is to be given. Notices sent by certified mail,
return receipt requested, shall be deemed to be served upon receipt. Notices
sent by express mail carrier shall be deemed to have been served on the day
following the day sent to the addressee subject to confirmation of delivery by
the applicable express mail carrier. Notices sent by telefacsimile shall be
deemed to have been served on the day sent.
Until changed by written notice given by either party to the other, the
addresses of the parties shall be as follows:
Debtor: Mercury Air Group, Inc.
Attn: Executive Vice President -
Commercial operations
5456 McConnell Avenue
Los Angeles, California 90066
Telefacsimile: (310) 827-5510
with copies to:
Mercury Air Group
Attn: General Counsel
5456 McConnell Avenue
Los Angeles, California 90066
Telefacsimile: (310) 827-5510
Secured Party: Raytheon Aircraft Services Corporation
Attn: President
P.O. Box 2966
10225 E. Kellogg
Wichita, Kansas 67207
Telefacsimile (316) 676-4906
The designated addresses of both parties must be located within the United
States of America.
18. Signatory Authority. The undersigned officer of Debtor
verifies and warrants that he/she has read this Promissory Note in its
entirety, that he/she understands its provisions and purpose, and that he/she
has full authority to sign and deliver the same on behalf of Debtor and to bind
Debtor, as a corporation, thereto.
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<PAGE> 9
In witness of the foregoing, Debtor has caused its duly authorized
officer to execute and deliver this Agreement at Wichita, Kansas on the day and
year herein stated.
MERCURY AIR GROUP INC.
By: /s/ Randolph E. Ajer
--------------------------------
"Debtor"
STATE OF CALIFORNIA )
) ss:
COUNTY OF LOS ANGELES )
On June 26, 1996, before me, the undersigned, personally appeared
Randolph E. Ajer, personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to the within
instrument and acknowledged to me that he executed the same in his authorized
capacity, and that by his signature on the instrument the entity upon behalf of
which the person acted, executed the instrument.
WITNESS my hand and official seal
Signature /s/ SIG (Seal)
---------------------------
THIS PROMISSORY NOTE IS SUBJECT TO THE TERMS OF A LETTER AGREEMENT DATED AUGUST
29, 1996 BETWEEN MERCURY AIR GROUP, INC. AND RAYTHEON AIRCRAFT SERVICES, INC.
9
<PAGE> 1
EXHIBIT 99.4.2
August 29, 1996
John Willis
President
Raytheon Aircraft Services, Inc.
P.O. Box 2966
Wichita, Kansas 67201
Reference: Asset Purchase Agreement (the "Purchase Agreement") made as of
April 8, 1996, as amended, between Mercury Air Group, Inc., a
New York corporation ("Mercury"), and Raytheon Aircraft
Services, Inc., a Kansas corporation ("RAS")
Dear John:
This letter reflects the understanding of the parties with respect to
that certain Negotiable Promissory Note dated June 21, 1996 in the principal
amount of Four Million Six Hundred Fifty Thousand Dollars ($4,650,000) made by
Mercury in favor of RAS (the "Note"), as follows:
1. All capitalized terms used herein without definition shall have the
meanings assigned to such terms in the Note.
2. The Commencement Date under the Note shall be August 29, 1996.
3. Effective as of the Commencement Date, the parties have agreed to
credit $750,000 toward payment of the principal due under the Note, making the
Principal Sum due under the Note $3,900,000, rather than the $4,650,000, as
stated in the Note.
4. The parties intend that the Note shall be reamortized based on the new
Principal Sum and that the quarterly payments shall accordingly be
recalculated.
5. A copy of this letter agreement shall be attached to the Note and the
first page and signature page of the Note shall each be legended, as follows:
"This Promissory Note is subject to the terms of a letter agreement
dated August 29, 1996 between Mercury Air Group, Inc. and Raytheon
Aircraft Services, Inc."
6. The parties have agreed that the defaults specified in Sections 7(i)
and (j) and any corresponding default provisions contained in the Security
Agreements shall not apply with respect to failure to pay amounts due the
lessor of or declaration of defaults by the lessor of the leasehold property
located at Bedford, Massachusetts.
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<PAGE> 2
7. The terms of this letter agreement are binding upon Mercury, RAS and
any subsequent holder of the Note.
If you are in agreement with the foregoing, please return three
originally executed copies of this letter agreement.
Very truly yours,
/s/ Randolph E. Ajer
- ------------------------
Randolph E. Ajer
Executive Vice President
Mercury Air Group, Inc.
Agreed and Accepted:
RAYTHEON AIRCRAFT SERVICES, INC.
By: John C. Willis
-----------------------
Its: President
-----------------------
11
