-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DdP/INTqTO5xcjwSmvYdT5KvI7SezzdA+5XMoFE/fKhpxrfX1xAtjPS8HN/2TWZk 2hyfM+UOuL8p7M8uU8HxJg== 0000073887-99-000007.txt : 19990630 0000073887-99-000007.hdr.sgml : 19990630 ACCESSION NUMBER: 0000073887-99-000007 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990629 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OFFSHORE LOGISTICS INC CENTRAL INDEX KEY: 0000073887 STANDARD INDUSTRIAL CLASSIFICATION: AIR TRANSPORTATION, NONSCHEDULED [4522] IRS NUMBER: 720679819 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-05232 FILM NUMBER: 99654662 BUSINESS ADDRESS: STREET 1: 224 RUE DE JEAN STREET 2: PO BOX 5C CITY: LAFAYETTE STATE: LA ZIP: 70505 BUSINESS PHONE: 3182331221 MAIL ADDRESS: STREET 1: 224 RUE DE JEAN 70508 STREET 2: PO BOX 5C CITY: LAFAYETTE STATE: LA ZIP: 70505 10-K405 1 FORM 10-K ============================================================================== SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended March 31, 1999 |_| 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 0-5232 Offshore Logistics, Inc. (Exact name of registrant as specified in its Charter) Delaware 72-0679819 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 224 Rue de Jean P. O. Box 5-C, Lafayette, Louisiana 70505 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (318) 233-1221 Securities registered pursuant to Section 12(b) of the Act: Title of each Class: None Name of each exchange on which registered: None Securities registered pursuant to Section 12(g) of the Act: Common Stock ($.01 par value) Preferred Share Purchase Rights (Title of Class) 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X ----- The aggregate market value of the voting stock held by non-affiliates of the registrant as of May 29, 1999 was $223,252,436. The number of shares outstanding of the registrant's Common Stock as of May 29, 1999 was 21,103,421. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on September 20, 1999, are incorporated by reference into Part III hereof. ============================================================================== OFFSHORE LOGISTICS, INC. INDEX--FORM 10-K PART I Page Item 1. Business ..........................................................1 Item 2. Properties.........................................................6 Item 3. Legal Proceedings..................................................7 Item 4. Submission of Matters to a Vote of Security Holders................8 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............................................... 9 Item 6. Selected Financial Data ...........................................9 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.........................................10 Item 7a.Quantitative and Qualitative Disclosures about Market Risk........16 Item 8. Consolidated Financial Statements and Supplementary Data..........17 Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure..............................................49 PART III Item 10. Directors and Executive Officers of the Registrant ..............49 Item 11. Executive Compensation ..........................................49 Item 12. Security Ownership of Certain Beneficial Owners and Management...49 Item 13. Certain Relationships and Related Transactions ..................49 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..50 Signatures................................................................54 i PART I ITEM 1. Business Offshore Logistics, Inc. was incorporated in Louisiana in 1969 and its state of incorporation was changed to Delaware in 1988. Unless the context herein indicates otherwise, all references to the "Company" refer to Offshore Logistics, Inc., ("OLOG") and its majority-owned entities and non-majority owned entities. The Company's executive offices are located at 224 Rue de Jean, Post Office Box 5-C, Lafayette, Louisiana 70505, and its telephone number is (318) 233-1221. The Company, through its Air Logistics subsidiaries ("Air Log") and with its investment in Bristow Aviation Holdings Limited ("Bristow"), is a major supplier of helicopter transportation services to the worldwide offshore oil and gas industry. See Note C in "Notes to Consolidated Financial Statements" for discussion of the Company's investment in Bristow. At March 31, 1999, Air Log's and Bristow's operations included 373 aircraft (including 78 aircraft operated through unconsolidated entities). Through a series of transactions in 1993 and 1994, the Company expanded its operations to include production management services. In September 1994, Grasso Production Management, Inc. ("GPM") became a wholly-owned subsidiary of the Company. See Note K in "Notes to Consolidated Financial Statements" for information on the Company's operating revenue, operating profit and identifiable assets by industry segment and geographical distribution for the years ended March 31, 1999 and 1998 and the nine month period ended March 31, 1997. FISCAL YEAR CHANGE On May 1, 1997, the Board of Directors approved a change in the Company's fiscal year end from June 30 to March 31, effective for the nine month period ended March 31, 1997. As a result of this change in year end, this report includes the fiscal years ended March 31, 1999 and 1998 and the nine month fiscal transition period from July 1, 1996 through March 31, 1997. FORWARD LOOKING STATEMENTS This report contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). All statements included herein other than statements of historical fact are forward-looking statements. Such forward-looking statements include, without limitation, the statements herein regarding the timing of future events regarding the Company's operations, the statements under "Helicopter Activities -- United States Operations" regarding the ability of the Company to better manage its helicopter fleet, under "Production Management Services -- Customers" and "Production Management Services -- Competition" regarding outsourcing and cost structure and the market for production management operations, under "General -- Union Activities" regarding the effect of the Company's pilots electing to be represented by a union, under "Legal Proceedings" regarding the Company's potential liability on environmental claims, under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- General" and "Helicopter Activities" regarding, respectively, concentration and globalization of the helicopter industry, restructuring of the oil and gas industry, decreased levels of activity and their effects on the Company's future prospects, the estimated compensation increases resulting from the union contract with the Company's pilots, and the estimation of annual revenue from a contract not yet fully phased-in and the effect of such contract and under "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and "Year 2000 Matters" regarding, respectively, the Company's anticipated future financial position and cash requirements and the impact of Year 2000 compliance. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from the Company's expectations ("Cautionary Statements") may include, but are not limited to, demand for Company services, worldwide activity levels in oil and natural gas exploration, development and production, fluctuations in oil and natural gas prices, unionization and the response thereto by the Company's customers, currency fluctuations, international political conditions, the ability to achieve reduced operating expenses and ability to achieve Year 2000 compliance. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements. 1 HELICOPTER ACTIVITIES Air Log and Bristow charter their helicopters to customers for use in transporting personnel and time-sensitive equipment from onshore bases to offshore drilling rigs, platforms and other installations. The helicopter charters are for varying periods and, in some cases, may contain provisions for cancellation prior to completion of the contract. Charges under these charter agreements are generally based on either a daily or monthly fixed fee plus additional hourly charges. Helicopter activities are seasonal in nature and influenced by weather conditions, length of daylight hours, and level of offshore production, exploration, and construction activity. The following table sets forth the number and type of aircraft operated by Air Log and Bristow at the end of the past three fiscal years.
Passenger Speed March 31, March 31, March 31, Type Capacity (MPH) 1999 1998 1997 - ------------------------- --------- ----- -------- --------- -------- AS332L Super Puma........ 18 160 33 30 29 Sikorsky S-61............ 19 135 17 17 17 Bell 214ST............... 18 150 6 6 5 Puma SA 330J............. 16 150 2 2 2 Sikorsky S-76............ 12 160 41 41 36 Bell 212................. 12 115 42 42 44 Bell 412................. 12 140 6 6 6 Bo - 105................. 4 125 19 21 22 AS335 Twinstar........... 5 135 9 10 10 Bell 407................. 6 130 19 16 3 Bell 206L Series......... 6 125 66 68 71 Bell 206B Jet Ranger..... 4 115 21 24 26 Other.................... 14 18 17 --- --- --- 295 301 288 === === ===
At March 31, 1999, Air Log and Bristow owned or employed pursuant to a capital lease arrangement 291 of the 295 aircraft that are operated. The following table sets forth certain information concerning the 291 aircraft.
As of March 31, 1999 -------------------------- Net Type Number Book Value - ------------------------------------------- ------ ---------- (000's) AS332L Super Puma.......................... 31 $ 211,863 Sikorsky S-61.............................. 17 38,283 Bell 214ST................................. 6 12,786 Puma SA 330J............................... 2 2,678 Sikorsky S-76.............................. 39 47,995 Bell 212................................... 42 38,329 Bell 412................................... 6 6,497 Bo - 105................................... 19 5,799 AS335 Twinstar............................. 9 2,528 Bell 407................................... 19 23,513 Bell 206L Series........................... 66 17,558 Bell 206B Jet Ranger....................... 21 1,547 Other...................................... 7 10,092 --- --------- 284 419,468 Fixed Wing................................. 7 1,544 --- --------- 291 $ 421,012 === =========
In addition to the foregoing 291 aircraft, at March 31, 1999, Air Log and Bristow operated 4 aircraft pursuant to operating lease arrangements. Bristow provides engineering and administrative support to 47 aircraft operated in an unconsolidated entity involved in military training. Air Log and Bristow also provide services and technical support to other unconsolidated entities that operate 26 helicopters of various types and 5 fixed wing aircraft. 2 United States Operations The United States ("U.S.") helicopter activities are conducted primarily from operating facilities along the Gulf of Mexico. As of March 31, 1999, Air Log operated 143 aircraft in that area. Air Log also operates 12 aircraft in Alaska. Although the Company's business is primarily dependent upon activity levels in the offshore oil and gas industry, the existence of other markets for helicopter services distinguishes the Company's business from other segments of the oil service industry. Other markets for helicopters include emergency medical transportation, agricultural and forestry support and general aviation activities. These other markets enable the Company to better manage its helicopter fleet by providing both a source of additional aircraft during times of high demand and potential purchasers for excess Company aircraft during times of reduced demand. United Kingdom/Europe Operations During 1997, the Company expanded its presence in the United Kingdom and Europe through its investment in Bristow. As of March 31, 1999, 66 aircraft were being operated by Bristow in the United Kingdom and Europe, mainly in the North Sea offshore market. These activities are primarily dependent upon activity levels in the offshore oil and gas production, exploration and construction industries and search and rescue needs in that area. Bristow also has a 50% interest in an unconsolidated entity that has a 15 year contract to provide pilot training and maintenance services to the British military. This entity purchased and specially modified 47 aircraft and maintains a staff of approximately 600 employees dedicated to conducting these training activities which began in May 1997. Other International Operations Utilization of helicopters in international service is dependent on the worldwide level of oil and gas exploration and development offshore and in remote areas. This, in turn, is dependent on the funds available to the major oil companies to conduct such activities and upon the number and location of new foreign concessions. As of March 31, 1999, Air Log and Bristow operated 74 of their aircraft in locations outside the United States and Europe. Air Log operated 17 helicopters in Brazil, Colombia, Egypt and Mexico. Bristow operated 23 aircraft in Africa and 34 aircraft elsewhere throughout the world. In addition to its direct operations in international areas, Air Log has service agreements with, and equity interests in, entities that operate 31 aircraft in Egypt and Mexico. Air Log provides services and technical support to these entities and, from time to time, leases aircraft to these entities as additional support for these operations. Customers The principal customers for the Company's helicopter activities are national and international petroleum and offshore construction companies. During 1999, 1998, and 1997, no one customer accounted for more than 10% of the Company's consolidated operating revenues. Competition The helicopter transportation business is highly competitive on a worldwide basis. Chartering of helicopters is usually done on the basis of competitive bidding among those having the necessary experience, equipment and resources. The technical requirements of operating helicopters offshore have increased as oil and gas activities have moved into deeper water requiring more sophisticated aircraft to service the market. As it is difficult to maintain an adequate shorebased and offshore infrastructure and provide the working capital required to conduct such operations, the number of new entrants into the Gulf of Mexico market has been few. One of Air Log's competitors has substantially more helicopters in service in the Gulf of Mexico. The harsh conditions in the North Sea demand larger, more sophisticated helicopters to conduct operations. Bristow has two significant competitors in the North Sea. Industry Hazards and Insurance Hazards, such as adverse weather and marine conditions, crashes, collisions and fire are inherent in the offshore transportation industry, and may result in losses of equipment, revenues or death of personnel. Air Log and Bristow maintain Hull and Liability insurance, which generally insures them against certain legal liabilities to others, as well as damage to their aircraft. It is also their policy to carry insurance for or require their customers to provide indemnification against expropriation, war risk and confiscation of their helicopters employed in international operations. There is no assurance that in the future they will be able to maintain their existing coverage or that the related premiums will not increase substantially. 3 Government Regulation United States. As a commercial operator of small aircraft, Air Log is subject to regulations pursuant to the Federal Aviation Act of 1958, as amended, and other statutes. Air Log carries persons and property in its helicopters pursuant to an Air Taxi Certificate granted by the Federal Aviation Administration ("FAA"). The FAA regulates the flight operations of Air Log, and in this respect, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of its operations. The National Transportation Safety Board is authorized to investigate aircraft accidents and to recommend improved safety standards. Air Log is also subject to the Communications Act of 1934 because of the use of radio facilities in its operations. Under the Federal Aviation Act, it is unlawful to operate certain aircraft for hire within the United States unless such aircraft are registered with the FAA and the operator of such aircraft has been issued an operating certificate by the FAA. As a general rule, aircraft may be registered under the Federal Aviation Act only if the aircraft are owned or controlled by one or more citizens of the United States and an operating certificate may be granted only to a citizen of the United States. For the purposes of these requirements, a corporation is deemed to be a citizen of the United States only if, among other things, at least 75% of the voting interest therein is owned or controlled by United States citizens. In the event that persons other than United States citizens should come to own or control more than 25% of the voting interest in the Company, the Company has been advised that Air Log's aircraft may be subject to deregistration under the Federal Aviation Act and loss of the privilege of operating within the United States. At March 31, 1999, the Company had approximately 1,350,346 common shares held by persons with foreign addresses representing approximately 6.4% of the 21,103,421 common shares outstanding. The Company's operations are subject to federal, state and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, such laws and regulations have not had a material adverse effect on the Company's business or financial condition. Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the oil and gas industry, which in turn could adversely affect the Company. United Kingdom. As a commercial operator of aircraft, Bristow is subject to the Licensing of Air Carriers Regulations 1992, and Regulations made under the Civil Aviation Act 1982 and other statutes. Bristow carries persons and property in its helicopters pursuant to an operating license issued by the Civil Aviation Authority ("CAA"). The CAA regulates the flight operations of Bristow, and in this respect, exercises jurisdiction over personnel, aircraft, ground facilities and certain technical aspects of Bristow's operations. Accident investigations are carried out by the Air Accident Investigation Branch of the Department of the Environment, Transport and the Regions. The CAA often imposes improved safety standards on the basis of a report of the Inspector. Under the Licensing of Air Carriers Regulations 1992, it is unlawful to operate certain aircraft for hire within the United Kingdom unless such aircraft are approved by the CAA. The holder of an operating license must meet the ownership and control requirements of Council Regulation 2407/92 (i.e. the entity that operates under the license must be owned directly or through majority ownership by United Kingdom or European Economic Area nationals and must at all times be effectively controlled by them). Bristow's operations are subject to local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, such laws and regulations have not had a material adverse effect on Bristow's business or financial condition. Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the oil and gas industry, which may in turn have an adverse affect on the Company. International. Operations other than in the United States and the United Kingdom are subject to local governmental regulations and to uncertainties of economic and political conditions in those areas. Because of the impact of local laws, these operations are conducted primarily through entities (including joint ventures) in which local citizens own interests and Air Log or Bristow holds only a minority interest, or pursuant to arrangements under which the Company operates assets or conducts operations under contracts with local entities. There can be no assurance that there will not be changes in local laws, regulations or administrative requirements, or the interpretation thereof, any of which could have a material adverse effect on the business or financial condition of the Company or on its ability to continue operations in certain regions. 4 Currency Fluctuations Most of Bristow's revenues and expenses are denominated in British Pounds Sterling ("pound"). For the year ended March 31, 1999, approximately 51% of consolidated operating revenues were translated from pounds into the United States Dollar. In addition, a portion of Bristow's revenues are denominated in other currencies (including Australian Dollars, French Francs, Nigerian Naira and Trinidad and Tobago Dollars) to cover expenses in the areas and/or currencies in which such expenses are incurred. To the extent operating revenues are denominated in the same currency as operating expenses, the Company can reduce its vulnerability to exchange rate fluctuations. Because the Company maintains its financial statements in United States Dollars, it is vulnerable to fluctuations in the exchange rate between the pound and the United States Dollar. PRODUCTION MANAGEMENT SERVICES The Company's wholly owned subsidiary, GPM is the leading independent contract operator of oil and gas production facilities in the Gulf of Mexico. In addition, GPM also provides services for certain onshore facilities. In providing these services, GPM operates oil and gas production facilities for major and smaller independent oil and gas companies. Typical project assignments may involve full or limited management of operations of oil and gas production facilities located offshore, particularly in the Gulf of Mexico. The work involves placing experienced crews, employed by GPM, to operate the facilities and provide all necessary services and products for the offshore operations. When servicing offshore oil and gas production facilities, GPM's employees normally live on the facility for a seven day rotation. GPM's services include furnishing personnel, engineering, production operating services, paramedic services and the provision of boat and helicopter transportation of personnel and supplies between onshore bases and offshore facilities. GPM also handles regulatory and production reporting for certain of its customers. Operations GPM's production management services are conducted primarily from production facilities in the Gulf of Mexico. As of March 31, 1999, GPM managed or had personnel assigned to 217 production facilities in the Gulf of Mexico. Although GPM's business is primarily dependent upon activity levels in the offshore oil and gas industry, 90% of GPM's production management costs consist of labor and contracted transportation services. This enables GPM to scale down operations rapidly should market conditions change. Because of this ability to react to market conditions, management believes the production management segment of the oil service industry is less affected by downturns in offshore oil and gas activities. Customers GPM's customers are primarily major and small independent oil and gas companies that own oil and gas production facilities in the Gulf of Mexico. These companies are increasingly inclined to out-source services provided by companies such as GPM which are able to operate more efficiently and with a lower cost structure. This allows the customers to focus their efforts on their core activities, which is the exploration for and development of oil and gas reserves. During 1999, 1998 and 1997, no single GPM customer accounted for more than 10% of the Company's consolidated operating revenues. Competition GPM's business is highly competitive. There are a number of competitors that are smaller than GPM but maintain a Gulf-wide presence. In addition, there are many smaller operators that compete on a local basis or for single projects or jobs. Management of the Company anticipates that the market for oil and gas production management operations will continue to increase over the next few years as oil and gas producing companies continue to reduce the size of field personnel and further utilize outside contractors as efforts to reduce their operating costs continue. Typically, GPM will be requested to bid on one or more production facilities owned by an oil and gas producer. The two key elements in the pricing of the bid are personnel and transportation costs. In addition to price, an additional consideration is the quality of personnel, training programs, safety record and stability of the operator since this can greatly affect the revenue flow to the producer and reduce the risk of possible damage to the production facility. There are no assurances that an increase in the market for production management services will occur. 5 Industry Hazards and Insurance GPM's operations are subject to the normal risks associated with working on oil and gas production facilities. These risks could result in damage to or loss of property and injury to or death of personnel. GPM carries normal business insurance including general liability, worker's compensation, automobile liability and property and casualty insurance coverages. Government Regulation The Mineral Management Service ("MMS") regulates the production operations of GPM's customers and, in this respect, exercises jurisdiction over personnel, production facilities and certain technical aspects of GPM's operations. GPM's operations are subject to federal, state and local laws and regulations controlling the discharge of materials into the environment or otherwise relating to the protection of the environment. To date, such laws and regulations have not had a material adverse effect on GPM's business or financial condition. Increased public awareness and concern over the environment, however, may result in future changes in the regulation of the oil and gas industry, which in turn could adversely affect the Company. GENERAL Employees As of March 31, 1999 Air Log, Bristow and GPM employed 659, 2,067 and 546 employees worldwide, respectively. The Company's corporate staff consisted of 23 employees. Union Activities On August 6, 1997, the U.S. pilots at the Company voted to become members of the Office and Professional Employees International Union ("OPEIU"). The Company commenced contract negotiations with the OPEIU on April 1, 1998 and on April 15, 1999 announced that it had reached a tentative agreement with pilot representatives on the contract's provisions. The contract calls for a four year term beginning May 18, 1999. The contract provides the pilots with scheduled increases in base pay and other fringe benefit enhancements and provides the Company with strike protection and certain other rights to allow it to continue to manage its business. The contract was ratified on May 18, 1999 by a 96% affirmative vote of the pilot employees and on May 26, 1999, by a unanimous affirmative vote of the Company's Board of Directors. In January 1998, the OPEIU petitioned the National Mediation Board ("NMB") to organize the Company's domestic mechanics and ground support personnel. Certain objections to this petition were filed and the NMB dismissed the OPEIU application on May 12, 1998. Under the Federal labor law rules, the union is prohibited from petitioning the NMB for one year from date of dismissal. To date, no subsequent petitions have been filed with the NMB. The Company does not believe that the terms of the pilots' contract or other potential organizing efforts will place it at a disadvantage with its competitors as management believes that pay scales and work rules will continue to be similar throughout the industry. ITEM 2. Properties See "Business -- Helicopter Activities" for a discussion of the number and types of aircraft operated by Air Log and Bristow. Air Log leases approximately 8 acres of land at the Acadiana Regional Airport in New Iberia, Louisiana under a lease expiring in 2030. The Company has constructed office and helicopter maintenance facilities on the site containing approximately 44,000 square feet of floor space. The property has access to the airport facilities, as well as a major highway. The Company's Corporate offices occupy 14,440 square feet in a building in Lafayette, Louisiana under a lease expiring in 2000. Other office and operating facilities in the United States and abroad, including most of the operating facilities along the Gulf of Mexico, are held under leases, the rental obligations under which are not material in the aggregate. 6 Bristow leases land and facilities at Redhill Aerodrome near London, England under a lease expiring in 2075. Leases of various hangars, offices and aviation fuel facilities at Redhill Aerodrome expire during 2003. Bristow leases a helicopter terminal, offices and hangar facilities at Aberdeen Airport, Scotland under a lease expiring in 2013 with an option to extend to 2023. Additional hangar and office facilities at Aberdeen Airport are maintained under a lease expiring in 2030. Bristow leases various hangars and terminal access at North Denes Airport near Great Yarmouth, England under a lease expiring in 2014. Bristow leases office space and hangar facilities at Sumburgh Airport in Sumburgh, Shetland under a lease expiring in 1999 with renewal options through 2019, and at Unst in Shetland under a lease expiring in 1999 with a renewal option to 2004. Bristow owns and leases numerous residential locations near its operating bases in the United Kingdom, Australia, China, Nigeria, and in the Caribbean primarily for housing pilots and staff supporting those areas of operation. GPM's Corporate offices occupy 6,000 square feet in a building in Houston, Texas, under a lease expiring in 2002. Other office and operating facilities along the Gulf of Mexico are held under leases, the rental obligations under which are not material in the aggregate. ITEM 3. Legal Proceedings In January 1989, the Company received notice from the United States Environmental Protection Agency ("EPA") that it is a potentially responsible party ("PRP") for clean up and other response costs at the Sheridan Disposal Services Superfund Site in Waller County, Texas. The Company is among approximately 160 PRPs identified with respect to the site. The EPA has estimated that the cost of remedial activities at the site will be approximately $30 million. In August 1989, the Company received a similar notice with respect to the Gulf Coast Vacuum Services Site, which is near Abbeville, Louisiana. The Company is among over 300 PRPs identified with respect to this site. The EPA alleged that the Company was a generator or transporter of hazardous substances found at the two sites. In February 1991, the Company received a request for information from the EPA relating to the Western Sand and Gravel Superfund Site in Rhode Island, as to which the Company had been named a PRP after an earlier request for information from the EPA issued in 1983 - 1984. During 1997, the Company executed a consent decree with the EPA and settlement documents with the Performing Parties with respect to the Company's previous exposure at the D.L. Mudd site. Costs incurred were nominal. Based on presently available information, the Company believes that it generated only a small portion, if any, of the substances found at the above described sites. In addition, many of the other PRPs at all of the aforementioned sites are large companies with substantial resources. As a result, the Company believes that its potential liability for clean up and other response costs in connection with these sites is not likely to have a material adverse effect on the Company's business or financial condition. In addition to notification of PRP responsibility, the EPA notices to the Company also contained information requests regarding the Company's connection with the various sites. The responses to the information requests were due in early March 1989 for the Sheridan site and in early September 1989 for the Louisiana site. Through oversight, the Company did not respond to the requests until April and May 1990. The EPA is authorized to seek civil penalties for failure to respond to its information requests in a timely manner in an amount up to a maximum of $25,000 per day for each day of continued non-compliance; however, to date, no such penalties have been sought. While it is not possible to predict whether any civil penalties might be assessed against the Company for the delays in responding to the EPA requests, the Company believes the amount of such penalties, if any, will not have a material adverse effect on its business or financial condition. The Company is not a party to any other litigation, which, in the opinion of management, will have a material adverse effect on the Company's business or financial condition. 7 ITEM 4. Submission of Matters to a Vote of Security Holders Not applicable. Executive Officers of the Registrant All executive officers hereunder are, in accordance with the By-laws, elected annually and hold office until a successor has been duly elected and qualified. There are no family relationships among any of the Company's executive officers. The executive officers of the Company as of June 29, 1999, were as follows: Name Age Position Held with Registrant - ------------------- --- -------------------------------------------- George M. Small.......54 President and Director Drury A. Milke........41 Vice President, Chief Financial Officer and Secretary Gene Graves...........50 Vice President -- Marketing Hans J. Albert........57 Vice President -- International Aviation Neill Osborne.........50 Vice President -- Domestic Aviation Patricia M. Como......38 Corporate Treasurer E. H. Underwood III...42 General Counsel H. Eddy Dupuis........34 Corporate Controller and Assistant Secretary Mr. Small joined the Company in 1977 as Controller and was elected Vice President -- Treasurer in 1979, Chief Financial Officer and Secretary in 1986 and President during the fiscal year ended March 31, 1998. Mr. Milke joined the Company in 1988 as Director of Planning and Development and was elected Vice President in 1990 and Chief Financial Officer and Secretary during the fiscal year ended March 31, 1998. He is a CPA. Mr. Graves joined the Company in 1993 as Vice President -- Aviation Marketing and was elected Vice President -- Domestic Aviation in 1994 and Vice President -- Marketing in 1998. Prior to joining the Company, Mr. Graves had 26 years experience in the commercial helicopter service business in the Gulf of Mexico as Vice President -- Marketing and several operating positions. Mr. Albert joined the Company in 1972 as a pilot and served in several operating capacities before being appointed Director of International Aviation Operations in 1980. He was elected Vice President in 1987. Mr. Albert has thirty-three years of experience in the aviation industry. Mr. Osborne joined the Company in 1993 as Director of Operations for Air Logistics and was elected Vice President -- Domestic Aviation in 1998. Prior to joining the Company, Mr. Osborne had 24 years of aviation experience as a pilot and a manager. Mr. Osborne is the immediate past Chairman of the Helicopter Association International and the current Vice Chairman of the International Federation of Helicopter Associations. Mrs. Como joined the Company in 1990 as Controller and was elected Treasurer during 1998. Prior to joining the Company, Mrs. Como was a Manager with Arthur Andersen LLP. She is a CPA. Mr. Underwood joined the Company in 1995 as General Counsel. He received a Juris Doctorate from Loyola University in 1987 and has a degree in risk management from the University of Georgia. Prior to joining the Company, Mr. Underwood was General Counsel for another oilfield service company. Mr. Dupuis joined the Company in 1998 as Controller. Prior to joining the Company, Mr. Dupuis was a Manager with Arthur Andersen LLP. 8 PART II ITEM 5. Market for the Registrant's Common Equity and Related Stockholder Matters The Common Stock of the Company is traded in the over-the-counter market and is reported on the National Association of Securities Dealers Automated Quotation System ("NASDAQ") under the symbol "OLOG". The Company's Common Stock has been quoted on the NASDAQ National Market System since 1984. March 31, 1999 March 31, 1998 ------------------ --------------- High Low High Low -------- ------ ------ ------ First Quarter..................... 25 13/16 17 21 5/8 14 3/4 Second Quarter.................... 18 5/8 8 3/4 21 5/8 16 1/4 Third Quarter..................... 18 9 5/8 25 1/4 17 1/2 Fourth Quarter.................... 13 8 1/2 21 7/8 16 The approximate number of holders of record of Common Stock as of May 29, 1999 was 2,000. On January 27, 1998, the Company issued $100 million of 7 7/8% Senior Notes due 2008. The terms of the Senior Notes restrict payment of cash dividends to shareholders. The Company has not paid dividends on its Common Stock since January 1984. ITEM 6. Selected Financial Data The following table sets forth certain selected historical consolidated financial data of the Company and should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and Notes thereto included elsewhere herein. The information presented reflects Cathodic Protection Services Company ("CPS") as a discontinued operation. See Note E in "Notes to Consolidated Financial Statements."
Year Ended March 31, Nine Months Year Ended June 30, --------------------------- Ended March 31, ------------------------ 1999 1998 1997 (2) 1996 1995 (1) ------------- ----------- ----------- ----------- ----------- (in thousands, except per share data) Statement of Operations Data: Operating revenues...................... $ 466,440 $ 426,893 $ 167,128 $ 117,289 $ 118,336 ============= =========== =========== =========== =========== Income from continuing operations....... $ 20,920 $ 31,254 $ 17,625 $ 15,024 $ 18,962 ============= =========== =========== =========== =========== Net income.............................. $ 20,920 $ 31,408 $ 17,232 $ 15,276 $ 18,450 ============= =========== =========== =========== =========== Basic earnings per common share: (3) Income from continuing operations.... $ 0.97 $ 1.45 $ 0.88 $ 0.77 $ 1.00 ============= =========== =========== =========== =========== Net income........................... $ 0.97 $ 1.46 $ 0.86 $ 0.78 $ 0.97 ============= =========== =========== =========== =========== Diluted earnings per common share: (3) Income from continuing operations.... $ 0.97 $ 1.35 $ 0.85 $ 0.76 $ 0.98 ============= =========== =========== =========== =========== Net Income........................... $ 0.97 $ 1.36 $ 0.83 $ 0.77 $ 0.96 ============= =========== =========== =========== =========== Balance Sheet Data: Total assets......................... $ 732,030 $ 736,011 $ 674,213 $ 230,741 $ 217,983 ============= =========== =========== =========== =========== Long-term obligations: Long-term debt....................... $ 233,615 $ 251,560 $ 199,631 $ -- $ -- ============= =========== =========== =========== =========== Cash dividends declared per common share......................... $ -- $ -- $ -- $ -- $ -- ============= =========== =========== =========== ===========
(1) Includes financial data for GPM after the effective date of the investment on September 16, 1994. (2) Includes financial data for Bristow after the effective date of the investment on December 19, 1996 (See Note C in "Notes to Consolidated Financial Statements"). (3) Earnings per share amounts for the nine months ended March 31, 1997 and for the years ended June 30, 1996 and 1995 have been restated for the adoption of Statement of Financial Accounting Standards No. 128 "Earnings per share." 9 ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations General The Company is a major supplier of helicopter transportation services to the worldwide offshore oil and gas industry. In December 1996, the Company expanded its aviation services and related operations through its investment in Bristow Aviation Holdings Limited ("Bristow") (see Note C in the "Notes to the Consolidated Financial Statements" for a complete discussion of this investment). The investment in Bristow was influenced by the Company's belief that the globalization of helicopter operators had begun with the then recent acquisitions and consolidations completed by two of its major international competitors. The Company believes that this trend will continue and accelerate as helicopter operators seek to broaden their exposure to international markets in order to better serve their customers and increase their access and influence with financial markets, insurance markets and other suppliers. The combined helicopter activities of the Company's Air Logistics subsidiaries (Air Log) and that of Bristow, together with its investment in unconsolidated entities, results in an operating fleet of 373 aircraft servicing the major oil and gas markets of the world. The Company also provides production management services to the domestic offshore oil and gas industry through its wholly owned subsidiary, Grasso Production Management, Inc. (GPM). GPM's services include furnishing personnel, engineering, production operating services, paramedic services and the provision of boat and helicopter transportation of personnel and supplies between onshore bases and offshore facilities. The Company's investment in GPM was influenced by its belief that a restructuring in the United States oil and gas industry was taking place, and is continuing, creating opportunities to provide production management services to both independent and major oil companies as they either grow, contract or re-focus their activities accordingly. The level of worldwide offshore oil and gas exploration, development and production activity has traditionally influenced demand for the Company's services. This was clearly evident during fiscal year 1999 when the oil and gas industry experienced a significant downturn. A market over-supply of oil caused prices to decline to their lowest level in over 12 years. This protracted decline in commodity prices resulted in oil companies' canceling or deferring a significant portion of their current and planned exploration and development activities, and, accordingly, reduced demand for helicopter services in certain markets and increased rate pressure from customers in other markets. Additionally, oil companies sought to lower their internal and external production costs through initiatives to reduce excess costs and make more efficient use of contracted third party services. Another factor affecting exploration, development and production activity is the merger activity among both major and independent oil companies, as these organizations attempt to increase their efficiencies. Generally, only the most promising exploration and development projects from each merged entity will be pursued, resulting in overall lower post merger exploration and development budgets. The Company has no way of predicting the activity levels of either the oil and gas industry in general or that of its specific customers. However, management does believe that it may take some period of higher sustained commodity prices before the industry commits resources for new exploration and development activities, and, consequently, helicopter transportation services. 10 Results of Operations Operating results and other income statement information for the years ended March 31, 1999 and 1998 and the nine month period ended March 31, 1997 follows (in thousands of dollars):
Year Ended Nine Months March 31, Ended ---------------------- March 31, 1999 1998 1997 --------- --------- --------- Operating revenues........................ $ 466,440 $ 426,893 $ 167,128 Gain (loss) on disposal of equipment....... 2,400 (238) 1,222 --------- --------- --------- 468,840 426,655 168,350 --------- --------- --------- Direct cost................................ 363,272 311,641 119,106 Depreciation and amortization.............. 32,742 32,240 12,624 General and administrative................. 29,847 26,310 11,406 --------- --------- --------- 425,861 370,191 143,136 --------- --------- --------- Operating income.......................... 42,979 56,464 25,214 Earnings from unconsolidated entities..... 5,104 7,205 2,602 Interest income (expense), net............ (16,351) (17,555) (2,228) --------- ---------- ----------- Income before provision for income taxes.. 31,732 46,114 25,588 Provision for income taxes................ 9,509 13,833 7,675 Minority interest......................... (1,303) (1,027) (288) Discontinued operations................... -- 154 (393) --------- --------- --------- Net income................................ $ 20,920 $ 31,408 $ 17,232 ========= ========= =========
11 Consistent with the presentation of segment information in Note K in the "Notes to Consolidated Financial Statements", the following table sets forth certain operating information which will form the basis for discussion of each of the two identified segments, Helicopter Activities and Production Management and Related Services. In order to ease comparison of current and prior year information, the table includes information for the twelve months ended March 31, 1997. Also shown, as presented in the prior year, is the nine months ended March 31, 1997. See "Business - Fiscal Year Change" for a discussion of the change in the Company's fiscal year.
Nine Twelve Months Ended March 31, Months Ended -------------------------------------- March 31, 1999 1998 1997(1) 1997(1) ---------- ---------- ---------- --------- (in thousands, except flight hours and gross margin percentages) Flight hours (excludes unconsolidated entities): Helicopter Activities: Air Log..................................... 120,888 137,495 115,747 86,638 Bristow..................................... 107,301 95,987 25,683 25,683 ---------- --------- --------- --------- Total................................... 228,189 233,482 141,430 112,321 ========== ========= ========= ========= Operating revenues: Helicopter Activities: Air Log..................................... $ 123,399 $ 123,544 $ 101,182 $ 77,185 Bristow..................................... 305,408 264,612 68,654 68,654 Less: Intercompany......................... (716) (587) (23) -- ---------- --------- --------- --------- Total................................... 428,091 387,569 169,813 145,839 Production management and related services...... 41,236 42,829 30,748 23,492 Corporate....................................... 5,580 4,069 52 43 Less: Intercompany ............................ (8,467) (7,574) (2,994) (2,246) ---------- --------- --------- --------- Consolidated total................. $ 466,440 $ 426,893 $ 197,619 $ 167,128 ---------- --------- --------- --------- Operating expenses: Helicopter Activities: Air Log..................................... $ 99,575 $ 95,034 $ 77,394 $ 58,323 Bristow..................................... 289,582 236,378 61,514 61,514 Less: Intercompany.......................... (716) (587) (23) -- ---------- --------- --------- --------- Total.................................. 388,441 330,825 138,885 119,837 Production management and related services...... 39,035 39,755 29,652 22,310 Corporate....................................... 6,852 7,185 4,152 3,235 Less: Intercompany............................. (8,467) (7,574) (2,994) (2,246) ---------- --------- --------- --------- Consolidated total................. $ 425,861 $ 370,191 $ 169,695 $ 143,136 ---------- --------- --------- --------- Operating income, excluding gain or loss on disposal of equipment: Helicopter Activities: Air Log..................................... $ 23,824 $ 28,510 $ 23,788 $ 18,862 Bristow..................................... 15,826 28,234 7,140 7,140 ---------- --------- --------- --------- Total.................................. 39,650 56,744 30,928 26,002 Production management and related services...... 2,201 3,074 1,096 1,182 Corporate....................................... (1,272) (3,116) (4,100) (3,192) ---------- --------- --------- --------- Consolidated total................. $ 40,579 $ 56,702 $ 27,924 $ 23,992 ========== ========= ========= ========= Gross margin, excluding gain or loss on disposal of equipment: Helicopter Activities: Air Log..................................... 19.3% 23.1% 23.5% 24.4% Bristow ................................... 5.2% 10.7% 10.4% 10.4% Total.................................. 9.3% 14.6% 18.2% 17.8% Production management and related services...... 5.4% 7.2% 3.6% 5.0% Consolidated total................. 8.7% 13.3% 14.1% 14.4%
(1) Includes data for Bristow after the effective date of the investment on December 19, 1996. 12 Helicopter Activities Air Log and Bristow conduct helicopter activities principally in the Gulf of Mexico and the North Sea, respectively, where they provide support to the production, exploration and construction activities of oil and gas companies. Air Log also charters helicopters to governmental entities involved in regulating offshore oil and gas operations in the Gulf of Mexico. Bristow also provides search and rescue services to the British Coast Guard. Air Log's Alaskan activity is primarily related to providing helicopter services to the Alyeska Pipeline. Air Log has service agreements with, and equity interests in, entities that operate aircraft in Egypt and Mexico ("unconsolidated entities"). Air Log and Bristow also operate in various other international areas (including Australia, Brazil, Brunei, China, Colombia, Mexico, Nigeria and Trinidad). These international operations are subject to local governmental regulations and to uncertainties of economic and political conditions in those areas. The following table sets forth certain information regarding aircraft operated by Air Log, Bristow and unconsolidated entities: March 31, March 31, March 31, 1999 1998 1997 -------- -------- -------- Number of aircraft operated (excludes unconsolidated entities): United States - Air Log.................. 155 154 141 United Kingdom/Europe - Bristow.......... 66 73 75 International - both Airlog and Bristow.. 74 74 72 --- --- --- Total....................................... 295 301 288 === === === Number of aircraft operated by unconsolidated entities..................... 78 78 42 === === === The Company experienced mixed results from its Helicopter Activities during fiscal 1999 as it saw revenues increase and operating income decrease. This is in contrast to the increases experienced during 1998 and 1997 fiscal periods primarily as a result of the Company's investment in Bristow and improved market conditions in the Gulf of Mexico. Air Log's flight activity decreased during fiscal 1999 by 12% from 1998 levels. This decrease is due primarily to the overall decrease in demand for helicopter services from the oil and gas industry. Despite the decrease in flight activity, Air Log's operating revenues remained unchanged from fiscal 1998 to 1999. Several factors, including rate increases (approximating 10%) obtained in the third quarter of fiscal 1998 and the continued high percentage of aircraft under contract between the two fiscal years, served to prevent an otherwise expected decline in revenue. Flight hours and related revenue generated per flight hour began trending downward from the first quarter of fiscal 1999 onward as customers began scaling back operations without releasing aircraft from fixed monthly leases until December 1998. While this situation had a positive effect on revenues, it had an opposite effect on operating costs as Air Log was required to keep these aircraft maintained and crewed ready for flight, which contributed to Air Log's overall operating income decline of 16% in fiscal 1999 from 1998. To protect the erosion of its margins, in July 1998 Air Log instituted stricter review and authorization procedures for maintenance expenditures, put a hiring freeze in effect, and in February 1999 reduced its workforce by 50 employees. Other factors contributing to Air Log's decline in profitability in 1999 include the provisions of additional reserve for bad debts of $.8 million for one significant customer which filed Chapter 11 bankruptcy and $1.1 million for another significant customer experiencing financial difficulties due to the devaluation of the Brazilian currency, and the accrual of $1.3 million for changes in Air Log's compensated absences policies. Unlike Air Log's other foreign operations, its customer in Brazil is exposed to currency exchange risk as it earns all of its revenue in the Brazilian currency, but incurs a majority of its expenses (including Air Log's leases) in United States Dollars. Air Log's revenue from this Brazilian customer was $5.0 million in fiscal 1999. Air Log's activity levels in the Gulf of Mexico were strong during fiscal 1998 and 1997. Increases in helicopter rates in fiscal 1998 and 1997 had a positive impact on operating revenues in the Gulf of Mexico during 1998 and 1997. Gulf of Mexico flight hours and operating revenues for 1998 increased 22% and 24%, respectively, over the similar twelve month period in 1997. Gulf of Mexico operating income increased $3.9 million for 1998, a 25% increase over the similar period in 1997. Alaska's operations in 1998 were relatively unchanged from the prior year. International flight activity from Air Log continued to improve during the year ended March 31, 1998 and the nine months ended March 31, 1997. International flight hours and operating revenues from Air Log for 1998 increased over 4.3% and 10.7%, respectively, from the similar twelve month period in 1997. International operating income increased $.9 million in 1998, a 15% increase over the similar period in 1997. Beginning in fiscal 2000, Air Log's domestic pilots will be compensated in accordance with the terms of a negotiated contract between the Company and the union representing the pilot group. The contract calls for a four year term, effective May 18, 1999. The contract provides the pilots with scheduled increases in base pay and other fringe benefit enhancements and provides the Company with strike protection and certain other rights to allow it to continue to manage its 13 business. The Company has extended the fringe benefit enhancements to Air Log's non-union employee group as well. Based on current employment levels, Air Log's compensation costs are projected to increase by $3.0 million in fiscal 2000 to $27.8 million, a 12% increase, as a result of the union contract. The contract also schedules three additional base pay increases of 3% each at varying intervals of 12 to 15 months through the remainder of the contract term. Bristow's flight activity increased during fiscal 1999 by 12% from 1998 levels resulting in a corresponding increase in operating revenue of 15%. These increases are primarily attributed to the start up of the Shell Expro contract on July 1, 1998, which accounted for 13,696 flight hours and $33.6 million in revenue. Apart from Shell Expro activity, Bristow's fiscal 1999 North Sea flight activity and revenue declined 6% and 4% respectively from 1998. These declines in the North Sea were caused by a lack of available aircraft to perform ad hoc work in early fiscal 1999 (due to full utilization of aircraft as a result of the Shell Expro contract) and the general downturn in the oil and gas industry in the last half of fiscal 1999. Bristow's operating income decreased by 44% during fiscal 1999 from fiscal 1998, and it saw its gross margins deteriorate from 10.7% in 1998 to 5.2% in 1999. Several factors contributed to this decline in profitability, including the reduction of higher margin ad hoc flight activity, the provision of additional reserve for bad debts of $.8 million and higher maintenance and repair expenditures. In February 1999, Bristow instituted procedures, similar to those of Air Log, to closely review all significant maintenance and repair expenditures and to better utilize existing spare parts and fleet capacity in order to manage its operating expense. Bristow's flight hours were 95,987 and 25,683 for the year ended March 31, 1998 and for the period from investment (December 19, 1996) to March 31, 1997, respectively. Operating revenues were $264.6 million and $68.7 million for the year ended March 31, 1998 and for the period from investment to March 31, 1997, respectively. Operating income and gross margin percentages attributable to Bristow were $28.2 million and 10.7% for the year ended March 31, 1998. Gross margin percentages for Bristow are lower than Air Log's, primarily due to different market environments, size of equipment and the cost to operate that equipment. As a result the consolidated gross margin from helicopter activities for the 1998 fiscal year was lower than the prior year. During fiscal 2000, two of Bristow's helicopter contracts which terminate on July 31, 1999 will not be renewed. These contracts accounted for $43.4 million in revenue in fiscal 1999, or 24% of revenue from the North Sea. The Aberdeen, Scotland base, from where these contracts are serviced, employs approximately 600 staff. Management is currently developing a plan to adjust its cost structure to adapt to the reduced volume of business. Management believes that the impact of the above decrease in revenue will be partially offset by a new contract which is being phased-in from January 1, 1999 to January 1, 2000 and that management believes should generate revenues of approximately $21 million per annum when fully operational. Production Management and Related Services GPM was also affected by the changing industry fundamentals during fiscal 1999. The reported 4% decline in revenues in 1999 from 1998 does not highlight the significant level of customer turnover which is inherent in its business due to mergers, business failures, and rate shopping by customers. Management was successful in replacing most of the work lost during 1999. Gross margin declined to 5% in 1999 from 7% in 1998, due primarily to an increase in the provision for bad debts of $.5 million attributable to two customers in bankruptcy. Additionally, some of the customer turnover discussed above was replaced with lower margin work, contributing to the decline in margins. GPM's production management activities and results experienced significant improvements in 1998 with increases of 39% in revenues and 180% in operating income over the same period from the prior year. Gross margins were 7.2% for the year ended March 31, 1998, up from 3.2% from the same period in 1997. Operating revenues were $41.2 million, $42.8 million and $23.5 million for the years ended March 31, 1999 and 1998 and the nine months ended March 31, 1997, respectively. Operating expenses for GPM were $39.0 million, $39.8 million and $22.3 million, respectively for those periods. GPM's operating income was $2.2 million, $3.1 million and $1.2 million for the 1999, 1998 and 1997 fiscal periods, respectively. Corporate and Other Corporate operating revenues are primarily generated from the intercompany leasing of aircraft to the operating segments, which in consolidation is eliminated. Corporate operating expenses in fiscal 1999 did not change materially from 1998 levels. Consolidated general and administrative expenses increased by $3.5 million during 1999 due primarily to the provisions for bad debts discussed above for Air Log, Bristow and GPM. Earnings from unconsolidated entities decreased in 1999 by $2.1 million due primarily to decreases in dividends received ($2.9 million in 1999 compared to $4.7 million in 1998) from equity investees accounted for under the cost method of accounting (See Note D in the "Notes to Consolidated Financial Statements"). The decline in dividends paid by these entities is directly attributable to the impact the oil industry downturn has had on their respective operations. The effective income tax rates from continuing operations were 30% for 1999, 1998, and 1997. The variance between the Federal statutory rate and the effective rate for these peri- 14 ods is due primarily to non-taxable foreign source income and foreign tax credits available to reduce domestic taxable income. The Company's effective tax rate is impacted by the amount of foreign source income generated by the Company and its ability to realize foreign tax credits. Changes in the Company's operations and operating location in the future could impact the Company's effective tax rate. Liquidity and Capital Resources Cash and cash equivalents were $70.6 million as of March 31, 1999, a $14.5 million increase from March 31, 1998. Working capital as of March 31, 1999 was $142.9 million, a $20.2 million increase from March 31, 1998. Total debt was $243.7 million as of March 31, 1999, a $16.6 million decrease from March 31, 1998. Cash flows provided by operating activities were $49.7 million, $68.9 million and $16.0 million in 1999, 1998 and 1997, respectively. The decrease in cash flows provided by operating activities from 1998 to 1999 was due primarily to the erosion in the oil and gas industry market conditions. During 1998, cash flows provided by operating activity increased to $68.9 million from $16.0 million primarily due to improved market conditions in the Gulf of Mexico and having twelve months of Bristow operations in 1998 compared to approximately three months in 1997. Cash flows used in investing activities were $13.0 million, $54.2 million and $141.2 million for 1999, 1998 and 1997, respectively. Capital expenditures during 1999 of $19.2 million included one AS332L-Super Puma and three Bell 407's. The Company used existing cash to purchase these aircraft. Deposits on two new AS332L-Super Pumas made during the third quarter of 1999 were refunded to the Company during the fourth quarter of 1999 after the Company decided to lease rather than purchase these aircraft (see Note G in the "Notes to Consolidated Financial Statements"). During 1998, the Company acquired five aircraft (including four AS332L-Super Pumas, which had previously been leased by Bristow under short-term operating leases) for $32.3 million. The Company used existing cash and incurred an additional $20.0 million of 7.9% fixed rate financing, that amortizes over five years, to complete this transaction. In addition to the financed aircraft, the Company used existing cash to purchase 13 Bell 407's, four Sikorsky S-76's and one Bell 214ST in 1998. During 1997, the Company utilized $155.5 million for the investment in Bristow, including the issuance of the 6% Convertible Subordinated Notes due 2003 ("6% Notes"). Capital expenditures during 1997 of $10.1 million included three new Bell 407's, one used Sikorsky S-76, three used Bo-105's, and one fixed wing. Cash flows provided by (used in) financing activities were $(22.0) million, $10.7 million and $98.1 million in 1999, 1998 and 1997, respectively. In July 1998, the Board of Directors reaffirmed its February 1996 authorization to repurchase up to 1 million shares of the Company's Common Stock in the open market or through private transactions. The authorization has no time limit and authorizes management to effect repurchases of common stock and/or debt securities as they deem prudent. During the fiscal year ended March 31, 1999, the Company repurchased 763,500 shares of Common Stock and $7.1 million face value of 6% Notes in the open market for a total purchase price of $13.2 million. In October 1997, the Company repaid (pound)11.6 million ($18.7 million) of Bristow debt with its existing cash. In January 1998, the Company issued $100 million of 7 7/8% Senior Notes due 2008 discounted to yield 7.915%, which resulted in net proceeds to the Company of $97.2 million. The proceeds were used to repay certain indebtedness of Bristow of (pound)40.7 million ($66.6 million) and to replace general corporate funds used to repay certain indebtedness of Bristow in October 1997. The Company received $88.4 million from the issuance of the 6% Notes during fiscal 1997. As of March 31, 1999, Bristow had a (pound)15 million ($24 million) revolving credit facility with a syndicate of United Kingdom banks that matures on December 31, 2000. Bristow had no amounts drawn under this facility as of March 31, 1999. As of March 31, 1999, OLOG had a $20 million unsecured working capital line of credit with a bank that expires on September 30, 1999. Management believes that normal operations, lines of credit and available financing will provide sufficient working capital and cash flow to meet debt service in the foreseeable future. Legal Matters The Company has received notices from the EPA that it is one of approximately 160 PRPs at one Superfund site in Texas, one of over 300 PRPs at a site in Louisiana and a PRP at one site in Rhode Island. The Company believes, based on presently available information, that its potential liability for clean up and other response costs in connection with these sites is not likely to have a material adverse effect on the Company's business or financial condition. See Item 3 -- "Legal Proceedings" for additional information regarding EPA notices. 15 Year 2000 Matters The Company is addressing its year 2000 exposure. The scope of management's efforts includes both information technology (IT) systems, such as accounting and financial ledgers and aircraft and pilot records, and non-IT systems (which incorporate embedded technology), such as onboard navigational, communication and safety systems. The Company is currently in the replacement and remediation phase of its efforts and expects (based on management's best estimates) to have year 2000 compliant IT and non-IT systems operating by July, 1999. There can be no guarantee however, that this estimated timetable will be achieved. Management is also investigating the year 2000 exposure posed by its significant vendors and customers. Currently, the Company does not have any IT or non-IT systems which directly interface with either its vendors' or customers' systems. Accordingly, the Company's exposure will result from its significant vendors' and customers' potential inability to achieve year 2000 compliance. Were this to occur, the Company could experience a disruption in the supply of needed parts and repair services and/or diminished demand for the Company's aircraft, either of which could have a material impact on the Company's business. Management is contacting its significant vendors and customers to ascertain their state of readiness and expects to conclude this process by July, 1999. No assurances can be given that the Company's significant vendors and customers will not cause disruption to the Company's operations. To date, the Company has spent $.3 million on its replacement and remediation efforts and expects to incur an additional $.1 million before its efforts are complete. The Company does not separately account for the internal costs incurred for its year 2000 compliance efforts. Such costs consist primarily of salaries and benefits for the Company's IT personnel. The Company is developing a contingency plan for the prospect that it or any of its significant vendors and customers may be unable to achieve year 2000 compliance, and expects to have a plan completed by September 1999. Recent Accounting Pronouncements In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". The Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statements of financial position and measure those instruments at fair value. Changes in a derivative's fair value are to be recognized currently in earnings unless specific hedge accounting criteria are met. The company will be required to adopt SFAS No. 133 no later than April 1, 2001. The company has not yet quantified the impact on its financial statements that may result from adoption of SFAS No. 133, however, the Company does not use derivative instruments or hedging activities extensively in its business and therefore the adoption of this new statement should not materially affect the Company's financial positions or results of operations. The new statement could however cause volatility in the components of other comprehensive income. ITEM 7A. Quantitative and Qualitative Disclosures about Market Risk. The Company has $243.7 million of debt outstanding, of which $34.5 million carries a variable rate of interest. The Company uses an interest rate swap to hedge a portion of the interest rate exposure on this variable rate debt. Management does not believe that this swap, or the remaining level of variable rate debt expose it to a material amount of interest rate market risk. However, the market value of the Company's fixed rate debt fluctuates with changes in interest rates. The Company does not have any significant maturities of fixed rate debt occurring before fiscal 2004. The Company's ability to refinance this fixed rate debt varies in response to significant changes in interest rates, among other factors. The Company currently does not use any off-balance sheet hedging instruments to manage its risks associated with its operating activities conducted in foreign currencies. In limited circumstances and when considered appropriate, the Company will utilize forward exchange contracts to hedge anticipated transactions. The Company has historically used these instruments primarily in the buying and selling of certain spare parts and equipment. The Company attempts to minimize its exposure to foreign currency fluctuations by matching its revenues and expenses in the same currency for its contracts. As of March 31, 1999, the Company does not have any outstanding forward exchange contracts. Management does not believe that its limited use of forward exchange contracts expose it to a material amount of foreign currency exchange risk. Most of Bristow's revenues and expenses are denominated in British Pounds Sterling ("pound"). 16 ITEM 8. Consolidated Financial Statements and Supplementary Data REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Offshore Logistics, Inc.: We have audited the accompanying consolidated balance sheets of Offshore Logistics, Inc. (a Delaware corporation) and subsidiaries as of March 31, 1999 and 1998, and the related consolidated statements of income, stockholders' investment and cash flows for the twelve months ended March 31, 1999 and 1998 and the nine month period ended March 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Offshore Logistics, Inc. and subsidiaries as of March 31, 1999 and 1998, and the results of their operations and their cash flows for the twelve months ended March 31, 1999 and 1998 and the nine month period ended March 31, 1997 in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP New Orleans, Louisiana, May 18, 1999 17 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
March 31, March 31, 1999 1998 --------- --------- (thousands of dollars) Current assets: Cash and cash equivalents..........................$ 70,594 $ 56,076 Accounts receivable................................ 89,077 85,543 Inventories........................................ 82,853 76,139 Prepaid expenses................................... 5,999 5,542 -------- -------- Total current assets.................................. 248,523 223,300 Investments in unconsolidated entities................ 9,998 7,866 Property and equipment -- at cost Land and buildings................................. 10,860 13,088 Aircraft and equipment............................. 554,852 556,318 -------- -------- 565,712 569,406 Less - Accumulated depreciation and amortization...(122,796) (98,267) -------- -------- 442,916 471,139 Other assets.......................................... 30,593 33,706 -------- -------- $732,030 $736,011 ======== ======== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable...................................$ 35,534 $ 31,024 Accrued liabilities................................ 42,395 42,612 Deferred taxes..................................... 17,697 18,335 Current maturities of long-term debt............... 10,037 8,693 -------- -------- Total current liabilities............................. 105,663 100,664 Long-term debt, less current maturities............... 233,615 251,560 Other liabilities and deferred credits................ 3,000 594 Deferred taxes........................................ 94,908 93,455 Minority interest..................................... 10,716 9,853 Commitments and contingencies......................... -- -- Stockholders' investment: Common stock, $.01 par value, authorized 35,000,000 shares; outstanding 21,103,421 in 1999 and 21,854,921 in 1998 (exclusive of 1,281,050 and 517,550 treasury shares, respectively)............. 211 219 Additional paid in capital............................ 116,053 123,061 Retained earnings..................................... 173,114 152,194 Accumulated other comprehensive income (loss)......... (5,250) 4,411 -------- -------- 284,128 279,885 -------- -------- $732,030 $736,011 ======== ========
The accompanying notes are an integral part of these statements. 18 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Twelve Months Ended Nine March 31, Months Ended ------------------- March 31, 1999 1998 1997 -------- -------- -------- (thousands of dollars, except per share amounts) Gross revenue: Operating revenue......................... $466,440 $426,893 $167,128 Gain (loss) on disposal of equipment...... 2,400 (238) 1,222 ------- ------- ------- 468,840 426,655 168,350 ------- ------- ------- Operating expenses: Direct cost............................... 363,272 311,641 119,106 Depreciation and amortization............. 32,742 32,240 12,624 General and administrative................ 29,847 26,310 11,406 ------- ------- ------- 425,861 370,191 143,136 Operating income............................. 42,979 56,464 25,214 Earnings from unconsolidated entities........ 5,104 7,205 2,602 Interest income.............................. 3,460 2,981 3,300 Interest expense............................. 19,811 20,536 5,528 ------- ------- ------- Income from continuing operations before provision for income taxes................ 31,732 46,114 25,588 Provision for income taxes................... 9,509 13,833 7,675 Minority interest............................ (1,303) (1,027) (288) ------- ------- ------- Income from continuing operations............ 20,920 31,254 17,625 Discontinued operations: Loss from CPS operations.................. -- (230) (393) Gain on sale of CPS....................... -- 384 -- ------- ------- ------- -- 154 (393) ------- ------- ------- Net income................................... $ 20,920 $ 31,408 $ 17,232 ======= ======= ======= BASIC: Income per common share: Continuing operations..................... $ 0.97 $ 1.45 $ 0.88 Discontinued operations................... -- 0.01 (0.02) ------- ------- ------- Net income per common share ................. $ 0.97 $ 1.46 $ 0.86 ======= ======= ======= DILUTED: Income per common share: Continuing operations..................... $ 0.97 $ 1.35 $ 0.85 Discontinued operations................... -- 0.01 (0.02) ------- ------- ------- Net income per common share ................. $ 0.97 $ 1.36 $ 0.83 ======= ======= =======
The accompanying notes are an integral part of these statements. 19 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' INVESTMENT
Accumulated Other Common Stock Additional Comprehensive Total -------------------- Paid in Income Retained Stockholders' Shares Amount Capital (Loss) Earnings Investment ------------- ----- ----------- ----------- ----------- ---------- (thousands of dollars) BALANCE - June 30, 1996............ 19,498,398 $ 195 $ 95,934 $ -- $ 103,554 $ 199,683 Comprehensive Income: Net income................. -- -- -- -- 17,232 17,232 Translation adjustments.... -- -- -- (1,437) -- (1,437) --------- Total Comprehensive Income..... 15,795 Stock options exercised........ 114,000 1 883 -- -- 884 GPM warrants exercised......... 94,040 1 1,015 -- -- 1,016 Restricted stock issued........ 306 -- 4 -- -- 4 Stock issued for Bristow investment................. 1,374,389 14 17,510 -- -- 17,524 ----------- ----- ----------- ----------- ----------- ---------- BALANCE - March 31, 1997........... 21,081,133 211 115,346 (1,437) 120,786 234,906 Comprehensive Income: Net income................. -- -- -- -- 31,408 31,408 Translation adjustments.... -- -- -- 5,848 -- 5,848 ---------- Total Comprehensive Income..... 37,256 Stock options exercised........ 745,500 8 7,335 -- -- 7,343 Restricted stock issued........ 28,288 -- 380 -- -- 380 ----------- ----- ----------- ----------- ----------- ---------- BALANCE - March 31, 1998........... 21,854,921 219 123,061 4,411 152,194 279,885 Comprehensive Income: Net income................. -- -- -- -- 20,920 20,920 Translation adjustments.... -- -- -- (9,661) -- (9,661) ---------- Total Comprehensive Income..... 11,259 Stock options exercised........ 12,000 -- 113 -- -- 113 Stock repurchased.............. (763,500) (8) (7,121) -- -- (7,129) ----------- ----- ----------- ----------- ----------- ---------- BALANCE - March 31, 1999........... 21,103,421 $ 211 $ 116,053 $ (5,250) $ 173,114 $ 284,128 =========== ===== =========== =========== =========== ==========
The accompanying notes are an integral part of these statements. 20 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Twelve Months Ended Nine Months March 31, Ended ------------------------- March 31, 1999 1998 1997 --------- ----------- ----------- (thousands of dollars) Cash flows from operating activities: Net income .....................................................$ 20,920 $ 31,408 $ 17,232 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization................................... 32,742 32,240 13,196 Increase in deferred taxes...................................... 3,724 10,826 1,059 (Gain) Loss on asset dispositions............................... (2,400) 238 (1,212) Equity in earnings from unconsolidated entities over dividends received..................................... 341 1,679 145 Minority interest in earnings................................... 1,303 1,027 67 Discontinued operations......................................... -- 230 -- Change in assets and liabilities net of effects from investment in Bristow: (Increase) Decrease in accounts receivable...................... (5,581) 6,694 (16,736) Increase in inventories......................................... (8,322) (4,187) (4,168) Increase in prepaid expenses and other.......................... (1,821) (5,574) (2,381) Increase (Decrease) in accounts payable......................... 5,565 (2,860) 5,801 Increase (Decrease) in accrued liabilities...................... 800 (2,747) 4,833 Increase (Decrease) in other liabilities and deferred credits... 2,406 (28) (1,865) --------- ----------- ----------- Net cash provided by operating activities............................ 49,677 68,946 15,971 --------- ----------- ----------- Cash flows from investing activities: Capital expenditures............................................ (19,219) (70,465) (10,106) Proceeds from asset dispositions................................ 6,236 10,963 6,026 Proceeds from CPS disposal...................................... -- 5,700 -- Proceeds from sale or maturity of marketable securities......... -- -- 20,001 Bristow investment............................................. -- -- (155,451) Acquisitions, net of cash received.............................. -- (353) (1,675) --------- ----------- ----------- Net cash used in investing activities................................ (12,983) (54,155) (141,205) --------- ----------- ----------- Cash flows from financing activities: Proceeds from borrowings........................................ -- 123,538 96,636 Repayment of debt............................................... (14,948) (120,519) (434) Repurchase of common stock...................................... (7,128) -- -- Issuance of common stock........................................ 113 7,723 1,899 --------- ----------- ----------- Net cash provided by (used in) financing activities.................. (21,963) 10,742 98,101 --------- ----------- ----------- Effect of exchange rate changes in cash.............................. (213) 714 23 Net increase (decrease) in cash and cash equivalents................. 14,518 26,247 (27,110) Cash and cash equivalents at beginning of period..................... 56,076 29,829 56,939 --------- ----------- ----------- Cash and cash equivalents at end of period...........................$ 70,594 $ 56,076 $ 29,829 ========= =========== ===========
The accompanying notes are an integral part of these statements. 21 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A -- OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations -- The Company's most significant area of operation is supplying helicopter transportation services to the worldwide offshore oil and gas industry. The Company also provides production personnel and medical support services to the worldwide oil and gas industry. Basis of Presentation -- The consolidated financial statements include the accounts of Offshore Logistics, Inc., a Delaware corporation ("OLOG") and its majority owned entities and non-majority owned entities including Bristow Aviation Holdings Limited ("Bristow"), collectively referred to as "the Company", after elimination of all significant intercompany accounts and transactions. Investments in 50% or less owned affiliates over which the Company has the ability to exercise significant influence are accounted for using the equity method. Investments in which the Company does not exercise significant influence are accounted for under the cost method. Use of Estimates -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents -- The Company's cash equivalents includes funds invested in highly liquid debt instruments with original maturities of 90 days or less. Accounts Receivable -- Trade and other receivables are stated at net realizable value and the allowance for uncollectible accounts was $4,010,000 and $850,000 at March 31, 1999 and 1998, respectively. The Company grants short-term credit to its customers, primarily major and independent oil and gas companies. Inventories -- Inventories are stated at the lower of average cost or market and consist primarily of spare parts. The valuation reserve related to obsolete and excess inventory was $4,045,000 and $4,049,000 at March 31, 1999 and 1998. There were no related charges to operations in 1999, 1998, or 1997. Other Assets -- In 1999, $17,171,000 of goodwill, net of accumulated amortization of $5,111,000, was included in other assets. Goodwill is amortized using the straight-line method over a period of 20 years. Goodwill is recognized for the excess of the purchase price over the value of the identifiable net assets. Realization of goodwill is periodically assessed by management based on the expected future profitability and undiscounted future cash flows of acquired companies and their contribution to the overall operations of the Company. Also included in other assets is restricted cash of (pound)4.8 million ($7.7 million) and debt issuance costs of $3.9 million, being amortized over the life of the related debt. Depreciation and Amortization -- Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the assets. Estimated residual value used in calculating depreciation of aircraft ranges from 30% to 50% of cost. Maintenance and repairs are expensed as incurred; betterments and improvements are capitalized. The costs and related accumulated depreciation of assets sold or otherwise disposed of are removed from the accounts and resultant gains or losses included in income. Income Taxes -- Income taxes are accounted for in accordance with the provisions of the Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes". Under this statement, deferred income taxes are provided for by the asset and liability method. 22 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Foreign Currency Translation -- Bristow maintains its accounting records in its local currency (British Pounds Sterling). Foreign currencies are converted to United States Dollars with the effect of the foreign currency translation reflected as a component of shareholders' investment in accordance with SFAS No. 52, "Foreign Currency Translation." Foreign currency transaction gains or losses are credited or charged to income and such amounts are insignificant for the periods presented. Derivative Financial Instruments -- The Company enters into forward exchange contracts from time to time to hedge known transactional exposures denominated in currencies other than the functional currency of the business. Foreign currency positions mature at the anticipated currency requirement date and rarely exceed three months. The purpose of the Company's foreign currency hedging activities is to protect the Company from the risk that foreign currency outflows resulting from payments for services and parts to foreign suppliers will be adversely affected by changes in exchange rates. Financial instruments are designated as a hedge at inception where there is a direct relationship to the price risk associated with the service and parts. Hedges of transactions are accounted for under the deferral method with gains and losses recognized in revenues when the hedged transaction occurs. If the direct relationship to price risk ceases to exist, the difference in the carrying value and fair value of a forward contract is recognized as a gain or loss in revenues in the period the relationship ceases to exist. The Company uses an interest rate swap to manage a portion of its interest rate exposure. Revenues or expenses on interest rate swaps are recognized over the lives of the agreements as adjustments to interest expense of the liability being hedged. Any interest rate swap not qualifying for deferred accounting is recorded at fair value. Stock Compensation -- The Company uses the intrinsic value method of accounting for stock-based compensation prescribed by Accounting Principles Board ("APB") Opinion No. 25 "Accounting for Stock Issued to Employees" (APB No. 25) and, accordingly, adopted the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). Fiscal-Year Change -- On May 1, 1997, the Board of Directors approved a change in the Company's fiscal year end from June 30 to March 31, effective for the nine month period ended March 31, 1997. As a result of this change in year end, these financial statements include the fiscal years ended March 31, 1999 and 1998 and the nine month fiscal transition period from July 1, 1996 through March 31, 1997. Comprehensive Income -- During 1999, the Company adopted SFAS No. 130, "Reporting Comprehensive Income," which requires an entity to report and display comprehensive income and its components. Effect of Recent Accounting Pronouncements -- During fiscal 1999, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Changes in a derivative's fair value are to be recognized currently in earnings unless specific hedge accounting criteria are met. The company will be required to adopt SFAS No. 133 no later that April 1, 2001. The company has not yet quantified the impact on its financial statements that may result from adoption of SFAS No. 133, however, the Company does not use derivative instruments or hedging activities extensively in its business. 23 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) B -- LONG-TERM DEBT Long-term debt at March 31, 1999 and 1998 consisted of the following (thousands of dollars):
March 31, March 31, 1999 1998 -------- -------- 7 7/8% Senior Notes due 2008....................... $ 100,000 $ 100,000 6% Convertible Subordinated Notes due 2003 ........ 90,922 98,000 Term Loan with a syndicate of United Kingdom banks. 29,061 33,456 Term Loan with a United Kingdom bank............... 15,439 18,009 Capital Lease Obligation........................... 5,391 6,248 Management Fee Debt (see Note C)................... 2,839 4,307 Other.............................................. -- 233 ------- ------- Total debt ..................................... 243,652 260,253 Less current maturities......................... 10,037 8,693 ------- ------- Total long-term debt............................ $ 233,615 $ 251,560 ======= =======
On January 27, 1998, the Company issued $100 million aggregate principal amount of 7 7/8% Senior Notes ("Senior Notes") due 2008 discounted to yield 7.915%. Proceeds of $97.2 million, after debt issuance costs of $2.8 million, were used to repay approximately (pound)40.7 million ($66.6 million) of Bristow debt and to replace general corporate funds used to repay certain indebtedness of Bristow in October 1997. The weighted average of the stated rates of interest on the indebtedness retired was 16.6%, but had been adjusted to 8.5% as a result of purchase accounting for the Company's investment in Bristow. The Senior Notes are guaranteed by certain of the Company's subsidiaries (see Note M). On December 17, 1996, the Company issued $98 million of 6% Convertible Subordinated Notes ("6% Notes") due 2003. The 6% Notes are convertible at any time into the Company's Common Stock at a conversion price of $22.86 per share (equivalent to a conversion rate of approximately 43.74 shares per $1,000 principal amount of 6% Notes). The 6% Notes are redeemable at the option of the Company beginning December 1999. The Company issued $7.5 million of the 6% Notes to Caledonia (See Note C) in conjunction with the investment in Bristow. Proceeds of $88.4 million, after debt issuance costs of $2.1 million, were also used to finance the investment in Bristow. During 1999, the Company repurchased $7.1 million face value of the 6% Notes in the open market at a gain to the Company, which was not material. Bristow renewed a term loan with a syndicate of United Kingdom banks on January 26, 1998, that is repayable in semi-annual installments varying from $1.6 to $4.8 million ((pound)1.0 to (pound)3.0 million) through December 31, 2002. The term loan bears interest at 0.8% above LIBOR rates. The average interest rate for the term loan during the year ended March 31, 1999 and during the period from renewal to March 31, 1998 was 8.214% and 8.425%, respectively. The term loan is guaranteed by certain United Kingdom subsidiaries of Bristow and is secured by a negative pledge on all Bristow assets. The Company entered into an interest rate swap agreement to reduce the impact of change in interest rates on this floating rate long-term debt. At March 31, 1999, the outstanding notional amount of the swap was (pound)33.0 million ($53.3 million). The agreement matures on December 31, 2001. At March 31, 1999, the fair value of the swap was (pound)1.6 million ($2.6 million) and the fair value of the notional amount of the swap in excess of the outstanding principal amount of the term loan was (pound).5 million ($.8 million) which is included in Accrued liabilities in the accompanying balance sheet. In May 1997, the Company acquired five aircraft (including four AS332L Super Pumas, which had previously been leased by Bristow under short-term operating leases) for $32.3 million. The Company used existing cash and incurred an additional $20.0 million of 7.9% fixed rate financing, that amortizes over five years, to complete this transaction. 24 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The obligation under capital lease bears interest at a rate tied to LIBOR and requires monthly payments. The lease is secured by the aircraft and the guarantee of Bristow. Bristow has a revolving credit facility, with the same syndicate of United Kingdom banks, as with the term loan, which matures December 31, 2000, and is available for working capital requirements and general corporate purposes. Availability under the revolving credit facility is subject to certain limitations based on the value of certain qualifying helicopters. All advances under the revolving credit facility bear interest at 0.6% above one, three, or six month LIBOR rates. The revolving credit facility is guaranteed by certain United Kingdom subsidiaries of Bristow and is secured by helicopter mortgages and a negative pledge of all Bristow assets. The availability under the revolving credit facility is (pound)15 million ($24 million). There were no borrowings under this revolving credit facility as of March 31, 1999. The facility requires Bristow to pay a quarterly commitment fee at an average annual rate of .367% on the unused portion of the line. At March 31, 1999, the Company had a $20 million unsecured line of credit with a U.S. bank that expires on September 30, 1999. There were no borrowings under this line as of March 31, 1999. The rate of interest payable under the line of credit is, at the Company's option, prime rate or LIBOR rate plus 1.25%. The agreement requires the Company to pay a quarterly commitment fee at an annual rate of .25% on the average unused portion of the line. Aggregate annual maturities for all long-term debt, including the capitalized lease, for the next five years are as follows: 2000 -- $10,037,000; 2001 -- $11,318,000; 2002 -- $15,290,000; 2003 -- $16,085,000; and 2004 -- $90,922,000. Interest paid during the year was $19,881,000, $21,673,000 and $3,620,000 for 1999, 1998, and 1997, respectively. The estimated fair value of the Company's total debt at March 31, 1999 and 1998 was $229.4 million and $269.3 million, respectively based on quoted market prices for the publicly listed 6% Notes and the Senior Notes and the current rates offered to the Company on other outstanding obligations. C -- INVESTMENT IN BRISTOW On December 19, 1996, OLOG acquired 49% of the common stock and a significant amount of Bristow subordinated debt as detailed below. Bristow is incorporated in England and holds all of the outstanding shares in Bristow Helicopter Group Limited ("BHGL"). Bristow provides helicopter transportation services to the North Sea oil and gas industry. Services consist of short and long range crew change flights, offshore-based and inter-platform shuttle operations and search and rescue missions. Bristow also operates aircraft in Australia, Brunei, Cambodia, China, Nigeria, South America, Trinidad and Vietnam among others. Bristow is organized with three different classes of ordinary shares (common stock) having disproportionate voting rights. The Company, Caledonia Investments plc and its subsidiary, Caledonia Industrial & Services Limited (collectively, "Caledonia") and a Norwegian investor (the "E.U. Investor"), own 49%, 49% and 2%, respectively, of Bristow's total outstanding ordinary shares. The Company paid (pound)80.2 million (approximately $132 million) in cash (funded from existing cash balances and the proceeds of the 6% Notes), issued $7.5 million of the 6% Notes to Caledonia and issued 1,374,389 shares of common stock on December 19, 1996. In addition, the Company acquired (pound)5.0 million ($8.4 million) principal amount of BHGL's subordinated debt for cash of approximately (pound)5.4 million ($8.9 million) including accrued interest. Caledonia received 1,300,000 shares of the common stock and BHGL's management received 74,389 shares. In addition to its ownership of 49% of Bristow's outstanding ordinary shares and (pound)5.0 million principal amount of Bristow's subordinated debt, the Company acquired (pound)91.0 million (approximately $150 million) principal amount of subordinated unsecured loan stock (debt) of Bristow bearing interest at an annual rate of 13.5% and payable semi-annually. Bristow has the right to defer payment of interest on such debt until January 31, 2002. Any such deferred interest would also accrue interest at an annual rate of 13.5%. 25 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The Company, Caledonia, the E.U. Investor and Bristow entered into a shareholders' agreement respecting, among other things, the composition of the board of directors of Bristow. On matters coming before Bristow's board, Caledonia's appointees have a total of five votes and the four other directors have one vote each. So long as Caledonia has a significant interest in the shares of Common Stock issued to it pursuant to the transaction or maintains its voting control of Bristow, Caledonia will have the right to nominate two persons to the board of directors of the Company and to replace any such directors so nominated. Caledonia, the Company and the E.U. Investor also entered into a Put/Call Agreement whereunder, upon giving specified prior notice, the Company has the right to buy all the Bristow shares held by Caledonia and the E.U. Investor, who, in turn, each has the right to sell such shares to the Company. Under current United Kingdom law, the Company would be required, in order for Bristow to retain its operating license, to find a qualified European investor to own any Bristow shares it has the right to acquire under the Put/Call Agreement. Any put or call of the Bristow shares will be subject to the approval of the Civil Aviation Authority ("CAA"). Caledonia will receive management fees from Bristow that will be payable semi-annually in advance ranging from (pound)500,000 to (pound)900,000 annually for the next five years. The investment was accounted for by the purchase method of accounting under Accounting Principals Board Opinion No. 16, as amended, and accordingly, the results of operations of Bristow for the period from December 19, 1996 forward are included in the accompanying consolidated financial statements. The total consideration has been allocated to Bristow's assets and liabilities based on the estimated fair market value as of December 19, 1996. The following unaudited pro forma financial information for the Company gives effect to the Bristow investment as if it had occurred on July 1, 1996. These pro forma results have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on the date indicated, or which may result in the future. The pro forma results follow (in thousands, except per share data): Nine Months Ended March 31, 1997 (unaudited) ------------ Gross revenue................................... $ 296,094 ========== Income from continuing operations............... $ 19,348 ========== Earnings per common share Income from continuing operations: Basic..................................... $ 0.92 ========== Diluted................................... $ 0.87 ========== 26 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) D -- INVESTMENTS IN UNCONSOLIDATED ENTITIES The Company has two principal unconsolidated entities that are accounted for on the cost method as the Company is unable to exert significant influence over the operations and one principal unconsolidated entity which it accounts for under the equity method. Each of these three investments is described in further detail below. The Company has a 49% investment in Hemisco Helicopters International, Inc. ("HHII") and related venture companies. The Company's investment in HHII was $2,637,000 at March 31, 1999 and 1998. During 1999, 1998 and 1997, $857,000, $2,292,000 and $1,539,000 respectively, in dividends were received from HHII. The Company has a 25% investment in an Egyptian helicopter venture. The Company's investment in the venture was $5,986,000 at March 31, 1999 and 1998. During 1999, 1998, and 1997, $1,997,000; $2,430,000 and $1,827,000, respectively, in dividends were received from the venture. During 1999, the venture's Board of Directors approved a cash dividend, of which the Company's share applicable to fiscal year 2000 is approximately $1.5 million. Bristow has a 50% investment (33% at March 31, 1998) in FBS Limited (FBS) which was formed in 1996 and was awarded a contract to provide pilot training and maintenance services to the Defence Helicopter Flying School ("DHFS"), a newly established training school for all branches of the British military, under a fifteen year contract valued at approximately (pound)500 million over the full term. FBS purchased and specially modified 47 aircraft and maintains a staff of approximately 600 employees dedicated to conducting these training activities which began in May 1997. Prior to FBS, Bristow had provided similar pilot training and maintenance services to the British Army Air Corps since 1963. Bristow's partners in FBS had similar experience in providing training services to other branches of the British military. Bristow and its partners have given joint and several guarantees related to the performance of this contract. To date, FBS has not paid any cash dividends, although certain income tax benefits have been distributed to Bristow. In the following unaudited table, FBS represents $127,135,000 and $132,472,000 of the assets and $(3,221,000) and $(3,372,000) of equity (deficit) at March 31, 1999 and 1998, respectively. FBS also represents $54,863,000 and $54,577,000 of revenue and $3,381,000 and $2,477,000 of net income for the years ended March 31, 1999 and 1998, respectively. A summary of unaudited financial information of these principal unconsolidated entities is set forth below (thousands of dollars):
March 31, March 31, 1999 1998 --------- --------- (unaudited) (unaudited) Current assets............................ $ 72,789 $ 75,737 Non-current assets........................ 139,003 147,415 ------- ------- Total assets........................... $211,792 $223,152 ======= ======= Current liabilities....................... $ 25,135 $ 22,030 Non-current liabilities................... 120,846 131,470 Equity ................................... 65,811 69,652 ------- ------- Total liabilities and equity........... $211,792 $223,152 ======= =======
27 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Twelve Months Ended Nine March 31, Months Ended ------------------------ March 31, 1999 1998 1997 -------- --------- ------- (unaudited) (unaudited) (unaudited) Revenues........................$109,879 $ 112,119 $41,026 ======== ========= ======= Gross profit....................$ 30,240 $ 32,638 $14,122 ======== ========= ======= Net income......................$ 13,768 $ 16,322 $ 9,918 ======== ========= =======
During 1999, 1998 and 1997, respectively, revenues of $15,984,000; $21,261,000 and $4,673,000 were recognized for services provided to these affiliates by the Company. E -- DISCONTINUED OPERATIONS In May 1997, the Company adopted a plan to discontinue its investment in Cathodic Protection Services Company ("CPS"). CPS manufactures, installs and maintains cathodic protection systems to arrest corrosion in oil and gas drilling and production facilities, pipelines, oil and gas well casings, hydrocarbon processing plants and other metal structures. As a result of the Company's adoption of the plan, the consolidated financial statements of the Company and the related Notes to Consolidated Financial Statements and supplemental data have been adjusted and restated to reflect the results of operations and net assets of CPS as a discontinued operation in accordance with generally accepted accounting principles. F -- INVESTMENT IN MARKETABLE SECURITIES Under the provisions of SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities", investments in debt and equity securities are required to be classified in one of three categories: held-to-maturity, available-for-sale, or trading. As of March 31, 1999 and 1998, the Company had (pound)4.8 million ($7.7 million and $8.0 million, respectively) of UK government securities classified as available-for-sale included in other assets. There were $12,001,000 sales of investments in U.S. Treasury investments during the nine month period ended March 31, 1997. The proceeds approximated the carrying cost of the investments. G -- COMMITMENTS AND CONTINGENCIES The Company has noncancelable operating leases in connection with the lease of certain equipment, land and facilities. Rental expense incurred under these leases was $2,150,000 in 1999; $1,872,000 in 1998 and $1,925,000 in 1997. On March 29, 1999, the Company entered into an eight year operating lease for a new aircraft under which it provided the lessor with a residual value guarantee of up to 15% ($1,972,000) of the aircraft's original cost. The Company has committed to enter into a similar lease for a second aircraft of comparable value expected to be delivered during the next fiscal year. As of March 31, 1999, aggregate future payments under noncancelable operating leases are as follows: 2000 -- $3,172,000; 2001 -- $2,961,000; 2002 -- $2,924,000; 2003 -- $2,793,000 and 2004 -- $2,519,000. On August 6, 1997, the United States pilots at the Company voted to become members of the Office and Professional Employees International Union ("OPEIU"). The Company commenced contract negotiations with the OPEIU on April 1, 1998 and on April 15, 1999 announced that it had reached a tentative agreement with pilot representatives on the contract's provisions. The contract was ratified on May 18, 1999 by the pilot employees and management believes that the contract terms will be approved by the Company's Board of Directors. In January 1998, the OPEIU petitioned the National Mediation Board ("NMB") to organize the Company's domestic mechanics and ground support personnel. Certain objections to this petition were filed and the NMB dismissed the OPEIU application on May 12, 1998. Under the Federal labor law rules, the union is prohibited from petitioning the NMB for one-year from date of dismissal. To date, no subsequent petitions have been filed with the NMB. The Company does not believe that the terms of the pilots' contract or other potential organizing efforts will place it at a disadvantage with its competitors as management believes that pay scales and work rules will continue to be similar throughout the industry. 28 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) H -- INCOME TAXES The components of deferred tax assets and liabilities are as follows (thousands of dollars):
March 31, March 31, 1999 1998 -------- -------- Deferred Tax Assets: Foreign tax credits.................... $ 108,843 $ 112,117 Other.................................. 11,672 10,390 Valuation allowance.................... (43,795) (50,308) -------- -------- Total deferred tax assets.......... $ 76,720 $ 72,199 -------- -------- Deferred Tax Liabilities: Property and equipment................. (152,663) (153,716) Inventories............................ (10,970) (10,901) Accrual for repairs and maintenance.... (6,408) (6,859) Other.................................. (19,284) (12,513) -------- -------- Total deferred tax liabilities..... (189,325) (183,989) -------- -------- Net deferred tax liabilities................ $ (112,605) $ (111,790) ======== ========
The valuation allowance was established for the deferred tax asset related to foreign tax credits. Companies may use foreign tax credits to offset the United States income taxes due on income earned from foreign sources. However, the credit is limited by the total income on the United States income tax return as well as by the ratio of foreign source income in each statutory category to total income. Excess foreign tax credits may be carried back two years and forward five years. As of March 31, 1999 and 1998, the Company did not believe it was more likely than not that it would generate sufficient foreign sourced income within the appropriate period to utilize all the foreign tax credits. Certain of the above components have changed due to changes in foreign currency rates. Income before provision for income taxes for the years ended March 31, 1999 and 1998 and the nine months ended March 31, 1997 was as follows (thousands of dollars):
Twelve Months Ended Nine March 31, Months Ended ------------------ March 31, 1999 1998 1997 ------ ------ ------ Domestic............................. $10,322 $12,675 $13,774 Foreign.............................. 21,410 33,439 11,814 ------ ------ ------ Total................................ $31,732 $46,114 $25,588 ====== ====== ======
29 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) The provision for income taxes for the years ended March 31, 1999 and 1998 and the nine month period ended March 31, 1997 consisted of the following (thousands of dollars):
Twelve Months Ended Nine March 31, Months Ended -------------------- March 31, 1999 1998 1997 ------ ------ ------ Current: Domestic......................... $ (66) $(2,237) $ 3,786 Foreign.......................... 6,044 7,545 1,219 ------ ------ ------ 5,978 5,308 5,005 ------ ------ ------ Deferred: Domestic......................... 10,526 9,035 2,671 Foreign.......................... (5,702) 2,965 (1) ------ ------ ------ 4,824 12,000 2,670 ------ ------ ------ Decrease in valuation allowance.... (1,293) (3,475) -- ------ ------ ------ Total.............................. $ 9,509 $13,833 $ 7,675 ====== ====== ======
The reconciliation of Federal statutory and effective income tax rates is shown below:
Twelve Months Ended Nine March 31, Months Ended ---------------- March 31, 1999 1998 1997 ---- ---- ---- Statutory rate............................. 35 % 35 % 35 % Utilization of foreign tax credits......... (7)% (3)% (3)% Additional taxes on foreign source income.. 9 % 8 % 5 % Foreign source income not taxable.......... (5)% (3)% (6)% Change in valuation allowance.............. (4)% (7)% -- State taxes provided....................... 1 % 1 % 2 % Other, net................................. 1 % (1)% (3)% ---- ---- ---- Effective tax rate......................... 30 % 30 % 30 % ==== ==== ====
The Internal Revenue Service has examined the Company's Federal income tax returns for all years through 1996. The years have been closed through 1996, either through settlement or expiration of the statute of limitations. The Company believes that it has made adequate provision for income taxes that may become payable with respect to open tax years. Unremitted foreign earnings reinvested abroad upon which deferred income taxes have not been provided aggregated approximately $18.8 million at March 31, 1999. Due to the timing and circumstances of repatriation of such earnings, if any, it is not practicable to determine the unrecognized deferred tax liability relating to such amounts. Withholding taxes, if any, upon repatriation would not be significant. Income taxes paid during 1999, 1998 and 1997 were $4,857,000; $4,516,000 and $8,454,000, respectively. 30 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) I -- EMPLOYEE BENEFIT PLANS Savings and Retirement Plans The Company currently has two qualified defined contribution plans, which cover substantially all employees other than Bristow employees. The Offshore Logistics, Inc. Employee Savings and Retirement Plan ("OLOG Plan") covers corporate level and Air Log employees. Under the OLOG Plan, except for those employees working in the state of Alaska, the Company matches each participant's contributions up to 3% of the employee's compensation. In addition, if net income exceeds 10% of stockholders' investment at the beginning of the year, the Company contributes funds to acquire Company stock up to an additional 3% of the employee's compensation, subject to a scheduled vesting period. Under the OLOG Plan, for Air Log employees working in the state of Alaska, the Company matches each participant's contributions up to 4% of the employee's compensation. The Grasso Production Management, Inc. Thrift & Profit Sharing Trust covers eligible GPM employees. Effective January 1, 1999, the Company began matching each participant's contributions up to 3% of the employee's compensation, plus a 50% match of contributions up to an additional 2% of compensation. Previously, the Company matched 25% of each participant's contributions up to 6% of the employee's compensation. Bristow has a defined benefit retirement plan, which covers all full-time employees of Bristow employed on or before December 31, 1997. The plan is funded by contributions partly from employees and partly from Bristow. Members contribute up to 7.5% of pensionable salary (as defined) and can pay additional voluntary contributions to provide additional benefits. The benefits are based on the employee's annualized average last three years pensionable salaries. Plan assets are held in separate trustee administered funds, which are primarily invested equities and bonds in the United Kingdom. For employees hired after December 31, 1997, Bristow contributes 4% (5% for pilots) of the employees base salary into a defined contribution retirement plan operated by a private insurance company. The following table sets forth the defined benefit retirement plan's funded status in accordance with the provisions of SFAS No. 87 "Employers' Accounting for Pensions" (SFAS No. 87) (in thousands of dollars): Actuarial Present Value of Benefit Obligations (thousands of dollars):
March 31, March 31, 1999 1998 -------- -------- Projected benefit obligation.............. $245,929 $218,760 Plan assets at fair value................. 241,589 230,179 -------- -------- Plan assets (less than) in excess of projected benefit obligation........... (4,340) 11,419 Unrecognized net loss (gain).............. 8,236 (10,048) -------- -------- Accrued pension asset..................... $ 3,896 $ 1,371 ======== ========
The following tables provide a rollforward of the projected benefit obligation and the fair value of plan assets in accordance with SFAS No. 132 "Employers' Disclosures about Pensions and Other Postretirement Benefits" (SFAS No. 133) and a detail of the components of net periodic pension cost calculated in accordance with SFAS No. 87 (in thousands of dollars): 31 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Twelve Months Ended March 31, Period from -------------------- December 19, 1996 1999 1998 to March 31, 1997 ------- ------- ----------------- Reconciliation of Projected Benefit Obligation: Projected benefit obligation (PBO) at beginning of period........... $218,760 $179,995 $179,546 Service cost....................... 9,218 8,394 1,885 Interest cost...................... 14,376 14,193 3,538 Member contributions............... 3,055 3,105 769 Actruarial (gain)/loss............. 15,947 15,941 (1,780) Benefit payments and expenses...... (6,946) (7,177) (1,297) Effect of exchange rate changes.... (8,481) 4,309 (2,666) ------- ------- ------- Projected benefit obligation (PBO) at end of period................ $245,929 $218,760 $179,995 ======= ======= ======= Reconciliation of Fair Value of Asset: Market value of assets at beginning of period....................... $230,179 $184,762 $179,546 Actual return on assets............ 16,474 38,543 7,189 Employer contributions............. 7,329 6,421 1,221 Member contributions............... 3,055 3,105 769 Benefit payments and expenses...... (6,946) (7,177) (1,297) Effect of exchange rate changes.... (8,502) 4,525 (2,666) -------- ------- ------- Market value of assets at end of period...................... $241,589 $230,179 $184,762 ======= ======= ======= Components of Net Periodic Pension Cost: Service cost for benefits earned during the period.............. $ 9,218 $ 8,394 $ 1,885 Interest cost on PBO............... 14,376 14,193 3,538 Expected return on assets.......... (18,902) (17,727) (4,223) ------- ------- ------- Net periodic pension cost.......... $ 4,692 $ 4,860 $ 1,200 ======= ======= =======
Actuarial assumptions used to develop these components were as follows:
1999 1998 1997 ---- ---- ---- Discount rate................................. 6.25% 6.75% 8.00% Expected long-term rate of return on assets... 8.00% 8.25% 9.50% Rate of compensation increase................. 4.75% 5.25% 6.25%
The Company's contributions to the three plans were $8,090,000; $7,190,000 and $2,575,000 for the years ended March 31, 1999 and 1998 and the nine month period ended March 31, 1997, respectively. 32 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Incentive and Stock Option Plans Under the 1994 Long-Term Management Incentive Plan, as amended ("1994 Plan"), a maximum of 1,900,000 shares of Common Stock, or cash equivalents of Common Stock, were provided for awards to officers and key employees. Awards granted under the 1994 Plan may be in the form of stock options, stock appreciation rights, restricted stock, deferred stock, other stock-based awards or any combination thereof. Options become exercisable at such time or times as determined at the date of grant and expire no more than ten years after the date of grant. Incentive stock option prices are determined by the Board and cannot be less than fair market value at the date of grant. Non-qualified stock option prices cannot be less than 50% of the fair market value at the date of grant. The Annual Incentive Compensation Plan ("Annual Plan") provides for an annual award of cash bonuses to key employees based primarily on pre-established objective measures of Company performance. Participants are permitted to receive all or any part of their annual incentive bonus in the form of shares of Restricted Stock in accordance with the terms of the 1994 Plan. The bonuses related to this plan were $550,000; $838,000 and $565,000 for the years ended March 31, 1999 and 1998 and the nine month period ended March 31, 1997, respectively. As of March 31, 1999 there were 28,288 shares of Restricted Stock outstanding issued at a weighted average price of $19.00 per share. The 1991 Non-qualified Stock Option Plan for Non-employee Directors ("1991 Plan") provided for a maximum of 200,000 shares of Common Stock to be reserved for issuance pursuant to such plan. As of the date of each annual meeting each non-employee director, who meets certain attendance criteria, will automatically be granted an option to purchase 2,000 shares of the Company's Common Stock. The exercise price of the options granted shall be equal to the fair market value of the Common Stock on the date of grant and are exercisable not earlier than six months after the date of grant. Under the Company's stock option plans there were 1,864,302 shares of Common Stock reserved for issue at March 31, 1999 of which 951,802 shares are available for future grants. The Company accounts for its stock-based compensation under APB No. 25. Had compensation cost been determined based on the fair value at the grant date consistent with the optional provisions of SFAS No. 123, the Company's net income and earnings per common share would have approximated the pro forma amounts below:
Twelve Months Ended March 31, ------------------------------ Nine Months Ended 1999 1998 March 31, 1997 --------- ------- ------------------ Net Income (in thousands): As reported............. $20,920 $31,408 $17,232 Pro forma............... $19,848 $30,109 $16,607 Basic earnings per share: As reported............. $ 0.97 $ 1.46 $ 0.86 Pro forma............... $ 0.92 $ 1.40 $ 0.83 Diluted earnings per share: As reported............. $ 0.97 $ 1.36 $ 0.83 Pro forma............... $ 0.92 $ 1.31 $ 0.81
The effects of applying SFAS No. 123 to this pro forma disclosure are not indicative of future amounts. SFAS No. 123 does not apply to grants prior to 1995, and additional awards in the future are anticipated. 33 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) A summary of the Company's stock options as of March 31, 1999, 1998 and 1997 and changes during the periods ended on those dates is presented below:
Weighted-Average Number Exercise Price of Shares ---------------- --------- Balance at June 30, 1996................ $ 9.78 988,500 Granted............................... 15.48 366,500 Exercised............................. 7.75 (114,000) Expired or cancelled.................. 12.94 (10,000) --------- Balance at March 31, 1997............... 11.64 1,231,000 Granted............................... 18.93 219,000 Exercised............................. 9.85 (745,500) Expired or cancelled.................. 19.38 (35,000) --------- Balance at March 31, 1998............... 15.62 669,500 Granted............................... 12.47 274,000 Exercised............................. 9.42 (12,000) Expired or cancelled.................. 18.18 (19,000) --------- Balance at March 31, 1999............... 14.70 912,500 =========
As of March 31, 1999, 1998, and 1997, the number of options exercisable under the stock option plans was 650,500, 349,500 and 864,500, respectively; and the weighted average exercise price of those options was $15.59; $12.44 and $10.02, respectively. The weighted average fair value at date of grant for options granted during 1999, 1998 and 1997 was $4.95; $6.48 and $5.30 per option, respectively. The fair value of options granted during the periods presented is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions: 1999 1998 1997 ------- -------- ------- Risk-free interest rate 5.2% 6.4% 6.4% Expected life 4 years 3 years 3 years Expected volatility 42% 40% 40% Expected dividend yield 0% 0% 0% The following table summarizes information about stock options outstanding as of March 31, 1999:
Options Outstanding Options Exercisable ---------------------------------------- ------------------------ Wgtd. Avg. Wgtd. Avg. Wgtd. Avg. Range of Number Remaining Exercise Number Exercise Exercise Prices Outstanding Contr. Life Price Exercisable Price - ----------------- ----------- ----------- --------- ----------- ---------- $ 7.375 - $ 8.250 44,000 2.76 $ 7.72 44,000 $ 7.72 $11.625 - $15.875 543,500 7.62 $12.60 281,500 $12.70 $19.00 - $19.625 325,000 8.21 $19.15 325,000 $19.15 ------- ------- $ 7.375 - $19.625 912,500 7.60 $14.70 650,500 $15.59 ======= =======
34 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) J -- EARNINGS PER SHARE In 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share" (SFAS No. 128), which replaced the previously reported primary and fully-diluted earnings per share with basic and diluted earnings per share. The Company adopted SFAS No. 128 during the quarter ended December 31, 1997. All income per share amounts for all periods have been presented, and where necessary, restated to conform to the requirements of SFAS No. 128. Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share for the twelve months ended March 31, 1999 and 1998 and for the nine months ended March 31, 1997 were determined on the assumptions that the convertible debt was converted on April 1, 1998 and 1997 and upon issuance on December 17, 1996, respectively. The computation of diluted earnings per common share for the twelve months ended March 31, 1999 excludes 423,625 stock options, at a weighted average exercise price of $16.51, which were outstanding during the period but were anti-dilutive. The following table sets forth the computation of basic and diluted income from continuing operations per share:
Twelve Months Ended Nine March 31, Months Ended ------------------------------ March 31, 1999 1998 1997 --------- ------------ ------------ Income from Continuing Operations (thousands of dollars): Income available to common stockholders.................$ 20,920 $ 31,254 $ 17,625 Interest on convertible debt, net of taxes.............. 4,012 4,116 1,178 ----------- ------------ ------------ Income available to common stockholders, plus assumed conversions.................................$ 24,932 $ 35,370 $ 18,803 =========== ============ ============ Shares: Weighted average number of common shares outstanding.... 21,581,683 21,543,198 20,095,403 Options ............................................... 65,731 269,911 357,385 Warrants ............................................... -- -- 17,120 Convertible debt........................................ 4,177,016 4,286,520 1,615,210 ----------- ------------ ------------ Weighted average number of common shares outstanding, plus assumed conversions............................ 25,824,430 26,099,629 22,085,118 =========== ============ ============ Income from Continuing Operations: Basic earnings per share................................$ 0.97 $ 1.45 $ 0.88 =========== ============ ============ Diluted earnings per share..............................$ 0.97 $ 1.35 $ 0.85 =========== ============ ============
The Company adopted a stockholder rights plan on February 9, 1996, designed to assure that the Company's stockholders receive fair and equal treatment in the event of any proposed takeover of the Company and to guard against partial tender offers, squeeze-outs, open market accumulations and other abusive tactics to gain control without paying all stockholders a fair price. The rights plan was not adopted in response to any specific takeover proposal. Under the rights plan, the Company declared a dividend of one right ("Right") on each share of the Company's common stock. Each Right will entitle the holder to purchase one one-hundredth of a share of a new Series A Junior Participating Preferred Stock, par value $1.00 per share, at an exercise price of $50.00. Each Right will entitle its holder to purchase a number of common shares of the Company having a market value of twice the exercise price. The Rights are not currently exercisable and will become exercisable only in the event a person or group acquires beneficial ownership of 10 percent or more of the Company's common stock. The dividend distribution was made on February 29, 1996 to stockholders of record on that date. The Rights will expire on February 26, 2006. 35 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) K -- SEGMENT INFORMATION The Company has adopted SFAS No. 131, "Disclosures about Segments of An Enterprise and Related Information", which requires that companies disclose segment data based on how management makes decisions about allocating resources to segments and measuring their performance. The Company operates principally in two business segments: Helicopter activities and Production management and related services. Air Log and Bristow are major suppliers of helicopter transportation services to the worldwide offshore oil and gas industry. GPM provides production management services, contract personnel and medical support services to the domestic and international oil and gas industry. The information presented has been restated to reflect CPS as discontinued operations. Identifiable assets include net assets relating to CPS of $6.7 million as of March 31, 1997. The following shows reportable segment information for the years ended March 31, 1999 and 1998 and the nine months ended March 31, 1997 and is prepared on the same basis as the Company's consolidated financial statements. (in thousands):
Twelve Months Ended Nine March 31, Months Ended -------------------- March 31, 1999 1998 1997 ------- ------- ------- Operating revenues: (1) Helicopter activities....................... $425,204 $384,108 $143,647 Production management and related services.. 41,236 42,785 23,481 ------- ------- ------- Total..................................... $466,440 $426,893 $167,128 ======= ======= ======= Operating profit (loss): Helicopter activities....................... $ 46,215 $ 59,024 $ 27,142 Production management and related services.. 2,201 3,072 1,182 ------- ------- ------- Total segment operating profit............ 48,416 62,096 28,324 Corporate overhead............................ (5,437) (5,632) (3,110) Earnings from unconsolidated entities......... 5,104 7,205 2,602 Interest income (expense), net................ (16,351) (17,555) (2,228) ------- ------- ------- Pretax income................................. $ 31,732 $ 46,114 $ 25,588 ======= ======= =======
(1) Net of Inter-Segment revenues of $2,896,000; $3,461,000 and $2,246,000 for March 31, 1999, 1998 and 1997, respectively.
Capital Expenditures ---------------------------- 1999 1998 1997 ------- ------- ------- Helicopter activities.................... $18,939 $70,170 $ 9,835 Production management and related services 253 140 112 Corporate................................. 27 155 -- ------ ------ ------ Total................................ $19,219 $70,465 $ 9,947 ======= ====== ======
Depreciation and Amortization --------------------------- 1999 1998 1997 ------- ------- ------- Helicopter activities..................... $31,245 $30,286 $11,531 Production management and related services 1,334 1,364 1,003 Corporate................................. 163 590 90 ------ ------ ------ Total................................ $32,742 $32,240 $12,624 ====== ====== ======
36 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Identifiable Assets ----------------------------- 1999 1998 1997 ------- ------- ------- Helicopter activities..................... $645,727 $658,461 $607,458 Production management and related services 30,208 28,421 26,279 Corporate and other....................... 56,095 49,129 40,476 ------- ------- ------- Total................................ $732,030 $736,011 $674,213 ======= ======= =======
The Company attributes revenue to various countries based on the location where helicopter activities or production management services are actually performed. Long-lived assets consist primarily of helicopters and are attributed to various countries based on the physical location of the asset at a given fiscal year end. Entity wide information by geographic area is as follows (thousands of dollars):
Twelve Months Ended Nine March 31, Months Ended --------------------- March 31, 1999 1998 1997 -------- -------- ---------- Operating revenue: United States................. $141,156 $143,870 $ 83,875 United Kingdom................ 179,572 167,776 39,892 Nigeria....................... 42,397 43,658 11,381 Norway........................ 26,857 10,066 1,844 Other countries............... 76,458 61,523 30,136 ------- ------- ------- $466,440 $426,893 $167,128 ======= ======= =======
As of March 31, ------------------------ 1999 1998 -------- ------- Long-lived assets: United States.........................$ 71,717 $ 76,015 United Kingdom........................ 222,677 221,366 Nigeria............................... 26,557 29,987 Norway................................ 42,566 37,742 Other countries....................... 79,399 106,029 -------- -------- $442,916 $471,139 ======== ========
During 1999, 1998 and 1997, Air Log and Bristow conducted operations in approximately 19 foreign countries as well as in the United States and the United Kingdom. Due to the nature of the principal assets of the Company, they are regularly and routinely moved between operating areas (both domestic and foreign) to meet changes in market and operating conditions. Revenue earned from any single customer did not exceed 10% of total revenues during 1999, 1998 or 1997. 37 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) L-- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarter Ended --------------------------------------------- June 30 September 30 December 31 March 31 -------- ------------ ----------- -------- (thousands of dollars, except per share amounts) 1999 Gross revenue.......................$117,553 $ 129,168 $ 116,190 $ 105,929 Gross profit........................$ 19,106 $ 25,137 $ 15,361 $ 13,222 Net income..........................$ 6,553 $ 10,016 $ 4,321 $ 30 ======== ========= ========= ========= Basic earnings per share............$ 0.30 $ 0.46 $ 0.20 $ 0.00 ======== ========= ========= ========= Diluted earnings per share..........$ 0.29 $ 0.43 $ 0.20 $ 0.00 ======== ========= ========= ========= 1998 Gross revenue.......................$ 99,981 $ 107,565 $ 112,950 $ 106,159 Gross profit........................$ 19,497 $ 21,526 $ 21,169 $ 20,582 Income from continuing operations...$ 6,593 $ 7,959 $ 7,963 $ 8,739 Income from discontinued operations. (15) 169 -- -- -------- --------- --------- --------- Net income..........................$ 6,578 $ 8,128 $ 7,963 $ 8,739 ======== ========= ========= ========= Basic earnings per share: Income from continuing operations...$ 0.31 $ 0.37 $ 0.37 $ 0.40 Income from discontinued operations. -- 0.01 -- -- -------- --------- --------- --------- Net Income..........................$ 0.31 $ 0.38 $ 0.37 $ 0.40 ======== ========= ========= ========= Diluted earnings per share: Income from continuing operations...$ 0.30 $ 0.35 $ 0.34 $ 0.37 Income from discontinued operations. -- 0.01 -- -- -------- --------- --------- --------- Net Income..........................$ 0.30 $ 0.36 $ 0.34 $ 0.37 ======== ========= ========= ========= 1997 Gross revenue....................... N/A $ 32,872 $ 41,459 $ 94,019 Gross profit........................ N/A $ 8,690 $ 9,347 $ 18,583 Income from continuing operations... N/A $ 5,781 $ 5,522 $ 6,322 Income from discontinued operations. N/A 74 86 (553) --------- --------- --------- Net income.......................... N/A $ 5,855 $ 5,608 $ 5,769 ========= ========= ========= Basic earnings per share: Income from continuing operations... N/A $ 0.30 $ 0.28 $ 0.30 Income from discontinued operations. N/A -- -- (0.03) --------- --------- --------- Net Income.......................... N/A $ 0.30 $ 0.28 $ 0.27 ========= ========= ========= Diluted earnings per share: Income from continuing operations... N/A $ 0.30 $ 0.28 $ 0.29 Income from discontinued operations. N/A -- -- (0.02) --------- --------- --------- Net Income.......................... N/A $ 0.30 $ 0.28 $ 0.27 ========= ========= =========
38 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) M -- SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION On January 27, 1998, the Company completed the sale of $100 million 7 7/8% Senior Notes due 2008, which were discounted to yield 7.915%. The net proceeds to the Company were $97.2 million. In connection with the sale of the Senior Notes, certain of the Company's subsidiaries (the "Guarantor Subsidiaries") jointly, severally and unconditionally guaranteed the payment obligations under the Senior Notes. The following supplemental financial information sets forth, on a consolidating basis, the balance sheet, statement of income and cash flow information for Offshore Logistics, Inc. ("Parent Company Only"), for the Guarantor Subsidiaries and for Offshore Logistics, Inc.'s other subsidiaries (the "Non-Guarantor Subsidiaries"). The Company has not presented separate financial statements and other disclosures concerning the Guarantor Subsidiaries because management has determined that such information is not material to investors. The supplemental condensed consolidating financial information has been prepared pursuant to the rules and regulations for condensed financial information and does not include all disclosures included in annual financial statements, although the Company believes that the disclosures made are adequate to make the information presented not misleading. Certain reclassifications were made to conform all of the financial information to the financial presentation on a consolidated basis. The principal eliminating entries eliminate investments in subsidiaries, intercompany balances and intercompany revenues and expenses. During 1998, the Company formed a new wholly owned subsidiary and contributed the Company's operating assets, separate from its investment in its subsidiaries, to the newly formed subsidiary. The subsidiary is a Guarantor Subsidiary. For purposes of the historical supplemental financial information, the Company has presented the aforementioned operating assets and related operating results together with the operating assets and results of other Guarantor Subsidiaries. The allocation of the consolidated income tax provision was made using the with and without allocation method. 39 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Supplemental Condensed Consolidating Balance Sheet March 31, 1999
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- --------- ---------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents.............$ 34,775 $ 10,584 $ 25,235 $ -- $ 70,594 Accounts receivable................... 3,792 20,752 67,499 (2,966) 89,077 Inventories........................... -- 36,621 46,232 -- 82,853 Prepaid expenses...................... 220 577 5,202 -- 5,999 ---------- --------- ---------- ----------- ----------- Total current assets.............. 38,787 68,534 144,168 (2,966) 248,523 Intercompany investment................. 220,575 -- -- (220,575) -- Investments in unconsolidated entities.. 1,108 229 8,661 -- 9,998 Intercompany note receivables........... 233,444 3,015 86 (236,545) -- Property and equipment--at cost: Land and buildings.................... -- 3,220 7,640 -- 10,860 Aircraft and equipment................ 3,630 149,544 401,678 -- 554,852 ---------- -------- ---------- ----------- ---------- 3,630 152,764 409,318 -- 565,712 Less: Accumulated depreciation and amortization................. (2,772) (72,292) (47,732) -- (122,796) ---------- --------- ---------- ----------- ----------- 858 80,472 361,586 -- 442,916 Other assets............................ 12,607 18,200 (325) 111 30,593 ---------- --------- ---------- ----------- ----------- $ 507,379 $ 170,450 $ 514,176 $ (459,975) $ 732,030 ========== ========= ========== =========== =========== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable......................$ 148 $ 4,378 $ 33,764 $ (2,756) $ 35,534 Accrued liabilities................... 7,033 11,171 24,620 (429) 42,395 Deferred taxes........................ -- -- 17,697 -- 17,697 Current maturities of long-term debt.. -- -- 10,037 -- 10,037 ---------- --------- ---------- ----------- ----------- Total current liabilities......... 7,181 15,549 86,118 (3,185) 105,663 Long-term debt, less current maturities. 190,922 -- 42,693 -- 233,615 Intercompany notes payable.............. 6,364 -- 229,962 (236,326) -- Other liabilities and deferred credits.. 4 2,364 632 -- 3,000 Deferred taxes.......................... 907 32,815 61,186 -- 94,908 Minority interest....................... 10,716 -- -- -- 10,716 Stockholders' investment: Common stock.......................... 211 4,048 1,384 (5,432) 211 Additional paid in capital............ 116,053 58,318 16,800 (75,118) 116,053 Retained earnings..................... 173,114 57,356 78,628 (135,984) 173,114 Accumulated other comprehensive income (loss).................... 1,907 -- (3,227) (3,930) (5,250) ---------- --------- ---------- ----------- ----------- 291,285 119,722 93,585 (220,464) 284,128 ---------- --------- ---------- ----------- ----------- $ 507,379 $ 170,450 $ 514,176 $ (459,975) $ 732,030 ========== ========= ========== =========== ===========
40 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Supplemental Condensed Consolidating Statement of Income Twelve Months Ended March 31, 1999
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated --------- --------- ---------- ----------- ------------ GROSS REVENUE Operating revenue........................... $ 10 $ 140,519 $ 325,911 $ -- $ 466,440 Intercompany revenue........................ 224 10,141 690 (11,055) -- Gain (loss) on disposal of equipment........ 11 227 2,162 -- 2,400 --------- --------- ---------- ----------- ----------- 245 150,887 328,763 (11,055) 468,840 OPERATING EXPENSES Direct cost................................. (12) 113,979 249,305 -- 363,272 Intercompany expense........................ -- 690 10,365 (11,055) -- Depreciation and amortization............... 163 10,019 22,560 -- 32,742 General and administrative.................. 5,339 6,695 17,813 -- 29,847 --------- --------- ---------- ----------- ----------- 5,490 131,383 300,043 (11,055) 425,861 --------- --------- ---------- ----------- ----------- OPERATING INCOME............................ (5,245) 19,504 28,720 -- 42,979 Earnings from unconsolidated entities....... 15,488 -- 5,108 (15,492) 5,104 Interest income ............................ 28,207 494 1,128 (26,369) 3,460 Interest expense............................ 14,458 1 31,721 (26,369) 19,811 --------- --------- ---------- ------------ ----------- INCOME BEFORE PROVISION FOR INCOME TAXES..................... 23,992 19,997 3,235 (15,492) 31,732 Allocation of consolidated income taxes..... 1,836 6,704 969 -- 9,509 Minority interest........................... (1,236) -- (67) -- (1,303) --------- --------- ---------- ------------ ----------- NET INCOME.................................. $ 20,920 $ 13,293 $ 2,199 $ (15,492) $ 20,920 ========= ========= ========== ============ ===========
41 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Supplemental Condensed Consolidating Statement of Cash Flows Twelve Months Ended March 31, 1999
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- --------- ---------- ------------ ----------- Net cash provided by operating activities...$ 10,791 $ 10,447 $ 26,747 $ 1,692 $ 49,677 ---------- --------- ---------- ------------ ----------- Cash flows from investing activities: Capital expenditures................. -- (5,543) (13,676) -- (19,219) Proceeds from asset dispositions..... 15 488 5,733 -- 6,236 ---------- --------- ---------- ------------ ----------- Net cash provided by (used in) investing activities........................... 15 (5,055) (7,943) -- (12,983) ---------- --------- ---------- ------------ ----------- Cash flows from financing activities: Proceeds from borrowings............. 20 -- -- (20) -- Repayment of debt.................... (3,300) -- (9,976) (1,672) (14,948) Repurchase of common stock........... (7,128) -- -- -- (7,128) Issuance of common stock............. 113 -- -- 113 ---------- --------- ---------- ------------ ----------- Net cash used in financing activities....... (10,295) -- (9,976) (1,692) (21,963) ---------- --------- ---------- ------------ ----------- Effect of exchange rate changes in cash..... -- -- (213) -- (213) ---------- --------- ---------- ------------ ----------- Net increase in cash and cash equivalents... 511 5,392 8,615 -- 14,518 Cash and cash equivalents at beginning of period............................... 34,264 5,192 16,620 -- 56,076 ---------- --------- ---------- ------------ ----------- Cash and cash equivalents at end of period..$ 34,775 $ 10,584 $ 25,235 $ -- $ 70,594 ========== ========= ========== ============ ===========
42 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Supplemental Condensed Consolidating Balance Sheet March 31, 1998
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- --------- ---------- ----------- ----------- ASSETS Current assets: Cash and cash equivalents.............$ 34,264 $ 5,192 $ 16,620 $ -- $ 56,076 Accounts receivable................... 599 23,908 63,065 (2,029) 85,543 Inventories........................... -- 31,998 44,141 -- 76,139 Prepaid expenses...................... 304 663 4,575 -- 5,542 ---------- --------- ---------- ----------- ----------- Total current assets.............. 35,167 61,761 128,401 (2,029) 223,300 Intercompany investment................. 218,143 -- -- (218,143) -- Investments in unconsolidated entities.. 1,108 229 6,529 -- 7,866 Intercompany note receivables........... 221,130 2,674 1,441 (225,245) -- Property and equipment--at cost: Land and buildings.................... -- 3,174 9,914 -- 13,088 Aircraft and equipment................ 3,642 145,648 407,028 -- 556,318 ---------- -------- ---------- ----------- ---------- 3,642 148,822 416,942 -- 569,406 Less: Accumulated depreciation and amortization................. (2,657) (65,050) (30,560) -- (98,267) ---------- --------- ---------- ----------- ----------- 985 83,772 386,382 -- 471,139 Other assets............................ 13,447 19,781 368 110 33,706 ---------- --------- ---------- ----------- ----------- $ 489,980 $ 168,217 $ 523,121 $ (445,307) $ 736,011 ========== ========= ========== =========== =========== LIABILITIES AND STOCKHOLDERS' INVESTMENT Current liabilities: Accounts payable......................$ 46 $ 4,389 $ 26,589 $ -- $ 31,024 Accrued liabilities................... 6,027 8,818 30,037 (2,270) 42,612 Deferred taxes........................ -- -- 18,335 -- 18,335 Current maturities of long-term debt.. 2,569 -- 6,124 -- 8,693 ---------- --------- ---------- ----------- ----------- Total current liabilities......... 8,642 13,207 81,085 (2,270) 100,664 Long-term debt, less current maturities. 195,374 -- 56,186 -- 251,560 Intercompany notes payable.............. 2,500 -- 222,505 (225,005) -- Deferred credits........................ -- -- 594 -- 594 Deferred taxes.......................... (4,077) 27,730 69,802 -- 93,455 Minority interest....................... 9,853 -- -- -- 9,853 Stockholders' investment: Common stock.......................... 219 4,048 1,384 (5,432) 219 Additional paid in capital............ 123,061 58,318 19,071 (77,389) 123,061 Retained earnings..................... 152,194 64,914 72,394 (137,308) 152,194 Accumulated other comprehensive income (loss).................... 2,214 -- 100 2,097 4,411 ---------- --------- ---------- ----------- ----------- 277,688 127,280 92,949 (218,032) 279,885 ---------- --------- ---------- ------------ ----------- $ 489,980 $ 168,217 $ 523,121 $ (445,307) $ 736,011 ========== ========= ========== =========== ===========
43 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Supplemental Condensed Consolidating Statement of Income Twelve Months Ended March 31, 1998
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- --------- ---------- ----------- ------------ GROSS REVENUE Operating revenue...........................$ 20 $ 141,179 $ 285,694 $ -- $ 426,893 Intercompany revenue........................ 280 10,345 308 (10,933) -- Gain (loss) on disposal of equipment........ -- (439) 201 -- (238) ---------- --------- ---------- ----------- ------------ 300 151,085 286,203 (10,933) 426,655 OPERATING EXPENSES Direct cost................................. 7 112,246 199,388 -- 311,641 Intercompany expense........................ -- 243 10,690 (10,933) -- Depreciation and amortization............... 589 8,949 22,702 -- 32,240 General and administrative.................. 5,632 5,289 15,389 -- 26,310 ---------- --------- ---------- ----------- ------------ 6,228 126,727 248,169 (10,933) 370,191 ---------- --------- ---------- ----------- ------------ OPERATING INCOME............................ (5,928) 24,358 38,034 -- 56,464 Earnings from unconsolidated entities....... 27,185 -- 7,207 (27,187) 7,205 Interest income ............................ 20,288 282 1,314 (18,903) 2,981 Interest expense............................ 7,419 -- 32,020 (18,903) 20,536 --------- ------- --------- ------------ ------------- INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES..................... 34,126 24,640 14,535 (27,187) 46,114 Allocation of consolidated income taxes..... 1,809 8,028 3,996 -- 13,833 Minority interest........................... (1,016) -- (11) -- (1,027) ---------- --------- ---------- ----------- ------------ INCOME FROM CONTINUING OPERATIONS........................... 31,301 16,612 10,528 (27,187) 31,254 Discontinued operations: Income (loss) from CPS operations.... 107 -- 47 -- 154 ---------- --------- ---------- ----------- ------------ NET INCOME..................................$ 31,408 $ 16,612 $ 10,575 $ (27,187) $ 31,408 ========== ========== ========== ============ ============
44 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Supplemental Condensed Consolidating Statement of Cash Flows Twelve Months Ended March 31, 1998
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- --------- --------- ---------- --------- Net cash provided by operating activities...$ (93,486) $ 27,903 $ 49,389 $ 85,140 $ 68,946 ---------- --------- --------- ---------- --------- Cash flows from investing activities: Capital expenditures................. (155) (27,706) (42,604) -- (70,465) Proceeds from asset dispositions..... -- 1,450 9,513 -- 10,963 Cash received from CPS disposal...... -- -- 5,700 -- 5,700 Acquisitions, net of cash received... -- -- (353) -- (353) ---------- --------- ---------- ------------ ----------- Net cash used in investing activities....... (155) (26,256) (27,744) -- (54,155) ---------- --------- ---------- ------------ ----------- Cash flows from financing activities: Proceeds from borrowings............. 98,723 -- 109,955 (85,140) 123,538 Repayment of debt.................... -- -- (120,519) -- (120,519) Issuance of common stock............. 7,723 -- -- -- 7,723 ---------- --------- ---------- ------------ ----------- Net cash provided by (used in) financing activities........................... 106,446 -- (10,564) (85,140) 10,742 ---------- --------- ---------- ------------ ----------- Effect of exchange rate changes in cash..... -- -- 714 -- 714 ---------- --------- ---------- ------------ ----------- Net increase in cash and cash equivalents... 12,805 1,647 11,795 -- 26,247 Cash and cash equivalents at beginning of period............................... 21,459 3,545 4,825 -- 29,829 ---------- --------- ---------- ------------ ----------- Cash and cash equivalents at end of period..$ 34,264 $ 5,192 $ 16,620 $ -- $ 56,076 ========== ========= ========== ============ ===========
45 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Supplemental Condensed Consolidating Statement of Income Nine Months Ended March 31, 1997
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- --------- ---------- ----------- ----------- GROSS REVENUE Operating revenue...........................$ 18 $ 83,440 $ 83,670 $ -- $ 167,128 Intercompany revenue........................ 105 7,463 3 (7,571) -- Gain (loss) on disposal of equipment........ 20 1,090 112 -- 1,222 ---------- --------- ---------- ----------- ----------- 143 91,993 83,785 (7,571) 168,350 OPERATING EXPENSES Direct cost................................. (1) 65,762 53,345 -- 119,106 Intercompany expense........................ -- 3 7,568 (7,571) -- Depreciation and amortization............... 90 5,849 6,685 -- 12,624 General and administrative.................. 3,110 3,839 4,457 -- 11,406 ---------- --------- ---------- ----------- ----------- 3,199 75,453 72,055 (7,571) 143,136 ---------- --------- ---------- ----------- ----------- OPERATING INCOME............................ (3,056) 16,540 11,730 -- 25,214 Earnings from unconsolidated entities....... 16,841 -- 2,784 (17,023) 2,602 Interest income............................. 6,025 238 1,478 (4,441) 3,300 Interest expense............................ 1,734 23 8,212 (4,441) 5,528 --------- ------- -------- --------- ---------- INCOME FROM CONTINUING OPERATIONS BEFORE PROVISION FOR INCOME TAXES..................... 18,076 16,755 7,780 (17,023) 25,588 Allocation of consolidated income taxes..... 170 5,404 2,101 -- 7,675 Minority interest........................... (281) -- (7) -- (288) ---------- --------- ---------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS........................... 17,625 11,351 5,672 (17,023) 17,625 Discontinued operations: Income (loss) from CPS operations.... (393) -- (890) 890 (393) ---------- --------- ---------- ----------- ----------- NET INCOME..................................$ 17,232 $ 11,351 $ 4,782 $ (16,133) $ 17,232 ========== ========= ========== ========== ==========
46 OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued) Supplemental Condensed Consolidating Statement of Cash Flows Nine Months Ended March 31, 1997
Parent Non- Company Guarantor Guarantor Only Subsidiaries Subsidiaries Eliminations Consolidated ---------- --------- ---------- ----------- ---------- Net cash provided by operating activities...$ 9,120 $ 4,598 $ 1,319 $ 934 $ 15,971 ---------- --------- ---------- ----------- ---------- Cash flows from investing activities: Capital expenditures................. (30) (7,108) (2,968) -- (10,106) Proceeds from asset dispositions..... 20 1,599 4,407 -- 6,026 Bristow investment................... (109,286) -- (46,165) -- (155,451) Acquisitions, net of cash received... -- -- (1,675) -- (1,675) Proceeds from maturity of marketable securities............ 5,000 -- 15,001 -- 20,001 ---------- --------- ---------- ----------- ---------- Net cash used in investing activities...... (104,296) (5,509) (31,400) -- (141,205) ---------- --------- ---------- ----------- ---------- Cash flows from financing activities: Proceeds from borrowings............. 89,094 -- 8,542 (1,000) 96,636 Repayment of debt.................... -- -- (434) -- (434) Issuance of common stock............. 1,899 -- -- -- 1,899 ---------- --------- ---------- ----------- ---------- Net cash provided by (used in) financing activities........................... 90,993 -- 8,108 (1,000) 98,101 ---------- --------- ---------- ----------- ---------- Effect of exchange rate changes in cash..... -- -- 23 -- 23 ---------- --------- ---------- ----------- ---------- Net decrease in cash and cash equivalents... (4,183) (911) (21,950) (66) (27,110) Cash and cash equivalents at beginning of period............................... 25,642 4,456 26,775 66 56,939 ---------- --------- ---------- ----------- ---------- Cash and cash equivalents at end of period..$ 21,459 $ 3,545 $ 4,825 $ -- $ 29,829 ========== ========= ========== =========== ==========
47 SCHEDULE II OFFSHORE LOGISTICS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS (in thousands)
Balance at Balance at Beginning Additions End of Description of Period at Cost Deductions (A) Period - -------------------------------------- ---------- --------- -------------- --------- Year ended March 31, 1999 Deducted in balance sheet from trade accounts receivables: Allowance for doubtful accounts $ 850 3,508 348 4,010 Year ended March 31, 1998 Deducted in balance sheet from trade accounts receivables: Allowance for doubtful accounts $ 1,340 310 800 850 Nine months ended March 31, 1997 Deducted in balance sheet from trade accounts receivables: Allowance for doubtful accounts $ 1,471 563 694 1,340
(A) Amounts include accounts receivable considered uncollectible and removed from accounts by reducing the allowance for doubtful accounts, and the effect of exchange rate differences. 48 ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure None PART III ITEM 10. Directors and Executive Officers of the Registrant There is incorporated by reference herein the information under the caption "Information Concerning Nominees" contained in the registrant's definitive proxy statement in connection with the Annual Stockholders' Meeting to be held on September 20, 1999. ITEM 11. Executive Compensation There is incorporated by reference herein the information under the caption "Executive Compensation" contained in the registrant's definitive proxy statement in connection with the Annual Stockholders' Meeting to be held on September 20, 1999. ITEM 12. Security Ownership of Certain Beneficial Owners and Management There is incorporated by reference herein the information under the captions "Security Ownership of Certain Beneficial Owners" and "Information Concerning Nominees" contained in the registrant's definitive proxy statement in connection with the Annual Stockholders' Meeting to be held on September 20, 1999. ITEM 13. Certain Relationships and Related Transactions There is incorporated by reference herein the information under the caption "Executive Compensation" contained in the registrant's definitive proxy statement in connection with the Annual Stockholders' Meeting to be held on September 20, 1999. 49 PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K (a) (1) Financial Statements -- Report of Independent Public Accountants Consolidated Balance Sheet -- March 31, 1999 and 1998 Consolidated Statement of Income for the twelve months ended March 31, 1999 and 1998 and the nine months ended March 31, 1997 Consolidated Statement of Stockholders' Investment for the twelve months ended March 31, 1999 and 1998 and the nine months ended March 31, 1997 Consolidated Statement of Cash Flows for the twelve months ended March 31, 1999 and 1998 and the nine months ended March 31, 1997 Notes to Consolidated Financial Statements (a) (2) Financial Statement Schedules Valuation and Qualifying Accounts All other schedules have been omitted because the information required is included in the financial statements or notes or have been omitted because they are not applicable or not required. Incorporated by Reference Form to Registration or Exhibit (a) (3) Exhibits or File Number Report Date Number ------------------------ -------------- ------- -------- -------- (3) Articles of Incorporation and By-laws (1) Delaware Certificate of 0-5232 10-K June 1989 3(10) Incorporation (2) Agreement and Plan of 0-5232 10-K June 1989 3(11) Merger dated December 29, 1987 (3) Certificate of Merger 0-5232 10-K June 1990 3(3) dated December 29, 1987 (4) Certificate of Correction 0-5232 10-K June 1990 3(4) of Certificate of Merger dated January 20, 1988 (5) Certificate of Amendment 0-5232 10-K June 1990 3(5) of Certificate of Incorporation dated November 30, 1989 (6) Certificate of Amendment 0-5232 8-K Dec. 1992 3 of Certificate of Incorporation dated December 9, 1992 (7) Rights Agreement and Form 0-5232 8A Feb. 1996 4 of Rights Certificate (8) Amended and Restated 0-5232 8-K Feb. 1996 3(7) By-laws (9) Certificate of 0-5232 10-K June 1996 3(9) Designation of Series A Junior Participating Preferred Stock (10)First Amendment to 0-5232 8-A/A May 1997 5 Rights Agreement (4) Instruments defining the rights of security holders, including indentures (1) Indenture dated as of 0-5232 10-Q Dec. 1996 4(1) December 15, 1996, between Fleet National Bank and the Company (2) Registration Rights 0-5232 10-Q Dec. 1996 4(2) Agreement dated December 17, 1996, between the Company and Jefferies & Company, Inc., Simmons & Company International, and Johnson Rice & Company L.L.C. (3) Registration Rights 0-5232 10-Q Dec. 1996 4(3) Agreement dated December 19, 1996, between the Company and Caledonia Industrial and Services Limited 50 Incorporated by Reference Form to Registration or Exhibit (a) (3) Exhibits or File Number Report Date Number ------------------------ -------------- ------- -------- -------- (4)(4) Indenture, dated as of 333-48803 S-4 March 1998 4.1 January 27, 1998, among the Company, the Guarantors and State Street Bank and Trust Company (5) Registration Rights 333-48803 S-4 March 1998 4.2 Agreement, dated as of January 22, 1998, among the Company, the Guarantors and Jefferies & Company, Inc. (10) Material Contracts (1) Employee Incentive 0-5232 10-K June 1981 10(5) Award Plan * (2) Executive Welfare 33-9596 S-4 Dec. 1986 10(ww) Benefit Agreement, similar agreement omitted pursuant to Instruction 2 to Item 601 of Regulation S-K* (3) Executive Welfare 33-9596 S-4 Dec. 1986 10(xx) Benefit Agreement, similar agreements are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K * (4) Offshore Logistics, 0-5232 10-K June 1990 (28) Inc. 1989 Incentive Plan * (5) Offshore Logistics, Inc. 33-50946 S-8 Aug. 1992 4.1 1991 Non-qualified Stock Option Plan for Non- employee Directors * (6) Agreement and Plan of 33-79968 S-4 Aug. 1994 2(1) Merger dated as of June 1, 1994, as amended (7) Shareholders 33-79968 S-4 Aug. 1994 2(2) Agreement dated as of June 1, 1994 (8) Proposed Form of 33-79968 S-4 Aug. 1994 2(3) Non-competition Agreement with Individual Shareholders (9) Proposed Form of Joint 33-79968 S-4 Aug. 1994 2(4) Venture Agreement (10) Offshore 33-87450 S-8 Dec. 1994 84 Logistics, Inc. 1994 Long-Term Management Incentive Plan * (11) Offshore 0-5232 10-K June 1995 10(20) Logistics, Inc. Annual Incentive Compensation Plan * (12) Indemnity 0-5232 10-K March 1997 10(14) Agreement, similar agreements with other directors of the Company are omitted pursuant to Instruction 2 to Item 601 of Regulation S-K. (13) Master Agreement 0-5232 8-K Dec. 1996 2(1) dated December 12, 1996 (14) Change of Control 0-5232 10-Q Sept. 1997 10(1) Agreement between the Company and George M. Small. Substantially identical contracts with five other officers are omitted pursuant to Item 601 of Regulation S-K Instructions. * 51 (a) (3) Exhibits (10) (15) Offshore Logistics, Inc. 1994 Long-Term Management Incentive Plan, as amended * (16) Agreement between Pilots Represented by Office and Professional Employees International Union, AFL-CIO and Offshore Logistics, Inc. * Compensatory Plan or Arrangement Agreements with respect to certain of the Company's long-term debt are not filed as Exhibits hereto inasmuch as the debt authorized under any such Agreement does not exceed 10% of the Company's total assets. The Company agrees to furnish a copy of each such Agreement to the Securities and Exchange Commission upon request. (21) Subsidiaries of the registrant. (23) Consent of Independent Public Accountants (27) Financial Data Schedule (b) Reports on Form 8-K There were no Form 8-K filings during the quarter ended March 31, 1999. 52 EXHIBIT 21 OFFSHORE LOGISTICS, INC. Subsidiaries of the Registrant at March 31, 1999
Percentage Place of of Voting Company Incorporation Stock Owned - ------------------------------------------- ------------------ ----------- Air Logistics of Alaska, Inc............... Alaska 100% Air Logistics, L.L.C....................... Louisiana 100% Aircopter Maintenance International, Inc... Panama 49% Airlog International, Inc.................. Panama 100% Airlog Part Sales, Inc..................... Louisiana 100% Brilog Leasing Limited..................... Cayman Islands 100% Bristow Aviation Holdings Limited.......... England 49% Bristow Helicopters Australia Pty. Ltd..... Australia 49% * Bristow Helicopters International Limited.. England 49% Bristow Helicopters Limited................ England 49% Bristow Helicopters Nigeria Limited........ Nigeria 40% * Bristow Helicopter Group Limited........... England 49% FBS Limited................................ England 50% * Grasso Corporation......................... Delaware 100% Grasso Production Management............... Texas 100% Guaranty Financial International, N.A...... Netherlands Antilles 49% Heliflight Services, Inc................... Texas 49% Heliservicio Campeche S.A. de C.V. ....... Mexico 49% Hemisco Helicopters International, Inc.... Panama 49% Medic Systems International, Inc........... Panama 100% Medic Systems, Inc......................... Delaware 100% Norsk Helikopter AS........................ Norway 49% * Offshore Logistics International, Inc...... Panama 100% Offshore Logistics Management Services, Inc. Louisiana 100% Petroleum Air Services..................... Egypt 25%
* percentage owned by Bristow Helicopters Limited 53 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. OFFSHORE LOGISTICS, INC. By: /s/ Drury A. Milke ------------------------------ Drury A. Milke Vice President-- Chief Financial Officer (Principal Financial and Accounting Officer) June 29, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ P. N. Buckley - -------------------------------- Peter N. Buckley Director June 29, 1999 /s/ J. H. Cartwright - -------------------------------- Jonathan H. Cartwright Director June 29, 1999 /s/ Louis F. Crane - -------------------------------- Louis F. Crane Chairman of the Board and June 29, 1999 Director - --------------------------------- David M. Johnson Director June 29, 1999 /s/ Kenneth M. Jones - --------------------------------- Kenneth M. Jones Director June 29, 1999 /s/ Harry C. Sager - --------------------------------- Harry C. Sager Director June 29, 1999 /s/ George M. Small - --------------------------------- George M. Small President and Director June 29, 1999 - --------------------------------- Howard Wolf Director June 29, 1999 54 EX-10.15 2 1994 INCENTIVE PLAN, AS AMENDED Exhibit (10)(15) OFFSHORE LOGISTICS, INC. 1994 LONG-TERM MANAGEMENT INCENTIVE PLAN (as amended) ARTICLE I GENERAL SECTION 1.1 Purpose. The purpose of the Plan is to enable the Company to attract, retain and motivate officers and employees and to provide the Company, its Affiliates and its subsidiaries with the ability to provide incentives more directly linked to the profitability of the Company, its businesses and increases in stockholder value. SECTION 1.2 Definitions. For purposes of the Plan, the following terms are defined as set forth below: (a) "Affiliate" means a corporation or other entity controlled by the Company and designated by the Committee as such. (b) "Agreement" means the written agreement governing an Award under the Plan, in a form approved by the Committee, which shall contain terms and conditions not inconsistent with the Plan and which shall incorporate the Plan by reference. (c) "Award" means a Stock Appreciation Right, Stock Option, Restricted Stock, Deferred Stock, Other Stock-Based Award or a combination of any of these. (d) "Board" means the Board of Directors of the Company. (e) "Cash Plan" means the Offshore Logistics, Inc. Annual Incentive Compensation Plan, as adopted by the Board effective December 31, 1993, subject to approval of the Stockholders of the Company at the 1994 Annual Meeting. (f) "Cause" has the meaning set forth in Section 2.3(f). (g) "Change in Control" and "Change in Control Price" have the meanings set forth in Sections 6.2 and 6.3, respectively. (h) "Code" means the Internal Revenue Code of 1986, as amended from time to time, including any successor thereto. (i) "Commission" means the Securities and Exchange Commission or any successor agency. (j) "Committee" means the Committee referred to in Section 1.3. (k) "Company" means Offshore Logistics, Inc., a Delaware corporation. (l) "Date of Award" means the date of the Award of the Stock Option, Stock Appreciation Right, Restricted Stock, Deferred Stock and/or Other Stock-Based Award as set forth in the applicable Agreement. A-1 (m) "Deferred Stock" means an Award granted under Article IV. (n) "Disability" shall have the same meaning as such term or a similar term has in the long-term disability policy maintained by the Company, an Affiliate or a subsidiary thereof, for the Participant and in effect on the date of the onset of the Participant's Disability, unless the Committee determines otherwise, in its discretion, and sets forth an alternative definition or other means of determining when a Disability shall be deemed to occur in the applicable Agreement. (o) "Disinterested Person" means a member of the Board who qualifies as a disinterested person as defined in Rule 16b-3, as promulgated by the Commission under the Exchange Act, or any successor definition adopted by the Commission. (p) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and any successor thereto. (q) "Fair Market Value" means, except as provided in Sections 2.3(g) and (h) and 2.4 (b)(iv)(2), as of any given date, the mean between the highest and lowest reported sales prices of the Stock on the New York Stock Exchange Composite Tape or, if not listed on such exchange, on any other national securities exchange on which the Stock is listed or on NASDAQ, or, in the event that the Stock is not quoted on any such system, the average of the closing bid prices per share of the Stock as furnished by a professional marketmaker making a market in the Stock designated by the Committee. If there is no regular public trading market for the Stock, the Fair Market Value of the Stock shall be determined by the Committee in good faith. (r) "Incentive Stock Option" means any Stock Option intended to be and designated as an "incentive stock option" within the meaning of Section 422 of the Code. (s) "Non-Employee Director" means a member of the Board who qualifies as a Non-Employee Director as defined in Rule 16b-3(b)(3), as promulgated by the Commission under the Exchange Act, or any successor definition adopted by the Commission. (t) "Non-Qualified Stock Option" means any Stock Option that is not an Incentive Stock Option. (u) "Other Stock-Based Award" means an Award under Article V that is valued in whole or in part by reference to, or is otherwise based on, Stock. (v) "Outstanding Stock Option" means a Stock Option granted to a Participant which has not yet been exercised and which has not yet expired or been cancelled or forfeited in accordance with its terms. (w) "Participant" means any employee who has met the eligibility requirements set forth in Section 1.4 and to whom an outstanding Award has been made under the Plan. (x) "Plan" means the Offshore Logistics, Inc. 1994 Long-Term Management Incentive Plan, as set forth herein and as hereafter amended from time to time. (y) "Restricted Stock" means an Award granted under Article III. (z) "Retirement" shall mean the resignation or Termination of Employment after attainment of age 60, unless the Committee determines otherwise in its discretion and sets forth an alternative definition or other means of determining when Retirement shall be deemed to occur. A-2 (aa) "Rule 16b-3" means Rule 16b-3, as promulgated by the Commission under Section 16(b) of the Exchange Act, and as amended from time to time. (bb) "Stock" means common stock, par value $.01 per share, of the Company. (cc) "Stock Appreciation Right" means a right awarded under Section 2.4. (dd) "Stock Option" means an option awarded under Article II. (ee) "Termination of Employment" means the termination of the Participant's employment with the Company and any subsidiary or Affiliate. A Participant employed by a subsidiary or an Affiliate shall also be deemed to incur a Termination of Employment if the subsidiary or Affiliate ceases to be such a subsidiary or Affiliate, as the case may be, and the Participant does not immediately thereafter become an employee of the Company or another subsidiary or Affiliate. In addition, certain other terms used in the Plan have definitions given to them in the first place in which they are used. SECTION 1.3 Administration of the Plan. The Plan shall be administered by the Long-Term Incentive Plan Committee of the Board or such other committee or subcommittee of the Board, composed of not fewer than two Non-Employee Directors, each of whom shall be appointed by and serve at the pleasure of the Board. The Committee shall have plenary authority to make Awards pursuant to the terms of the Plan to officers and employees of the Company and its subsidiaries and Affiliates. Among other things, the Committee shall have the authority, subject to the terms of the Plan: (a) to select from among the class of eligible persons specified in Section 1.4 below the officers and employees to whom Awards may from time to time be granted; (b) to determine whether and to what extent Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock and Other Stock-Based Awards or any combination thereof are to be granted under the Plan; (c) to determine the number of shares of Stock to be covered by each Award; (d) to determine the terms and conditions of any Award, including, but not limited to, the Stock Option exercise price (subject to Section 2.2), any vesting restriction or limitation and any vesting acceleration or forfeiture waiver regarding any Award and the shares of Stock relating thereto, based on such factors as the Committee shall determine; (e) to modify, amend or adjust the terms and conditions of any Award, at any time or from time to time, including, but not limited to, with respect to performance goals and measurements applicable to performance-based Awards pursuant to the terms of the Plan; (f) to determine to what extent and under what circumstances Stock and other amounts payable with respect to an Award shall be deferred; and (g) to determine under what circumstances a Stock Option may be settled in cash or Stock under Section 2.3(g). A-3 The Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable, to interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Agreement relating thereto) and to otherwise supervise the administration of the Plan. The Committee may act only by a majority of its members then in office, except that the members thereof may (i) delegate to any officer of the Company the authority to make decisions pursuant to Section 2.3(a), (c), (f), Section 3.3, Section 3.4, Section 4.2 (provided that no such delegation may be made that would cause Awards or other transactions under the Plan to cease to comply with the conditions for exemption from Section 16(b) of the Exchange Act and Rule 16b-3 thereunder) and (ii) authorize any one or more of their number or any officer of the Company to execute and deliver documents on behalf of the Committee. Any determination made by the Committee or pursuant to delegated authority pursuant to the provisions of the Plan with respect to any Award shall be made in the sole discretion of the Committee or such delegate at the time of the Award or, unless in contravention of any express term of the Plan, at any time thereafter. All decisions made by the Committee or any appropriately delegated officer pursuant to the provisions of the Plan shall be final and binding on all persons, including the Company and Plan Participants. Any authority granted to the Committee may also be exercised by the full Board, except to the extent that the grant or exercise of such authority would cause any Award or transaction to become subject to (or lose an exemption under) the short-swing profit recovery provisions of Section 16 of the Exchange Act. To the extent that any permitted action taken by the Board conflicts with action taken by the Committee, the Board action shall control. SECTION 1.4 Eligible Persons. Officers and employees of the Company, its subsidiaries and Affiliates who are responsible for or contribute to the management, growth and profitability of the business of the Company, its subsidiaries and Affiliates are eligible for Awards under the Plan; however, no Award shall be made to a director who is not an officer or a salaried employee of the Company or one of its subsidiaries or Affiliates. SECTION 1.5 Stock Subject to the Plan. The total aggregate number of shares of Stock that may be distributed under the Plan (whether reserved for issuance upon grant of Stock Options or Stock Appreciation Rights or granted as Restricted Stock, Deferred Stock or an Other Stock-Based Award) shall be 1,900,000, subject to adjustment pursuant to the terms of Section 6.4 of the Plan. In addition to the limitation set forth above, no more than 800,000 shares of Stock shall be cumulatively available for the grant of Incentive Stock Options over the entire term of the Plan. The shares of Stock shall be made available from authorized but unissued shares or shares issued and held in the treasury of the Company. The delivery of shares of Stock upon exercise of a Stock Option, Stock Appreciation Right or Other Stock-Based Award in any manner and the vesting of shares of Restricted Stock or Deferred Stock shall result in a decrease in the number of shares that thereafter may be issued for purposes of this Plan, by the net number of shares as to which the Stock Option, Stock Appreciation Right or Other Stock-Based Award is exercised or by the number of shares of Restricted Stock or Deferred Stock that vest. Shares of Restricted Stock or Deferred Stock that are forfeited and shares of Stock with respect to which Stock Options (and related Stock Appreciation Rights, if any) expire, are cancelled without being exercised or otherwise terminate without being exercised, or Stock Appreciation Rights exercised for cash, shall not be deemed awarded for purposes of this Section and shall again be available for distribution in connection with Awards under the Plan. To the extent not specified above, the Committee shall have the discretion to determine the manner in which shares shall be counted for purposes of calculating the number of shares available for distribution in connection with Awards under the Plan. SECTION 1.6 Agreements. Each Agreement (a) shall state the Date of Award and the name of the Participant, (b) shall specify the terms of the Award, (c) shall be signed by the Participant and a person designated by the Committee, (d) shall incorporate the Plan by reference and (e) shall be delivered to the Participant. The Agreement shall contain such other terms and conditions as are required by the Plan and, in addition, such other terms not inconsistent with the Plan as the Committee may deem advisable. A-4 SECTION 1.7 Limit on Annual Grants to Participants. The maximum aggregate number of shares of Stock that may be awarded under the Plan to any Participant (whether reserved for issuance upon grant of Stock Options or Stock Appreciation Rights or granted as Restricted Stock, Deferred Stock or other Award) during any fiscal year is 100,000. ARTICLE II PROVISIONS APPLICABLE TO STOCK OPTIONS SECTION 2.1 Grants of Stock Options. Stock Options may be granted alone or in addition to other Awards under the Plan and may be of two types: Incentive Stock Options and Non-Qualified Stock Options. Any Stock Option granted under the Plan shall be in such form as the Committee may from time to time approve. The Committee shall have the authority to grant Incentive Stock Options, Non-Qualified Stock Options or both types of Stock Options (in each case with or without Stock Appreciation Rights). Incentive Stock Options may be granted only to employees of the Company and its subsidiaries (within the meaning of Section 424(f) of the Code). To the extent that any Stock Option is not designated as an Incentive Stock Option or even if so designated does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock Option. Each Stock Option shall be evidenced by an Agreement, the terms and provisions of which may differ. The Agreement shall specify the number of Stock Options granted, the exercise price of such Stock Options, whether such Stock Options are intended to be Incentive Stock Options or Non-Qualified Stock Options and the period during which such Stock Options may be exercised and shall contain such other provisions as the Committee may determine. The Company shall notify a Participant of any Award of a Stock Option, and a written option Agreement or Agreements shall be duly executed and delivered by the Company and the Participant. Such Agreement or Agreements shall become effective upon execution by the Participant. Stock options granted under the Plan shall be subject to the following terms and conditions and shall contain such additional terms and conditions as the Committee shall deem desirable. SECTION 2.2 Exercise Price. At the time the Stock Option is granted, the Committee shall establish the per share exercise price for each Stock Option granted, except that the exercise price with respect to Non-Qualified Stock Options shall not be less than 50% of the Fair Market Value of a share of Stock on the Date of Award and except that, with respect to an Incentive Stock Option, the exercise price shall not be less than 100% of the Fair Market Value of a share of Stock on the Date of Award. The exercise price will be subject to adjustment in accordance with the provisions of Section 6 of the Plan. SECTION 2.3 Exercise of Stock Options. (a) Exercisability. Except as otherwise provided herein, Stock Options shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee. If the Committee provides that any Stock Option is exercisable only in installments, the Committee may at any time waive such installment exercise provisions, in whole or in part, based on such factors as the Committee may determine. In addition, the committee may at any time, in whole or in part, accelerate the exercisability of any Stock Option. (b) Option Period. The term of each Stock Option shall be fixed by the Committee, but no Stock Option shall be exercisable more than 10 years after the Date of Award of the Stock Option. (c) Method of Exercise. Subject to the provisions of this Section, Stock Options may be exercised, in whole or in part, at any time during the option term by giving written notice of exercise to the Company specifying the number of shares of Stock subject to the Stock Option to be purchased. The option price of Stock to A-5 be purchased upon exercise of any Option shall be paid in full in cash (by certified or bank check or such other instrument as the Company may accept) or, if and to the extent set forth in the option Agreement, may also be paid by one or more of the following: (i) in the form of unrestricted Stock already owned by the optionee (and, in the case of the exercise of a Non-Qualified Stock Option, Restricted Stock subject to an Award hereunder) based in any such instance on the Fair Market Value of the Stock on the date the Stock Option is exercised; provided, that such stock has been held by the optionee for at least six months, and provided, further, that, in the case of an Incentive Stock Option, the right to make a payment in the form of already owned shares of Stock may be authorized only at the time the Stock Option is granted; (ii) by requesting the Company to withhold from the number of shares of Stock otherwise issuable upon exercise of the Stock Option that number of shares having an aggregate fair market value on the date of exercise equal to the exercise price for all of the shares of Stock subject to such exercise; or (iii) by a combination thereof, in each case in the manner provided in the option Agreement. If payment of the option exercise price of a Non-Qualified Stock Option is made in whole or in part in the form of Restricted Stock, the number of shares of Stock to be received upon such exercise shall equal the number of shares of Restricted Stock used for payment of the option exercise price and shall be subject to the same forfeiture restrictions to which such Restricted Stock was subject, unless otherwise determined by the Committee. In the discretion of the Committee, payment for any shares subject to a Stock Option may also be made in such other manner as may be authorized from time to time by the Committee, including without limitation (i) payment in the form of an installment note or (ii) payment made by delivering a properly executed exercise notice to the Company, together with a copy of irrevocable instructions to a broker to deliver promptly to the Company the amount of sale or loan proceeds to pay the purchase price. To facilitate the foregoing, the Company may enter into agreements for coordinated procedures with one or more brokerage firms. No shares of Stock shall be issued until full payment therefor has been made and a Participant shall have no rights as a stockholder of the Company with respect to Stock subject to such option before the issuance of the shares of Stock upon the exercise of the option. (d) Limited Transferability of Stock Options. No Stock Option shall be transferable by the optionee other than (i) by will or by the laws of descent and distribution; or (ii) in the case of a Non-Qualified Stock Option, as otherwise expressly permitted under the applicable option agreement including, if so permitted, pursuant to a gift to such optionee's spouse, children, or other family members, whether directly or indirectly or by means of a trust or partnership or otherwise. All Stock Options shall be exercisable, subject to the terms of this Plan, only by the optionee, the guardian or legal representative of the optionee, or any person to whom such option is transferred pursuant to the preceding sentence, it being understood that the term "holder" and "optionee" include such guardian, legal representative and other transferee. (e) Forfeiture of Options Upon Termination of Employment for Cause. If a Participant's employment ends because of a Termination of Employment for Cause, then unless the Committee, in its discretion, determines otherwise, all Outstanding Stock Options, whether or not then vested, shall terminate effective as of the date of such Termination of Employment. (f) Exercise in the Event of Termination of Employment, Retirement, Death or Permanent Disability. If (i) there occurs a Termination of Employment by reason of the voluntary termination by the Participant or the termination by the Company or any of its Affiliates or subsidiaries (other than for Cause) the Participant's Outstanding Stock Options may be exercised to the extent then exercisable or on such accelerated basis as the Committee may determine, until the earlier of three months after the date of such termination (or such longer period as may be determined by the Committee in its discretion before the expiration of such three-month period) or the expiration of such Stock Options, (ii) a Participant dies during a period during which his Stock Options could have been exercised by him, his Outstanding Stock Options may be exercised to the extent exercisable at the date of death or on such accelerated basis as the Committee may determine, by the person who acquired the right to exercise such Stock Options by will or the laws of descent and distribution until the earlier of one year after such death (or such A-6 longer period as may be determined by the Committee, in its discretion, before the expiration of such one-year period) or the expiration of such Stock Options and (iii) the Disability or Retirement of the Participant occurs, then the Participant may exercise his Outstanding Stock Options to the extent exercisable upon date of the onset of such Disability or Retirement or on such accelerated basis as the Committee may determine, until the earlier of one year after such date (or such longer period as may be determined by the Committee in its discretion before the expiration of such one-year period) or the expiration of such Stock Options. Unless otherwise determined by the Committee, for the purposes of the Plan "Cause" shall mean cause as such term or a similar term is defined in any employment agreement applicable to the Participant, or if there is no such employment agreement or if such employment agreement contains no such term, (i) a failure or refusal by a Participant to substantially perform a material duty of such Participant's employment or (ii) the commission by the Participant of a felony or the perpetration by the Participant of a dishonest act or common law fraud against the Company or any Affiliate or subsidiary thereof. Upon the occurrence of an event described in clauses (i), (ii) or (iii) of this Section 2.3(f), unless the Committee accelerates vesting, all rights with respect to Stock Options that are not vested as of such event will be relinquished. Anything in this Section 2.3(f) to the contrary notwithstanding, no Stock Option shall be exercisable after the earlier to occur of (i) the expiration of the option period set forth in the applicable Agreement or (ii) the tenth anniversary of the Date of Award thereof. If the optionee's employment terminates due to death, Disability or Retirement, if an Incentive Stock Option is exercised after the expiration of the exercise periods that apply for purposes of Section 422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock Option. (g) Buy Out of Stock Option. On or before receipt of written notice of exercise, the Committee may elect to buy out all or part of the portion of the shares of Stock for which a Stock Option is being exercised by paying the optionee an amount, in cash or Stock, equal to the excess of the Fair Market Value of the Stock over the option price times the number of shares of Stock for which to the option is being exercised on the effective date of such buy out. (h) Change in Control Cash Out. Notwithstanding any other provision of the Plan, during the 60-day period from and after a Change in Control (the "Exercise Period"), unless the Committee shall determine otherwise at the time of Award, an optionee shall have the right (whether or not the Stock Option is fully exercisable and in lieu of the payment of the exercise price for the shares of Stock being purchased under the Stock Option) by giving notice to the Company, to elect (within the Exercise Period) to surrender all or part of the Stock Option to the Company and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change in Control Price per share of Stock on the date of such election shall exceed the option exercise price (the "Spread") multiplied by the number of shares of Stock granted under the Stock Option as to which the right granted under this Section 2.3(h) shall have been exercised. Notwithstanding the foregoing, if any right granted pursuant to this Section 2.3(h) would make a Change in Control transaction ineligible for pooling-of-interests accounting under APB No. 16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for the cash payable pursuant to such right Stock with a Fair Market Value equal to the cash that would otherwise be payable hereunder. (i) Replacement Options. The Committee may provide either at the time of Award or subsequently that a Stock Option includes the right to acquire a replacement option. A Stock Option which provides for the Award of a replacement option shall entitle the Participant, upon exercise of the Stock Option (in whole or in part) before the Termination of Employment of the Participant and satisfaction of the option exercise price in shares of Stock held by the Participant, to receive a replacement option. In addition to any other terms and conditions the Committee deems appropriate, the replacement option shall be subject to the following terms: the number of shares of Stock shall not exceed the number of whole shares used to satisfy the exercise price of the original Stock option and the number of whole shares, if any, withheld by the Company as payment for withholding taxes, the Date of Award of the replacement option will be the date of the exercise of the original Stock Option, the replacement option exercise price per share shall be the Fair Market Value on the Date of Award of the replacement option, the replacement option shall be exercisable no earlier than six months after the Date of Award of the replacement option, the term of the replacement option will terminate on the same date that the original Stock Option would have A-7 terminated had it not been exercised and the replacement option shall be a Non- Qualified Stock Option and shall otherwise meet all conditions of the Plan. SECTION 2.4 Stock Appreciation Rights. (a) Grant and Exercise. Stock Appreciation Rights may be awarded in conjunction with all or part of any Stock Option awarded under the Plan or separately and without reference to any related Stock Option. In the case of a Non-Qualified Stock Option, such rights may be awarded either at or after the award of the Stock Option. In the case of an Incentive Stock Option, such rights may be awarded only at the time of award of the Stock Option. A Stock Appreciation Right or applicable portion thereof awarded with respect to a Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the related Stock Option, subject to such provisions as the Committee may specify where a Stock Appreciation Right is awarded with respect to fewer than the full number of shares covered by a related Stock Option. A Stock Appreciation Right may be exercised by an optionee in accordance with this Section by surrendering the applicable portion of the related Stock Option in accordance with procedures established by the Committee. Upon such exercise and surrender, the optionee shall be entitled to receive an amount determined in the manner prescribed in Section 2.4(b). Stock Options relating to exercised Stock Appreciation Rights shall no longer be exercisable to the extent the related Stock Appreciation Rights have been exercised. (b) Terms and Conditions. Stock Appreciation Rights shall be subject to such terms and conditions, not inconsistent with the Plan, as shall be determined from time to time by the Committee, including the following: (i) Stock Appreciation Rights shall be exercisable only in accordance with the provisions of Section 2.3 and this Section 2.4 and, if awarded in tandem with Stock Options, only at the times and to the extent that the Stock Options to which they relate are exercisable. (ii) Upon the exercise of a Stock Appreciation Right, an optionee shall be entitled to receive an amount in cash, shares of Stock or both, equal in aggregate value to the excess of the Fair Market Value of one share of Stock over the option exercise price per share specified in the related Stock Option multiplied by the number of shares in respect of which the Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment. When payment is to be made in shares of Stock, the number of shares to be paid shall be calculated on the basis of the Fair Market Value of the shares on the date of exercise. (iii) Stock Appreciation Rights shall be transferable only if granted in tandem with Stock Options and then only to permitted transferees of the underlying Stock Option in accordance with Section 2.3(d). (c) In its discretion, the Committee may award "Limited" Stock Appreciation Rights under this Section (i.e., Stock Appreciation Rights that become exercisable only if a Change in Control occurs), subject to such terms and conditions as the Committee may specify at the time of the Award. Such Limited Stock Appreciation Rights shall be settled solely in cash. The Committee may also, in its discretion, provide that the amount to be paid upon the exercise of a Stock Appreciation Right or Limited Stock Appreciation Right shall be based on the Change in Control Price, subject to such terms and conditions as the Committee may specify at the time of the Award. ARTICLE III PROVISIONS APPLICABLE TO RESTRICTED STOCK SECTION 3.1 Awards of Restricted Stock. The Committee may condition the Award of Restricted Stock upon the attainment of specified performance goals of the Participant or of the Company or Affiliate, subsidiary, A-8 division or department of the Company for or within which the Participant is primarily employed or upon such other factors or criteria as the Committee shall determine. The provisions of Restricted Stock Awards need not be the same with respect to each recipient. SECTION 3.2 Awards and Certificates. Shares of Restricted Stock shall be evidenced in such manner as the Committee may deem appropriate, including book-entry registration or issuance of one or more stock certificates. Any certificate issued in respect of shares of Restricted Stock shall be registered in the name of such Participant and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award, substantially in the following form: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the 1994 Long-Term Management Incentive Plan and a Restricted Stock Agreement. Copies of such Plan and Agreement are on file at the offices of Offshore Logistics, Inc., 224 Rue de Jean, P.O. Box 56, Lafayette, Louisiana 70505." The Committee may require that the certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed and that, as a condition of any Award of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such Award. SECTION 3.3 Terms, Conditions and Restrictions. Shares of Restricted Stock shall be subject to the following terms, conditions and restrictions: (a) Subject to the provisions of the Plan and the Restricted Stock Agreement referred to below in Section 3.3(f), during a period set by the Committee, commencing with the Date of Award (the "Restriction Period"), the Participant shall not be permitted to sell, assign, transfer, pledge or otherwise dispose of or encumber shares of Restricted Stock. The Committee may provide for the lapse of such restrictions in installments or otherwise and may accelerate or waive such restrictions, in whole or in part, in each case based on period of service, performance of the Participant or of the Company or the Affiliate, subsidiary, division or department for which the Participant is employed or based on such other factors or criteria as the Committee may determine, in its discretion. (b) Except to the extent otherwise provided in the applicable Restricted Stock Agreement, upon the Participant's Termination of Employment due to the Participant's death, Disability or Retirement, all remaining restrictions with respect to all of the Participant's shares of Restricted Stock shall lapse, and all of the Participant's shares of Restricted Stock shall become free of all restrictions and become fully vested and freely transferable to the full extent of the original grant. (c) Except to the extent otherwise provided in the applicable Restricted Stock Agreement or Sections 3.3, 3.4 and 6.1, upon a Participant's Termination of Employment for any reason during the Restriction Period other than due to the Participant's death, Disability or Retirement, all shares of Restricted Stock still subject to the Restriction Period shall be forfeited by the Participant; provided, however, that except to the extent otherwise provided in Section 6.1, in the event of Termination of Employment of a Participant for any other reason, the Committee shall have the discretion to waive in whole or in part any or all of such remaining restrictions with respect to any or all of such Participant's shares of Restricted Stock. (d) Except as provided in this Article III or in the Restricted Stock Agreement, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a stockholder of the Company holding the class or series of Stock that is the subject of the Restricted Stock, including, if applicable, the right to vote the shares and the right to receive any cash dividends. If so determined by the Committee in the applicable Restricted Stock Agreement and subject to Section 7.8 of the Plan, (i) cash dividends on the shares of Stock that are the subject A-9 of the Restricted Stock Award shall be automatically deferred and reinvested in additional shares of Restricted Stock, and (ii) dividends payable in Stock shall be paid in the form of Restricted Stock. (e) If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, unlegended certificates for such shares shall be delivered to the Participant. (f) Each Award shall be confirmed by, and be subject to the terms of, a Restricted Stock Agreement. SECTION 3.4 Restricted Stock Awards to Cash Plan Participants in Lieu of Annual Incentive Award. (a) Eligibility. All of the participants in the Cash Plan are eligible to be granted Restricted Stock Awards under this section of the Plan in accordance with this Restricted Stock Feature, which is to be used in conjunction with the Cash Plan. (b) Petition to Receive Annual Incentive in Restricted Stock in Lieu of Cash Payment. Except as may be otherwise determined by the Committee in its discretion from time to time, participants in the Cash Plan may make a request to the Committee to receive all or any portion of their Annual Incentive Award (as defined in the Cash Plan) in the form of shares of Restricted Stock. Once made with respect to a particular fiscal year, the request is irrevocable. The Committee shall have the absolute authority in its discretion to grant or deny each such request. (c) Timing of Request. Except as may be otherwise provided by the Committee in its discretion, the Request must be made in writing on a form to be provided by the Committee and must be received by the Company at its offices before the beginning of the fiscal year with respect to which the Annual Incentive Award pertains. (d) Premium. For each request granted by the Committee, the Participant will receive the applicable portion of the Annual Incentive Award in the form of shares of Restricted Stock (the "Base Shares of Restricted Stock"), plus a premium of 20% additional shares of Restricted Stock ("Premium Shares of Restricted Stock"), calculated as follows: Amount of Incentive Award To Be Cancelled and Converted to X 1.20 = Number of Shares Shares of Restricted Stock Restricted Stock --------------------------------- (rounded to nearest 30 Day Trailing Average higher even share) Closing Stock Price At June 30 of Preceding Fiscal Year provided that for the fiscal year ended 1994, the number of shares of Restricted Stock to be awarded shall be calculated based on the 30 day trailing average closing stock price at December 31, 1993 (i.e., the 30 day period preceding the effective date of the Cash Plan). (e) Except as may be otherwise provided by the Committee and set forth in the Restricted Stock Agreement and subject to the provisions of the Plan, the Restriction Period shall be three years from the Date of Award for Awards made with respect to the fiscal year ended 1994, and 30 months for Awards made with respect to subsequent fiscal years. (f) Modified Forfeiture Restrictions. In lieu of the restrictions set forth above in Section 3.3, except as otherwise set forth in Section 6.1 and unless otherwise provided in the Restricted Stock Agreement and/or unless waived by the Committee, (i) upon the Participant's Termination of Employment due to death, Disability or A-10 Retirement, all remaining restrictions with respect to the Participant's Base Shares of Restricted Stock and the Participant's Premium Shares of Restricted Stock shall lapse and all of such shares shall become fully vested, free of all restrictions and freely transferable to the full extent of the original Award, (ii) if the Participant incurs a Termination of Employment for "Cause" or by reason of the Participant's voluntary resignation, all Base Shares of Restricted Stock as well as all Premium Shares of Restricted Stock still subject to the Restriction Period shall be forfeited by the Participant, and (iii) if the Participant incurs a Termination of Employment other than by reason of death, Disability or Retirement and other than for "Cause" or by reason of the Participant's voluntary resignation, all Base Shares of Restricted Stock shall be free of all restrictions, fully vested and freely transferable to the full extent of the original Award, but all Premium Shares of Restricted Stock still subject to the Restriction Period shall be forfeited by the Participant. ARTICLE IV PROVISIONS APPLICABLE TO DEFERRED STOCK SECTION 4.1 Awards of Deferred Stock. Awards of Deferred Stock may be made either alone, in addition to or in tandem with other Awards granted under the Plan and/or cash awards made outside of the Plan. The Committee shall determine the eligible Participants to whom and the time or times at which Deferred Stock shall be awarded, the number of shares of Deferred Stock to be awarded to any person, the duration of the period (the "Deferral Period") during which, and the conditions under which, receipt of the Stock will be deferred and the other terms and conditions of the award in addition to those set forth in Section 4.2. The Committee may condition the grant of Deferred Stock upon the attainment of specified performance goals or such other factors or criteria as the Committee shall determine, in its sole discretion. The provisions of Deferred Stock awards need not be the same with respect to each recipient. SECTION 4.2 Terms and Conditions. The shares of Deferred Stock awarded pursuant to this Article IV shall be subject to the following terms and conditions: (a) Subject to the provisions of this Plan and except as may be otherwise provided in the Award Agreement referred to in Section 4.2(e) below, Deferred Stock Awards may not be sold, assigned, transferred, pledged or otherwise disposed of or encumbered during the Deferral Period. At the expiration of the Deferral Period, where applicable), share certificates shall be delivered to the Participant, or his legal representative, in a number equal to the shares covered by the Deferred Stock Award. (b) Unless otherwise determined by the Committee at the time the Award is made, amounts equal to any dividends declared during the Deferral Period with respect to the number of shares covered by a Deferred Stock Award will be paid to the Participant currently, or deferred and deemed to be reinvested in additional Deferred Stock, or otherwise reinvested, all as determined at or after the time of the Award by the Committee, in its sole discretion. (c) Subject to the provisions of the Award Agreement and this Article IV, if the Participant incurs a Termination of Employment for any reason during the Deferral Period for a given Award, the Deferred Stock in question will vest, or be forfeited, in accordance with the terms and conditions established by the Committee at or after the Award is made. (d) Based on service, performance and/or such other factors or criteria as the Committee may determine, the Committee may, at or after making the Award, accelerate the vesting of all or any part of any Deferred Stock Award and/or waive the deferral limitations for all or any part of such Award. A-11 (e) Each Award shall be confirmed by, and subject to the terms of, a Deferred Stock Agreement executed by the Company and the Participant. SECTION 4.3 Minimum Value Provisions. In order to better ensure that Award payments actually reflect the performance of the Company and service of the Participant, the Committee may provide, in its sole discretion, for a tandem performance based or other award designed to guarantee a minimum value, payable in cash or Stock to the recipient of a Deferred Stock Award, subject to such performance, future service, deferral and other terms and conditions as may be specified by the Committee. ARTICLE V OTHER STOCK-BASED AWARDS SECTION 5.1 Administration. Other Awards of Stock and other awards that are valued in whole or in part by reference to, or are otherwise based on, Stock ("Other Stock-Based Awards"), including, without limitation, performance shares, convertible preferred stock, convertible debentures, exchangeable securities and Stock awards or options valued by reference to book value or Affiliate or subsidiary performance, may be granted either alone or in addition to or in tandem with Stock Options, Stock Appreciation Rights, Restricted Stock or Deferred Stock granted under the Plan and/or cash awards made outside of the Plan. The provisions of Other Stock-Based Awards need not be the same with respect to each recipient. Subject to the provisions of the Plan, the Committee shall have authority to determine the persons to whom and the time or times at which such Awards shall be made, the number of shares of Stock to be awarded pursuant to such Awards and all other conditions of the Awards. The Committee may also provide for the Award of Stock upon the completion of a specified performance period. SECTION 5.2 Terms and Conditions. Other Stock-Based Awards made pursuant to this Article V shall be subject to the following terms and conditions: (a) Subject to the provisions of this Plan and the Award Agreement referred to in Section 5.2(e) below, shares of Stock subject to Awards made under this Article V may not be sold, assigned, transferred, pledged or otherwise encumbered before the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses. (b) Subject to the provisions of this Plan and the Award Agreement and unless otherwise determined by the Committee at the time it makes the Award, the recipient of an Award under this Article V shall be entitled to receive, currently or on a deferred or restricted basis, interest or dividend equivalents with respect to the number of shares of Stock covered by the Award, as determined at the time of the Award by the Committee, in its sole discretion, and the Committee may provide that such amounts (if any) shall be deemed to have been reinvested in additional Stock or otherwise reinvested. (c) Any Award under this Article V and any Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award Agreement, as determined by the Committee, in its sole discretion. (d) In the event of the Participant's Retirement, Disability or death, or in cases of special circumstances, the Committee may, in its sole discretion, waive in whole or in part any or all of the remaining limitations and restrictions imposed hereunder (if any) with respect to any or all of an Award under this Article V. (e) Each Award under this Article V shall be confirmed by, and subject to the terms of, an Agreement by the Company and by the Participant. A-12 (f) Stock (including securities convertible into Stock) issued on a bonus basis under this Article V may be issued for no cash consideration; Stock (including securities convertible into Stock) to be purchased pursuant to a purchase right awarded under this Article V shall be priced at least 50% of the Fair Market Value of the Stock on the Date of Award. ARTICLE VI EFFECT OF CERTAIN CORPORATE CHANGES AND CHANGES IN CONTROL SECTION 6.1 Impact of Event. Notwithstanding any other provision of the Plan to the contrary but subject to the limitations of Section 7.10 of this Plan, in the event of a Change in Control: (a) Any Stock Options and Stock Appreciation Rights outstanding as of the date such Change in Control is determined to have occurred and not then exercisable and vested shall become fully exercisable and vested to the full extent of the original grant. (b) The restrictions and deferral limitations applicable to any still outstanding Restricted Stock, Deferred Stock and Other Stock-Based Awards (in each case to the extent not already vested under the Plan) shall lapse, and such shares and Awards shall become free of all restrictions and become fully vested and transferable to the full extent of the original Award. SECTION 6.2 Definition of Change in Control. For purposes of the Plan, a "Change in Control" shall mean the happening of any of the following events: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change in Control; (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 6.2; or (b) Individuals who, as of the Effective Date of the Plan, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Approval by the stockholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another corporation (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50.1% of, respectively, the then outstanding shares A-13 of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. SECTION 6.3 Change in Control Price. For purposes of the Plan, "Change in Control Price" means the higher of (a) the highest reported sales price, regular way, of a share of Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national securities exchange on which such shares are listed or on NASDAQ, as applicable, during the 60-day period prior to and including the date of a Change in Control and (b) if the Change in Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that in the case of Incentive Stock Options and Stock Appreciation Rights relating to Incentive Stock Options, the Change in Control Price shall be in all cases the Fair Market Value of the Stock on the date such Incentive Stock Option or Stock Appreciation Right is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other non-cash consideration, the value of such securities or other non-cash consideration shall be determined in the sole discretion of the Board. SECTION 6.4 Dilution and Other Adjustments. In the event of any merger, reorganization, consolidation, recapitalization, stock dividend, stock split, issuance or repurchase of stock or securities convertible into or exchangeable for shares of Stock, grants of options, warrants or rights to purchase Stock (other than pursuant to the Plan), extraordinary distribution with respect to the Stock or other change in corporate structure affecting the Stock, the Committee may make such substitution or adjustments in the aggregate number and kind of shares reserved for issuance under the Plan, in the number, kind and option price of shares subject to outstanding Stock Options and Stock Appreciation Rights, in the number and kind of shares subject to other outstanding Awards granted under the Plan and/or such other substitution or adjustments in the consideration receivable upon exercise, or take such other action, as it may determine to be appropriate in its sole discretion; provided, however, that the number of shares subject to any Award shall always be a whole number. Such adjusted option price shall also be used to determine the amount payable by the Company upon the exercise of any Stock Appreciation Right associated with any Stock Option. ARTICLE VII MISCELLANEOUS SECTION 7.1 No Rights to Awards or Continued Employment. No employee shall have any claim or right to receive Awards under the Plan. Neither the adoption of the Plan nor any action taken pursuant to the Plan shall confer upon any employee any right to continued employment nor shall it interfere in any way with the right of the Company or any subsidiary or Affiliate to terminate the employment of any employee at any time. A-14 SECTION 7.2 Restriction on Transfer and Additional Conditions. (a) All certificates for shares of Stock or other securities delivered under the Plan shall be subject to such stock transfer orders and other restrictions as the Committee in its sole discretion may deem advisable, including without limitation, restrictions under the rules, regulations and other requirements of the Commission, any stock exchange upon which the Stock is then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to any such restrictions. Before making any transfer or disposition of Stock issued pursuant to the Plan, the Committee may require a Participant to provide written notice to the Company describing the manner of such proposed disposition or transfer and such other information as shall be necessary for counsel to the Company to determine whether registration of any such Stock is required. Such proposed disposition or transfer, in the absence of an effective registration statement covering such Stock or an opinion of counsel to the Company that such registration is not required, shall not be permitted. Each Participant shall agree to indemnify and hold harmless the Company from and against all liability, cost and expense (including attorneys' fees) suffered and incurred by the Company as a result of any disposition or transfer of the shares in violation of any federal or state securities or blue sky law or any other law, rule or regulation. (b) Anything in the Plan to the contrary notwithstanding (a) the Committee may, if it determines it is necessary or desirable for any reason, at the time of any Award the issuance of any shares of Stock pursuant thereto, require a Participant as a condition of receipt thereof or receipt of shares of Stock issued pursuant to the terms of the Award, to deliver to the Company a written representation of present intention to acquire the Award or the shares of the Stock issuable pursuant to the Award for the Participant's own account for investment and not for distribution, (b) the Company shall have no obligation to issue shares of Stock except in accordance with applicable law and (c) if at any time the Company further determines, in its sole discretion, that the listing, registration or qualification (or any updating of any such document) of any Award or the shares of Stock issuable pursuant thereto is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of any Award or the issuance of shares of Stock pursuant thereto, such Award shall not be granted or such shares of Stock shall not be issued, as the case may be, in whole or in part, unless such listing, registration, qualification, consent or approval is effected or obtained free of any conditions not acceptable to the Company. SECTION 7.3 Tax Withholding. No later than the date as of which an amount first becomes includible in the gross income of the Participant for federal income tax purposes with respect to any Award under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations may be settled with Stock, including Stock that is part of the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company, its subsidiaries and its Affiliates shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. The Committee may establish such procedures as it deems appropriate, including the making of irrevocable elections, for the settlement of withholding obligations with Stock. SECTION 7.4 Stockholder Rights. No Award under the Plan shall entitle a Participant or beneficiary to any rights of a holder of shares of Stock, except as provided in Article III with respect to Restricted Stock or upon the delivery of share certificates to a Participant upon exercise of a Stock Option or upon the delivery of share certificates in settlement of a Stock Appreciation Right. SECTION 7.5 No Restriction on Right of Company to Effect Corporate Changes. The Plan shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalization, reorganization or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of stock or of options, warrants or rights to purchase stock or of bonds, A-15 debentures, preferred or prior preference stock whose rights are superior to or affect the Stock or the rights thereof or which are convertible into or exchangeable for Stock, or the dissolution or liquidation or the Company, or any sale or transfer of all or any part of its assets or business or any other corporate act or proceeding, whether of a similar character or otherwise. SECTION 7.6 Unfunded Status of Plan. It is presently intended that the Plan constitute an "unfunded" plan for incentive and deferred compensation. The Committee may, but shall have no obligation to, authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver Stock or make payments; provided, however, that, unless the Committee otherwise determines, the existence of such trusts or other arrangements is consistent with the "unfunded" status of the Plan. Nothing contained in this Plan shall create or be construed to create a trust of any kind, or a fiduciary relationship, between the Company and a Participant or any other person. SECTION 7.7 First Refusal Right. At the time of grant, the Committee may provide in connection with any grant made under the Plan that the shares of Stock received as a result of such grant shall be subject to a right of first refusal pursuant to which the Participant shall be required to offer to the Company any shares that the Participant wishes to sell at the then Fair Market Value of the Stock, subject to such other terms and conditions as the Committee may specify at the time of grant. SECTION 7.8 Dividend Reinvestment. The reinvestment of dividends in additional Restricted Stock at the time of any dividend payment shall only be permissible if sufficient shares of Stock are available under Section 1.5 for such reinvestment (taking into account then outstanding Stock Options and other Awards). SECTION 7.9 Beneficiaries. The Committee shall establish such procedures as it deems appropriate for a Participant to designate a beneficiary to whom any amounts payable in the event of the Participant's death are to be paid. If no beneficiary is designated by the Participant or if no beneficiary designated by the Participant is living at the time such a payment is due, payments shall be made to the Participant's estate. ARTICLE VIII TERM, AMENDMENT AND TERMINATION Unless previously terminated pursuant to this Article VIII, the Plan shall terminate on December 9, 2004, and no further Awards may be made hereunder after such date. The Board may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part. No amendment, alteration or discontinuation shall be made that would without the recipient's consent, impair the rights of any recipient of an Award theretofore granted, except such an amendment made to cause the Plan to qualify for the exemption provided by Rule 16b-3. Also, the Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but no such amendment shall impair the rights of any recipient without the recipient's consent except such an amendment made to cause the Plan or Award to qualify for the exemption provided by Rule 16b-3. Subject to the above provisions, the Board shall have authority to amend the Plan to take into account changes in law and tax and accounting rules as well as other developments, and to grant Awards which qualify for beneficial treatment under such rules without stockholder approval. A-16 ARTICLE IX INTERPRETATION SECTION 9.1 Compliance with Governmental Regulations. The Plan, and all Awards hereunder, shall be subject to and shall be administered and interpreted in order to comply with, all applicable rules and regulations of governmental or other authorities as amended from time to time, including without limitation Section 16(b) of the Exchange Act and the rules and regulations promulgated thereunder, with respect to persons subject to Section 16 of the Exchange Act. SECTION 9.2 Headings. The headings of sections and subsections herein are included solely for convenience of reference and shall not affect the meaning of any of the provisions of the Plan. SECTION 9.3 Governing Law. The Plan and all Awards made and actions taken hereunder shall be construed in accordance with and governed by the laws of the State of Delaware. ARTICLE X EFFECTIVE DATE AND STOCKHOLDER APPROVAL The Plan shall be effective as of the date it is approved by the stockholders (the "Effective Date"), and stockholder approval shall be sought at the first annual meeting of stockholders following the adoption of the Plan by the Board. If stockholder approval is not obtained on or before the date of such annual meeting, the Plan and all Awards thereunder shall be void ab initio and of no effect. No Stock Option or Stock Appreciation Right shall be exercisable and no Restricted Stock, Deferred Stock or other Award shall vest until the date of such stockholder approval. A-17 EX-10.16 3 UNION AGREEMENT Exhibit (10)(16) AGREEMENT BETWEEN PILOTS REPRESENTED BY OFFICE AND PROFESSIONAL EMPLOYEES INTERNATIONAL UNION, AFL-CIO AND OFFSHORE LOGISTICS, INC. CONTENTS
ARTICLE SUBJECT PAGE - ------- -------------------------- ---- 1 Statement of Purpose 2 2 Recognition and Representation 3 3 Status of Agreement 5 4 Pilot Status 7 5 Seniority 8 6 Seniority Roster 10 7 Reductions in Workforce 11 8 Job Posting and Bidding 13 9 Categories of Aircraft 16 10 Schedules of Service 17 11 Leaves of Absence 18 12 Paid Days Off and Banked Days 22 13 On-the-Job Injury (OJI) Leave 26 14 Bereavement Leave 28 15 Jury Duty 29 16 Fees and Physical Examinations 30 17 Training 32 18 Facilities, Equipment and Uniforms 35 19 Severance Pay 37 20 Moving Expense 39 21 Base Pay 41 22 Supplemental Pay 42 23 Bonuses 43 24 Workover/Overtime 44 25 Travel Pay 47 26 Per Diem 48 27 Insurance Benefits 49 28 Retirement and 401(k) Plan 50 29 Safety/Accident Prevention 51 30 General and Miscellaneous 53 31 Union Bulletin Boards and Communications 56 32 Grievance Procedure 57 33 System Board of Adjustment 61 34 No Strike/No Lockout 66 35 Union Representation 67 36 Union Security 69 37 Savings Clause 75 38 Duration 76 APPENDIX A 77
i 1 Fixed Wing Pilots 84 2 Effective Date for Paid Days Off 81 3 IFR Cadre 82 4 Pilots Hired With Prior Experience 83 5 Implementation Dates 84 6 Air Logistics of Alaska, Inc. 86
ii AGREEMENT This Agreement and Contract is made by and between OFFICE and PROFESSIONAL EMPLOYEES INTERNATIONAL UNION hereinafter called the "Union" or the "OPEIU" and OFFSHORE LOGISTICS INC., hereinafter called the "Company" or "Employer". 1 ARTICLE 1 STATEMENT OF PURPOSE Section 1. The purpose of this Agreement is, in the mutual interest of the Company and its pilots, to provide for the operation of the services of the Company under methods which will further, to the fullest extent possible, the safety of air transportation and the efficiency of operation. Section 2. No Pilot covered by this Agreement will be interfered with, restrained, coerced or discriminated against by the Company, its officers, or its agents because of membership in or lawful activity on behalf of the Union. Section 3. It is understood, whenever in this Agreement, Pilots or jobs are referred to in the male gender, it shall be recognized as referring to both male and female Pilots. The provisions of this Agreement apply to all Pilots regardless of sex, color, race, creed, age, religion, national origin, handicapped or veteran status or other protected status in accordance with applicable national or state law. 2 ARTICLE 2 RECOGNITION AND REPRESENTATION Section 1. This Agreement is made and entered into in accordance with the provisions of Title II of the Railway Labor Act, as amended, by and between Offshore Logistics, Inc. (the "Company") and the Office and Professional Employees International Union (the "Union") representing employees composed of the craft or class of Pilots as certified by the National Mediation Board in Case Number R-6517, August 6, 1997. a. The Company hereby recognizes the Union as the sole collective bargaining agent and authorized representative for those employees described in Section 1 above, to represent them and, in their behalf, to negotiate and conclude agreements with the Company as to hours of work, wages, and other conditions of employment in accordance with the provisions of the Railway Labor Act, as amended. Section 2. The term Pilot as used in this Agreement means Pilots (PIC) and/or Co-Pilots (SIC) covered by this Agreement and for whom the Union is the recognized collective bargaining representative. Section 3. This Agreement covers all revenue and all known and recurring miscellaneous flying performed by the Company with Pilots on its payroll. All flying covered by this Agreement shall be performed by Pilots whose names appear on the Air Logistics L.L.C. and Air Logistics of Alaska, Inc. Pilot's System Seniority List. Section 4. Pilots covered by this Agreement shall be governed by all reasonable Company rules, regulations and orders previously or hereafter issued by proper authorities of the Company which are not in conflict with the terms and conditions of this Agreement, and which have been made available to the Pilots and union prior to becoming effective. Section 5. If the Union considers the rule to be unreasonable, it will have the right to file a written grievance challenging such rule prior to the implementation by the Company. Grievances properly filed in this respect will be subject to the normal Grievance and System Board of Adjustment procedures as set forth in Article 32 and Article 33 of this Agreement. Section 6. The Company may engage in Subcontracted Revenue Flying under the following circumstances: Subcontracted Revenue Flying may be engaged in for periods not to exceed one hundred and eighty (180) days per occurrence during 3 the term of this Agreement when (i) such Subcontracted Revenue Flying is necessary to accomplish the needs of the service of the Company, (ii) the Company determines that it does not have sufficient or appropriate aircraft, or sufficient or appropriately trained Pilots, available to perform the Subcontracted Revenue Flying, and (iii) the Company does not furlough any Pilot as a direct result of such engagement in Subcontracted Revenue Flying. It is understood and agreed that nothing in this paragraph will prevent the Company from furloughing Pilots or severing the employment relationship with Pilots for economic reasons independent of or unrelated to its engagement in Subcontracted Revenue Flying. Section 7. Notwithstanding Section 6 above, in the event the Company engages in Subcontracted Revenue Flying solely due to circumstances over which the Company does not have control, it may engage in the Subcontracted Revenue Flying for a time not to exceed the duration of the circumstance beyond the Company's control or twelve (12) months, whichever is less. Circumstances beyond the Company's control shall include: an act of nature; a strike affecting the Company's business; grounding of a substantial number of the Company's aircraft by a government agency or court; loss or destruction of the Company's aircraft; war emergency; or owner's or manufacturer's delay in the delivery of aircraft scheduled for delivery. 4 ARTICLE 3 STATUS OF AGREEMENT Section 1. It is fully understood and agreed that this Agreement supercedes any and all Agreements now existing or previously executed between the Company and any other Union, or individual, affecting the class or craft of employees covered by this Agreement. Section 2. The Company shall give notice of the existence of this Agreement, and its full terms, to any entity which engages in a possible transaction. Section 3. MERGERS a. In the event of a complete merger between the Company and another helicopter company (i.e., the combination of all or substantially all the assets of the two carriers) where the surviving carrier decides to integrate the pre-merger operations, the following procedures will apply: (1) if the Company is the surviving carrier, the Company will integrate the two Pilot groups in accordance with OPEIU Merger Policy if both groups are OPEIU-represented, and in accordance with Sections 3 and 13 of the Allegheny Mohawk LPPs if Pilots of the Company's merger partner are not represented by OPEIU, and (2) if the Company is not the surviving carrier, the Company will make reasonable efforts to have the surviving carrier integrate the two Pilot groups in the same manner as stated in (1) of this paragraph. b.In the event the Company acquires all or substantially all of the assets or equity of another air carrier, or another air carrier acquires all or substantially all of the assets or equity of the Company, the Company will meet promptly with the Union to negotiate a possible "Fence Agreement" to be in effect during the period, if any, the two carriers are operated separately without integration of the Pilot work force. These discussions shall not be pursuant to Section 6 of the Railway Labor Act, and reaching an agreement with the Union shall not be a prerequisite for closing, or any other aspect of the transaction or operations pursuant to the transaction. 5 Section 4. MANAGEMENT RIGHTS a. The Union recognizes that the management of the business of the Company and the direction of the working force are vested exclusively with the employer, subject to the provisions of this Agreement. b. The management functions shall not be used for the purpose of discrimination against any Pilot because of Union activity or for the purpose of evading any of the provisions of this Agreement. c. Except as restricted by the express terms of this Agreement, the Company shall retain all rights to manage and operate its business and work force, including but not limited to the right to sell or discontinue all or part of the business; to sell or lease aircraft or facilities; to determine where and when to operate scheduled or unscheduled flights; to determine its marketing methods and strategies; and to enter into affiliation or marketing agreements with other carriers; to invest (including equity investments) in other business entities including, without limitation, other helicopter carriers; and to determine the type of aircraft it will utilize. (1) The exercise of any right reserved herein to management in a particular manner, or the non-exercise of such right, shall not operate as a waiver of the Company's rights hereunder, or preclude the Company from exercising the right in a different manner. d. The parties agree that any past practices established prior to the date of this Agreement shall not create any contractual or legal obligation to continue such practices following the effective date of this Agreement. 6 ARTICLE 4 PILOT STATUS Section 1. Each newly hired Pilot shall be on probation for a period which normally will not exceed six (6) months of cumulative service. The probationary period will begin on the date a Pilot enters training. During this time, a Pilot will become acquainted with his job duties, fellow Pilots and Company facilities while being evaluated by his supervisor. Evaluation of probationary period job performance is based on a number of factors including attitude, attendance, competence, and overall work performance. A supervisor who requires additional time to evaluate a Pilot's suitability for a position may extend the probationary period for an additional ninety (90) days of cumulative active service. Section 2. A newly employed Pilot shall be entitled to all the rights and benefits of any other Pilot under the terms of this Agreement, except that the termination of a Pilot's employment during his probationary period, will not be subject to the grievance procedures and System Board of Adjustment as set forth in this Agreement. After completing the probationary period, such Pilot shall be considered a non-probationary Pilot. Section 3. Once each month, the Company will provide the Union office with a listing of Pilots who have been hired, terminated, transferred and/or granted a military leave of absence during the prior month. This listing will include the home address of these Pilots. 7 ARTICLE 5 SENIORITY Section 1. Seniority of a Pilot shall begin on the date a Pilot enters the Company's training program. Section 2. There shall be two (2) types of seniority, Company seniority and Bidding seniority. a. Company Seniority - Company Seniority shall be ------------------- defined as a Pilot's length of service with the Company, regardless of location, and shall govern pay rates, and accrual or granting of paid days off pursuant to Article 12 of this Agreement. Company Seniority shall be adjusted for leaves of absence and reductions in force as provided for in Articles 7 and 11 of this Agreement. b. Bidding Seniority - Bidding Seniority shall be ------------------- defined as a Pilot's length of service with the Company, adjusted for leaves of absence as provided for in Article 5, Section 4, and Article 11 of this Agreement. Bidding Seniority shall govern all Pilots covered by this Agreement in bidding for job assignments and vacancies as provided for in this Agreement, layoffs, reemployment after layoff, demotions due to a reduction in force, and awarding of full week VSTO periods. Section 3. A Pilot who is promoted to a non-flying or supervisory position shall continue to accrue Company and bidding seniority for one (1) year. Thereafter, such Pilot shall continue to accrue Company Seniority and retain his Bidding Seniority. If said Pilot returns to flying duty, it shall be in accordance with his Company and Bidding seniority. In the event there is no vacancy, he shall be carried as an overage until the Company adjusts its staffing levels. If a Pilot is terminated while in a supervisory or non-flying position, such Pilot shall have no rights under this Agreement. Section 4. A Pilot elected or appointed to a full-time position with the Union shall retain and accrue Company and bidding seniority in their immediate former classification. Section 5. A Pilot will lose his seniority rights and his name will be removed from the seniority list under the following conditions: a. Resignation or retirement; b. Discharge for just cause; 8 c. Absent from work for forty-eight (48) consecutive hours without proper notification to the Director of Operations or his designee of the reason, unless the employee is physically incapable of providing the Company with the proper notification of his absence; d. Failure to return to work from an authorized leave of absence in the time provided for by the Company, giving a false reason for obtaining a leave of absence or accepting gainful employment while on a leave of absence, when the employment was not specifically authorized; e. Failure to inform the designated Company representative in person or by certified mail of his intention to return to work as provided for in Article 7, Section 5(a); f. Failure to return to work on or before a date specified in the notice of recall from the designated Company representative after a layoff as provided for in Article 7, Section 5.b.; g. A Pilot who is furloughed and who is not recalled to service with the Company within three (3) years from the date of furlough. Section 6. Disputes arising over seniority shall be handled in accordance with Article 32 and Article 33 of this Agreement. 9 ARTICLE 6 SENIORITY ROSTER Section 1. The Company will post a seniority roster on bulletin boards at all bases, listing the names of its Pilots, date of hire, station and base as reflected by its records. Copies of the seniority roster will be furnished to the Union. Section 2. When two or more Pilots are employed on the same date, they shall be placed on the seniority roster according to the last four digits of each new-hire's social security number. If two individuals have the same last four digits in their social security number, the digit immediately preceding the last four digits will be used to determine the lowest number. The Pilot with the lowest last four digits will be awarded the most senior position in the class. The balance of the class will be awarded seniority positions in order of their numbers, with the highest social security number receiving the lowest seniority. Section 3. The Company agrees to update the seniority roster once each month, beginning with the effective date of this Agreement with a copy to the Union. A Pilot shall have a period of thirty (30) days after the posting of the seniority roster to protest to the Company any omission or incorrect posting affecting his seniority. Pilots on vacation, leave of absence or furlough shall be permitted thirty (30) days after their return to duty to make any protest concerning his seniority. Once the thirty (30) day period has expired without a protest, a Pilot's posting will be considered correct and shall not be subject to further protest, unless the omission or incorrect posting was the result of a clerical error on the part of the Company. 10 ARTICLE 7 REDUCTIONS IN WORKFORCE Section 1. When it becomes necessary to reduce the workforce, a Pilot's seniority, pursuant to Article 5 of this Agreement, shall govern the layoff. Pilots with the least seniority at a location shall be laid off first. For the purposes of this Article, there shall be two locations: the Gulf of Mexico operation or the Alaska operation. The Company shall give at least fourteen (14) days notice of an impending layoff at the affected location, or two (2) weeks pay in lieu thereof. The Company shall notify the Union in advance of the impending reductions. a. The fourteen (14) day notice or pay in lieu thereof may be waived by the Company if the reduction in force is caused by circumstances beyond the control of the Company. Examples of this would include a war or foreign invasion, an act of God/natural disaster, an official state of emergency, a strike affecting the Company's business, a work stoppage, a government grounding of aircraft, the revocation of operating certificate(s), or an unannounced cancellation of contract flying. Section 2. Pilots will be recalled from furlough in seniority order, with the most senior laid-off Pilot being recalled first. The Company will make reasonable efforts to place the recalled Pilot in his former position or one of equal status. Section 3. Pilots shall continue to accrue Bidding Seniority while on furlough. He shall not accrue Company Seniority while on a furlough of more than thirty (30) days duration. Section 4. Laid off Pilots are required to file their proper address and telephone number(s) with the Director of Operations at the time of the lay off and will notify the Company of any address changes promptly. Section 5. Laid off Pilots shall be notified of a recall by telephone, certified mail, or telegram to the most recent telephone number and address provided by the Pilot. Notification by telephone must be accomplished by positive telephone contact with the Pilot and the call must be followed up with official notification by certified mail. The date of recall notification shall be the earlier of the date on which the recall letter was mailed, or the date the telegram was sent. Notices sent to the last address of record shall be considered conclusive evidence of notice to the Pilot. 11 a. Each Pilot accepting recall shall answer his recall notice no later than five (5) days after receipt of such notice in person or by certified mail. Pilots are strongly encouraged to notify the Company prior to the five (5) day period of his acceptance of the recall. b. A laid off Pilot will not be allowed more than fifteen (15) days after the date of recall notification to report to duty from layoff. Nothing shall prevent the Company from beginning recall classes prior to the end of the fifteen (15) day period if a sufficient number of Pilots agree to return from recall early. c. Pilots who fail to respond to a recall notice within the time limits set forth above, Pilots who refuse recall, or Pilots who reject a recall notice shall forfeit all recall rights and have his name stricken from the seniority list. d. Seniority and recall rights shall terminate if a laid off Pilot is not recalled within thirty-six (36) months from the commencement of his layoff. 12 ARTICLE 8 JOB POSTING AND BIDDING I. PERMANENT VACANCIES Section 1. When a job or crew position vacancy occurs on a full-time basis, or when a new job or crew position is created, the vacancy will be posted at all locations within seven (7) days after the vacancy occurs. The notice shall provide as much information as is available regarding the vacant position, including the job, location and closing date for bid application. Section 2. Bidding procedures are as follows: a. Pilots will be given fourteen (14) calendar days from the initial posting to bid on any vacant position. The fourteen (14) days shall commence with the time the notice is faxed to all bases. b. The Company will make the awards within five (5) calendar days after the bidding has closed, not including Saturdays, Sundays, and holidays. c. The senior qualified Pilot, as defined in Section 2, Paragraph f. of this Article that bids on the vacancy shall be awarded the job. The Company reserves the right to remove a Pilot from an awarded job based on a customer complaint. Written documentation of reasons for the complaint shall be provided to the Pilot and to the Union upon request. d. A Pilot responding to more than one (1) vacancy shall indicate his order of preference on the bid and shall be awarded his first preference. e. A Pilot on VSTO, SUTO or leave of absence for the entire period that bids are posted shall have an additional seven (7) days to bid on the vacancy. f. DEFINITION OF QUALIFIED Qualified: The term qualified as used in this Article and Agreement means that a Pilot has been trained in an aircraft model, or holds the necessary Pilot License and endorsements to be trained by the Company in that aircraft model. Training shall be provided in accordance with Article 17. A Pilot will be considered qualified in an aircraft model although he may not be "current" as per FAR 135.293(b), 135.299, etc. If that Pilot is 13 otherwise qualified and can become current within a reasonable amount of time, the Company will provide training. g. In the event no bid is received on a posted vacancy and pool Pilot(s) exist, such vacancies will be filled by the pool Pilots in reverse seniority order. A pool Pilot is a Pilot who has not been awarded to a contract on a full-time basis. Section 3. After a Pilot has been assigned to a bid job, the Company will not allow any other Pilot to temporarily perform work on that job, provided the bid Pilot is available for work during his normal hitch. If an immediate operational requirement exists, an available qualified Pilot may be removed from his job, in reverse seniority order, to fulfill such requirement for as short a period as possible, not to exceed three (3) days. In such cases, the Pilot being removed from his position will be pay protected until such time as he has returned to his original job. Section 4. A Pilot may bid on any posted position, provided that once he has been awarded a vacancy, the Pilot shall be ineligible to bid on another vacancy for six (6) months from the date of transfer. Date of transfer is defined as the first date a Pilot is available for duty at his new job and/or base. The following exceptions apply to the six (6) month rule: a. A Pilot is being promoted from VFR to SIC, VFR to PIC, or SIC to PIC. b. Once every two (2) calendar years, a Pilot may request and shall be granted an exemption from the six (6) month rule. Section 5. During the time necessary to select and/or train the Pilot who is to regularly fill a new job or crew position, the Company may fill the vacancy on a temporary basis. Section 6. If the Company hires a Pilot with less than fifteen hundred (1,500) hours of total helicopter time and places him in an IFR SIC position in order to build time, he will be paid at the VFR pay scale. Upon reaching fifteen hundred (1,500) hours total helicopter time, he will be removed from the IFR SIC slot and that slot will be opened to seniority bidding. Section 7. The Company may elect, based on operational needs, to withhold a Pilot who has successfully bid for a vacancy from entering training for a period not to exceed ninety (90) days unless mutually agreed otherwise by the Company and the Pilot. a. If a Pilot is withheld, he will be compensated at the base salary he would have been entitled to if he had completed training and the higher base 14 salary will commence when he was originally scheduled to enter training. II. TEMPORARY VACANCIES Section 1. Temporary vacancies are positions created to fill needs for ninety (90) consecutive days or less. Section 2. Temporary vacancies shall be filled by offering the positions to pool Pilots in seniority order. If no pool Pilot accepts the opening, the job will be assigned to a pool Pilot in reverse seniority order. If there are no pool Pilots, the Company shall assign a Workover. If no Workover Pilots are available, the Company shall assign the job in reverse seniority order. Section 3. Pilots assigned to temporary vacancies shall be returned to their former position, if it still exists, upon completion of the temporary assignment. Section 4. A Pilot assigned to a temporary vacancy with a higher salary than his current salary will receive such pay for the duration of the temporary assignment. Section 5. A Pilot assigned to a temporary vacancy pursuant to Section II, 3 will be pay protected in accordance with the provisions of this Article. III. GENERAL Section 1. A Pilot will not be considered qualified for an IFR PIC job unless he has completed six (6) months as an IFR SIC with Air Logistics, is recommended by an IFR Line Captain, and successfully completes an IFR flight check by a Check Airman. 15 ARTICLE 9 CATEGORIES OF AIRCRAFT Section 1. For the purpose of this Agreement, aircraft shall be divided into three (3) categories as follows: a. Single/Light Twin: Any single or multi-engine aircraft designed to carry eight (8) passengers or less. b. Medium Aircraft: Any aircraft designed to carry nine (9) passengers or more; and having a maximum gross weight of less than twelve thousand five hundred (12,500) pounds. c. Large Aircraft: Any aircraft with a gross weight of twelve thousand five hundred (12,500) pounds or greater. Section 2. For the purpose of this Agreement, "Upgrade" shall be defined as any one or more of the following: a. Moving into a larger category of aircraft as per Section 1. b. Moving from a SIC seat to a PIC seat on crew-served aircraft. c. Any aircraft or job assignment requiring a formal training school. d. Any change in aircraft or job assignment that involves an increase in pay. Section 3. When it becomes necessary to upgrade Pilots, seniority shall be given full consideration. All upgrades will be offered on a bid basis in accordance with Article 8 of this Agreement. Section 4. A VFR medium twin (i.e., 212 or 412) job which is sold to the customer as "limited by waiver to nine (9) or less passengers" and is subject to increased passenger load at customer request will be considered an IFR contract for purposes of the Pilot pay scale. 16 ARTICLE 10 SCHEDULES OF SERVICE Section 1. Pilots will work one of the following schedules as determined by the needs of service provided it is consistent with applicable FARs: a.Seven (7) consecutive duty days, followed by seven (7) consecutive days of rest. b.Five (5) consecutive duty days, followed by two (2) consecutive days of rest. c.Four (4) consecutive duty days, followed by three (3) consecutive days of rest. d.Alternate fourteen (14) scheduled duty days on, followed by fourteen (14) consecutive days off duty can be worked provided the Company, Pilots and customers are agreeable, and the applicable FARs are followed. Section 2. Any work schedules not provided for in this Article must be discussed with the Union prior to implementing any changes. Section 3. The schedule in Section 1(a) of this Article shall be considered standard. Any other schedule shall be considered non-standard. Nonstandard schedules shall be filled on a voluntary basis. The Company reserves the right to fill the nonstandard job that is not bid by hiring for the position. It is not the intention of the Company to use this Article to dramatically change schedules from the standard schedule. Section 4. Break-days shall not be changed without five (5) calendar days notice, unless caused by operational necessity. Section 5. This Agreement requires that Pilots not engage in business activities that are in competition with the Company and flying activities that interfere with their service to the Company, provided, however, that this provision shall not be construed to prohibit Pilots from affiliating with the Armed Forces of the United States. 17 ARTICLE 11 LEAVES OF ABSENCE I. PERSONAL LEAVE OF ABSENCE Section 1. A Pilot who has accrued sixty (60) days of continuous active service with the Company shall be eligible for an unpaid personal leave of absence. Section 2. No Pilot may begin a personal leave of absence without written permission from the Company. The written application submitted to the Company must specify the reasons for such leave. Requests for personal leave and mutually agreed upon start and end dates shall be in writing. Section 3. Personal leaves shall not normally exceed sixty (60) days in duration. Such leaves may be extended for additional periods, if approved by the Company. Once a personal leave has been awarded, it may only be cancelled prior to the end date by mutual agreement between the Company and the Pilot. Section 4. A Pilot who is granted a personal leave of absence to fly in the service of the international operation shall continue to accrue his Company Seniority, but shall only retain his Bidding Seniority. a.A Pilot returning from such leave will not be permitted to bump another Pilot from his job assignment. If no job assignment exists, he will serve as a pool Pilot until a job assignment becomes available for which he may bid. II. UNION LEAVE OF ABSENCE Section 1. A Pilot who accepts a temporary position with the Union (less than three (3) months) will be permitted to return to his original position upon release from such temporary assignment. Time under this paragraph will be extended if requested by the Union and agreed to by the Company up to a maximum of six (6) months. Section 2. When requested by the Union, a Pilot who is elected or appointed to a full-time position with the Union shall be granted an indefinite leave of absence. A Pilot leaving full-time service of the Union, for any reason, must return to duty within thirty (30) days or voluntarily forfeit all seniority rights. Section 3. A Pilot on a Union Leave of Absence shall continue to retain and accrue Bidding and Company Seniority for the duration of the leave. 18 III. FAMILY AND MEDICAL LEAVE OF ABSENCE Section 1. Eligible Pilots shall be granted a leave specified under federal or state law provisions of the Family and Medical Leave Act (FMLA). All leaves granted by the Company which would qualify as FMLA will run concurrently with the employee's FMLA entitlement. a. Refer to the Company Administrative Procedures Manual for specific rules and regulations with respect to the administration of FMLA. Section 2. Pilots on FMLA shall retain and accrue Company and Bidding Seniority and shall receive all benefits as provided for by the FMLA or applicable state statute. Section 3. A Pilot on a medical leave of absence due to a serious nonoccupational health condition of the Pilot, who does not return to work during the twelve (12) week period provided for under the FMLA, shall be granted an additional medical leave for the duration of the illness or injury, not to exceed twenty-seven (27) months or the length of his employment, whichever is less. During such leave, a Pilot shall retain and accrue Company and Bidding Seniority and shall be eligible for benefits pursuant to Section 5 below. Section 4. As provided for in the FMLA, regular accrued SUTO and VSTO must be taken during a FMLA leave of absence. Section 5. Pilots shall retain insurance coverage, provided the premiums are paid for at the applicable employee contribution costs for a period not to exceed six (6) months. Once the six (6) month period has been exhausted, the Pilot will be eligible for medical insurance under COBRA for the applicable period of time. Section 6. The Company will require a Pilot who requests a medical leave to present a report to the Company from his physician that sufficiently certifies his medical condition. Section 7. Prior to returning to duty from medical leave, a Pilot will be required to present a physician's statement to the Company verifying that he is medically fit to perform all Pilot duties. In the event there is a dispute concerning the Pilot's fitness for duty, the procedures in Article 16 shall be utilized to resolve the dispute. Section 8. A Pilot may choose to utilize either his disability benefits or SUTO while on medical leave, however, he may not use both at the same time. Once a Pilot begins to receive disability benefits or requests and is granted an unpaid medical leave, he cannot use any additional SUTO until he returns to active duty. 19 Section 9. Pilots on an approved medical leave of absence shall have the option of applying for a temporary "light duty" position, if any are available, provided the Pilot meets the skill level for the position and his personal physician certifies that he is able to perform the job. The duration of the job is at the Company's discretion and his performance must be acceptable to the Company. Compensation for light duty will be at the Pilot's regular base rate of pay. IV. MILITARY LEAVE OF ABSENCE Section 1. Military leaves of absence and reemployment rights upon return from such leave shall be granted in accordance with applicable local, state, or federal law. Section 2. All orders for military duty, including National Guard and Reserve duty, shall be provided in writing to the Director of Operations, within four (4) calendar days of receiving the orders. If the orders are not provided in advance of the duty, the request for Guard or Reserve duty may be denied. Time off for optional training and/or course work must be approved in advance by the Director of Operations. Section 3. A Pilot on a military leave shall retain and accrue Company and Bidding Seniority. V. GENERAL Section 1. Except as provided for in this Agreement, during any nonmedical leave of absence, a Pilot will retain and accrue Bidding Seniority, but will accrue Company Seniority for purposes of pay, VSTO and SUTO for up to the first thirty (30) days of such leave. Unused or banked SUTO cannot be used for leaves, except for FMLA leave. Earned VSTO for the year will be paid out to the Pilot at the commencement of his leave of absence. Section 2. In the event of a layoff, a Pilot on a leave of absence who would otherwise be laid off will have his leave of absence cancelled. A Pilot will be notified that his rights under the Agreement have been changed to those of a furloughed Pilot. Section 3. Except as otherwise provided for in this Agreement, a Pilot returning from a leave of absence will be restored to his former position if the position still exists or he will be placed in any other position where his seniority permits. Being restored to his former position means his job at the time of his leave of absence, his seat, aircraft type and job number. a. Any Pilot returning from a leave of absence who requires training prior to returning to flying will be scheduled for required training as soon as possible at the discretion of the Company, not to exceed one (1) week. Pay shall resume when a Pilot commences training and shall be based on the position he is training for. 20 Section 4. All leaves of absences granted shall specify a date on which the Pilot will return to duty unless mutually agreed otherwise or by operation of law. Section 5. All leaves of absence shall be without pay, unless otherwise specified in the Agreement. Section 6. Unless otherwise specified in the Agreement, insurance coverage for a leave of absence will terminate at the end of the month in which the leave commences. After this date, an employee may elect to pay an amount equal to the group insurance premiums paid by the Company. Section 7. Failure of a Pilot to return to active status at the end of any leave of absence shall be deemed a voluntary resignation from the Company and his name will be removed from the seniority list. Section 8. Any Pilot on a personal leave who enters the services of another employer or who enters into a competing business of his own without first obtaining written permission from the Company will voluntarily forfeit his seniority rights with the Company. Section 9. A Pilot who is granted a leave of absence during his probationary period shall have his probationary period extended accordingly. Section 10. A Pilot on a leave of absence will keep the Company informed of his current address and telephone number. Section 11. All requests for leaves of absences must be submitted in writing through the Pilot's immediate supervisor for approval. Final approval shall be obtained through the Director of Operations. 21 ARTICLE 12 PAID DAYS OFF AND BANKED DAYS There will be two types of Banks: a Vacation and Scheduled Time Off Bank (VSTO) and a Sick Time/Unscheduled Time Off (SUTO) Bank. These two banks are used to give a Pilot more flexibility and control for his paid time off. Section 1: VACATION AND SCHEDULED TIME OFF The number of VSTO days earned each year is dependent on a Pilot's years of active service with the Company. Completed Years of Calendar Active Year Accrual Monthly Service As A Pilot Accrual ---------------------- ------------ ----------- 1 Year through 9 Years 14 Days 1.167 days 10 Years through 20 21 Days 1.75 days Years 21 Years and More 28 Days 2.33 days Pilots working a five (5) on, two (2) off schedule will have three (3) days added to each of the above blocks. Pilots working a four (4) on, three (3) off schedule will have one (1) day added to each block. Monthly accruals shall be adjusted to account for the additional days. A.In order to accrue VSTO days, a Pilot must be an active employee on the payroll for at least fifteen (15) days in a month. 1. New hire Pilots will accrue VSTOs in a month only if they are on the payroll prior to the fifteenth (15th) of the month. 2. New hire Pilots are not eligible to take scheduled or unscheduled days during their probationary period. The Company shall place three (3) days into a Pilot's Sick Time/Unscheduled Time Off Bank upon the successful completion of his probationary period. At the end of his first year of employment, an additional four (4) days shall be placed in his bank. B.VSTO is to be used for scheduled time off. A Pilot may request up to seven (7) day-at-a-time (DAT) VSTOs per year. Approval of the seven (7) days is based on operational needs. The request must be submitted to the Base Manager prior to the end of a hitch for use in the next hitch. DAT will be granted on a first-come, first-serve basis. 22 C.A Pilot may use his current year's allotment of VSTO days in advance of time earned, but if a Pilot leaves the Company or is terminated before it is earned, any such time will be deducted from his final paycheck. VSTO days from the next year's VSTO allotment may not be advanced to a Pilot for use in the current year. D.A Pilot may bid all or part of his VSTO accrual as full weeks of vacation. Full week VSTO days are awarded based on Bidding Seniority. The number of Pilots permitted time off at any one time may be limited due to operational needs. 1. Full week requests must be made at least sixty (60) days in advance. Approvals will be given to Pilots no less than thirty (30) days prior to the start of the vacation period. 2. A Pilot has the option of being paid for up to one-third of his unused VSTO days at the end of each year. These unused days will be paid out at eighty (80) percent of a Pilot's applicable daily rate. All remaining unused days may be placed in the SUTO bank. The election must be made in writing to the Company no later than the last business day in the first quarter in the year of accrual. 3. In the event a Pilot voluntarily leaves the Company, he will be paid for his accrued VSTO days provided he has given the Company two weeks notice of his departure. 4. Upon normal retirement from the Company (defined as reaching age 62) or when declared medically retired by the Company, a Pilot will be paid his accrued vacation and fifty (50) percent of his SUTO bank. a.In the event VSTO days are canceled due to operational necessity, the Company shall notify the affected Pilot. Cancellations shall first be offered to volunteers in seniority order. If an insufficient number of Pilots voluntarily accept cancellation, remaining cancellations shall be involuntarily cancelled and assigned in inverse seniority order. If a vacation is involuntarily cancelled by the Company, the Pilot shall be paid one hundred and fifty (150) percent of his base pay. b.When a full week's VSTO is canceled, the Pilot and the Company shall attempt to find a mutually agreeable substitute block during the current year. In the event a mutual agreement is not reached, the Pilot may elect to receive compensation in lieu of vacation. A Pilot who has been offered and has accepted a vacation cancellation shall receive his regular compensation. A Pilot whose vacation has been 23 involuntarily cancelled shall receive the one hundred and fifty (150) percent compensation referred to in Section 1(D.4.a.) of this Article. c.In the event the Company cancels a Pilot's full week VSTO for operational needs, all non-refundable vacation deposits which the Pilot, with the assistance of the Company, is unable to recover shall be reimbursed to the Pilot. In order to receive reimbursement, the Pilot shall provide the Company with proof of the deposit. Section 2: SICK TIME/UNSCHEDULED TIME OFF (SUTO) A.Sick Time/Unscheduled Time Off (SUTO) Days are to be used for unscheduled absences including personal illness and injury off the job. B.Pilots must have at least seven (7) days in the SUTO bank at the beginning of each calendar year prior to bidding VSTO for that calendar year. Pilots who have less than seven (7) days in the SUTO bank are required to set aside the appropriate number of VSTOs to satisfy the SUTO bank minimum. Section 3: GENERAL A.All VSTO and SUTO days are paid at a Pilot's applicable daily rate, except as provided for elsewhere in this Article. B. Unscheduled absences are taken in the following order: 1. A maximum of seven (7) days can be taken as unscheduled time off in a calendar year from the SUTO Bank. 2. Unscheduled absences due to personal illness or injury off the job will also be taken from the SUTO Bank. 3. Once the SUTO Bank is exhausted a Pilot may use his remaining unused VSTO days. 4. Unbid accrued VSTO days must be used for any additional unscheduled absences. 5. A Pilot may not take an unpaid day off unless all valid accrued VSTOs and SUTOs days have been exhausted. C.Use of VSTO and SUTO on an FML shall be required pursuant to Article 11, III, Section 4 of the Agreement. Use of VSTO days for other leaves of absence will be pursuant to Article 11, V, Section 1 of the Agreement. 24 D.Pilots and the Union share in the responsibility for preventing unnecessary absences and shall assist the Company in its efforts to minimize any abuse of excessive absenteeism. 1. A Pilot who cannot perform his duties due to a non occupational injury or illness shall immediately report such absence and the reason for it to his immediate supervisor. A Pilot shall personally contact his supervisor on a daily basis during his scheduled work hitch unless physically unable to do so and shall advise the supervisor of his expected date of return and a telephone number where he can be reached during his absence. 2. Upon reasonable suspicion of misuse of such leave, the Company reserves the right to require a physician's certificate or an examination by a Company-designated physician. To the extent any Company-requested examination is not covered by insurance, it shall be paid for by the Company provided the Pilot submits receipts for reimbursement in a timely manner. 25 ARTICLE 13 ON-THE-JOB INJURY (OJI) LEAVE Section 1. Pilots are eligible for worker's compensation benefits with respect to injuries or illnesses arising out of and in the course of employment with the Company. Section 2. VSTO and SUTO days will not be charged to a Pilot who is injured on the job. Section 3. A Pilot must report the occurrence of an OJI to his supervisor immediately. Section 4. A Pilot injured on the job will receive his worker's compensation benefit in accordance with applicable state law. During the statutory waiting period, an injured Pilot will receive his base pay. Section 5. All insurance benefits shall continue to be available to a Pilot on the same basis as an active employee for a maximum of twelve (12) months, provided the Pilot continues to pay his portion of the insurance premium. Once the twelve (12) month period has been exhausted, the Pilot shall be eligible for medical insurance under COBRA for the applicable period of time. Section 6. The Company may require an injured Pilot to submit to a physical examination in accordance with the provisions of Article 16. Section 7. Prior to returning to duty from an OJI Leave, a Pilot shall be required to present a physician's statement to the Company verifying that he is medically fit to perform all Pilot duties. In the event there is a dispute concerning the Pilot's fitness for duty, the procedures of Article 16 shall be utilized to resolve the dispute. Upon return from an OJI Leave, a Pilot shall be returned to his former position if the position still exists, or to any other position where his seniority permits. Section 8. When a Pilot covered by this Agreement suffers a job-related injury, the Company shall inform the Pilot of his rights under the applicable state's Worker's Compensation statute and the Longshoreman's Act, if applicable. Section 9. During an OJI Leave, the Company may offer, and a Pilot may accept light duty, provided it is consistent with his medical restrictions. During a light duty assignment, the Pilot shall be compensated at his applicable base pay. Section 10. Worker's Compensation benefits made by the Company shall be reduced (as allowed by applicable Worker's Compensation statutes) to the extent the Pilot receives income from other sources. These shall include, but not be limited to, 26 such other outside income as social security benefits and/or outside employment. Section 11. If a Pilot sustains an on-the-job-injury while at work away from his base station, the Company shall provide transportation to return the Pilot to his base station. If a Pilot sustains an on-the-job-injury requiring medical attention, the Company shall provide the Pilot transportation to the extent necessary to obtain medical attention. 27 ARTICLE 14 BEREAVEMENT LEAVE Section 1. The Company shall grant a bereavement leave commensurate with each individual for the death of a member of the Pilot's immediate family. Pilots on bereavement leave shall be paid for each duty day missed, up to a maximum of seven (7) days. Pilots may use accrued VSTO and/or SUTO days to be paid beyond the seven (7) paid duty days. Pilots shall inform the Company which bank(s) they intend to utilize in order to be paid beyond the seven (7) paid duty days. Section 2. For the purposes of this Article, a Pilot's immediate family shall include his mother, father or legal guardians, spouse, children, brother, sister, grandparents, mother-in-law and father-in-law. Section 3. The Gulf Coast Manager, at his sole discretion, may extend the duration of a bereavement leave or grant bereavement leave for persons other than the Pilot's immediate family. Section 4. Funeral leave is not compensable when the Pilot is on days off, leave of absence, VSTO/SUTO, layoff, or suspension. Section 5. The Company will accept any method of reasonable proof of death and funeral. This will include a newspaper clipping, copy of death certificate, etc. 28 ARTICLE 15 JURY DUTY Section 1. When a Pilot is called for Jury Duty, he is required to present proof in the form of a court summons or subpoena for jury duty to his supervisor as soon as possible. Section 2. A Pilot serving on Jury Duty shall receive his regular pay. The day or days for which a Pilot will receive pay for Jury Duty must fall within the Pilot's regularly assigned workweek (the day or days the Pilot normally works). Paid Jury Duty will be limited to a maximum of five (5) duty days in a twelve (12) month period. Any monies received by a Pilot from the court for Jury Duty shall be signed over to the Company. Section 3. Jury pay is not applicable when a Pilot is on suspension, leave of absence, VSTO/SUTO, layoff or day(s) off. Section 4. In the event a Pilot is released from Jury Duty on a duty day, he shall be required to return to his base provided the court is located within reasonable proximity to the base and he has at least six (6) hours remaining in his duty day. 29 ARTICLE 16 FEES AND PHYSICAL EXAMINATIONS Section 1. Should the Company require any Pilot to be bonded in the performance of his duties, the premium involved shall be paid by the Company. Section 2. In the event identification badges or cards are required, the Company shall provide identification badges or cards at no cost to the Pilot. In the event the I.D. badge or card is lost or misplaced by the Pilot, he shall be charged for the total cost of a replacement badge or card and shall be required to secure such badge or card on one of his days off. Section 3. Pilots shall maintain a rotorcraft Helicopter Commercial License (RCHCL) with an Instrument Rating at his expense. Section 4. a.It shall be the responsibility of each Pilot to pay for and arrange his regular medical examinations by a qualified aeromedical examiner of the Pilot's choice, as required by the Federal Aviation Regulations. Examinations will be scheduled while the Pilot is off-duty. b.Any additional physical exams and/or tests required by the Company or a customer beyond those required as provided for in Section 5(a) of this Article shall be paid for by the Company. Section 5. a. When the Company believes that there are grounds to question a Pilot's physical or mental condition to remain on flight status, the Company may require that such Pilot be examined by a medical examiner designated by the Company. b. Any medical examination or tests required by the Company pursuant to Section 5(a) of this Article shall be paid for by the Company. Payment shall be made by the Company directly to the medical examiner and/or test facility conducting such examination or tests. c. A Pilot will be provided a copy of the Company physician's report. This report will state specifically if the Pilot is able to perform his duties. d. A Pilot who fails to pass a Company physical examination may have a review of the case. Such review will proceed in the following manner: 30 1.Within fifteen (15) calendar days of the date the Pilot is presented the report of the Company physician, the Pilot may employ a qualified medical examiner of his own choosing and at his own expense for the purpose of conducting a physical examination for the same medical purpose as the examination made by the Company's medical examiner. 2.A copy of the findings of the qualified medical examiner chosen by the Pilot shall be submitted to the Company within seven (7) business days of receipt by the Pilot, and will state if he is able to perform Pilots' duties. In the event that such findings verify the findings of the medical examiner employed by the Company, no further medical review of the case shall be afforded. 3.In the event that the findings of the medical examiner chosen by the Pilot disagree with the findings of the medical examiner employed by the Company, the Company will, at the written request of the Pilot, ask the two (2) medical examiners to agree upon and appoint a third qualified and impartial medical examiner who is a specialist in the area of the Pilot's alleged disability, for the purpose of making a further medical examination of the Pilot. In the event the Pilot fails to submit a written request, within fifteen (15) calendar days after the findings, the results of the original Company examination shall govern. 4.The decision of the impartial physician, who has been agreed upon by the Company physician and the Pilot's physician, shall be final and binding on all parties. 5.The expense of employing the impartial medical examiner shall be borne equally by the Company and the Pilot. Copies of the medical examiner's report shall be furnished to the Company and to the Pilot. e. When a Pilot is removed from flight status by the Company as a result of failure to pass the Company's physical examination, and appeals such action under the provisions of this Section, he shall, if subsequently found by the impartial examiner to have been fit to perform the work at the time of removal, be reimbursed at his regular rate of pay and medical expenses. 31 ARTICLE 17 TRAINING I. RECURRENT TRAINING Section 1. The Company will attempt to schedule recurrent training on days off to minimize disruption to the operation. The Company will make reasonable efforts to schedule training immediately before or immediately after a Pilot's hitch. If recurrent training cannot be scheduled immediately before or after his hitch, the Company shall provide the Pilot with housing and per diem during the day(s) off between his training and his hitch. Pay for recurrent training will be in accordance with Article 21 of this Agreement. Section 2. In the event a Pilot is unable to attend training on the day(s) assigned, he will notify the Manager of Gulf Coast Operations as far in advance as possible. The Manager will work with the Pilot to arrange for alternative training dates. However, if there are no mutually agreeable dates available, the Pilot will remain obligated to conduct the training on the original dates assigned by the Company. Section 3. Each month, the Company will publish a list of recurrent training. At the beginning of each year, the Company will also publish a list of scheduled recurrent training classes for the year along with a list of Pilots assigned to such training. It will be the responsibility of the Pilot to know the dates for his scheduled recurrent training class and whether a Pilot's recurrent training has been rescheduled due to a change in assignments. II. UPGRADE TRAINING Section 1. The Company will attempt to schedule upgrade training on days off to minimize disruption to the operation. The Company will make reasonable efforts to schedule training immediately before or immediately after a Pilot's hitch. If upgrade training cannot be scheduled immediately before or after his hitch, the Company shall provide the Pilot with housing and per diem during the day(s) off between his training and his hitch. Pay while in upgrade will be in accordance with Article 21 of this Agreement. A Pilot's base salary will not increase until he has successfully completed all training and reports for duty for the first scheduled revenue flight in the upgraded aircraft. 32 III. SPECIAL TRAINING AND NEW HIRE TRAINING Section 1. The Company will attempt to assign any nonrecurrent special training on a Pilot's day off to minimize disruption to the operation. The Company will make reasonable efforts to schedule training immediately before or immediately after a Pilot's hitch. If special training cannot be scheduled immediately before or after his hitch, the Company shall provide the Pilot with housing and per diem during the day(s) off between his training and his hitch. (This preceding sentence is not applicable for new hire training.) Pay for special assignment training will be in accordance with Article 21 of this Agreement. Section 2. Training pay of new hire Pilots will be determined by the Company and may be modified from time-to-time based on market conditions. In no event shall Pay for new hire Pilots exceed the base salary for Pilots in their first year of service. First year pay commences after a Pilot has successfully completed all new hire training. IV. TRAINING FAILURES Section 1. It is recognized that not all Pilots reach the required level of proficiency in the same amount of time. Therefore, when it becomes apparent to the Company that a Pilot will require time in excess of that usually required to reach proficiency, the Company Training Department will, in consultation with the Pilot, determine the cause of his inability to reach the required proficiency level and establish a plan for correcting the problem. In the event a Pilot fails to demonstrate the required degree of proficiency after completion of the individual training plan, he will be handled in accordance with the provisions outlined below. a. Recurrent Training 1. A Pilot who fails any portion of recurrent training (written exam, oral exam, flight check) will be removed from line duty without pay for up to seven (7) days, commencing with the first day of his next scheduled hitch, or until he has commenced retraining and has been successfully retested by the Company. 2. A Pilot who fails his oral exam or flight check may request a change in instructor or additional training prior to his retest. 3. If the Pilot fails the retest, his status with the Company will be reviewed. 33 b. Upgrade/Transition Training 1. A Pilot who fails any portion of his upgrade/transition training after a retest (written, oral or flight check) will have the training discontinued. The Pilot will be returned to his previously flown aircraft if the aircraft is still being flown by the Company, or any other available aircraft for which he is qualified. 2. A Pilot who fails his oral exam or flight check may request a change in instructor or additional training prior to his retest. 3. A Pilot who fails upgrade/transition training will not be permitted to upgrade in that aircraft for a period of six (6) months following his training failure. A Pilot who fails upgrade/transition training a second time will not be permitted to upgrade for a period of twelve (12) months following his training failure. It is understood and agreed that the Company has the right to conduct a line check following any training failure. c. Flight Check/ Progress Ride 1. When a Pilot fails a flight check given as a result of an aircraft incident or an observed departure from normal flight procedures, his status with the Company will be reviewed. 2. If an oral exam is necessary and the Pilot fails a retest, his status with the Company will also be reviewed. d. Initial Training (New Hire) 1. A Pilot who fails any portion of his new hire training will be subject to termination by the Company. 34 ARTICLE 18 FACILITIES, EQUIPMENT AND UNIFORMS Section 1. The Company shall provide Pilots with clean and comfortable rooms near its operating bases. For the purpose of this Agreement, clean and comfortable rooms may be either apartment units, motels or mobile homes. These rooms will be provided under the following circumstances: a. When a Pilot engages in a Workover at an unassigned base; b. When a Pilot does not work within reasonable proximity of his home regardless of whether he is on regular hitch or Workover; or c. When travel back to his home would prevent a Pilot from receiving minimum rest in accordance with FARs. All new mobile homes purchased by the Company will be limited to a maximum of five (5) bedrooms. Existing mobile homes that have six (6) bedrooms may continue to be used. However, if any Pilot in a six (6) bedroom mobile home objects to such sleeping accommodations, the Company will place one (1) of those Pilots into a nearby apartment unit, motel, or another mobile home when available. No Pilot will be asked to share his sleeping room with another. Normal furnishings will be provided, include air-conditioning, furniture, television, stove and/or microwave oven, and cooking and eating utensils. If not provided in the mobile homes, washers and dryers shall be provided near the operating bases. Section 2. Company-provided accommodations will be cleaned at Company expense at least once a week. It will be the responsibility of each Pilot housed in Company-provided accommodations to treat all furnishings and appliances with care. Section 3. When Company-provided rooms are filled to capacity, or otherwise not available, the Company shall provide individual motel accommodations, when available, including transportation to and from such facility for non-domiciled Pilots. Section 4. The Union shall appoint a Crew Accommodations Committee to work jointly with the Company to periodically review Company-provided accommodations for comfort and cleanliness. In addition, the Committee shall make recommendations to the Company for ways to improve crew accommodations. 35 Section 5. The Company shall furnish its Pilots with all necessary equipment to perform their duties. This equipment shall not include headsets or computers, but shall include Switlik vest style PFDs. The Company will meet with the Union to determine an appropriate timetable for replacement of existing PFDs with the Switlik PFDs. Section 6. Pilots are responsible for all equipment assigned to them, and if they lose equipment, or damage equipment through negligence, the Pilot will be required to reimburse the Company for the cost of the replacement. Company-provided equipment that becomes inoperative as a result of normal wear and tear shall be repaired or replaced by the Company. Section 7. Pilots will be issued a set of seven (7) uniforms and a jacket upon hire. Should a Pilot uniform show exceptional wear and tear during a one (1) year period, the Pilot should consult with his supervisor for replacement items. Upon request and subject to approval by the Company, Pilots shall be entitled to four (4) replacement items per year. Section 8. The Company will pay to each Pilot each year, beginning thirty (30) days after the date of signing this Agreement, an equipment allowance of two hundred dollars ($200.00). Section 9. The Company shall have the right to determine reasonable grooming standards for Pilots. Such standards will be published and distributed to all Pilots. 36 ARTICLE 19 SEVERANCE PAY Section 1. A Pilot who is laid off shall receive severance pay based on the total amount of Company Seniority under this Agreement unless one or more of the following conditions exist: a. He exercises his seniority in order to remain in the employ of the company. b. He accepts any other employment with the Company or refuses to accept a job or assignment within his category as "Pilot" in the Company. c. The layoff is caused by circumstances beyond the control of the Company. Examples of this would include a war or foreign invasion, an act of God/natural disaster, an official state of emergency, a strike affecting the Company's business, a work stoppage, a government grounding of aircraft, or the revocation of operating certificate(s). d. He is dismissed for just cause, resigns or retires. Section 2. The amount of severance pay due to a Pilot under this Article shall be based on the Pilot's Company Seniority with the Company and shall be computed on the basis of the Pilot's regular base pay at the time of layoff as follows: Completed Years of Service Severance Allowance ------------------------------- ------------------- 1 year but less than 4 years 2 weeks 4 years but less than 8 years 4 weeks 8 years but less than 12 years 6 weeks 12 years but less than 16 years 8 weeks 16 years or more 10 weeks Section 3. Severance pay shall be paid on the dates of his regular pay periods. At Pilot option, he may elect to receive his severance pay in a lump sum. Section 4. Severance pay shall continue until all severance pay has been paid. However, if a Pilot is recalled, severance pay shall stop on the effective date of recall. Section 5. The Company may offer voluntary leaves of absence to offset scheduled furloughs. 37 Section 6. The Company may offer voluntary furloughs to Pilots flying a specific aircraft and/or seat to offset scheduled involuntary furloughs. Volunteers shall be entitled to all of the provisions of this Article, except that severance pay will be calculated based on the position of the most junior Pilot scheduled for involuntary furlough. Return to active status shall occur only as a result of the normal recall process. Section 7. Medical, dental and life insurance for laid off Pilots and their eligible dependents will continue on the same basis as active Pilots until all severance pay has been paid. 38 ARTICLE 20 MOVING EXPENSE Section 1. The Company shall provide a paid move to a Pilot who is required to move by the Company as a result of the opening of a new base(s) that is not part of the Gulf Coast operations, provided that the Pilot moves within fifty (50) miles of his new base. In addition, a move will only be paid if it results in the Company not having to provide the Pilot with Company-provided accommodations at his new base. Section 2. In order to receive a Company-paid move, Pilots must complete such move within twelve (12) months from the date of notice and shall be entitled to the following reimbursement upon presentation of reasonable documentation. a. Actual moving expense for normal household effects including normal packing charges up to a maximum of twelve thousand (12,000) pounds. Not included in the move are the transportation of pets/animals, boats, automobiles, motorcycles, heavy shop or hobby equipment. Section 3. Pilots shall be allowed the following enroute expenses when properly substantiated by receipts during the period of enroute travel: a. For Pilot only - $30.00/day b. For Pilot and Spouse - $60.00/day c. For each dependent child - $15.00/day The period of enroute travel shall continue after arrival until the day the household effects arrive or until the end of the fifth day, whichever comes first. Section 4. For the purpose of determining necessary travel time, the Company will allow one (1) travel day for each five hundred (500) miles or fraction thereof, to a maximum of three (3) travel days when driving a vehicle. The Pilot is expected to move during his days off and be prepared to work on his regular hitch. Travel time will be determined by the most direct AAA mileage between the two (2) cities. Section 5. In addition to moving expenses, one (1) vehicle per family may be driven to the new location and the Pilot will be reimbursed at the rate established by the IRS. It is agreed by the parties that as of the date of signing of this Agreement, the 39 mileage rate will be thirty-one (31) cents per mile by the most direct AAA highway mileage. No expenses will be paid for a second vehicle. Section 6. To be eligible to obtain reimbursement from the Company, a Pilot must meet the requirements of Section 1 of this Article and have: a. completed his probationary period, b. provided the Company with at least thirty (30) days advance notice of the move, c. not have had another Company-paid move in the preceding twenty-four (24) months, and d. use a Company contracted mover, if required to do so by the Company. Section 7. Pilots who voluntarily leave the Company within twenty-four (24) months of a paid move will be required to reimburse the Company for all moving expenses provided under this Article. Section 8. Pilots eligible for reimbursement of moving expenses electing to move themselves shall be reimbursed for actual moving expenses such as truck rental, gas, oil, drop-off, and other Company-approved expenses. Pilots must notify the Company in advance of a move, receive prior Company approval, and follow the specified procedures per Company policy in order to be reimbursed. a. The actual expenses reimbursed cannot exceed the total estimated cost of a Company-coordinated move. b. If the actual move by the employee is less than the lowest estimate for a Company-coordinated move, one half of the difference will be paid to the employee. Total reimbursement shall not exceed the reimbursement for which the employee is eligible pursuant to Sections 2, 3 & 5 of this Article. 40 ARTICLE 21 BASE PAY Section 1. A Pilot on the seniority roster shall be paid the following salary in accordance with his Company seniority as a Pilot with the Company. Rates are shown in Appendix "A." Section 2. A Pilot in recurrent, upgrade, or special training shall be paid seventy (70) percent of his applicable base pay for all days spent in training. 41 ARTICLE 22 SUPPLEMENTAL PAY Section 1. CHECK AIRMAN. In addition to their base pay, Company-designated Check Airmen shall receive an override of five hundred dollars ($500.00) per month. The monthly override shall be prorated if the Check Airman serves in that capacity for a portion of the month. Section 2. FIELD CHECK AIRMAN. In addition to their base pay, Company-designated Field Check Airmen shall receive an override of two hundred dollars ($200.00) per month. The monthly override shall be prorated if the Field Check Airmen serves in that capacity for a portion of the month. Section 3. PILOT MECHANIC. In addition to their base pay, Company-designated Pilot/Mechanics shall receive an override of five hundred dollars ($500.00) per month. The monthly override shall be paid only when the Pilot is called upon to perform such work and shall be prorated based on the number of days actually working in that function. Section 4. LEAD PILOT. In addition to their base pay, Company-designated Lead Pilots shall receive an override of three hundred dollars ($300) per month. The monthly override shall be prorated if the Lead Pilot serves in that capacity for a portion of the month. Section 5. WORKOVERS. A Workover shall be paid at one and one-half (1.5) times a Pilot's applicable daily rate. The daily rate is equal to one-fifteenth (1/15) of the monthly base salary. Section 6. All supplemental pay for Workovers and temporary assignments shall be paid at the rate of one-fifteenth (1/15) of the monthly supplement for each day of applicable work performed. 42 ARTICLE 23 BONUSES Section 1. OFFSHORE BONUS. In addition to his base salary, a Pilot required by the Company or customer to remain at an offshore location overnight shall receive thirty dollars ($30) per night. Section 2. SLING BONUS. In addition to base salary and when sling rates are charged to customers, a Pilot required by the Company to conduct external load operations in revenue service shall receive thirty-five ($35) per flight hour or fraction thereof. Section 3. NIGHT FLIGHT BONUS. In addition to base pay and when night rates are charged to customers, a Pilot required by the Company to fly in revenue service during the hours of official sunset to official sunrise as reported by the United States Naval Observatory shall receive thirty-five ($35) per flight hour or fraction thereof. Section 4. SAFETY AND SERVICE INCENTIVE PLAN (SSIP) A. The SSIP will remain in effect for the duration of this Agreement, provided that the program is offered to all other eligible employees of the Company. B. A Pilot shall be eligible for the SSIP once he has completed a full quarter of active service with the Company. Active Service means a Pilot on the payroll. Section 5. SIGNING BONUS. Each Pilot on the active payroll as of the effective date of this Agreement shall receive six hundred dollars ($600) for each completed year of service with the Company. Such payment shall be made to an eligible Pilot within thirty (30) days from the date of ratification. 43 ARTICLE 24 WORKOVER/OVERTIME Section 1:WORKOVER PAY a.A Workover is defined as being scheduled for and reporting to work on a regularly scheduled day off. b.A Workover shall be paid at one and one-half (1.5) times the daily rate. The daily rate is equal to one-fifteenth (1/15) of the monthly base salary for the actual aircraft flown or for what a Pilot was scheduled to fly on the Workover, whichever is greater as provided for in Article 21 of this Agreement. 1. The Workover rate shall apply regardless of job assignment, aircraft flown or hours on duty. Section 2:WORKOVER PROCEDURES AND ASSIGNMENTS a.It is understood that Workovers are a viable and popular means for providing additional income and, as such, should be assigned in a fair and equitable manner. b.A Pilot who desires a Workover assignment will submit a Written Workover Form, which will be provided by the Company, to the ARA scheduling department. The request will include: 1. A Pilot's name and contact number; 2. The date(s) a Pilot is available to Workover on his off hitch; 3. The aircraft a Pilot is able to fly; 4. The bases at which a Pilot is willing to Workover; and 5. Whether the Pilot can be contacted to perform emergency Workovers. c.A Pilot is responsible for ensuring that the information on file in the scheduling department is accurate and that the dates requested for the Workover are correct. 44 d.The Company will maintain a Workover list that will be redone each Friday. Therefore, Pilots must request Workovers and confirm the information on the list no later than the end of each work hitch. A Pilot who agrees to a Workover shall be considered on hitch for the dates agreed to by the Company and Pilot. e.The Company shall maintain two (2) Workover lists. 1. The Emergency list will contain the names of those Pilots who are able to report to work on two (2) hours notice. 2. The Normal Roster will be divided into two (2) groups: those Pilots who want to perform Workovers at any base; and those Pilots who want to perform Workovers only at a specified base. f.Normal Workovers will be offered in the following order: 1. To Pilots with "off days" between training and their hitch; 2. To Pilots who fly the job on the opposite hitch; 3. To any qualified Pilot, in seniority order, regardless of the base; 4. To supervisors. g.Emergency Workovers will only be offered to Pilots who meet the criteria identified in Section 2, Paragraph (e.1) of this Article. h. Pilots will be passed over for Workovers when: 1. A Pilot is not qualified; 2. A specific customer requests that a certain Pilot not fly his job; 3. There is a conflict with a Pilot's regular job (i.e., FAR limitations); 4. The dates of a Pilot's availability conflict with the length of a job (i.e., 1-day job vs. RON); 5. A pilot does not answer a phone call from the Company. A daily phone record shall be maintained to verify that a call to the Pilot has been made. 45 6. A Pilot is unable to give the scheduling department a definitive answer at the time of the call. i.A Pilot will be allowed to use a beeper as his contact number only for Normal Workovers. A Pilot contacted on his beeper will have fifteen (15) minutes to respond to his page or he will be passed over for a Workover assignment. It will be the Pilot's responsibility to make certain that his beeper is in working order. j.Any Pilot who refuses two (2) Workover offers will be placed at the bottom of the list for the remainder of the hitch. k.When the procedures of Section 2, Paragraph f of this Article have been exhausted, the Company may remove a Pilot from his job at his base, in reverse seniority order, to fulfill such requests for as short a period as possible, not to exceed three (3) days. This is in accordance with the procedures of Article 8, I, Section 3. l.When assigning Workovers, base supervisors will make every reasonable effort to follow the guidelines set forth in this Article. Further, they will insure, to the best of their ability, that Workovers are distributed equally to all whose names appear on Workover rosters at their respective bases. m.Supervisors shall not be used on revenue flights which could be flown by Pilots on Workover status, or in any manner so as to avoid hiring a Workover Pilot, except in the following circumstances: 1. Medical emergencies; 2. When every reasonable effort has been made to secure a Workover Pilot in accordance with the provisions of this Article and such efforts were unproductive. Section 3:COMPENSATORY TIME a. Compensatory Time means a Pilot requests a day off from a regularly scheduled workday in lieu of Workover pay. Such time shall be compensated as his regular base pay. b. The request for compensatory time must be agreed to by the Company and the day off shall be granted by mutual agreement. In the event mutual agreement cannot be reached, the Pilot shall receive the applicable Workover pay. 46 ARTICLE 25 TRAVEL PAY Section 1. Mileage pay shall be paid at the applicable rate established by the Internal Revenue Service under the following circumstances: a. When required to relocate to another base or location other than the Pilot's assigned base via personal vehicle. Mileage will be calculated from the point of the Pilot's assigned base to the location directed by the Company. b. When mileage is in excess of thirty (30) miles for use of a personal vehicle. When computing mileage, figures must reflect mileage from ARA to Workover base or mileage from the Pilot's home to Workover base, whichever is the lesser distance or if applicable, mileage from assigned base to the Workover base. Section 2. Mileage will not be paid in cases of Workover at the assigned bases when such Workover immediately proceeds or follows a normal work schedule. Section 3. a. Additional Crew Member Agreement (ACM). As the flight deck crewmembers covered under this agreement reside in various locations, and are subject to frequent changes of job assignment with little or no notice, the Company shall make reasonable efforts to enter into ACM Agreements with other carriers in the Air Transportation Industry to provide for transportation related to commuting to and from their residence to job assignments. b. If requested by a Pilot, the Company shall provide a Photo Identification Card that provides sufficient information about each Pilot and the Company. The Photo ID System shall be available within ninety (90) days from the effective date of this Agreement. 47 ARTICLE 26 PER DIEM Section 1. A Pilot shall receive per diem under the following circumstances. a. PILOT ON REGULAR WORK SCHEDULE - When required to relocate via vehicle or aircraft after arriving at their assigned base, a meal allowance is paid. This excludes an offshore location where a Pilot receives an offshore bonus. b. PILOTS ASSIGNED OFFSHORE - Pilots assigned to offshore contracts who are required to RON onshore during a hitch may be eligible for reimbursement of meals. c. PILOT WORKING OVER - When a Pilot is on a Workover, a meal allowance is paid Section 2. Per Diem shall be paid at the rate of $5.00 per meal, to a maximum of $15.00 per day. 48 ARTICLE 27 INSURANCE BENEFITS Section 1. The Company shall amend the following employee benefit plans as follows: Group Term Life/AD&D Insurance: 2 x salary to $125,000. The Company will provide group term life/AD&D benefits on a non-contributory basis. Disability Insurance: Short Term Disability: Current Company policy. Long Term Disability: 50% of covered monthly compensation to a maximum monthly benefit of $5,000. The Company will work with it's insurance carriers to consider offering buy-up options for employees. Medical Insurance: $250 deductible plan: Current Company policy. Contributions will remain in effect from 8/01/99 to 12/31/00. Future adjustment to contributions will be made on the same basis as other Company employees. $750 deductible plan: Benefit amended to provide an individual out-of-pocket maximum of $2,000 (including deductible) and a family out-of-pocket maximum of $4,000 (including deductibles). Note: Plan provisions prohibit some benefits from being reimbursed a 100%. Contributions for the $750 deductible plan are amended as follows: Employee only coverage: $10.00 per month. Additional for dependent coverage: $75.00 per month. The amended contributions will remain in effect from 8/01/99 to 12/31/00. Future adjustments to contributions will be made on the same basis as other Company employees. Dental Insurance: Current Company policy. 49 ARTICLE 28 RETIREMENT AND 401(K) PLAN Section 1. The Company shall match a participating Pilot's 401(k) salary deferral contribution dollar for dollar to a maximum of the first three (3) percent of gross earnings, exclusive of bonuses. Section 2. The Company shall also contribute three (3) percent of gross earnings, exclusive of bonuses for each Pilot who is on the payroll as of December 31 of each year. Contributions shall be made on an annual basis. No contribution shall be required to be made by any Pilot in order to be eligible for the three (3) percent Company contribution. 50 ARTICLE 29 SAFETY / ACCIDENT PREVENTION Section 1. The Company shall continue to maintain safe and healthful working conditions for its Pilots and agrees to further that important goal by establishing a joint Company/Union Safety Committee and creating an Accident Prevention Policy. Section 2. In that the Company is engaged in a vital service to our Customers, the Company and Union have a particular obligation to carry out this service courteously, efficiently and with due regard for the safety of our passengers and ourselves. The Company and the Union recognize their duty and responsibility to assist in the maintenance of the Accident Prevention Policy. The Policy shall consist of the following guidelines: a. Safety is a primary concern of every operational undertaking. b. The Company and the Union recognize that safe working conditions, proper and adequate training, equipment and protective devices are important elements in the workplace setting. Required equipment shall be provided by the Company. c. The Company will train Pilots in any new aircraft, its components, or on any new procedures which they may be required to utilize. d. All Pilots must follow accident prevention measures. e. Both the Company and the Pilots must follow all applicable Federal Aviation Regulations. Section 3. The Company agrees to meet and confer on a periodic basis with a Safety Committee to receive and discuss recommendations from the Committee. The Committee shall consist of no more than two (2) Company representatives and two (2) Pilots appointed by the Union. The role of the Safety Committee shall be to receive and review complaints regarding unsafe working conditions or noncompliance with safety rules and may make recommendations concerning such complaints. Union members shall function in an advisory capacity. a. The Company shall designate a management representative to be responsible for receiving safety complaints. b. The Company and the Union shall cooperate in seeking feasible solutions to help reduce accident frequency and severity rates. 51 c. The Company and the Union shall encourage Pilots to engage in safe work practices and to communicate safety issues to the designated management representative identified in Section 3(a). Section 4. The Safety Committee will meet whenever it deems necessary, but not less than once during every calendar quarter, or not less than once every three (3) months. a. Any member of the Safety Committee who attends a committee meeting on his normal scheduled work day shall not suffer any loss in pay. b. All members of the Safety Committee shall receive travel pay and per diem in accordance with the rates established in Articles 25 and 26. Section 5. It shall be the purpose of this Committee to work closely with the Company through the Director of Safety to insure that all possible measures are taken to prevent accidents, promote a safe working environment, and insure that the provisions of this Article are enforced. 52 ARTICLE 30 GENERAL AND MISCELLANEOUS Section 1. Any deviation from this Agreement shall be made by mutual consent between the Company and the OPEIU. Such mutual agreement must be in writing and signed by both parties thereto. Section 2. Any Pilot leaving the service of the Company shall, upon request to the Human Resources Department, be provided with a letter setting forth the Company's record of his job classification, stating his length of service and rate of pay at the time he left the Company. Section 3. There shall be no loss of pay when a line Pilot is displaced by a supervisor on a revenue flight. Section 4. All orders or notices to a Pilot covered by this Agreement involving a transfer, promotion, demotion, layoff, or leave of absence shall be given in writing to such Pilot with a copy to the Union within five (5) business days. Section 5. The pay period is currently every fourteen (14) days (bi-weekly). If the Company wishes to change the pay period timing, it shall meet and discuss the change with the Union prior to implementation. The Company shall continue to offer, on a voluntary basis to its Pilots, Electronic Funds Transfer (EFT) to the Pilot's bank of choice. Section 6. Where there is a shortage equal to twenty-five (25) dollars or more in the pay of a Pilot, the Pilot will be reimbursed for such shortage as soon as possible but no later than five (5) working days for the payroll department. If a Pilot is overpaid, he will have the option to: a. have a new corrected check issued on the same work day; b. reimburse the Company the total amount; or c. reimburse the Company through payroll deductions spread equally over four (4) pay periods. Section 7. The parties agree that the intention of this Agreement is not to inadvertently reduce a benefit or working condition heretofore enjoyed by the Pilots. 53 Section 8. The Company shall pay for the costs of printing and distributing a copy of this Agreement to each Pilot as well as an adequate number of additional copies needed by each side. Section 9. If the Company decides to place into service aircraft other than those already included in this contract, it shall notify the Union as soon as possible. Conferences shall be initiated by either the Company or Union upon written notice to the other party for the purpose of establishing rates of pay, rules and working conditions applicable to the new equipment. a. The parties shall meet at a mutually agreed upon time, but no later than sixty (60) calendar days before the aircraft is to be placed into service. b. In the event the parties fail to reach an agreement prior to placing the new equipment into service, the Company may place such new equipment into service. Pilot operating that new equipment shall be compensated at the contractual rate of pay appropriate to his seat and pay year. Nothing herein shall deny the Company the right to place new equipment into service. c. The provisions of Section 9 are not intended to hinder the acquisition or use of new equipment. Section 10. Pilots shall not engage in any flying or other business activities which interfere or are in conflict with their service to the Company, provided, however, that this provision shall not be construed to prohibit Pilots from affiliating with Armed Forces of the United States. Section 11. PERSONNEL FILE Upon request, a Pilot's personnel file shall be open for his inspection during normal office hours in the presence of a Company representative. Nothing of a derogatory nature will be placed in a Pilot's file unless a copy is sent to the Pilot. Upon receipt of such report, the Pilot shall have the option of responding by returning his explanation or comments to be included with the report in his file or by challenging the truth or accuracy of the report. If the Company determines the challenge to be justified, the report will be removed from the Pilot's file and destroyed. If the Company determines otherwise, it shall notify the Pilot who may then avail himself of the provisions of Article 32 to appeal this decision. a. Customer complaints or correspondence of a derogatory nature shall not serve as the basis for any employment action, including discipline after twelve (12) months from the date of issuance unless within the twelve 54 (12) month period there has been a recurrence of the same or similar nature. b. Disciplinary records involving safety matters shall not serve as the basis for any employment action, including discipline after five (5) years from the date of issuance unless within the five (5) year period there has been a recurrence of the same or similar nature. In addition, the Company shall not be required to remove copies of public records or documents which are required to be retained in accordance with applicable law or governmental regulations. 55 ARTICLE 31 UNION BULLETIN BOARDS & COMMUNICATIONS Section 1. The Company shall permit the Union to display an unlocked bulletin board at each base location. The Union shall purchase the bulletin boards and shall be responsible for its installation. The bulletin board shall be a maximum of four (4) feet by five (5) feet. The bulletin boards shall only be placed in areas that have been agreed to by the Company in advance. Section 2. The bulletin board used by the Union and Pilots covered by this Agreement shall be for posting notices of Union social and recreational affairs, meetings and elections. Section 3. General distributions, posted notices and official business will bear the seal or signature of an officer of the Union or a Pilot representative and will not contain anything defamatory, derogative, inflammatory, negative or of a personal nature attacking the Company or its representatives. Section 4. The Company may refuse to permit any posting that would violate any of the provisions of this Agreement. Any notices posted that are not in accordance with this Article shall be removed by the Union or by the Company upon notice to the Union. 56 ARTICLE 32 GRIEVANCE PROCEDURE Section 1. INTRODUCTION The procedures described in this Article shall be the mandatory and exclusive mechanism for the resolution of all grievances concerning an action of the company affecting a Pilot or group of Pilots, including, without limitation, any and all grievances arising from discipline, discharge, or the interpretation or application of the express terms of this Agreement. Section 2. DISCIPLINE AND DISCHARGE a. Based on the severity of the infraction, a Pilot may be subject to disciplinary action, up to and including discharge, for any violation(s) or infraction(s) of Company regulations, policies or violation of provisions contained in this Agreement. Disciplinary action will be in accordance with the following procedures: 1. The Company may suspend the Pilot with pay prior to notifying the Pilot of the charge; 2.The Company will provide the affected Pilot, with a copy to the Union, of the notice of the charge(s); and 3.Within seven (7) working days, the Company will inform the Pilot in writing, with a copy to the Union, of its decision regarding the charge and any discipline imposed. b. A Pilot may be immediately removed from payroll and may be suspended without pay if he is disciplined or discharged for violation of the FAA drug/alcohol policy, acts of violence or sabotage or threatening same, theft, or use of a weapon on Company premises. c. In the event the Pilot feels he had been unjustly disciplined or discharged, the Pilot or the Union may appeal in writing the Company's decision to the Director of Operations within seven (7) calendar days of the Company's decision. The appeal must set forth a concise statement of the facts giving rise to the appeal, and state the remedy or relief requested. 57 d. The Director of Operations or his designee may elect to investigate the matter, and shall issue a decision in writing to the Pilot, with a copy to the Union, regarding disposition of the appeal within seven (7) calendar days of when the appeal was filed. In the event the decision on the appeal is not satisfactory to the Pilot, he or the Union may appeal to the System Board of Adjustment in accordance with Article 33 of this Article. Section 3. GRIEVANCE PROCEDURE a. Disputes arising under this Agreement or between the parties with respect to the interpretation or application of the Agreement, excluding discipline or discharge matters subject to Section 2 of this Article, shall be processed in the following manner: 1.Pilot(s) shall first attempt to resolve any dispute informally through consultation with his immediate supervisor within seven (7) calendar days of the date on which the affected Pilot, or any Pilot among a group of affected Pilots know or reasonably should have known of the facts on which the grievance is based. The supervisor shall render a decision within seven (7) calendar days from the date of consultation. 2. If the dispute is not resolved to the satisfaction of the Pilot(s) within this time period, the aggrieved party or the Union shall reduce the grievance to writing on a standard form provided by the Union, signed by an authorized representative of the Union, and present it to the Gulf Coast Manager of the Company. At a minimum the written grievance shall contain the following information: a. A reference to the provisions of the Agreement alleged to have been breached; b. A statement of the facts involved; and c. The specific remedy requested by the affected Pilot(s). 3. The written grievance must be submitted to the Gulf Coast Manager within ten (10) calendar days of the date on which the grievance was denied or deemed to have been denied by the supervisor. 4. The Gulf Coast Manager shall render a decision on the grievance in writing within ten (10) calendar days of the date on which the 58 grievance was filed. In the event the Gulf Coast Manager's decision is unacceptable to the Union, it may appeal the decision in writing to the Director of Operations, with a copy to the Director of Human Resources, within seven (7) calendar days of receipt of the decision. The appeal must include a statement of the reason(s) why the Union believes that the decision by the Gulf Coast Manager was erroneous. 5. The Director of Operations shall render a decision on the appeal in writing within fourteen (14) calendar days of the date on which the grievance was appealed. In the event the Director of Operations' decision is unacceptable to the Union, it may appeal to the System Board of Adjustment in accordance with Article 33 of this Agreement. Section 4. The Company has the right to file a grievance over any dispute arising under this Agreement. Company grievances shall be handled in accordance with Section 3 of this Article, except that such grievances shall be presented to the President of the Local 107, who shall issue a written decision within fourteen (14) calendar days of the date the grievance was filed. If the decision of the President of the Local 107 is not satisfactory, the Company may appeal to the System Board of Adjustment in accordance with Article 33 of this Agreement. Section 5. TIME LIMITS a. The failure of a Company representative to issue a decision or hold a hearing within the deadlines prescribed by this Article shall be deemed a denial of the grievance or appeal, and such grievance or appeal shall be deemed to have been immediately and automatically appealed to the next step unless the Union indicates that it wishes to withdraw such appeal. b. The failure of the Pilot(s) or the Union to comply with any of the time limits set forth in this Section shall be deemed an immediate, automatic, and final withdrawal of the grievance or appeal unless an extension of time has been requested within the prescribed time limits set forth in this Article. Section 6. GENERAL a. Unless expressly provided otherwise, all notification(s) or appeals required by this Article shall be in writing, and accomplished by either hand delivery verified by an initialed copy or by delivery system prepaid with return receipt requested. A notification or appeal required by this Article 59 shall only be valid if it is sent to the last known address of the party to whom the notice is directed. b. Compliance with all time limits specified in this Article shall be determined by the date of mailing, as established by postmark or by date of hand delivery, as established by the initialed copy. c. A group grievance may be filed by the Union. Any such grievance shall contain sufficient information to permit the Company to identify the individual Pilots covered by the group grievance. No remedy awarded in a group grievance shall provide monetary compensation for periods prior to thirty (30) calendar days from the date on which the formal, written grievance was filed or the date the alleged violation, whichever is less. d. Time limits specified in this Agreement may be waived by mutual written consent of the parties. e. The parties will notify one another of the persons designated to file and answer grievances. f. All grievances resolved at any step of the Grievance Procedure prior to the System Board of Adjustment shall be on a non-precedential basis unless mutually agreed otherwise. g. If a grievant is exonerated, his personnel file shall be cleared of all reference to the incident. Records may be kept in a separate file but may not be used in future disciplinary actions. A grievant who is cleared of all charges shall be made whole as pertains to wages, seniority, longevity and benefits. h. A Pilot shall have the right of Union representation at all meetings with the Company. A Pilot shall be advised in advance of the nature of the subject of any hearing or conference. 60 ARTICLE 33 SYSTEM BOARD OF ADJUSTMENT Section 1. In compliance with Section 204, Title II, of the Railway Labor Act, as amended, there is hereby established a System Board of Adjustment, which shall be known as the "AIR LOGISTICS PILOTS' SYSTEM BOARD OF ADJUSTMENT" (hereinafter referred to as the Board). Section 2. The Board shall have jurisdiction over disputes between any Pilot and the Company with respect to discipline or discharge, and over grievances or disputes growing out of the interpretation or application of this Agreement. The Company and the Union intend that procedures set forth in this Article shall be the exclusive and mandatory forum of all such disputes. Section 3. The Board shall not have jurisdiction over any disputes unless all of the procedures required in Article 32 have been completely exhausted with respect to the dispute, and the dispute has been properly submitted to the Board pursuant to the provisions of this Article. Section 4. The Board shall have no jurisdiction to modify, add to, or otherwise change the terms of this Agreement, or to establish or change the rates of pay, rules, and working conditions covered by this Agreement. Section 5. The Board shall consist of four (4) members, two (2) of whom shall be selected and appointed by the Company and two (2) of whom shall be selected and appointed by the President of Local 107. Board members shall have a vote in connection with all actions taken by the Board. a. In the event the four (4)-member Board is not able to reach a decision with respect to a particular dispute, the Board will be reconstituted as a five (5)-member Board with the addition of a neutral member as described in this Article. Section 6. Except as otherwise provided herein, the Board shall meet quarterly in the city where the general offices of the Company are maintained (unless a different place of meeting is agreed upon by the parties to the dispute), provided that at such time there are cases filed with the Board for its consideration. Section 7 Members of the Board who are employees of the Company shall suffer no loss of pay while attending Board meetings. 61 Section 8. The Board shall consider any dispute properly submitted to it by the President of the Local 107 or a duly designated officer, or the Company, when the dispute has not been previously settled in accordance with Article 32, as applicable. Decisions of the Board shall be final and binding upon the Company, the Union, and the affected Pilot(s). Section 9. The office of chairman shall be filled alternately by the parties. A Union representative shall serve as Chairman and a Company representative shall serve as Vice Chairman in even years, the vice versa, in odd years. The Vice Chairman shall act as Chairman in his absence. Section 10. The party appealing a final decision under Article 32 shall submit the dispute for consideration by the Board, including all papers and exhibits, within fourteen (14) calendar days of that decision. If the appeal is not made within the fourteen (14) day period, the System Board of Adjustment does not have jurisdiction over the dispute. Section 11. All disputes referable to the Board shall be sent to the Director of Human Resources, and that office shall assign a docket number according to the order in which the dispute is received. Section 12. The appealing party will ensure that a copy of the petition is served on the Members of the Board. Section 13. Each case submitted shall be addressed to the Members of the Board, and shall state: a. The question or questions at issue; b. A statement of the facts with supporting documents; c. A reference to the applicable provision(s), if any, of the Agreement alleged to have been breached; d. The position of the Pilot or Pilots. e. The remedy requested; and f. The position of the Company. Section 14. The Company and Union shall, in good faith, attempt to make a joint submission of their dispute to the Board. If the parties are unable to agree on a joint submission, the appealing party shall file a submission with the Board containing all of the information described in Section 13 above, and the responding party may do the same. Any party filing a submission with the Board pursuant to this Article shall serve a copy of its submission with the other party. Section 15. Pilots covered by this Agreement may be represented at Board hearings by a person or persons the Union may designate, with the approval of the Union, and 62 the Company may be represented by a person or persons it may designate. Evidence presented at Board hearings may include sworn depositions, oral testimony, and written evidence. Witnesses who testify at Board hearings may be required to do so under oath if requested by either party. Section 16. A majority vote of the Members of the Board (either four-member or five-member board) is required to make a finding or a decision with respect to any dispute properly before it, and such finding or decision shall be final and binding upon the parties to such dispute. Section 17. Decisions of the Board shall be rendered no later than thirty (30) calendar days after the close of the hearing. Section 18. The Board shall keep complete and accurate records of all papers submitted to it and of all findings and decisions made. A stenographic record of all Board hearings will be taken if mutually requested by the parties and the cost will be equally shared. If only one (1) party requests that a stenographic record be taken, the cost shall be borne by the requesting party. If the other party subsequently requests to be furnished a copy of the record, it will be provided a copy at the same cost as if the parties had equally shared the cost. Otherwise, the stenographic record shall be the exclusive property of the party requesting such record. Section 19. The Board may summon any witnesses employed by the Company who are necessary for a proper resolution of the dispute. The number of witnesses summoned at any one time shall not be greater than the number that can be spared from the operation without interference to the services of the Company. Witnesses who are employees of the Company, whether summoned by the Company, the Union or the Board, shall suffer no loss of pay. Section 20. Within ten (10) calendar days after the four (4) Member Board reaches a deadlock, either the Union or the Company may, by written notice to the other, state its desire that the dispute be heard by a five (5) Member Board. When it is necessary that a Neutral Member sit with the Board, he shall be selected from the panel of neutrals set forth herein. Section 21. The Neutral Member shall not have authority to hear any case except when sitting with the Company and Union Members, constituting the five (5) Member Board. Section 22. The Company and the Union shall by mutual agreement name seven (7) neutrals as a panel of potential arbitrators. Section 23. The selected neutral panel members shall serve until removed by either or both of the parties. Both parties may remove a neutral at any time by mutual 63 agreement. Either party may remove a neutral provided that the neutral shall have served at least one (1) year as a member of the panel and shall have heard and decided at least one (1) case. Once a neutral has been selected to hear a case, a single party may not remove such neutral until such case has been heard and decided. In the event a party determines to remove a neutral, that party shall provide the other with thirty (30) calendar days notice of same. In such event the parties shall immediately confer and by mutual agreement name a replacement. If the parties are unable to agree before the expiration of the thirty (30) calendar day period, either party may request that the National Mediation Board provide a panel of five (5) potential members, all of whom shall be members of the National Academy of Arbitrators, and the replacement shall be selected by the parties alternately striking names until only one (1) remains. Section 24. The neutral member shall be selected from the panel of seven (7) arbitrators. The neutral shall be chosen by agreement of the Company and Union or, if they do not agree, by alternatively striking names from the panel until one remains. A coin toss shall determine who strikes first from the panel of seven (7) arbitrators. Section 25. As soon as possible after the selection of the Neutral Member, the five (5) Member Board shall meet, hear and decide the case or cases submitted to it. The date, time, and place for such hearing shall be set by mutual agreement of the parties. Should the parties be unable to agree upon a date, time or place, the Neutral shall set the same. Section 26. The Chairman and Vice Chairman, acting jointly, shall have the authority to incur reasonable expenses as in their judgment may be deemed necessary for the proper conduct of the business of the Board. These expenses shall be borne one-half (1/2) by each of the parties. Section 27. The Company and the Union will assume the travel expense and other related expenses of the Board Members selected by them, and of the witnesses called by them. Expenses for witnesses called by the Board shall be borne one-half (1/2) by each of the parties. Section 28. The expenses and reasonable compensation of the Neutral selected as provided herein shall be borne equally by the Company and the Union. 64 Section 29. GENERAL a. The time limits set forth in Articles 32 and 33 may be extended in writing by mutual agreement of the Company and the Union. b. The Union and the Company may, by mutual agreement in writing, elect to bypass any or all of the steps in this Section and proceed directly to the five (5) Member Board. c. Probationary Pilots shall be subject to discharge at any time without cause. d. Compliance with all time limits under this Article shall be determined by the date of mailing, as established by postmark or by date of hand delivery, as established by the initialed copy. e. The parties understand and agree that each and every Board member shall be free to discharge his duty in an independent manner, without fear that his individual relations with the Company, Union or other Pilots may be affected in any manner by any action taken by him in good faith in his capacity as a Board member. f. Except as expressly provided otherwise, this Article shall not be construed to limit, restrict or abridge the rights or privileges accorded to the Company, the Pilots, or its and their duly accredited representatives under the provisions of the Railway Labor Act, as amended. 65 ARTICLE 34 NO STRIKE/NO LOCKOUT Section 1. During the term of this Agreement, it is understood and agreed that the Company will not lock out any employee covered hereby, and the Union will not authorize or take part in any strike or picketing of the Company premises. Any Pilot engaging in such activity may be subject to discipline up to and including discharge. Section 2. It shall not be a violation of this Agreement for a Pilot to refuse to cross a customer's picket line, provided that in cases where a customer's place of business is being picketed and separate gates are being provided for ingress and egress for persons not involved with the primary labor disputes, Pilots will be required to perform their normal duties at the customer's place of business. Section 3. In situations where one of the Company's customers is being picketed, and if the Company knows about the picket in advance, the Company will notify the Pilot about the picket line before dispatching a Pilot to that customer. Pilots who refuse to take an assignment to cross a picket line because of safety concerns will not be penalized. When no one is willing to cross a picket line, the Company will be permitted to service its customers the best way possible. Section 4. The Company will not require Pilots to transport replacement workers involved in any labor dispute. 66 ARTICLE 35 UNION REPRESENTATION Section 1. Upon reasonable advance notification to appropriate management personnel, the Company agrees to admit to its stations and bases officially designated representatives of the Union to transact business as is necessary for the administration of the Agreement. Such business shall be transacted in as short a time as possible and shall not interfere with the operations of the Company. The Union representative may be escorted by a management representative while on Company property; in the alternative, the Company may make a private meeting space available to the Union representative for any Union visit. Section 2. The Union may select elected or appointed representatives and shall notify the Company designee, from time to time of their appointment or removal. The Company designee shall notify the Union of the appropriate Company representative hereunder. Section 3. The Union shall elect or appoint Pilots to be primary job steward(s) and alternate(s) to conduct Union business and shall notify the Company in writing of their election, appointment or removal. Section 4. a. A primary or alternate steward shall be permitted reasonable time to investigate, present and process grievances within the scope of said steward's station or base on the Company property without loss of pay during his/her regular working hours. b. A primary or alternate steward shall be permitted to present grievances to management and attempt to resolve any alleged grievance. c. A primary or alternate steward shall be granted the right to consult with Pilots under their jurisdiction for the purpose of enforcing the provisions of this Agreement. d. Time spent in handling grievances during the steward's regular working hours shall be considered hours worked for all purposes. e. The provisions of Section 4 above shall not result in any Workovers nor cause any adverse impact on the Company's operation. In addition, a Pilot, while serving as a primary or alternate steward shall remain available to assist the Base Manager with Pilot-related tasks, if requested. This paragraph shall not be used to keep a steward from performing his union work when he otherwise would not be needed by the Company. 67 Section 5. Upon forty-eight (48) hours notification by the Union President, the Company will grant a Pilot(s) unpaid time off to perform Union business off the Company premises. In the event the Union business shall require an absence from work in excess of one (1) week, a Union leave of absence will be granted in accordance with Article 11. The Union will cooperate with the Company to minimize any negative impact on operations as a result of this Section (i.e., scheduling meetings/union-sponsored training on Pilot's days off, limiting the number of Pilots who can have union time off). Section 6. The Company will notify the Union in writing of the names and hire dates of all newly hired Pilots and transfers. Such notification will be transmitted during the Pilot's first week on the payroll. Upon notification from the Union, the appropriate Company manager will allow a Union representative who is an employee of the Company access to new hire Pilots to provide Union orientation for thirty (30) minutes before or after the Company's new hire orientation. Section 7. Stewards who serve their fellow Pilots at any Company station or base shall be considered Union Representatives. 68 ARTICLE 36 UNION SECURITY Section 1. Each Pilot covered by this agreement shall become a member of the Union within sixty (60) days after the effective date of this Agreement, and shall be required as a condition of continued employment by the Company to maintain his/her membership in the Union so long as this Agreement remains in effect, to the extent of paying an initiation (or re-initiation) fee, monthly membership dues and assessments, which are uniformly required of Pilots covered by this Agreement. Such Pilot shall have his/her monthly membership dues deducted from his/her earnings by payroll deduction. Section 2. Any Pilot hired into a classification covered by this Agreement on or after the effective date of this Agreement shall become a member of the Union within sixty (60) days after employment and shall be required as a condition of continued employment by the Company to maintain his membership in the Union so long as this Agreement remains in effect, to the extent of paying the uniformly required initiation (or re-initiation) fee, monthly membership dues and assessments. Section 3. Any Pilot maintaining or accruing seniority in a classification covered by this Agreement (except as provided in Section 6) but not employed in such classification, or any other classification covered by this Agreement, shall not be required to maintain Union membership during such employment but may do so at his/her option. Should a Pilot return to a classification covered by this Agreement, s/he shall be required to become a member of the Union within fifteen (15) days after the date s/he returns to such classifications, and shall, as a condition of employment in classification covered by this Agreement, become a member of the Union and maintain membership in the Union so long as this Agreement remains in effect to the extent of paying an initiation (or re-initiation) fee, monthly membership dues and assessments. Section 4. The provisions of this Agreement shall not apply to any Pilot covered by this Agreement to whom membership in this Union is not available by payment of initiation (or re-initiation) fees, if applicable, monthly dues and assessments under the same terms and conditions as uniformly applicable to any other Pilot, or to any other Pilot to whom membership in the Union is denied or terminated for any reason other than the failure of the employee to pay uniformly levied initiation (or re-initiation) fees, if applicable, monthly dues and assessments. Nothing in this Agreement shall require the payment of any initiation (or re- 69 initiation) fee, by a Pilot if an authorized or permissible transfer according to the Bylaws and Constitution is involved. Section 5. If a Pilot covered by this Agreement has resigned from the Company and is re-employed, s/he shall be governed by Section 2 of this Article. a. If a Pilot is laid off and is recalled from layoff s/he shall be governed by Section 3 of this Article. b. The seniority status and rights of Pilots granted leaves of absence to serve in the armed forces shall not be terminated by reason of any of the provisions of this Article but such Pilot shall, upon resumption of employment in classification covered by this Agreement be governed by the provisions of Section 3, Paragraph 2 of this Article. Section 6. The payment of dues by a member shall not be required as a condition of employment during leave of absence without pay or during periods of transfer or promotions to a classification not covered by this Agreement. Section 7. When a Pilot does not become a member of the Union by payment of initiation (or re-initiation) fee as provided in this Article, or is a member of the Union and becomes delinquent in the payment of monthly dues or assessments, as provided in this paragraph, the following procedure shall apply: a. If a new hire Pilot has not become a member of the Union within sixty (60) days after employment with the Company, the Union shall notify such Pilot in writing, certified mail, return receipt requested, copy to the Company designee, that such Pilot must become a member of the Union within the time limits specified in Section 2 of this Article or be subject to discharge as Pilot of the Company. If, upon expiration of the period of time specified in Section 2 of this Article, such new Pilot has not become a member of the Union, the Union shall certify in writing to the Company designee, copy to the Pilot, that the Pilot has failed to become a member of the Union as provided in this Article, and is, therefore, to be discharged. The Company shall then promptly notify the Pilot involved that s/he is to be discharged from the services of the Company and shall promptly take proper steps to so discharge the Pilot. 1. If a Pilot, other than a new hire Pilot, who is required to become a member of the Union as provided in this Article does not become a member of the Union within the time limits specified in this Article for Pilots covered by this Agreement, the Union shall notify the Company designee with a copy to the Pilot, that the Pilot has failed to become a member of the Union as required by this Article and is, therefore, to be discharged. The Company shall then 70 promptly notify the Pilot involved that s/he is to be discharged from the service of the Company and shall promptly take proper steps to discharge said Pilot. b. If a Pilot covered by this Agreement becomes delinquent by more than two (2) calendar months in the payment of monthly dues including assessments, the Union shall notify the Pilot, in writing, certified mail, return receipt requested, copy to the Company designee that said Pilot is delinquent in the payment of monthly membership dues as specified herein and, accordingly, will be subject to discharge as a Pilot of the Company. Such letter shall also notify the Pilot that s/he must remit the required payment to the Secretary-Treasurer of his/her Local Union by the twenty-second (22) day of he month in which notice from the Union was received or be subject to discharge. If such Pilot still remains delinquent in the payment of dues on the twenty-second (22 nd) day of the month in which his/her notice from the Union was received, the Union shall notify in writing the Company designee, with a copy to the Pilot, that the Pilot has failed to remit payment of the dues within the grace period allowed herein and is, therefore, to be discharged. The Company shall then promptly notify the Pilot involved that s/he is to be discharged from the service of the Company, and shall promptly take the proper steps to so discharge the Pilot. c. A Pilot discharged by the Company under the provisions of this paragraph shall be deemed to have been discharged for cause. Section 8. Any discharge under the terms of this Article shall be based solely upon failure of the Pilot to pay or tender initiation (or re-initiation) fee, membership dues and assessments upon the same terms and conditions as are generally applicable to any other member of the Union, within the time limits specified herein, and not because of denial or termination of membership in the Union for any other reason. Section 9. A grievance by a Pilot who is to be discharged as a result of an interpretation or application of the provisions of this Article shall be subject to the following procedures: a. A Pilot who believes the provisions of this Article pertaining to him/her have not been properly interpreted or applied, and who desires a review must submit his/her request for review in writing within five (5) business days from the date of his/her notification by the Company as provided in Section 7, subsection (a) 1 and 2 of this Article. The request will be submitted to the Company designee, with a copy to the Union. The Union may be present at the review of the grievance to represent the Union's interest in the case. The Company designee will review the 71 grievance and render a decision in writing with a copy to the Union no later than ten (10) business days following the receipt of the grievance. b. If the decision is not satisfactory to the Union, then it may appeal the decision through the grievance procedure. If the decision is not satisfactory to the Pilot, then he/she may appeal the decision within ten (10) days from the date of receipt directly to a neutral referee who must be agreed upon by the Pilot and the Union within (10) days thereafter. c. In the event the parties fail to agree upon a neutral referee within the specified period, either the Pilot or the union may request the National Mediation Board to name such neutral referee. d.The decision of the neutral referee shall be binding on all parties to the dispute. The fees and charges of such neutral shall be borne equally by the Pilot and the union. e.During the period a grievance is being handled under the provisions of this section and until after the decision by the Company designee or after final decision by the neutral referee, the Pilot shall not be discharged from the Company because of noncompliance with the terms and provisions of this Article. Section 10. No Pilot(s) covered by this Agreement or Pilot whose employment is terminated pursuant to the provisions of this Article or the Union shall have any claim for loss of time, wages or any other damages against the Company because of agreeing to this Article or because of any alleged violation, misapplications, compliance or noncompliance with any provision of this Article. The Union agrees to hold the Company harmless and to indemnify the Company against any suits, claims, liabilities, and reasonable and customary attorneys' fees which arise out of or by reason of any action taken by the Company pursuant to a written demand by an authorized union representative under the terms of this Article. Section 11. During the life of this Agreement, the Company agrees that upon receipt of a properly executed Authorization of Payroll Deduction, voluntarily executed by a Pilot, it will make a single monthly deduction from the Pilot's earnings, after other deductions authorized by the Pilot or required by law have been made, to cover his/her current standard monthly Union dues, assessments and/or initiation fees uniformly levied in accordance with the Constitution and Bylaws of the Union, as set forth in the Railway Labor Act, as amended. . Section 12. The Company will deduct said Pilot's dues in the month in which the Pilot is recalled from furlough or returns from a leave of absence. In the event the Pilot 72 is recalled from furlough or returns from a leave of absence after the dues have been deducted for a month, the Company will make a double deduction in the following month. The Company will pay over to the designated official of the Union the wages withheld for such initiation fees and dues. The amount withheld shall be reported and paid to the Union within ten (10) business days from when deductions were made. Section 13. Any authorizations from payroll deductions under this Article shall be effective one (1) week following its receipt by the Company Payroll Department and shall apply to the next paycheck from which dues deduction is made. Section 14. The Company remittance to the Union will be accompanied by lists of names and Pilot numbers of the Pilots for whom the deductions have been made in that particular period and the individual amounts deducted. Section 15. Collection of dues not deducted because of insufficient current earnings, dues missed because of clerical error, or inadvertent error in the accounting procedure, dues missed due to delay in receipt of the Authorization for Payroll Deductions shall be the responsibility of the Union and shall not be the subject of payroll deductions from subsequent pay checks, and the Company shall not be responsible in any way for such missed collections. It shall be the Union's responsibility to verify apparent errors with the individual Union member or Pilot prior to contacting the Company Human Resources Department. The total or balance of unpaid dues, assessments and/or initiation fees due and owing the Union at the time a Pilot terminates his/her employment shall be deducted from the final paycheck in accordance with applicable law. Section 16. In the event the amount of the standard dues or fees uniformly levied are changed, it shall be the sole responsibility of the Union to notify the Company and to make any necessary adjustments as to the amounts to be deducted from the Pilot's earnings. So far as the Company is concerned, any such changes shall be made in accordance with the time limits set forth in Section 13 of this Article. Section 17. An Authorization for Payroll Deduction under this Article, once voluntarily executed and delivered to the Payroll Department of the Company, shall be irrevocable during the effectiveness of the Agreement, or as long as the Union is the certified representative of Pilots covered by this Agreement, or for a period of one (1) year, whichever is the lesser, and shall renew itself for successive yearly or applicable periods thereafter unless the Pilot serves written notice by registered mail on the Payroll Department of the Company and the Union to revoke such Authorization for Payroll Deduction during the ten (10) days preceding any periodic renewal date. Subject to Section 15 above, an Authorization for Payroll Deduction shall automatically be revoked if: 73 a. The Pilot transfers to a position with the Company not covered by this Agreement. b. The Pilot's services with the Company are terminated; c. The Pilot is furloughed; or d. The Pilot is on an authorized leave of absence. Section 18. The Authorization for Payroll Deduction to be voluntarily executed shall be signed by the Pilot. It shall stipulate the following language: "I, (name of Pilot) do hereby authorize and direct my Employer, (circle one) Air Logistics L.L.C. Air Logistics of Alaska, to deduct from my wages for remittance to the authorized official or affiliate of the Office and Professional Employees International Union, Local 107, periodic dues, initiation fees, and/or assessments uniformly required as a condition of acquiring or maintaining membership in accordance with the provisions of the Union Shop Agreement between my Employer and the Union. I further authorize and direct my Employer to deduct from my wages for remittance, as set forth above, the total or balance of unpaid dues, assessments and/or initiation fees due and owing the Union at the time my employment with the above named Employer ends." "This authorization shall not include fines and penalties. I agree that this authorization shall be irrevocable for one (1) year from the date hereof or until termination of the Union Shop Agreement between my Employer and the Union, whichever occurs first. If the Union Shop Agreement is terminated, this authorization may be revoked effective as of any anniversary date of the signing hereof, by written notice given by me to my Employer and the Union by registered mail, during the ten (10) days preceding any such anniversary. All amounts to be deducted from my wages will commence with the first regular dues deduction paycheck following receipt by my Employer of this notice." 74 ARTICLE 37 SAVINGS CLAUSE Section 1. Should any part of this Agreement be rendered or declared invalid by reason of any existing or subsequently enacted legislation, act of government agency, or by any decree of a court of competent jurisdiction, such invalidation of such part or portion of this Agreement shall not invalidate the remaining portions hereof, and they shall remain in full force and effect. Section 2. In the event that any provisions of this Agreement are in conflict with or are rendered inoperative or unlawful by virtue of any duly enacted law or regulation or any governmental agency or commission having jurisdiction over the Company, the Union and Company will meet and attempt to negotiate changes necessary, pertaining only to those provisions so affected or directly related thereto. 75 ARTICLE 38 DURATION The Agreement shall become effective on May 18, 1999 and shall remain in full force and effective through May 18, 2003 and shall renew itself without change each succeeding May 18th thereafter unless written notice of intended change is served in accordance with Section 6, Title I of the Railway Labor Act, as amended, by either party hereto at least sixty (60) days prior to May 18, 2003, or any May 18th thereafter. In witness whereof, the parties hereto have signed this Agreement on this ____ day of ____________, ______. FOR OFFICE AND PROFESSIONAL FOR OFFSHORE LOGISTICS, INC.: EMPLOYEES INTERNATIONAL UNION, AFL-CIO: /s/ Michael Goodwin /s/ George M. Small - ------------------------------------ ------------------------------------ Michael Goodwin, President, OPEIU George M. Small, President NEGOTIATING COMMITTEE: WITNESSES: /s/ James J. Morgan /s/ Drury A. Milke - ------------------------------------ ------------------------------------ James J. Morgan Dru Milke President, OPEIU/Local 107 Chief Financial Officer /s/ Pete Catalano /s/ Neill Osborne - ------------------------------------ ------------------------------------ Pete Catalano Neill Osborne Secretary-Treasurer, OPEIU/Local 107 Vice President - Aviation Services /s/ Rickey LeBlanc /s/ Ricardo Fira - ------------------------------------ ------------------------------------ Rickey LeBlanc, Trustee, Local 107 Ricardo Fira Director - Human Resources /s/ Kenneth E. Bruner /s/ Stephen T. Viljoen - ------------------------------------ ------------------------------------ Ken Bruner Steve Viljoen Director - Operations /s/ Herbert G. Graddy /s/ Richard A. Dunkin - ------------------------------------ ------------------------------------ Herb Graddy Richard A. Dunkin Director of Finance & Administration 76 APPENDIX "A" AIR LOGISTICS, L.L.C. - PILOT PAY SCALES VFR - Single and Small Twin - ---------------------------
Years of May 18, September 18, December 18, December 18, June 18, Service 1999 * 2000 * 2001 * 2002 * 2003 * - ---------- -------- ------------- ------------ ------------ --------- 0- 1 $ 34,200 $ 35,226 $ 36,283 $ 37,371 $ 38,119 1- 2 34,200 35,226 36,283 37,371 38,119 2- 3 34,200 35,226 36,283 37,371 38,119 3- 4 34,200 35,226 36,283 37,371 38,119 4- 5 36,730 37,832 38,967 40,136 40,939 5- 6 39,622 40,811 42,035 43,296 44,162 6- 7 41,962 43,221 44,517 45,853 46,770 7- 8 43,747 47,804 48,760 45,059 46,411 8- 9 45,384 46,746 48,148 49,592 50,584 9-10 45,384 46,746 48,148 49,592 50,584 10-11 45,500 46,865 48,271 49,719 50,713 11-12 45,500 46,865 48,271 49,719 50,713 12-13 45,500 46,865 48,271 49,719 50,713 13-14 45,500 46,865 48,271 49,719 50,713 14-15 45,500 46,865 48,271 49,719 50,713 15-16 45,500 46,865 48,271 49,719 50,713 16-17 46,500 47,895 49,332 50,812 51,828 17-18 46,500 47,895 49,332 50,812 51,828 18-19 46,500 47,895 49,332 50,812 51,828 19-20 46,500 47,895 49,332 50,812 51,828 20-21 46,500 47,895 49,332 50,812 51,828 21-22 46,500 47,895 49,332 50,812 51,828 22-23 46,500 47,895 49,332 50,812 51,828 23-24 46,500 47,895 49,332 50,812 51,828 24-25 46,500 47,895 49,332 50,812 51,828 25-26 46,500 47,895 49,332 50,812 51,828 26-27 46,500 47,895 49,332 50,812 51,828 27-28 46,500 47,895 49,332 50,812 51,828 28-29 46,500 47,895 49,332 50,812 51,828 29-30 46,500 47,895 49,332 50,812 51,828 30+ 46,500 47,895 49,332 50,812 51,828
Pilots on 4&3 and 5&2 (non-standard) schedules shall be paid the above base salary plus the following percentages of base pay: 4&3: 25.00%; 5&2: 45.00%. * Increases will become effective on the first pay period following these dates. 77 IFR-SIC - -----------
Years of May 18, September 18, December 18, December 18, June 18, Service 1999 * 2000 * 2001 * 2002 * 2003 * - ----------- -------- ------------- ------------ ------------ --------- 0- 1 $ 35,986 $ 37,066 $ 38,178 $ 39,323 $ 40,109 1- 2 35,986 37,066 38,178 39,323 40,109 2- 3 35,986 37,066 38,178 39,323 40,109 3- 4 35,986 37,066 38,178 39,323 40,109 4- 5 38,730 39,892 41,089 42,321 43,168 5- 6 41,415 42,657 43,937 45,255 46,160 6- 7 42,408 43,680 44,991 46,340 47,267 7- 8 44,268 48,373 49,340 45,596 46,964 8- 9 46,054 47,436 48,859 50,324 51,331 9-10 47,170 48,585 50,043 51,544 52,575 10-11 48,286 49,735 51,227 52,763 53,819 11-12 49,402 50,884 52,411 53,983 55,063 12-13 49,402 50,884 52,411 53,983 55,063 13-14 49,402 50,884 52,411 53,983 55,063 14-15 49,402 50,884 52,411 53,983 55,063 15-16 50,500 52,015 53,575 55,183 56,286 16-17 51,000 52,530 54,106 55,729 56,844 17-18 51,000 52,530 54,106 55,729 56,844 18-19 51,000 52,530 54,106 55,729 56,844 19-20 51,000 52,530 54,106 55,729 56,844 20-21 51,000 52,530 54,106 55,729 56,844 21-22 51,000 52,530 54,106 55,729 56,844 22-23 51,000 52,530 54,106 55,729 56,844 23-24 51,000 52,530 54,106 55,729 56,844 24-25 51,000 52,530 54,106 55,729 56,844 25-26 51,000 52,530 54,106 55,729 56,844 26-27 51,000 52,530 54,106 55,729 56,844 27-28 51,000 52,530 54,106 55,729 56,844 28-29 51,000 52,530 54,106 55,729 56,844 29-30 51,000 52,530 54,106 55,729 56,844 30+ 51,000 52,530 54,106 55,729 56,844
Pilots on 4&3 and 5&2 (non-standard) schedules shall be paid the above base salary plus the following percentages of base pay: 4&3: 25.00%; 5&2: 45.00%. * Increases will become effective on the first pay period following these dates. 78 IFR-PIC - -----------
Years of May 18, September 18, December 18, December 18, June 18, Service 1999 * 2000 * 2001 * 2002 * 2003 * - ----------- -------- ------------- ------------ ------------ --------- 0- 1 $ 41,738 $ 42,990 $ 44,280 $ 45,608 $ 46,520 1- 2 41,738 42,990 44,280 45,608 46,520 2- 3 41,738 42,990 44,280 45,608 46,520 3- 4 41,738 42,990 44,280 45,608 46,520 4- 5 42,408 43,680 44,991 46,340 47,267 5- 6 44,194 45,520 46,885 48,292 49,258 6- 7 45,086 46,439 47,832 49,267 50,252 7- 8 46,426 47,819 49,253 50,731 51,746 8- 9 48,732 50,194 51,700 53,251 54,316 9-10 49,848 51,343 52,884 54,470 55,560 10-11 50,964 52,493 54,068 55,690 56,804 11-12 52,824 54,409 56,041 57,722 58,877 12-13 54,312 55,941 57,620 59,348 60,535 13-14 56,544 58,240 59,988 61,787 63,023 14-15 58,032 59,773 61,566 63,413 64,681 15-16 59,148 60,922 62,750 64,633 65,925 16-17 59,500 61,285 63,124 65,017 66,318 17-18 59,500 61,285 63,124 65,017 66,318 18-19 59,500 61,285 63,124 65,017 66,318 19-20 59,500 61,285 63,124 65,017 66,318 20-21 59,500 61,285 63,124 65,017 66,318 21-22 60,264 62,072 63,934 65,852 67,169 22-23 60,264 62,072 63,934 65,852 67,169 23-24 60,264 62,072 63,934 65,852 67,169 24-25 60,264 62,072 63,934 65,852 67,169 25-26 60,264 62,072 63,934 65,852 67,169 26-27 60,500 62,315 64,184 66,110 67,432 27-28 60,500 62,315 64,184 66,110 67,432 28-29 60,500 62,315 64,184 66,110 67,432 29-30 60,500 62,315 64,184 66,110 67,432 30+ 60,500 62,315 64,184 66,110 67,432
Pilots on 4&3 and 5&2 (non-standard) schedules shall be paid the above base salary plus the following percentages of base pay: 4&3: 25.00%; 5&2: 45.00%. * Increases will become effective on the first pay period following these dates. 79 Letter of Understanding #1 Re: Fixed Wing Pilots Mr. Jim Morgan President, Local 107 303 Elm St. Covington, TN 38019 Dear Jim: This letter will confirm our understanding that the Pilot(s) employed by Offshore Logistics, Inc. operating fixed wing aircraft under FAR Part 91 will not be covered by the collective bargaining agreement between Offshore Logistics, Inc. and OPEIU. If such Pilot(s) performs work operating helicopters in the service of Offshore Logistics, Inc. under FAR Part 135, he will be subject to the terms and conditions of the contract. Please sign in the space provided below acknowledging your understanding of this letter. Sincerely, /s/ Neill Osborne -------------------------------- Neill Osborne Vice-President-Aviation Services /s/ James J. Morgan - -------------------------------- Mr. James Morgan President, Local 107 Office and Professional Employee International Union, AFL-CIO 80 Letter of Understanding #2 Re: Effective Date for Paid Days Off Mr. Jim Morgan President, Local 107 303 Elm St. Covington, TN 38019 Dear Jim: This will confirm our understanding that the provisions of Article 12, Paid Days Off will become effective on January 1, 2000. The Company's current policies related to sick leave, holiday and vacation accruals will remain in place through December 31, 1999, and unused sick leave and vacation accruals as of December 31, 1999 shall be placed in the Sick and Unscheduled Time Off (SUTO) Bank as of January 1, 2000. Please sign below if you concur with this understanding. Sincerely, /s/ Neill Osborne ----------------------------- Neill Osborne Vice President - Aviation Services /s/ James J. Morgan - ------------------------------ Mr. James Morgan President, Local 107 Office and Professional Employee International Union, AFL-CIO 81 Letter of Understanding #3 Re: IFR Cadre Mr. Jim Morgan President, Local 107 303 Elm St. Covington, TN 38019 Dear Jim: The parties agree to meet within thirty (30) days after the date of signing of the Agreement to discuss the possibility of developing an IFR Cadre. An IFR Cadre would insure that the most senior, qualified Pilots retain IFR slots, would promote professionalism and maintain skill levels and regency of experience, and would insure that the Company would be able to maintain a core group of IFR PICs and SICs. Please sign below if you concur with this understanding. Sincerely, /s/ Neill Osborne -------------------------------- Neill Osborne Vice President-Aviation Services /s/ James J. Mogan - --------------------------------- Mr. James Morgan President, Local 107 Office and Professional Employee International Union, AFL-CIO . 82 Letter of Understanding #4 Re: Pilots Hired With Prior Experience Mr. Jim Morgan President, Local 107 303 Elm St. Covington, TN 38019 Dear Jim: The parties agree that a Pilot who has been hired at a step on the pay scale based on his experience shall be frozen at his pay rate until his longevity with the Company exceeds his step on the pay scale. For example, a Pilot hired at the fifth (5th) year rate will remain frozen at the fifth year rate until he begins his sixth (6th) year of longevity with the Company. Please sign below if you concur with this understanding. Sincerely, /s/ Neill Osborne --------------------------- Neill Osborne Vice-President-Aviation Services /s/ James J. Morgan - --------------------------- Mr. James Morgan President, Local 107 Office and Professional Employee International Union, AFL-CIO 83 Letter of Understanding #5: Implementation Schedule Mr. Jim Morgan President, Local 107 303 Elm St. Covington, TN 38019 Dear Jim: The following contract items will be implemented along the following guidelines: 1. Article 8 - Job Posting and Bidding. The new bidding and posting system as described in Article 8 will be implemented within ninety (90) days from the date of ratification. 2. Article 18 - Facilities, Equipment and Uniforms Based on commitments made by the vendor, new Switlik vest PFDs are expected to arrive within eight (8) weeks from the ratification date. Should there be a delay beyond that date due to circumstances beyond the control of the company (i.e., vendor problems with manufacturing and/or shipping), we will inform you as soon as the Company is aware of any delay. 3. Article 21 - Base Pay New pay rates will be implemented on the first pay period following ratification. That date is May 24. 4. Article 24 - Workover The new workover system described in Article 24 will be implemented within ninety (90) days from the date of ratification. 5. Article 27 - Insurance In order to get open enrollment accomplished properly, the implementation date for the insurance article will be August 1, 1999. 84 Sincerely, /s/ Neill Osborne -------------------------------- Neill Osborne Vice-President-Aviation Services /s/ James J. Morgan - ----------------------------- Mr. James Morgan President, Local 107 Office and Professional Employee International Union, AFL-CIO 85 LETTER OF AGREEMENT #6 Between OFFSHORE LOGISTICS, INC. And OFFICE AND PROFESSIONAL EMPLOYEES INTERNATIONAL UNION, AFL-CIO In the service of AIR LOGISTICS OF ALASKA, INC. As represented by - --------------------------------------------------------------------- LOCAL 107/OPEIU This Letter of Agreement is made and entered into in accordance with the provisions of the Railway Labor Act, as amended, by and between Offshore Logistics, Inc. (hereinafter referred to as the "Company"), and the Office and Professional Employees International Union, AFL-CIO, in the service of Air Logistics of Alaska, Inc., as represented by Local 107, OPEIU (hereinafter referred to as the "Union"). CONTRACT TERMS APPLICABLE TO PILOTS OF AIR LOGISTICS OF ALASKA, INC. It is agreed and understood by the Union that the Air Logistics of Alaska, Inc. operation is unique and different from the Air Logistics L.L.C. Gulf of Mexico operation, and that terms and conditions of employment negotiated by OPEIU on behalf of Pilots operating in the Gulf of Mexico do not have the same applicability to the Alaskan operation. Therefore, the parties mutually agree and understand that the following provisions of the contract between the Company and the Union will be amended as follows: ARTICLE 1 - STATEMENT OF PURPOSE: Applicable to both Gulf Coast and Alaskan operations. ARTICLE 2 - RECOGNITION AND REPRESENTATION: Sections 1, 2, 5, 6 and 7 are applicable to both Gulf Coast and Alaskan operations. Section 3 will be amended to read as follows: This Agreement covers all revenue and all known and recurring miscellaneous flying performed by the Company with Pilots on its payroll. All flying covered by this Agreement shall be performed by Pilots whose names appear on the Air Logistics, L.L.C. and Air Logistics 86 of Alaska, Inc. Pilot's Seniority List, except when Air Logistics of Alaska, Inc. Management and Seasonal Pilots are needed to perform flying services as a result of operational and/or economic requirements of the Company. Section 4 will be amended to read as follows: Pilots covered by this Agreement shall be governed by all reasonable Company rules, regulations and orders previously or hereafter issued by proper authorities of the Company. Terms and conditions of Air Logistics of Alaska, Inc. employment may differ from those found in the basic contract between the Company and the Union as a result of the operational needs of Air Logistics of Alaska, Inc. ARTICLE 3 - STATUS OF AGREEMENT: Applicable to both Gulf Coast and Alaskan operations. ARTICLE 4 - PILOT STATUS: Applicable to both Gulf Coast and Alaskan operations. ARTICLE 5 - SENIORITY: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 6 - SENIORITY ROSTER: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. A copy of the Air Logistics of Alaska, Inc. seniority roster will be provided to the Union on a quarterly basis. ARTICLE 7 - REDUCTIONS IN FORCE: Applicable only to Gulf Coast operation. Based on the unique nature of the Alaskan operation, Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 8 - JOB POSTING AND BIDDING: This Article will be amended for the Alaska operation as follows: I. PERMANENT VACANCIES Section 1. Pilots working in the Alaska operation shall not be displaced by either active or furloughed Pilots working in the Gulf of Mexico operation. Pilots working in the Gulf of Mexico operation will not be displaced by either active or furloughed Pilots working in the Alaskan operation. Section 2. When a job or crew position becomes available on a full-time basis, or when a new job or crew position is created that differs from those positions described in the Temporary/Seasonal Vacancies Section of this Article, the vacancy will be posted for review by Pilots working in Alaska and the Gulf of Mexico. Priority 87 for filling of all vacancies in the Alaskan operation will be given to Pilots employed by Air Logistics of Alaska, Inc. If the position remains unfilled, the Company may fill the position from outside the Company. Postings will include job qualifications and prerequisites for the position. a. Positions will be posted for seven (7) days in Alaska and the Gulf of Mexico. b. The Company will make the awards within five (5) calendar days after the bidding has closed, not including Saturdays, Sundays, and holidays. c. The senior qualified Pilot within Alaska shall be awarded the job. If no Alaskan Pilots is awarded the position, then the senior qualified Pilot in the Gulf of Mexico will be awarded the job. For the purpose of this Article, a qualified Pilot will be determined by Air Logistics of Alaska, Inc. and customer requirements. d. A pilot responding to more than one (1) vacancy shall indicate his order of preference on the bid and shall be awarded his first preference, assuming he is qualified for the position. e. In the event no bid is received from a qualified Pilot and pool Pilot(s) exist, such vacancies will be filled by the pool Pilots in reverse seniority order. Section 3. The same rules outlined above related to permanent vacancies in Alaska will also apply to permanent vacancies in the Gulf of Mexico operations. II. TEMPORARY OR SEASONAL VACANCIES Section 1. Temporary vacancies are positions created to fill operational needs for ninety (90) consecutive days or less. Seasonal vacancies are positions created to fill the operational needs of summer flying. Section 2. Pilots flying in the Gulf operation are eligible to work in temporary or seasonal positions subject to the following provisions: a. All current Air Logistics of Alaska, Inc. Pilots who work only on temporary or seasonal jobs as of the date of signing of this Agreement will be "grandfathered" for the purpose of filling these summer or temporary jobs. b. Once a grandfathered Pilot declines a temporary or seasonal job, the position will be offered to a Gulf Coast Pilot subject to the following conditions: 88 1. The successful completion of a flight check with and an evaluation by the Chief Pilot of the Alaskan operation; 2.The Pilot must meet all the qualification requirements set forth by Air Logistics of Alaska, Inc. and the customer. 3.The Pilot is responsible for his own travel to and from Alaska. There will be no travel or mileage pay provided to the Pilot for travel. In the event a Gulf of Mexico Pilot is involuntarily assigned to Alaska, the Company shall pay for his travel expenses to Alaska. 4.The Pilot will be paid in accordance with the Alaska pay scale and will be subject to all terms and conditions of employment of Air Logistics of Alaska, Inc. Section 3. The same rules outlined above related to temporary or seasonal vacancies in Alaska will also apply to temporary or seasonal vacancies in the Gulf of Mexico operations. ARTICLE 9 - CATEGORIES OF AIRCRAFT: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 10 - SCHEDULES OF SERVICE: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 11 - LEAVE OF ABSENCE: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies, with the exception of the Union Leave of Absence section of this Article. ARTICLE 12 - PAID DAYS OFF AND BANKED DAYS: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 13 - ON-THE-JOB INJURY LEAVE: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 14 - BEREAVEMENT LEAVE: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. 89 ARTICLE 15 - JURY DUTY: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 16 - FEES AND PHYSICAL EXAMINATIONS: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 17 - TRAINING: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 18 - FACILITIES, EQUIPMENT AND UNIFORMS: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 19 - SEVERANCE PAY: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 20 - MOVING EXPENSE: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 21 - BASE PAY: Base pay for Pilots in the Alaskan operation will be as follows: Co-Pilot: $2,160 per month Captain: $2,790 - $3,370 per month Alyeska: $2,000 - $3,520 per month Future salary ranges will be reviewed by management for possible adjustments around the same time as scheduled increases for Air Logistics, L.L.C. Pilots (see Appendix "A" for specific dates). Modifications to the ranges will be based on market conditions and other related factors. In the event Pilots in the service of Air Logistics of Alaska, Inc. would prefer to receive preset increases in the future pay ranges rather than leaving future adjustments to the discretion of the Company, the Company agrees to meet and discuss these increases with representatives of the union. These negotiations will not be pursuant to Section 6 of the Railway Labor Act and will in no way cause the reopening of any other provision of this Agreement. ARTICLE 22 - SUPPLEMENTAL PAY: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. 90 ARTICLE 23 - BONUSES: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 24 - WORKOVER/OVERTIME: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 25 - TRAVEL PAY: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 26 - PER DIEM: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 27 - INSURANCE: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 28 - RETIREMENT AND 401(K) PLAN: Applicable to both Gulf Coast and Alaskan operations. ARTICLE 29 - SAFETY/ACCIDENT PREVENTION: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 30 - GENERAL AND MISCELLANEOUS: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. ARTICLE 31 - UNION BULLETIN BOARDS AND COMMUNICATIONS: Applicable to Gulf Coast and Alaskan operations. ARTICLE 32 - GRIEVANCE PROCEDURE: Applicable to both Gulf Coast and Alaskan operations. However, all references to "Gulf Coast Manager" shall be changed to "Chief Pilot," and all references to "Director of Operations" shall be changed to "General Manager." ARTICLE 33 - SYSTEM BOARD OF ADJUSTMENT: Applicable to both Gulf Coast and Alaskan operations. ARTICLE 34 - NO STRIKE/NO LOCKOUT: Applicable to both Gulf Coast and Alaskan operations. 91 ARTICLE 35 - UNION REPRESENTATION: Applicable to both Gulf Coast and Alaskan operations. ARTICLE 36 - UNION SECURITY: Applicable to both Gulf Coast and Alaskan operations. ARTICLE 37 - SAVINGS CLAUSE: Applicable to both Gulf Coast and Alaskan operations. ARTICLE 38 - DURATION: Applicable to both Gulf Coast and Alaskan operations. Letter of Understanding Re: Fixed Wing Aircraft: Applicable to both Gulf Coast and Alaska operations. Letter of Understanding Re: Effective Date of Paid Days Off: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. Letter of Understanding Re: IFR Cadre: Applicable only to Gulf Coast operation. Air Logistics of Alaska, Inc. will continue with existing policies. In witness whereof, the parties hereto have signed this Agreement on this 18th day of May, 1999. FOR OFFICE AND PROFESSIONAL FOR OFFSHORE LOGISTICS, INC.: EMPLOYEES INTERNATIONAL UNION, AFL-CIO: /s/ Michael Goodwin /s/ George M. Small - ------------------------------------ ------------------------------- Michael Goodwin, President, OPEIU George M. Small, President FOR OPEIU, LOCAL 107: WITNESSES: /s/ James J. Morgan /s/ Drury A. Milke - ------------------------------------ ------------------------------- James J. Morgan Dru Milke President, OPEIU/Local 107 Chief Financial Officer 92 EX-23 4 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated May 18, 1999 included in this Form 10-K, into the Company's previously filed Registration Statement File Nos. 33-87450, 33-50946, 33-14800, 333-23355 and 33-50948. /s/ ARTHUR ANDERSEN LLP New Orleans, Louisiana June 29,1999 EX-27 5 FINANCIAL DATA SCHEDULE
5 This Schedule Contains Summary Financial Information Extracted From The March 31, 1999 Financial Statements And Is Qualified In Its Entirety By Reference To Such Financial Statements. 1,000 12-MOS MAR-31-1999 APR-01-1998 MAR-31-1999 70,594 0 89,077 0 82,853 248,523 565,712 122,796 732,030 105,663 233,615 0 0 211 283,917 732,030 466,440 468,840 363,272 425,861 0 0 19,811 31,732 9,509 20,920 0 0 0 20,920 0.97 0.97
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