FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 1-7141
PS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-2760133
(State or other jurisdiction (IRS Employer
of incorporation) Identification No.)
4370 La Jolla Village Drive, Suite 1050
San Diego, California 92122
(Address of principal executive offices)
(Zip code)
(619) 546-5001
(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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 3, 1995: 6,068,313 shares of common stock, $1
par value.<PAGE>
PS GROUP, INC.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Included herein.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Included herein.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
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.
None.<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
10. Material contracts.
(a) Amended and Restated Credit Agreement dated October 3,
1995 between the Company and Bank of America National
Trust and Savings Association.
27. Financial Data Schedule.
(b) Reports on Form 8-K.
None.
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.
PS GROUP, INC.
--------------
(Registrant)
Date: November 6, 1995
/s/ L.A. Guske
- -----------------
LAWRENCE A. GUSKE
Vice President - Finance and
Chief Financial Officer<PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 1995 and December 31, 1994
(in thousands)
1995 1994
------- -------
ASSETS
Current assets:
Cash and cash equivalents $ 6,876 $ 22,780
Marketable securities 16,868 1,113
Accounts and notes receivable 21,627 18,304
Other current assets 13,709 13,789
------- -------
Total current assets 59,080 55,986
Property and equipment, net 20,250 21,081
Aircraft leased under operating leases, net 123,975 134,933
Investment in aircraft financing leases 97,557 101,248
Aircraft held for sale 29,100
Other assets 15,587 18,910
------- -------
$316,449 $361,258
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued legal settlement $ 5,000
Income taxes payable $ 129 4,944
Other current liabilities 16,172 20,602
Current portion of long-term obligations 17,458 15,151
------- -------
Total current liabilities 33,759 45,697
Long-term obligations 108,472 122,074
Deferred income taxes 37,326 32,840
Other liabilities 5,615 31,496
Stockholders' equity:
Common stock 6,068 6,068
Additional paid-in capital 98,420 98,420
Retained earnings 26,789 24,663
------- -------
Total stockholders' equity 131,277 129,151
------- -------
$316,449 $361,258
======= =======
See accompanying notes.
F-1<PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three and Nine Months Ended September 30, 1995 and 1994
(in thousands, except per share amounts)
Three Months Nine Months
Ended Ended
------------- -------------
1995 1994 1995 1994
Continuing operations:
Revenues:
Fuel sales and distribution $31,692 $19,102 $88,017 $54,466
Aircraft leasing 8,842 8,933 26,587 26,718
Oil and gas production 1,635 2,248 5,222 5,846
Interest and other 782 360 1,936 2,064
------- ------ ------- -------
42,951 30,643 121,762 89,094
Costs and expenses:
Costs of products and services sold 32,095 19,691 89,611 55,803
Depreciation, depletion and amortization 3,986 4,153 12,109 12,215
General and administrative expenses 946 2,304 3,030 4,939
Interest expense 3,774 4,173 11,597 12,550
Loss on aircraft disposition 1,701
------- ------- ------- -------
40,801 30,321 118,048 85,507
Income from continuing operations before
taxes 2,150 322 3,714 3,587
Provision for taxes 909 131 1,589 1,516
------- ------- ------- ------
Income from continuing operations 1,241 191 2,125 2,071
Discontinued operations, net of tax:
(Loss) from operations (3,504)
Gain on disposition 12,844
-------
9,340
------- ------ ------- -------
Net income $ 1,241 $ 191 $ 2,125 $11,411
======= ====== ======= =======
Income (loss) per share:
Continuing operations $ .20 $ .03 $ .35 $ .34
(Loss) from operations of discontinued
operations (.58)
Gain on disposition of discontinued
operations 2.12
------- ------ ------- -------
Net income per share $ .20 $ .03 $ .35 $ 1.88
======= ====== ======= =======
Shares used in determining net income per 6,068 6,067 6,068 6,066
share ======= ====== ====== =======
See accompanying notes.
F-2<PAGE>
PS Group, Inc.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1995 and 1994
(in thousands)
1995 1994
------- -------
Cash provided from operating activities $ 8,247 $ 12,261
Cash flows from financing activities:
Additions to long-term obligations 10,270
Reductions to long-term obligations (11,296) (30,475)
------- --------
Net cash used in financing activities (11,296) (20,205)
Cash flows from investing activities:
Purchase of marketable securities (15,942)
Proceeds from disposition of marketable securitie s 1,248 4,915
Cash collateralization of letters of credit, net 1,417 (7,691)
Changes in notes receivable and other 422 4,483
------- --------
Net cash used in investing activities (12,855) 1,707
Discontinued operations 19,746
------- --------
Net increase (decrease) in cash and cash equivalents (15,904) 13,509
Cash and cash equivalents at beginning of period 22,780 5,133
------- --------
Cash and cash equivalents at end of period $ 6,876 $ 18,642
======= ========
See accompanying notes.
F-3<PAGE>
PS Group, Inc.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(a) In March 1994, the assets of USTravel Systems Inc., PSG's travel
management segment, were sold. In August 1994, PSG adopted a plan to
close-down or sell a metallic waste recycling plant, the major asset of
PSG Services, Inc. (formerly known as Recontek, Inc.), a subsidiary of
PSG, and in December 1994, the plant was sold. Accordingly, travel
management and metallic waste recycling are shown as discontinued
operations in 1994.
(b) Certain amounts in the 1994 Statement of Cash Flow have been reclassified
to conform with the year-end 1994 presentation.
(c) In the opinion of management, the accompanying Unaudited Condensed
Consolidated Financial Statements include all adjustments (consisting
only of normal recurring adjustments, other than the disposition of the
travel management and metallic waste recycling businesses in 1994)
necessary for a fair statement of the consolidated financial position at
September 30, 1995 and the results of operations for the three and nine
months ended September 30, 1995 and 1994, and cash flows for the nine
months ended September 30, 1995 and 1994. These Unaudited Condensed
Consolidated Financial Statements should be read in conjunction with the
Consolidated Financial Statements and Notes thereto contained in the PSG
1994 Annual Report to Stockholders (the 1994 Annual Report).
F-4<PAGE>
PS Group, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At September 30, 1995, PSG's principal source of liquidity was cash, cash
equivalents and marketable securities of $23.7 million, a $.1 million decrease
from December 31, 1994. The major changes in cash and cash equivalents are
detailed in the Unaudited Condensed Consolidated Statements of Cash Flows. The
cash provided from operating activities was $4 million less in the first
nine months of 1995 than the first nine months of 1994 primarily because
aircraft lease payments totalling approximately $4.7 million were received in
October 1995 since the due date, September 30th, was on a weekend. Working
capital increased by $15 million since December 31, 1994. PSG's
capitalization consisted of 49% long and short-term obligations and 51% equity
at September 30, 1995 compared to 52%/48% at December 31, 1994.
At the end of 1995's third quarter, PSG had $6.2 million outstanding under its
bank credit agreement, consisting entirely of letters of credit, all of which
were fully cash collateralized. In October 1995, PSG entered into a new
credit agreement which extended the expiration of certain long-term letters of
credit (LC's) aggregating $5.2 million and provided an additional $4 million
of LC's above the existing $1 million of LC's that may be issued to support
the operations of PS Trading, Inc. (PST). These letters of credit will also
require cash collateralization if issued. The new credit agreement expires in
1996 as to the PST-related LC's and in 2000 as to the long-term LC's. No
borrowings are permitted under the bank credit agreement.
Statex Petroleum, Inc. (Statex), PSG's oil and gas production and development
subsidiary, has entered into a separate bank credit agreement collateralized
by its major oil properties. The initial availability is $1.5 million but on
approval could be increased up to $6.7 million. No amounts have yet been
borrowed under this agreement. This source of funding is intended for the
acquisition and development of properties which Statex may acquire in the
future.
In late October 1995, the United States District Court approved the settlement
reached in March 1995 of all pending class action litigation against PSG and
certain of its directors and officers. While the $5 million settlement
liability was recorded as of December 31, 1994, the actual cash payment to an
escrow account was made by PSG in July 1995.
Realization of certain of PSG assets is dependent upon the future performance
by USAir, Inc. (USAir) and Continental Airlines, Inc. (Continental) under
aircraft leases with PSG. Should either USAir or Continental default on their
leases with PSG or reject certain of such leases, PSG would suffer significant
losses on the ultimate disposal of the related aircraft or upon the ultimate
repossession of the aircraft by the lenders. The eventual outcome of these
matters cannot be determined at this time. For a more complete discussion of
USAir's and Continental's relationships to PSG's financial condition refer to
PSG's 1994 Annual Report. PSG refers readers to information released by USAir
and Continental for details relating to their financial condition.
PSG believes that, absent a failure by USAir to meet its lease obligations to
PSG, its cash, cash equivalents and marketable securities plus projected cash
F-5<PAGE>
flow are adequate to meet the operating and planned capital needs of PSG in
both the short and long-term.
Usage of tax benefit carryforwards - PSG has significant federal tax net
operating loss carryforwards, investment tax credit carryforwards and
California net operating loss carryforwards. Based on information currently
available to PSG, these amounts were $83.4 million, $12.5 million and $20.6
million, respectively, as of December 31, 1994. Certain federal tax
regulations could severely limit future usage of these tax benefits. These
limitations would apply if there were a "calculated" 50% stock ownership
change over a three year period. The change in ownership calculation, which
is complex, is heavily influenced by changes in shares held by owners of 5% or
more of PSG stock. While a 50% stock ownership change has not occurred
(estimated cumulative change is in excess of 30% as of September 30, 1995),
future ownership changes, primarily involving present or future holders of 5%
or more of PSG's shares, could result in a "calculated" ownership change.
Generally, PSG has no control of purchases or sales by investors who acquire
5% or more of PSG shares.
RESULTS OF OPERATIONS - COMPARISON OF THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994
Revenues - Revenues from PSG's fuel sales and distribution subsidiary, PST,
increased 66% and 62%, respectively, for the third quarter and first nine
months of 1995 compared to the 1994 periods as a result of increased marketing
efforts of the wholesale fuel marketing division. Oil and gas production
revenues were lower in the third quarter and nine months of 1995 when compared
to the 1994 periods largely because of a $.3 million favorable settlement of a
disputed interest in an oil well made in the third quarter of 1994. The 1995
periods also experienced decreases in oil and gas production.
Interest and other revenues were up in the third quarter of 1995 compared to
the 1994 third quarter due to increased levels of cash and marketable
securities. For the first nine months of 1995, interest and other revenues are
slightly lower than the 1994 period because there were no investment gains in
1995 compared to gains of $.7 million in 1994. However 1995 had higher
interest income as discussed in the preceding sentence.
Costs and expenses - The 63% increase during the third quarter and the 61%
increase during the first nine months of 1995 in the cost of products and
services sold reflects the increased volumes at PST discussed in the first
paragraph. The decrease in general and administrative expenses for the third
quarter and first nine months of 1995 is largely due to reductions in
corporate staffing, especially as a result of a $1.1 million charge accrued in
September 1994 related to the cancellation of employment contracts with former
PSG officers who resigned at that time. Reduced legal expenses associated
with the securities litigation described in the 1994 Annual Report also
contributed to the lower general and administrative expenses. Interest
expense decreased in 1995's third quarter and first nine months primarily due
to lower levels of outstanding debt.
Loss on aircraft disposition - In June 1995, PSG sold two Boeing 747-100SF
aircraft which were held for sale since they were returned to PSG in early
F-6<PAGE>
1992 when the lessee of the aircraft, Pan American World Airways, Inc., ceased
operations. Subsequently, these aircraft were converted into full cargo
configuration under an agreement with a third party vendor, and an obligation
for approximately $20 million was incurred. This obligation was paid-off out
of the sale proceeds. As a result of this sale, PSG recorded in the second
quarter of 1995 a $1.7 million pre-tax loss on disposition. The net cash
proceeds to PSG (after payment of costs and expenses and the repayment of the
obligation mentioned above) was approximately $1.5 million.
Income taxes - Taxes in both 1995 and 1994 differ from the corporate federal
tax rate primarily because of the effect of state taxes.
Segment results - In spite of increased revenues, PST's profits decreased
during the first nine months of 1995 due to lower operating margins as a
result of declining prices in early 1995. PST's third quarter profits in 1995
and 1994 were approximately the same.
Third quarter and first nine month results in 1995 for aircraft leasing were
slightly improved over 1994 primarily due to reduced interest expense.
Statex's operating results were lower in 1995 principally because there were
higher revenues in 1994 as described above.
F-7<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 6876
<SECURITIES> 16868
<RECEIVABLES> 21627
<ALLOWANCES> 0
<INVENTORY> 5301
<CURRENT-ASSETS> 8408
<PP&E> 287622
<DEPRECIATION> 143397
<TOTAL-ASSETS> 316449
<CURRENT-LIABILITIES> 33759
<BONDS> 0
<COMMON> 6068
0
0
<OTHER-SE> 125209
<TOTAL-LIABILITY-AND-EQUITY> 316449
<SALES> 93239
<TOTAL-REVENUES> 121762
<CGS> 89611
<TOTAL-COSTS> 89611
<OTHER-EXPENSES> 15139
<LOSS-PROVISION> 1701
<INTEREST-EXPENSE> 11597
<INCOME-PRETAX> 3714
<INCOME-TAX> 1589
<INCOME-CONTINUING> 2125
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2125
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
PS Group, Inc.
Form 10-Q September 30, 1995
Exhibit 10. (a)
September 22, 1995
PS GROUP, INC.
4370 La Jolla Village Drive, Suite 1050
San Diego, California 94538
Attention: Lawrence A. Guske
Vice President Finance and
Chief Financial Officer
Gentlemen:
Bank of America National Trust and Savings Association ("Bank") is pleased to
amend and restate that certain Credit Agreement dated as of June 23, 1994
(the "Existing Agreement"), between PS Group, Inc., a Delaware corporation,
("Company") and Bank of America National Trust and Savings Association
(the "Bank") on the following terms and conditions:
I. Tranche A Letter of Credit Facility.
A. Subject to the terms and conditions set forth herein, Bank
agrees to continue outstanding the standby letters of credit set
forth on Exhibit A hereto issued under the Existing Agreement;
provided that such letters of credit shall be amended to reduce
in amount as shown on Exhibit A and to have an expiry date of
May 10, 2000 (the "Tranche A Letter of Credit Facility").
B. The Tranche A Letter of Credit Facility is not a revolving credit, and
once any letter of credit is reduced in amount that amount
shall not be reinstated, and once any letter of credit expires it
may not be renewed or continued. Bank shall be under no obligation to
renew or continue a letter of credit beyond its stated expiration
date.
II. Tranche B Letter of Credit Facility.
A. The Bank agrees to continue its letter of credit number 220857
in the amount of $1,000,000 issued in favor of Exxon Company, USA,
a division of Exxon Corporation and to issue new letters of
credit not to exceed $5,000,000, including the $1,000,000 Exxon
letter of credit, in face amount outstanding at any one time to
support fuel trading operations (the "Tranche B Letter of Credit
Facility").
B. The Tranche B Letter of Credit Facility is a revolving credit under
which letters of credit may be paid, extended, renewed or expire and
new letters of credit may be issued.
C. The Tranche B Letter of Credit Facility shall expire on September 30,
1996, and no Tranche B Letter of Credit shall have an expiry date
later than September 30, 1997.
III. Provisions Applicable to the Tranche A Letter of Credit Facility and the
Tranche B Letter of Credit Facility.
A. Company shall reimburse any drawings on the letters of credit
immediately upon demand.
B. Company agrees to pay to Bank a commission on each outstanding
Tranche A and Tranche B Letter of Credit in an amount equal to 1%
per annum on the daily average aggregate undrawn face amount
thereof, and on the Tranche B Letter of Credit Facility, a fee of
1/2 of 1% per annum on the unused availability. The commission
and the fee shall be payable quarterly in arrears on the last
day of each calendar quarter.
C. Bank's standard fee schedule shall apply to all letters of
credit including, without limitation, issuance, negotiation,
amendment and transfer fees.
D. Any amount not paid when due hereunder shall bear interest at a per
annum rate which is equal to the Reference Rate plus 2 percent.
The Reference Rate is the rate of interest publicly announced from
time to time by Bank in San Francisco, California, as its "reference
rate." It is a rate set by Bank based upon various factors
including Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above, or below such
announced rate. Any change in the reference rate announced
by Bank shall take effect at the opening of business on the day
specified in the public announcement of such change.
E. All interest and commissions shall be calculated on the basis of
a 360-day year and actual days elapsed (which results in more
interest and commissions than if a 365-day year were used).
IV. Payments.
A. All payments to Bank shall be made at its Global Payment Operations,
1850 Gateway Boulevard, Concord, California 94520 in same day funds.
B. Company agrees to make all payments or reimbursements hereunder
free and clear of any deduction for any present or future taxes and
agrees to pay any present or future taxes or charges with respect
to such payments or reimbursements which may be imposed by any
government authority, except net income taxes of Bank imposed by any
jurisdiction.
C. Company shall reimburse or compensate Bank, upon demand by Bank,
for all costs incurred, losses suffered or payments made by Bank or
any corporation controlling Bank which are applied or allocated by
Bank to the transaction contemplated herein (all as determined by
Bank in its sole and absolute discretion) by reason of:
1. Any and all present or future reserve, deposit or similar
requirements against (or against any class of or change in or
in the amount of) assets or liabilities of, or commitments or
extensions of credit made hereunder by, Bank;
2. Any and all present or future capital or similar
requirements affecting Bank or any corporation controlling Bank
against (or against any class of or change in or in the amount
of) assets or liabilities or, or commitments or extensions of
credit by, Bank; and
3. Compliance by Bank with any direction, requirements or request
from any regulatory authority, whether or not having the force of
law.
V. Security and Support.
Company's obligations hereunder shall be secured by a cash collateral
account in an amount at all times equal to the total undrawn and drawn
and unreimbursed amount of letters of credit pursuant to the Security
Agreement (the "Security Agreement") in the form of Exhibit B hereto.
VI. Conditions for Effectiveness.
A. As a condition precedent to this Agreement becoming effective, Bank
must have received all of the following in form and substance
satisfactory to Bank:
1. Corporate resolutions with certificate of incumbency
evidencing the authority of the officer(s) executing this
agreement and the Security Agreement on behalf of Company.
2. A fee of $35,000; and
3. This Agreement and the Security Agreement duly executed and
delivered by Company, together with any account opening
documents and deposits in such account required in connection
herewith and therewith.
B. As a condition precedent to the issuance of Tranche B Letters of
Credit hereunder:
1. Each representation and warranty set forth in Section VII below
must be true and correct (and the request for the letter of
credit shall be deemed a further representation that they are
true and correct).
2. No Event of Default or event which would, with due notice or
lapse oftime or both, constitute an Event of Default shall have
occurred.
3. The wording and beneficiary of the letter of credit
shall be satisfactory to Bank.
4. Bank shall have received a duly executed and completed standby
letter of credit application on Bank's standard form.
VII. Representations and Warranties. Company represents and warrants to Bank
that:
A. Company and its Subsidiaries are corporations duly organized and
existing under the laws of their respective jurisdiction of
incorporation and are duly organized to do business and are
in good standing under the laws of all jurisdictions in which they
are doing business except where the failure to so qualify would
not result in a material adverse effect upon (i) the business,
operations, properties, assets, business prospects or condition
(financial or otherwise) of Company and its Subsidiaries, taken as
a whole, or (ii) the ability of Company to perform, or of Bank to
enforce, the obligations of Company hereunder (a "Material Adverse
Effect");
B. All corporate action on the part of Company necessary for
the authorization, execution, delivery and performance hereof has
been duly taken;
C. This agreement creates legally valid and binding obligations of
Company, enforceable against Company in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
D. All required waivers, consents, permissions or licenses
from any governmental regulatory body to which Company is
subject which are necessary in connection with this agreement and
the borrowings hereunder have been obtained prior to the date
hereof;
E. Company's audited consolidated financial statements dated December 31,
1994 and unaudited consolidated financial statements dated June 30,
1995 fairly present the financial position and results of
operations of Company and its consolidated subsidiaries as of the
respective dates thereof. Since June 30, 1995 there has not been
any Material Adverse Effect; and
F. The execution, delivery and performance by Company of this agreement
do not and will not (a) violate any provision of law, the
certificate of incorporation or bylaws of Company or any order,
judgment or decree of any court or other agency of government
binding on Company, or (b) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default
under any agreement or instrument to which Company is a party or by
which any of its properties or assets is bound.
VIII. Affirmative Covenants.
So long as credit is available hereunder and until full and final
payment of all of Company's obligations hereunder and any other
instruments or agreements required hereunder, Company shall:
A. Promptly give written notice to Bank of any Event of Default or event
which constitutes (with due notice or lapse of time or both) an Event
of Default;
B. Deliver to Bank, in form and substance satisfactory to Bank:
1. Within 120 days after the end of each fiscal year, Company's
audited consolidated financial statements and unaudited
consolidating financial statements for such year together with an
opinion related to the audited financial statements of an
independent certified accountant containing only such
limitations and qualifications as shall be satisfactory to
Bank;
2. Within 60 days after the end of its first three (3) fiscal
quarters, Company's consolidating financial statements for such
quarter; and
3. Within 10 days after the end of each month, a certificate
signed by the chief financial officer, controller, treasurer
or an assistant treasurer of Company stating that Company has
been, and continues to be, in compliance with Paragraph VIII.C
during such month;
C. Maintain at all times an aggregate minimum of not less than Three
Million Dollars in cash and cash equivalents on hand, unpledged
and free and clear of all liens and encumbrances (including the
lien of Bank under the Security Agreement) whether voluntary or
involuntary; and
D. Maintain at all times a balance in the cash collateral account of not
less than the total undrawn and drawn and unreimbursed letters of
credit by depositing cash or Invested Assets when required to make up
any deficiency.
IX. Default. If any of the following events ("Events of Default") shall occur:
A. Any reimbursement of any drawing under any letter of credit is not
made when due; or any other payment required to be made hereunder is
not made within three (3) days thereof when due; or
B. Any representation or warranty to Bank in any document related to
this financing proves to be in any respect false or misleading in
any material respect at the time made and shall not have been cured
within fifteen (15) days of the Company having become aware thereof;
or
C. Company fails to comply with any other term or provision of this
agreement and such failure shall continue for more than thirty
(30) days after written notice from Bank to Company of the existence
and character of such Event of Default; or
D. Any provision of this agreement or the Security Agreement shall for
any reason cease to be valid and binding on or enforceable against
Company or Company shall so state in writing or bring an action
to limit its obligations or liabilities thereunder; or the Security
Agreement shall for any reason cease to create a valid security
interest in the collateral purported to be covered thereby or such
security interest shall for any reason cease to be a perfected and
first priority security interest; or
E. Any bankruptcy, receivership, reorganization, liquidation,
arrangement, insolvency or dissolution proceeding is commenced in
any court by or against Company or any of its Subsidiaries
under the laws of any jurisdiction;
THEN, at the option of Bank, all sums outstanding hereunder or under
any instrument executed in connection herewith shall immediately be due and
payable, together with all commissions and interest thereon, and the
Bank may exercise the remedies available to it under law, in equity
and under the Security Agreement, all without notice of default,
presentment or demand for payment, protest or notice of nonpayment or
dishonor, or other notices or demands of any kind or character, all of
which are hereby expressly waived.
X. Miscellaneous.
A. The obligation of Company to reimburse Bank for payments made by Bank
under the letters of credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the
terms of this agreement under all circumstances.
B. This agreement shall bind and inure to the benefit of the parties and
their respective successors and assigns; provided, however, Company
shall not assign this agreement or any other instrument or
agreement required hereunder or any rights, duties or
obligations of Company herein and thereunder.
E. Bank may at any time upon written consent by Company, which consent
shall not be unreasonably withheld by Company, sell, assign, grant
participation in, or otherwise transfer (a "Transfer") all or part of
the obligations of Company or any part of them under this agreement,
provided such Transfer shall result in no cost to Company not
otherwise contemplated by this Agreement, and Company agrees
each such disposition shall give rise to their direct
obligation to any buyer, participant or assignee of Bank.
Bank may disclose to any such prospective buyer information
in Bank's possession concerning Company, this agreement.
F. No delay or omission by Bank to exercise any right under this
agreement or under any document related hereto shall impair such
right, nor shall it be construed as a waiver thereof. No waiver of
any breach or default shall be deemed a waiver of any subsequent
breach or default. Any waiver, consent or approval under this
agreement must be in writing to be effective.
G. Company agrees to pay all costs, expenses and attorneys' fees
(including the allocated costs of in-house counsel) incurred in
the preparation, negotiation and administration of this
agreement and the documents delivered in connection herewith
and incurred in the enforcement and collection (including without
limitation during any bankruptcy or receivership proceeding)
of any indebtedness incurred or outstanding hereunder.
H. This agreement, and all other instruments or agreements attached
hereto, required hereunder, or referred to herein, integrate all
the terms and conditions mentioned herein or incidental hereto,
supersede all oral negotiations and prior existing with respect to
the transactions authorized herein, and are intended by the parties
as the final expression of their agreement with respect to the terms
and conditions set forth herein and in any such other instruments or
agreements. Notwithstanding any provision of any application relating
to any letter of credit to the contrary, it is understood that in the
event of any conflict between the terms of any such application and
the terms of this agreement, the terms of this agreement shall
control with respect to events of default, representations and
warranties, and covenants, except that such application may
provide for further warranties relating specifically to the
transaction or affairs underlying such letter of credit.
I. All notices, consents and other communications provided for or
permitted hereunder, shall be given in writing and delivered or
sent by hand, by telex, cable or facsimile transmission to each party
at its address set forth below, or to such other addresses as
either party may hereafter designate in writing:
To Borrower
PS GROUP, INC.
4370 La Jolla Village Drive, Suite 1050
San Diego, California 92122
Attention: Lawrence A. Guske
Vice President Finance and
Chief Financial Officer
Telephone: (619) 546-5004
Facsimile: (619) 546-5017
To Bank
Bank of America National Trust
and Savings Association
555 South Flower Street, 11th Floor
Los Angeles, California 90071
Attention: Carolyn Simmons
Vice President
Credit Products #5618
Telephone: (213) 228-2832
Facsimile: (213) 228-2756
I. This agreement shall be governed by and construed under the laws
of the State of California.
J. This agreement amends and restates in its entirety the Existing
Agreement. To the extent not amended, restated and set forth herein,
all terms of the Existing Agreement shall be of no further force and
effect from and after the date of this Agreement.
This commitment shall expire unless accepted in writing by Company on or
before October 15, 1995. If and when this agreement is accepted it shall
constitute the final agreement between the parties hereto. Please indicate
your acceptance of the foregoing by signing and returning a copy of this letter
to my attention on or before such date.
Sincerely yours,
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION
By: /s/ Carolyn Simmons
-------------------
Carolyn Simmons
Vice President
AGREED TO AND ACCEPTED:
PS GROUP, INC.
Date: October 3, 1995
By: /s/ L.A. Guske
--------------
Title: Vice President - Finance <PAGE>
EXHIBIT A
LETTERS OF CREDIT
Standby Letter Expiry or Reduction
of Credit No. Face Amount Date
LASB 205060 $ 2,542,095.72 05/11/95 - 11/10/95
2,249,642.23 11/11/95 - 05/10/96
1,957,188.74 05/11/96 - 11/10/96
1,687,231.67 11/11/96 - 05/10/97
1,462,267.45 05/11/97 - 11/10/97
1,147,317.54 11/11/97 - 05/10/98
899,856.89 05/11/98 - 11/10/98
674,892.67 11/11/98 - 05/10/99
472,424.87 05/11/99 - 11/10/99
292,453.49 11/11/99 - 05/10/00
LASB 205062 $ 2,686,222.56 05/11/95 - 11/10/95
2,377,188.10 11/11/95 - 05/10/96
2,068,153.65 05/11/96 - 11/10/96
1,782,891.08 11/11/96 - 05/10/97
1,545,172.27 05/11/97 - 11/10/97
1,212,365.93 11/11/97 - 05/10/98
950,875.24 05/11/98 - 11/10/98
713,156.43 11/11/98 - 05/10/99
499,209.50 05/11/99 - 11/10/99
309,034.45 11/11/99 - 05/10/00
Both letters of credit shall expire on May 10, 2000.<PAGE>
EXHIBIT B
SECURITY AGREEMENT
1. As security for the payment (in such manner and order as of the
holder may elect) of any drawings under the Tranche A and Tranche B Letters of
Credit (as defined in the Agreement referred to below) and any extensions or
renewals of the same and all other obligations of the undersigned pursuant
to the amended and restated letter loan Agreement dated as of even date
herewith between PS Group, Inc. ("Company") and Bank of America National
Trust and Savings Association ("Bank") (as amended, restated, extended or
otherwise modified from time to time, the "Agreement"), Company hereby assigns
and grants a security interest in all money and property from time to time
delivered to and deposited with Bank in the bank account identified on
Schedule 1 attached hereto, together with all proceeds thereof,
interest, earnings, money, rights to subscribe, new securities or other
property to which Debtor is or may hereafter become entitled to receive on
account of such property (the "collateral").
2. Provided no Default or Event of Default has occurred and is
continuing, Company may instruct Bank to invest the collateral in debt
securities of the following types (the funds at any time and from time to time
so invested and all proceeds thereof being herein called "Invested Assets"):
(a) direct obligations of, or obligations the principal and
interest of which are guaranteed by, the United States of America;
(b) deposit accounts (which may be represented by certificates of
deposits) in Bank and bankers acceptances drawn on and accepted by Bank;
(c) Pacific Horizon Government Service Funds; and
(d) other debt securities approved by Bank in writing;
provided, however, that (i) in all cases the maturity of any such Invested
Assets described in clauses (a) and (b) above shall not exceed six months;
(ii) so long as no Default or Event of Default has occurred and is continuing,
Bank shall remit any interest received on the Invested Assets to Company; (iii)
so long as no Default or Event of Default has occurred and is continuing,
Bank shall remit to Company the excess of total Invested Assets over the
total undrawn and drawn and unreimbursed amount of all letters of credit;
(iv) Bank shall be satisfied, in its sole discretion, that the perfection
and continuity of security interest granted hereunder in such Invested Assets
shall not be adversely affected by such investment; and (v) if USAir Group,
Inc. and/or any subsidiary thereof including USAir, Inc. should be the
subject of a voluntary or involuntary bankruptcy, receivership, reorganization,
liquidation, arrangement, insolvency or dissolution proceeding in any court,
then the collateral shall be invested only in deposit accounts in Bank.
3. Company, upon any Event of Default, authorizes Bank to
cause to collect upon the collateral by transferring to the name of Bank
or that of its nominee any investment securities, cash or any other assets
now or hereafter deposited with it as collateral and further authorizes Bank
at its option, without demand, advertisement or notice to liquidate all or
any portion of the above collateral or any substitute or addition thereto,
including evidences of debt, at 10/27/95 public or private sale, at the best
price offered and pursue any other remedy of a secured creditor under the
California Uniform Commercial Code.
4. Company waives, to the full extent permissible by law, the
pleading of the statute of limitations as a defense to any demand hereunder, and
hereby consents, without notice, to renewals and extensions of time, to the
release, surrender of substitutions of collateral, and to the acceptance of
any type of further security; and diligence, presentment, protest, demand and
notice of every kind are hereby waived. Company also specifically agrees
that it shall not be necessary for said holder to proceed against anyone
liable for the payment of said obligations, or against any other security
therefor, prior to or as a condition of realizing upon any security held
hereunder.
5. Terms not defined herein have the meanings assigned to them
in the Agreement.
6. Company agrees to pay all costs, expenses and attorneys'
fees (including the allocated costs of in-house counsel) incurred in the
preparation, negotiation and administration of this agreement and the
documents delivered in connection herewith. Company hereunder agrees to pay
any costs and attorneys' fees (including the allocated cost of in-house
counsel) incurred in the enforcement and collection (including without
limitation during any bankruptcy or receivership proceeding) of any
indebtedness incurred or outstanding hereunder.
7. No delay or omission by Bank to exercise any right under
this agreement or under any document related hereto shall impair such right,
nor shall it be construed as a waiver thereof. No waiver of any breach or
default shall be deemed a waiver of any subsequent breach or default.
Any waiver, consent or approval under this agreement must be in writing to
be effective.
8. This agreement shall be governed by and construed under the
laws of the State of California.
9. This Agreement amends and restates the Security Agreement dated
as of June 23, 1994 between Company and Bank of America National Trust
and Savings Association, as agent, and continues in existence the
security interest in the Collateral provided for therein.
IN WITNESS WHEREOF, the parties hereto have entered into this
Security Agreement as of October 3, 1995.
PS GROUP, INC.
By: /s/ L.A. Guske
---------------
Title: Vice Predident - Finance
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ Carolyn Simmons
--------------------
Carolyn Simmons
Vice President
