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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________________ TO ______________ .
COMMISSION FILE NUMBER 0-22526
TOWER AIR, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 11-2621046
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
HANGAR NO. 17
J.F.K. INTERNATIONAL AIRPORT
JAMAICA, N.Y. 11430
(Address of principal executive offices) (Zip Code)
(718) 553-4300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
- --
As of April 30, 1998, there were 15,351,583 shares of Common Stock, par
value $.01 per share, outstanding.
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Page 1 of 15 pages
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TOWER AIR, INC.
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1998
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of March 31, 1998 and December 31, 1997................................ 3
Statements of Operations for the three months ended March 31, 1998 and 1997............ 4
Statements of Cash Flows for the three months ended March 31, 1998 and 1997.............. 5
Notes to Financial Statements............................................................ 6
Selected Operating Data.................................................................. 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.... 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk............................... 13
PART II. OTHER INFORMATION........................................................................ 14
SIGNATURES ........................................................................................ 15
</TABLE>
2
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TOWER AIR, INC.
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
(UNAUDITED) (NOTE)
------------------ ---------------
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 1,373 $ 3,922
Certificates of deposit, at cost,
which approximates market 2,157 2,407
Receivables, net 28,792 28,151
Income tax receivable 150 3,850
Prepaid expenses and other current assets 1,381 880
------------------ ---------------
Total current assets 33,853 39,210
Property and Equipment, at cost:
Flight equipment 433,205 419,851
Ground property and equipment 33,651 33,489
------------------ ---------------
466,856 453,340
Less accumulated depreciation and amortization 200,851 186,945
------------------ ---------------
266,005 266,395
Other Assets 6,105 4,515
------------------ ---------------
$ 305,963 $ 310,120
================== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Notes payable $ 22,718 $ 21,038
Accounts payable 56,027 55,313
Accrued liabilities 29,347 40,698
Air traffic liability 22,838 18,867
Current maturities of long-term debt 57,508 43,273
------------------ ---------------
Total current liabilities 188,438 179,189
Long-Term Debt 63,035 63,321
Deferred Income Taxes 10,405 16,399
Deferred Rent 1,836 1,790
Stockholders' Equity:
Preferred stock, $.01 par value;
5,000,000 shares authorized; none issued -- --
Common stock, $.01 par value;
35,000,000 shares authorized;
15,556,781issued 156 155
Additional paid-in capital 44,037 43,885
Retained earnings deficit (433) 6,892
Less treasury stock, at cost (210,000 shares) (1,511) (1,511)
------------------ ---------------
Total stockholders' equity 42,249 49,421
------------------ ---------------
$ 305,963 $ 310,120
================== ===============
</TABLE>
See accompanying notes to financial statements.
Note: The Balance Sheet at December 31, 1997 has been derived from the audited
financial statements at that date.
3
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TOWER AIR, INC.
STATEMENTS OF OPERATIONS
(Unaudited, in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31
----------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
OPERATING REVENUES:
Scheduled Passenger Service $ 52,725 $ 42,777
Commercial Charter Service 25,771 18,030
Military Charter Service 13,023 15,511
Cargo Service 3,462 314
Other 1,759 1,378
--------------- ---------------
Total operating revenues 96,740 78,010
OPERATING EXPENSES:
Fuel 15,506 16,759
Flight equipment rentals and insurance 8,282 4,926
Maintenance 11,699 7,967
Crew costs and other 6,568 5,512
Aircraft and traffic servicing 18,866 14,596
Passenger servicing 12,285 9,985
Promotion, sales and commissions 13,917 10,385
General and administrative 4,852 4,788
Depreciation and amortization 14,120 10,166
--------------- ---------------
Total operating expenses 106,095 85,084
--------------- ---------------
OPERATING LOSS (9,355) (7,074)
OTHER EXPENSES (INCOME):
Interest and other income 67 5
Interest expense 3,897 2,787
--------------- ---------------
Total other expenses 3,964 2,792
--------------- ---------------
LOSS BEFORE INCOME TAXES (13,319) (9,866)
Income Tax Benefit (5,994) (4,441)
--------------- ---------------
NET LOSS $ (7,325) $ (5,425)
=============== ===============
BASIC AND DILUTED LOSS PER SHARE $ (.48) $ (.35)
=============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 15,347 15,290
=============== ===============
</TABLE>
See accompanying notes to financial statements
4
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TOWER AIR, INC.
STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Three Months Ended March 31,
------------------------------------
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (7,325) $ (5,425)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 14,120 10,166
Provision for doubtful accounts 15 234
Deferred income taxes (5,994) (4,441)
Deferred rent 46 (177)
Changes in operating assets and liabilities:
Receivables (634) 1,021
Income tax receivable 3,700 6,397
Prepaid expenses and other assets (1,953) 476
Accounts payable and accrued liabilities (4,338) 2,829
Air traffic liability 3,971 608
-------------- --------------
Net cash provided by operating activities 1,608 11,688
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of flight equipment (11,875) (25,215)
Purchase of ground property and equipment (162) (233)
(Increase) decrease in certificates of deposit 250 (250)
-------------- --------------
Net cash used in investing activities (11,787) (25,698)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings 121,812 92,754
Principal payments on borrowings (113,964) (78,755)
Proceeds stock option 134 --
Other (352) (89)
-------------- --------------
Net cash provided by financing activities 7,630 13,910
-------------- --------------
Net decrease in cash and cash equivalents (2,549) (100)
Cash and cash equivalents at beginning of period 3,922 2,968
-------------- --------------
Cash and cash equivalents at end of period $ 1,373 $ 2,868
============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 3,319 $ 2,049
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Purchase of flight equipment accrued but not paid $ 7,781 $ 8,990
Purchase of flight equipment financed through debt $ 7,936 $ 5,867
</TABLE>
See accompanying notes to financial statements.
5
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NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by Tower Air,
Inc. (the "Company") in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, these financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary to present fairly the financial position, results of operations and
cash flows for the periods indicated. These interim financial statements and
related notes should be read in conjunction with the financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997. The results of operations for the three months ended March
31, 1998 are not necessarily indicative of the results that may be expected for
the full year.
2. LONG-TERM DEBT
In November 1996, the Company borrowed $2,000,000 from a commercial finance
institution. The note bears interest at 10.27% and was due December 1997. In
January 1997, the Company borrowed an additional $2,000,000 from the same
commercial finance institution. In December 1997, the loan agreement was amended
and restated whereas the financial institution made an additional loan of
approximately $4,000,000 from December 1997 through March 1998. The amended note
bears interest at a rate of 10.27% per annum and is due in September 1998.
Monthly principal and interest payments required under the amended note
approximate $694,000. At March 31, 1998, the amount outstanding was
approximately $4,668,000.
In February and March 1998, the Company borrowed $6,000,000 from Funding
Enterprises, LLC, a limited liability company in which the Chairman and
President are members. The $6,000,000 is payable on July 1, 1998 with interest
at 12% per annum. In connection with the borrowing, warrants for the purchase of
1,200,000 shares of common stock were issued with an exercise price of $5. The
warrants expire in February 2008.
The Company entered into a finance agreement involving the conversion and
refurbishment of six Pratt & Whitney JT9 engines during September 1997 through
March 1998. In connection with this transaction, promissory notes were issued,
totaling $21,253,844. The notes mature on various dates through July 1999.
Related interest accrues at prime plus 2% per annum on the outstanding principal
balance and required monthly payments approximate $1,300,000. The aggregate
balance outstanding on the notes at March 31, 1998 was approximately
$20,090,000.
6
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The Company has a $25,000,000 line of credit with a financial institution which
may be used for short term borrowings and/or letters of credit. The agreement,
as amended in September 1997, expires on September 30, 1999. This $25,000,000
line of credit decreases to $15,000,000 during the Company's peak cash flow
cycle starting June 1, 1998 through August 31, 1998. This line of credit further
increases to $20,000,000 starting September 1, 1998 and thereafter reverts to
$25,000,000 starting October 1, 1998 through the 1999 first quarter. Interest
accrues on the outstanding credit line at a "base rate" equal to the higher of
the Federal Reserve System prime loan rate plus 0.75% or the Federal Funds
effective rate plus 0.75% (9.25% as of March 31, 1998). As of March 31, 1998,
the Company had borrowings of approximately $22,700,000 and letters of credit of
$1,962,000 outstanding. The credit line is primarily secured by the Company's
trade receivables and spare parts inventory. The agreement was amended in 1998.
See Management's Discussion and Analysis of Financial Condition and Results of
Operation--Liquidity and Capital Resources.
In January 1998, the Company entered into an agreement with a financial
institution to borrow $15,000,000. The proceeds of this borrowing were used to
pay off the two existing balances of $7,500,000 and $3,757,000 respectively
outstanding as of December 31, 1997 with the same financial institution. The
note bears interest at prime plus 2.75% and is due in January 2000. The note is
secured by twelve JT9D engines The aggregate balance outstanding on the note at
March 31, 1998 was approximately $12,452,000.
3. STOCKHOLDERS' EQUITY
In an effort to conserve cash, the Company did not pay a cash dividend on the
Common Stock for the first quarter of 1998.
4. INCOME TAXES
Income taxes are calculated at the estimated annual effective tax rate, which
differs from the federal statutory rate of 35%, primarily due to the effect of
state income taxes and certain nondeductible items.
5. EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share, Statement No. 128
replaced the calculation of primary earnings per share and fully diluted
earnings per share with basic and diluted earnings per share. Unlike primary
earnings per share, basic earnings per share excluded any dilutive effects of
options, warrants, and convertible securities. Diluted earnings per share is
very similar to the previously reported fully diluted earnings per share. All
earnings per share amounts have been presented, and where appropriate, restated
to conform to Statement No. 128 requirements.
The following table sets forth the computation of basic and diluted earnings per
share:
7
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
1998 1997
----------------- ------------------
(in thousands except for per share data)
-------------------------
<S> <C> <C>
Numerator for basic and diluted earnings per share - loss
available to common stockholders after assumed
conversions (7325) (5425)
===============================
Denominator for basic and diluted earnings per share-
adjusted weighted average shares and assumed
conversions 15,347 15,290
===============================
Basic and diluted earnings per share $ (.48) $ (.35)
===============================
</TABLE>
8
<PAGE>
TOWER AIR, INC.
SELECTED OPERATING DATA
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------------------
1998 1997
------------------ -----------------
<S> <C> <C>
Scheduled Passenger Service:
Revenue passengers carried
(in thousands) 295 222
Revenue passenger miles
(in thousands) (RPMs) (1) 755,301 570,477
Available seat miles
(in thousands) (ASMs) (2) 994,341 804,478
Passenger load factor (3) 75.96% 70.91%
Yield per RPM (4) $ .0698 $ .0750
Block hours flown (5) 4,697 3,808
Operating expense per ASM (6) $ .0559 $ .0547
Revenue per block hour (7) $ 11,225 $ 11,233
Variable expense per block hour (8) $ 10,124 $ 9,899
Commercial Charter Service:
Block hours flown (5) 3,741 2,620
Revenue per block hour (7) $ 6,889 $ 6,882
Variable expense per block hour (8) $ 4,082 $ 4,801
Military Charter Service:
Block hours flown (5) 1,106 1,307
Revenue per block hour (7) $ 11,775 $ 11,868
Variable expense per block hour (8) $ 7,156 $ 8,309
Cargo Service:
Block hours flown (5) 612 41
Revenue per block hour (7) $ 5,657 $ 7,659
Variable expense per block hour (8) $ 3,314 $ 2,562
Total:
Block hours flown (5) 10,156 7,776
Revenue per block hour (7) $ 9,352 $ 9,855
Variable expense per block hour (8) $ 7,165 $ 7,851
Average hours of daily utilization (9) 9.3 8.5
Employees (at period-end) 1,987 1,523
Number of aircraft in service
(at period-end) 17* 17*
</TABLE>
*One cargo aircraft temporarily out of service for mandatory modifications.
- ------------------------------------------------------------------
(1) "Revenue passenger miles" or "RPMs" represent the number of miles flown by
revenue passengers.
(2) "Available seat miles" or "ASMs" represent the number of seats available
for passengers multiplied by the number of miles those seats are flown.
(3) "Passenger load factor" represents revenue passenger miles divided by
available seat miles.
(4) "Yield per RPM" represents total revenue from scheduled passenger service
divided by revenue passenger miles.
(5) "Block hours" represent the period of time between the aircraft's departure
from the place where it is parked to its arrival at its destination.
(6) "Operating expense per ASM" represents certain direct variable costs for
scheduled passenger service, which include passenger liability insurance,
catering, crew costs, fuel, landing and handling fees, maintenance,
navigation fees, "power by the hour" rent, plus marketing and reservations,
and an allocation of other fixed costs based on block hours, divided by
total scheduled passenger service ASMs.
(7) "Revenue per block hour" represents total revenue from scheduled passenger
service, commercial charter service, military charter service and cargo
service divided by total block hours flown.
(8) "Variable expense per block hour" represents total direct variable costs,
which include passenger liability insurance, catering, crew costs,
commissions, fuel, landing and handling fees, maintenance, navigation fees
and insurance and "power by the hour" rent, divided by block hours.
(9) "Average hours of daily utilization" represents the actual number of block
hours per aircraft per operating day.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS:
Certain statements contained herein constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1996. Such
statements incorporate assumptions that entail uncertainties and unknown risks.
A variety of factors may cause the actual results and performance of the Company
or industry to differ materially from any future results or performance
expressed or implied by such forward-looking statements. These factors include,
among others, the following: general economic conditions affecting the industry
and the Company; competition within the industry; changes in consumer
preferences; regulatory changes; and political, social and economic conditions
in key markets.
RESULTS OF OPERATIONS
For the three-month period ended March 31, 1998 (the "1998 First Quarter"), the
Company recorded an operating loss of $9.4 million and a net loss of $7.3
million, or $0.48 per share. This compares with an operating loss of $7.1
million and a net loss of $5.4 million, or $0.35 per share, for the three-month
period ended March 31, 1997 (the "1997 First Quarter"). The increase in net loss
of $1.9 million for the 1998 First Quarter as compared to the 1997 First Quarter
resulted from a substantial increase, 30.6%, in block hours coupled with higher
costs arising from the late release of three aircraft from heavy maintenance and
one aircraft from cargo conversion facilities. The increase in operating revenue
of $18.7 million, or 24.0%, was not sufficient to offset the impact of higher
costs associated with these delays.
OPERATING REVENUES. The Company's operating revenues for the 1998 First Quarter
increased by $18.7 million, or 24.0%, to $96.7 million compared with operating
revenues of $78.0 million in the 1997 First Quarter.
Scheduled passenger service revenues for the 1998 First Quarter increased $9.9
million, or 23.3%, to $52.7 million from $42.8 million in 1997 First Quarter.
Scheduled passenger traffic (as measured in revenue passenger miles) for 1998
First Quarter increased by 32.4%, resulting in a load factor of 76.0% compared
to 70.9% in the 1997 First Quarter. Higher operating revenues for the 1998 First
Quarter were attributable to increased frequencies on existing routes. The Tel
Aviv market increased demand contributed $4.3 million, or 26.6%, in revenue for
the 1998 First Quarter over 1997. The domestic market demand also increased
during the 1998 First Quarter which resulted in an increase of $10.2 million, or
48.5%, in revenue over the 1997 First Quarter. The enhanced activities in these
markets were partially offset by the March 1997 discontinuation of Brazil
scheduled passenger service.
Commercial charter revenue for the 1998 First Quarter increased by $7.8 million,
or 42.9%, to $25.8 million from $18.0 million for the 1997 First Quarter,
primarily due to the earlier inception of Hajj charter operations. Military
charter revenue for the 1998 First
10
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Quarter decreased by $2.5 million, or 16.1%, to $13.0 million from $15.5 million
for the 1997 First Quarter primarily due to decreased activities related to the
deployment or repatriation of troops. Cargo charter revenue increased from $0.3
million to $3.5 million in the 1998 First Quarter due to a new wet lease
agreement with a South American airline. In addition, one of the Company's three
cargo aircraft remains grounded to comply with restrictive Airworthiness
Directive ("AD") requirements. Nine cargo aircraft owned by other carriers or
institutions are also subject to the same AD requirements. The return of the
grounded aircraft to full service is awaiting FAA approval of a repair program.
OPERATING EXPENSES. The Company's operating expenses for the 1998 First Quarter
increased $21.0 million, or 24.7%, to $106.1 million from $85.1 million for the
1997 First Quarter. Operating expenses, excluding fuel and depreciation, rose by
31.5% in the 1998 First Quarter. While block hours increased by 30.6%, operating
costs were impacted by the increased costs arising from the delayed release of
three aircraft from heavy maintenance and one aircraft from cargo conversion
facilities.
Aircraft fuel expenses for the 1998 First Quarter decreased $1.3 million, or
7.5%, to $15.5 million from $16.8 million for the 1997 First Quarter. The
decrease in the 1998 First Quarter resulted from a 18.9% reduction in the cost
of fuel offset by a 14.1% consumption increase.
Flight equipment rentals and insurance expenses for the 1998 First Quarter
increased $3.4 million, or 68.1%, to $8.3 million from $4.9 million for the 1997
First Quarter. The increase was attributable to the sale and leaseback of three
Boeing 747 aircraft and charges associated with the rental of additional
aircraft and engines to support the Company's fleet requirements during the 1998
First Quarter.
Maintenance costs for the 1998 First Quarter increased $3.7 million, or 46.8%,
to $11.7 million from $8.0 million for the 1997 First Quarter. The increase was
due to the level of flying and increased maintenance reserves associated with
aircraft and engine rentals.
Crew costs and other expenses for the 1998 First Quarter increased $1.1 million,
or 19.2%, to $6.6 million from $5.5 million in the 1997 First Quarter. The
increase was primarily due to a 30.6% increase in block hours flown.
Aircraft and traffic servicing expenses for the 1998 First Quarter increased
$4.3 million, or 29.3%, to $18.9 million from $14.6 million for the 1997 First
Quarter. The increase was primarily due to a 30.6% increase in block hours
partially offset by cost reductions from renegotiated ground handling and
servicing contracts.
Passenger servicing expenses for the 1998 First Quarter increased $2.3 million,
or 23.0%, to $12.3 million from $10.0 million for the 1997 First Quarter. The
increase was due to a higher level of flying partially offset by reduced
catering costs and improved catering inventory controls.
Promotion, sales and commission expenses for the 1998 First Quarter increased
$3.5 million, or 34.0%, to $13.9 million from $10.4 million for the 1997 First
Quarter. The
11
<PAGE>
increase was primarily due to higher commission expenses related to higher
scheduled passenger service revenues, and commercial charter service Hajj
revenues in the First Quarter of 1998.
General and administrative expenses for the 1998 First Quarter increased $0.1
million, or 1.3%, to $4.9 million from $4.8 million for the 1997 First Quarter.
As a percentage of operating revenue, general and administrative expenses for
the 1998 First Quarter were 5.0% compared with 6.1% for the 1997 First Quarter.
Depreciation and amortization expenses for the 1998 First Quarter increased $3.9
million, or 38.9%, to $14.1 million from $10.2 million for the 1997 First
Quarter. The increase was principally due to capitalized engine overhauls and
heavy airframe maintenance.
OTHER EXPENSES AND INCOME. Interest expense for the 1998 First Quarter increased
by $1.1 million, or 39.8%, to $3.9 million from $2.8 million for the 1997 First
Quarter. The increase reflects a higher average outstanding debt balance in
First Quarter 1998 resulting from the use of the line of credit established in
December 1996 and additional borrowing during the 1998 First Quarter (See Note 2
to the Financial Statements for additional information regarding the financing
of certain flight equipment expenditures).
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its working capital and capital
expenditure requirements with cash flow generated from operations and through
lease, debt and equity financing.
The Company's cash, cash equivalents and certificates of deposit at March 31,
1998 and December 31,1997 were $3.5 million and $6.3 million, respectively. The
Company generated cash from operations for the 1998 First Quarter of $1.6
million which included $3.7 million of proceeds related to 1997 tax refunds.
Net cash used in investing activities was $11.8 million for the 1998 First
Quarter compared with $25.7 million for the 1997 First Quarter. The Company's
expenditures for flight equipment were $11.9 million for the 1998 First Quarter
compared with $25.2 million for the 1997 First Quarter. Expenditures for flight
equipment in the 1998 First Quarter included the capitalized engine overhauls
and heavy airframe maintenance (See Note 2 to the Financial Statements for
additional information regarding the financing of certain flight equipment
expenditures).
As of March 31, 1998, the Company had negative working capital of $154.6 million
compared to negative working capital of $140.0 million as of December 31, 1997.
Historically, the Company has operated with a working capital deficit.
The Company established a $12.5 million secured line of credit with Heller
Financial, Inc. ("Heller") in December 1996. The line was increased to $18.0
million in January 1997 and then to $20.0 million in March 1997. In September
1997, the Company extended the line of credit to $25.0 million for two years
with Heller. This $25.0 million line of credit decreases to $15.0
12
<PAGE>
million during the Company's peak cash flow cycle starting June 1, 1998 through
August 31, 1998. If the Company raises additional financing by July 31, 1998
this line of credit further increases to $20.0 million starting September 1,
1998 and reverts to $25.0 million starting October 1, 1998 through the 1999
First Quarter. If the Company does not raise additional financing by July 31,
1998, the line of credit remains at $15.0 million. The line of credit is secured
by trade receivables and inventory, and the interest rate is prime plus 0.75%
(9.25% at March 31, 1998). Under this line, $1.96 million of letters of credit
have been issued to various suppliers and insurance companies. As of March 31,
1998, the Company had borrowed $22.7 million from the line of credit.
Since February 1998, the Company entered into four amendments (the "Amendments")
to the Amended and Restated Loan and Security Agreement, dated September 1, 1997
(the "Loan Agreement"), with Heller. The Amendments provide, among other things,
for (i) changes in the maximum amount of the revolving loan available during
different periods, (ii) subordination of loans made to the Company by officers
and directors, which are described in the Company's Annual Report on Form 10-K,
(iii) increases to the spread between the amount of collateral required and the
amount available for borrowing under the Loan Agreement, and (iv) modification
of the financial covenant relating to the Company's tangible net worth to
facilitate compliance by the Company. The Amendments also limit the maximum
amount of the revolving loan to $15,000,000 unless the Company raises additional
financing by July 31, 1998. The Amendment have been filed as exhibits to this
quarterly report on Form 10-Q. The Company is currently in compliance with the
covenants under the Loan Agreement, as amended by the Amendments.
The Company believes that cash generated from operations as well as from the
line of credit needs to be supplemented by additional debt financing during 1998
to finance working capital needs, capital expenditures and debt repayments.
Discussions are currently in progress with financial institutions to refinance
and restructure borrowings secured by owned assets.
The Company has been negotiating revised payment terms with vendors and other
creditors for settlement of current obligations, some of which are secured.
Payment agreements have been made with all major vendors and with several other
vendors.
In an effort to conserve cash, the Company did not pay a cash dividend for the
First Quarter of 1998.
YEAR 2000
The Company has determined that due to its most recent software upgrades, its
internal systems will function properly with respect to dates in the year 2000
and beyond. The Company has initiated discussions with its significant
suppliers, large customers and financial institutions to ensure that those
parties have appropriate plans to remediate Year 2000 issues where their systems
interface with the Company's systems or otherwise impact its operations. The
Company is assessing the extent to which its operations are vulnerable should
those organizations fail to remediate properly their computer systems.
The Company's comprehensive Year 2000 initiative is being managed by a team of
internal staff. The team's activities are designed to ensure that there is no
adverse effect on the Company's core business operation and that transactions
with customers, suppliers, and financial institutions are fully supported. The
Company is well under way with these efforts, which are scheduled to be
completed in early 1999. While the Company believes its planning efforts are
adequate to address its Year 2000 concerns, there can be no guarantee that the
systems of other companies on which the Company's systems and operations rely
will be converted on a timely basis and will not have a material effect on the
Company. The cost of the Year 2000 initiatives is not expected to be material to
the Company's results of operations or financial position.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
None.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The only change in legal proceedings as disclosed in the Company's Annual Report
on Form 10-K for the year ended December 31, 1997 is the following:
The tentative settlement of the Tennessee State Court action Federal Express
---------------
Corporation v. Tower Air, Inc. and the United States District Court for the
- ------------------------------
Eastern District of New York action Tower Air, Inc. v. Federal Express
----------------------------------
Corporation was made final on February 9, 1998.
- -----------
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
Nathan Nelson has been appointed Chief Financial Officer and
Treasurer on May 11, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
10(23) Heller Financial Inc. - First Amendment to Amended &
Restated Loan & Security Agreement, dated February 27,
1998
10(24) Heller Financial Inc. - Subordination Agreement dated
April 12, 1998
10(25) Heller Financial Inc. - Second Amendment to Amended &
Restated Loan & Security Agreement, dated April 24, 1998
10(26) Heller Financial Inc. - Third Amendment to Amended &
Restated Loan & Security Agreement, dated May 1, 1998
14
<PAGE>
SIGNATURES
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 thereunto duly authorized.
Tower Air, Inc.
(Registrant)
Date: May 15, 1998 /s/ Morris K. Nachtomi
----------------------
Morris K. Nachtomi
Chief Executive Officer
and Chairman of the Board of Directors
(Principal Executive Officer)
Date: May 15, 1998 /s/ Terry V. Hallcom
--------------------
Terry V. Hallcom
President and Executive Vice President-
Operations
(Acting Principal Financial and Accounting
Officer)
15
<PAGE>
EXHIBIT 10.23
FIRST AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
The First Amendment to that certain Amended and Restated Loan and
Security Agreement ("Amendment") is made and entered into as of this 27th day of
February, 1988 by and between Tower Air, Inc. ("Borrower"), the financial
institutions listed on the signature pages thereof (collectively, "Lenders") and
Heller Financial, Inc. (in its individual capacity, "Heller"), for itself as a
Lender and as Agent ("Agent").
WHEREAS, Agent, Lenders and Borrower are parties to a certain Amended
and Restated Loan and Security Agreement, dated September 1, 1997 and all
amendments thereto (the "Agreement"); and
WHEREAS, the parties desire to amend the Agreement as hereinafter set
forth.
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
-----------
otherwise defined herein, shall have the meaning ascribed to such term in the
Agreement.
2. Amendment. Subject to the conditions set forth below, the Agreement
---------
is amended as follows:
Subsection 2.1(A) is amended by adding the following paragraph
immediately after the first paragraph of said subsection:
Notwithstanding the foregoing, during the period from March 1, 1998
through and including April 30, 1998 only, the aggregate amount of all
Revolving Loan Commitments shall not exceed the following amounts: (i)
from March 1, 1998 through and including March 31, 1998, Twenty-Five
Million Dollars ($25,000,000); (ii) from April 1, 1998 through and
including April 10, 1998, Twenty-Four Million Dollars ($24,000,000);
(iii) from April 11, 1998 through and including April 17, 1998, Twenty-
Three Million Dollars ($23,000,000); (iv) from April 18, 1998 through
and including April 24, 1998, Twenty-Two Million Dollars ($22,000,000);
(v) from April 25, 1998 through and including April 30, 1998, Twenty
Million Dollars ($20,000,000), as reduced by subsection 2.4(B). Except
-----------------
as otherwise provided herein, no Lender shall have any obligation to
make an advance under this
<PAGE>
subsection 2.1(A) to the extent such advance would cause the Revolving
-----------------
Loan (after giving effect to any immediate application of the proceeds
thereof) to exceed the Maximum Revolving Loan Amount.
3. CONDITIONS. The effectiveness of this Amendment is subject to the
----------
following conditions precedent (unless specifically waived in writing by Agent):
(a) Borrower shall have executed and delivered such other
documents and instruments as Agent may require;
(b) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal maters incident thereto shall be satisfactory to Agent and its
legal counsel;
(c) No Default or Event of Default shall have occurred and be
continuing; and
(d) Borrower shall pay Agent an amendment fee in the
amount of $100,000, which shall be due and fully earned upon the
execution hereof and shall be payable on March 4, 1998, upon which date
Agent shall charge such amount to the Revolving Loan.
4. CORPORATE ACTION. The execution, delivery, and performance of this
----------------
Amendment has been duly authorized by all requisite corporate action on the part
of Borrower and this Amendment has been duly executed and delivered by Borrower.
5. SEVERABILITY. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6. REFERENCES. Any reference to the Agreement contained in any document,
----------
instrument or agreement executed in connection with the Agreement, shall be
deemed to be a reference to the Agreement as modified by this Amendment.
7. COUNTERPARTS. This Amendment may be executed in one or more
------------
counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.
8. RATIFICATION. The terms and provisions set forth in this Amendment
------------
shall modify and supersede all inconsistent terms and provisions of the
Agreement, and shall not be deemed to be a consent to the modification or waiver
of any other term or condition of the Agreement. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are
ratified and confirmed and shall continue in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
HELLER FINANCIAL, INC. TOWER AIR, INC.
By: /s/ Paul L. Puryear By: /s/ Morris K. Nachtomi
--------------------------- ---------------------------
Title: Executive Vice President Title: Chairman/CEO
------------------------ ------------------------
3
<PAGE>
EXHIBIT 10.24
SECOND AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Second Amendment to that certain Amended and Restated Loan and
Security Agreement ("AMENDMENT") is made and entered into as of this 24th day of
April 1998, by and between Tower Air, Inc. ("BORROWER"), the financial
institutions listed on the signature pages thereof (collectively, "LENDERS") and
Heller Financial, Inc., (in its individual capacity, "Heller"), for itself as a
Lender and as Agent ("AGENT").
WHEREAS, Agent, Lenders and Borrower are parties to a certain Amended
and Restated Loan and Security Agreement, dated September 1, 1997 and all
amendments thereto (the "AGREEMENT"); and
WHEREAS, pursuant to the First Amendment to Amended and Restated Loan
and Security Agreement dated as of April 24, 1998, subsection 2.1(A) of the
Agreement was amended by adding a new paragraph to the end of said subsection;
and
WHEREAS, Borrower has requested that Lender amend clauses (iv) and (v)
of said paragraph; and
WHEREAS, Lender and has agreed to amend the Agreement, subject to the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment, unless
-----------
otherwise defined herein, shall have the meaning ascribed to such term in the
Agreement.
2. AMENDMENT. Subject to the conditions set forth below, the Agreement
---------
is amended as follows:
Subsection 2.1(A) is amended by deleting clauses (iv) and (v)
contained in the second paragraph of said subsection and replacing them with the
following:
"(iv) from April 25, 1998 through and including April 30, 1998, Twenty-
Two Million Dollars ($22,000,000); and (v) from May 1, 1998 through and
including May 31, 1998, Twenty Million Dollars ($20,000,000),".
<PAGE>
3. CONDITIONS. The effectiveness of this Amendment is subject to the
----------
following conditions precedent (unless specifically waived in writing by Agent):
(a) Borrower shall have executed and delivered such other
documents and instruments as Agent may require;
(b) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be satisfactory to Agent and its
legal counsel;
(c) No Default or Event of Default shall have occurred and be
continuing; and
(d) Borrower shall have paid Agent an amendment fee in the
amount of $50,000, which shall be due, fully earned and payable upon the
execution hereof, and which Agent shall charge to the Revolving Loan
upon such date.
4. CORPORATE ACTION. The execution, delivery, and performance of this
----------------
Amendment has been duly authorized by all requisite corporate action on the part
of Borrower and this Amendment has been duly executed and delivered by Borrower.
5. SEVERABILITY. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6. REFERENCES. Any reference to the Agreement contained in any document,
----------
instrument or agreement executed in connection with the Agreement, shall be
deemed to be a reference to the Agreement as modified by this Amendment.
7. COUNTERPARTS. This Amendment may be executed in one or more
------------
counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.
8. RATIFICATION. The terms and provisions set forth in this Amendment
------------
shall modify and supersede all inconsistent terms and provisions of the
Agreement, and shall not be deemed to be a consent to the modification or waiver
of any other term or condition of the Agreement. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are
ratified and confirmed and shall continue in full force and effect.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
HELLER FINANCIAL, INC. TOWER AIR, INC.
By: /s/ Anthony Vizgarda By: /s/ Morris K. Nachtomi
--------------------------- ---------------------------
Title: Vice President Title: CEO
------------------------ ------------------------
3
<PAGE>
EXHIBIT 10.25
THIRD AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Third Amendment to that certain Amended and Restated Loan and Security
Agreement ("AMENDMENT") is made and entered into as of this 1st day of May 1998,
by and between Tower Air, Inc. ("BORROWER"), the financial institutions listed
on the signature pages thereof (collectively, "LENDERS") and Heller Financial,
Inc., (in its individual capacity, "Heller"), for itself as a Lender and as
Agent ("AGENT").
WHEREAS, Agent, Lenders and Borrower are parties to a certain Amended and
Restated Loan and Security Agreement, dated September 1, 1997 and all amendments
thereto (the "AGREEMENT"); and
WHEREAS, pursuant to the First Amendment to Amended and Restated Loan and
Security Agreement dated as of February 27, 1998, subsection 2.1(A) of the
Agreement was amended by adding a new paragraph to the end of said subsection,
which paragraph was subsequently amended pursuant to the Second Amendment to
Amended and Restated Loan and Security Agreement dated as of April 24, 1998; and
WHEREAS, Borrower has requested that Lender further amend said paragraph;
and
WHEREAS, Lender and has agreed to amend the Agreement, subject to the terms
and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual conditions and agreements set
forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Amendment, unless otherwise
-----------
defined herein, shall have the meaning ascribed to such term in the Agreement.
2. AMENDMENTS. Subject to the conditions set forth below, the Agreement is
----------
amended as follows:
(a) Subsection 1.1 is amended by inserting, in proper alphabetical order,
the following new defined term:
"Suppressed Availability" means the amount by which the Borrowing Base
exceeds the Revolving Loan Commitment.
<PAGE>
(b) Subsection 2.1(A) is amended by deleting clause (v) contained in
the second paragraph of said subsection and replacing it with the following:
(v) from May 1, 1998 through and including May 17, 1998, Twenty-Two
Million Dollars ($22,000,000); (vi) from May 18, 1998 through and
including May 24, 1998, Twenty-One Million Dollars ($21,000,000); and
(vii) from May 25, 1998 through and including May 31, 1998, Twenty
Million Dollars ($20,000,000).
(c) Section 5 is amended by inserting the following new subsection
immediately after subsection 5.15:
5.16 Suppressed Availability. Borrower shall maintain Suppressed
-----------------------
Availability in an amount of at least $3,500,000 at all times.
(d) Subsection 8.1(C) is amended by deleting said subsection in its
entirety and replacing it with the following:
(C) Breach of Certain Provisions. Failure of Borrower to perform
----------------------------
or comply with any term or condition contained in subsections 5.1(A),
-------------------
(B), (C), (I) and (P), 5.3, 5.5, 5.6 or 5.16 or contained in section 6
-------------------------------------------- ---------
or section 7; or
---------
3. CONDITIONS. The effectiveness of this Amendment is subject to the
----------
following conditions precedent (unless specifically waived in writing by Agent):
(a) Borrower shall have executed and delivered such other
documents and instruments as Agent may require;
(b) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other legal
matters incident thereto shall be satisfactory to Agent and its legal counsel;
(c) No Default or Event of Default shall have occurred and be
continuing; and
(d) Borrower shall have paid Agent an amendment fee in the amount
of $100,000, which shall be due, fully earned and payable upon the execution
hereof, and which Agent shall charge to the Revolving Loan upon such date.
4. CORPORATE ACTION. The execution, delivery, and performance of this
----------------
Amendment has been duly authorized by all requisite corporate action on the part
of Borrower and this Amendment has been duly executed and delivered by Borrower.
4
<PAGE>
5. SEVERABILITY. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6. REFERENCES. Any reference to the Agreement contained in any document,
----------
instrument or agreement executed in connection with the Agreement, shall be
deemed to be a reference to the Agreement as modified by this Amendment.
7. COUNTERPARTS. This Amendment may be executed in one or more
------------
counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.
8. RATIFICATION. The terms and provisions set forth in this Amendment
------------
shall modify and supersede all inconsistent terms and provisions of the
Agreement, and shall not be deemed to be a consent to the modification or waiver
of any other term or condition of the Agreement. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are
ratified and confirmed and shall continue in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
HELLER FINANCIAL, INC. TOWER AIR, INC.
By: /s/ Anthony Vizgirda By: /s/ Morris K. Nachtomi
--------------------------- ---------------------------
Title: Vice President Title: CEO
------------------------ ------------------------
3
<PAGE>
EXHIBIT 10.26
FOURTH AMENDMENT TO AMENDED AND RESTATED LOAN AND
SECURITY AGREEMENT
This Fourth Amendment to that certain Amended and Restated Loan and
Security Agreement ("AMENDMENT") is made and entered into as of this 5th day of
May, 1998 by and between Tower Air, Inc. ("BORROWER"), the financial
institutions listed on the signature pages thereof (collectively, "LENDERS") and
Heller Financial, Inc. (in its individual capacity, "Heller"), for itself as a
Lender and as Agent ("AGENT").
WHEREAS, Lender and Borrower are parties to a certain Amended and
Restated Loan and Security Agreement, dated September 1, 1997 and all amendments
thereto (the "AGREEMENT"); and
WHEREAS, an Event of Default is in existence under the Agreement as a
result of Borrower's breach of the Tangible Net Worth covenant contained in
subsection 6.1. For the months of January and February, Borrower did not
maintain Tangible Net Worth of at least $47,500,000, (the "Existing Event of
Default"), and Borrower has requested Lender waive the Existing Event of
Default; and
WHEREAS, the parties desire to further amend the Agreement as
hereinafter set forth:
NOW THEREFORE, in consideration of the mutual conditions and agreements
set forth in the Agreement and this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. Definitions. Capitalized terms used in this Amendment, unless
-----------
otherwise defined herein, shall have the meaning ascribed to such term in the
Agreement.
2. Amendment. Subject to the conditions set forth below, the Agreement
---------
is amended as follows:
(a) Section 5 is amended by inserting the following new subsection
5.1(Q) immediately after subsection 5.1(P);
"5.1 (Q) Subordinated Debt and Other Indebtedness Notices Borrower shall
------------------------------------------------
deliver (1) Signed and fully executed original copy of that certain
Subordination Agreement in favor of the Lender dated April 12, 1998 and
(2) copies of all notices given or received by Borrower and any of its
subsidiaries with respect to noncompliance with any term or condition
related to any Subordinated Debt and other Indebtedness, and shall
promptly notify Lenders and Agent of any
<PAGE>
potential or actual event of default with respect to any Subordinated
Debt or other indebtedness."
(b) Section 5 is amended by deleting subsection 5.16 in its entirety
and inserting the following in lieu thereof:
"5.16 Suppressed Availability. Borrower shall maintain Suppressed
-----------------------
Availability in an amount of at least $5,000,000 at all times."
(c) Section 5 is amended by inserting the following new subsection
immediately after subsection 5.16;
"5.17. borrower shall raise proceeds of new equity by July 31,
1998, on terms satisfactory to Lender, in a minimum amount of $30,000,000, that
is committed and is available to Borrowers on demand."
(d) Section 6 is amended by deleting subsection 6.1 in its entirety and
inserting the following in lieu thereof;
"6.1 (A) Tangible Net Worth. Borrower shall maintain Tangible Net
------------------
Worth equal to at least the amounts indicated for each period specified below:
Period Amount
------ ------
March 1998 through May 1998 $35,000,000
June 1998 $40,000,000
July 1998 $47,500,000
(B) Borrower shall maintain Tangible Net Worth equal to at least
$55,000,000 after August 1, 1998 and at all times thereafter."
(e) Section 8 is amended by deleting subsection 8.1(C) in its entirety
and substituting the following in lieu thereof:
"(C) Breach of Certain Provisions. Failure of Borrower to perform or
----------------------------
comply with any term or condition contained in subsections 5.1(A), (B), (C),
-----------------------------
(I), (P), and (Q), 5.3, 5.5, 5.6, 5.16 or 5.17 or contained in section 6 or
- ---------------------------------------------- ---------
section 7; or
- ---------
3. WAIVER. Lender hereby waives the Existing Event of Default. This
------
is a limited waiver and shall not be deemed to constitute a waiver of any other
Event of Default or any future breach of the Agreement or any of the other Loan
Documents.
4. CONDITIONS. The effectiveness of this Amendment is subject to the
----------
following conditions precedent (unless specifically waived in writing by
Lender):
(a) Borrower shall have executed and delivered such other documents
and instruments as Lender may require;
2
<PAGE>
(b) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments and other
legal matters incident thereto shall be satisfactory to Lender and its
legal counsel;
(c) No Default or Event of Default other than the Existing Event
of Default shall have occurred and be continuing;
(d) Borrower shall have paid Lender an amendment fee in the
amount of $50,000; and
(e) There shall have occurred no material adverse change in the
business, operations, financial condition, profits or prospects of
Borrower, or in the Collateral;
(f) Borrower shall provide Lender with a signed and duly
executed copy of that certain Subordination Agreement in favor Lender
dated April 12, 1998.
4. CORPORATE ACTION. The execution, delivery, and performance of this
----------------
Amendment has been duly authorized by all requisite corporate action on the part
of Borrower and this Amendment has been duly executed and delivered by Borrower.
5. SEVERABILITY. Any provision of this Amendment held by a court of
------------
competent jurisdiction to be invalid or unenforceable shall not impair or
invalidate the remainder of this Amendment and the effect thereof shall be
confined to the provision so held to be invalid or unenforceable.
6. REFERENCES. Any reference to the Agreement contained in any document,
----------
instrument or agreement executed in connection with the Agreement, shall be
deemed to be a reference to the Agreement as modified by this Amendment.
7. COUNTERPARTS. This Amendment may be executed in one or more
------------
counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.
8. RATIFICATION. The terms and provisions set forth in this Amendment
------------
shall modify and supersede all inconsistent terms and provisions of the
Agreement, and shall not be deemed to be a consent to the modification or waiver
of any other term or condition of the Agreement. Except as expressly modified
and superseded by this Amendment, the terms and provisions of the Agreement are
ratified and confirmed and shall continue in full force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed under seal and delivered by their respective duly authorized
officers on the date first written above.
HELLER FINANCIAL, INC. TOWER AIR, INC.
By: By:
--------------------------- ---------------------------
Title: Title:
------------------------ ------------------------
4
