UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-21818
FIELDS AIRCRAFT SPARES, INC.
(Name of Small Business Issuer as specified in its charter)
Utah 95-421826
(State or other jurisdiction of (I.R.S. employer identification No.)
incorporation or organization)
2251-A Ward Avenue
Simi Valley, California 93065
(Address of principal executive offices)
Issuer's telephone number, including area code: (805) 583-0080
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Shares, par value $.05 per share
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of Issuer's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The Issuer's revenues for the fiscal year ended December 31, 1996 were
$5,734,000.
As of December 31, 1996, 1,302,137 of the Issuer's common shares were
issued and outstanding, approximately 1,011,200 of which were held by
non-affiliates. As of March 26, 1997, the aggregate market value of shares held
by non-affiliates (based upon last cash sale of common shares) was approximately
$6,132,000. The Issuer believes that two shareholders who own approximately
11.84% and, 8.42% respectively, of the total shares issued and outstanding are
not affiliates of the Issuer since they do not participate in management
decisions.
DOCUMENTS INCORPORATED BY REFERENCE:
Certain portions of the documents of the Issuer listed below have been
incorporated by reference into the indicated parts of the Form 10-KSB:
Notice of Annual Meeting of Shareholders and Proxy Statement anticipated to
be filed within 120 days after December 31, 1996............Part III, Items 9-12
Transitional Small Business Disclosure Format: Yes_____ No X
<PAGE>
PART I.
ITEM 1. BUSINESS
Development of the Company
The primary business of Fields Aircraft Spares, Inc. (the "Company") is
the distribution of and stocking of factory new spare parts applicable to
various commercial aircraft models and the brokerage of a wide variety of new
and reconditioned aircraft parts through its subsidiary Fields Aircraft Spares,
Incorporated ("FAS").
In 1984, the Company was organized as FEP Resources, Inc. under the
laws of the State of Utah for the purpose of acquiring business opportunities.
In 1985, the Company was renamed Fields Industrial Group, Inc. and acquired
Fields Industrial Supply, Inc., a California corporation that was engaged in the
sale of cutting tools and supplies. As of 1990, that business was discontinued
and 100% of its common stock sold to an unrelated party on February 9, 1995. In
1987, the Company began its current business of distributing aircraft parts. In
1988, the Company incorporated FAS as a wholly-owned subsidiary. In 1995,
McDonnell Douglas Corporation (together with its affilates and/or divisions,
"MDC") acquired Series A Convertible Preferred Stock of FAS. The Company's
primary business of distribution of spare parts for commercial aircraft was
commenced and has been conducted through FAS since 1988. In 1995, the Company
changed its name to Fields Aircraft Spares, Inc.
On March 29, 1995, the Company's shareholders authorized the reverse
split of the Company's common shares on the basis of 50 old shares for one new
share. The reverse split was effective as of November 20, 1995.
All material aspects of the Company's business are conducted through
FAS. The Company has an additional wholly owned subsidiary, Fields Aero
Management, Inc., a California corporation ("FAM"). However, no significant
operations are conducted through FAM. The business of the Company as conducted
through FAS is referred to in this document as the Company's business.
References in this document to the Company, where appropriate, shall be deemed
to be references to the Company and its subsidiaries, collectively.
Business of the Company
The primary business of the Company is the distribution and stocking of
factory new spare parts applicable to various commercial aircraft models and the
brokerage of a wide variety of new and reconditioned aircraft parts through FAS.
The Company's business is concentrated in the distribution and stocking, as an
authorized factory distributor for various manufacturers, of interior
replacement parts for a wide variety of commercial aircraft models. The Company
also distributes from what it believes to be the largest inventory, outside of
McDonnell Douglas Corporation, of factory new parts for DC-8, DC-9, DC-10 and
MD-80 aircraft, and also purchases and distributes both new and used parts and
related equipment from other aircraft manufacturers for other aircraft. The
Company sells, exchanges or leases parts to commercial aircraft operators
servicing both the passenger and cargo markets, to overhaul facilities and to
brokers throughout the world.
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Distributorships
The Company provides distribution services for manufacturers of
aircraft spare parts. The Company has decided, at this time, to concentrate on
interior parts and is an authorized distributor for a number of manufacturers
providing replacement parts for lavatories, galleys, seats, latches, lighting
and cleaning products. The Company is in varying stages of negotiations with a
number of other manufacturers with respect to becoming their authorized
distributor.
The Company's salespersons solicit annual usage projections from
customers which are used by management to determine inventory stocking levels.
During the fourth quarter of 1996, a major US airline and a regional
carrier each appointed the Company as their exclusive source of replacement
parts for a leading manufacturer of galleys and lavatories. The Company is in
varying stages of negotiations with a number of other airlines to become their
exclusive source of various interior replacements parts. No formal agreements
have been reached with other airlines.
As of December 31, 1996, backlog of distributorship orders for shipment
in 1997, which the Company believes to be firm, was in excess of $1.6 million.
There was no backlog of distributorship orders as of December 31, 1995.
The Company believes that distributorships will represent over 50% of
the Company's gross revenue in 1997, up from 28% in 1996. Accordingly, the
majority of the Company's resources will be directed to this area of business.
McDonnell Douglas Parts
The Company believes that it has the largest factory new inventory of
DC-8, DC-9, DC-10 and MD-80 parts outside of MDC. This inventory consists of
over $80 Million, catalog value, of factory new spare parts purchased directly
from MDC. MDC invantory is generally sold at a discount to catelog value. The
toal future discount to catalog value connot be quantified at this time.
An important factor in the aircraft spare parts distribution market is
the documentation or traceability that is supplied with an aircraft spare part.
MDC has re-certified this inventory as directly traceable to their production
certificate, and is the only inventory known to the Company outside of MDC's
direct control that has been certified to allow them to repurchase and ship to
customers without having to go through their quality control department for a
source inspection.
Based upon its market research, the Company believes that in many cases
parts in this inventory are the only new material and in many cases are the only
material available in any condition.
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McDonnell Douglas Corporation Contracts
On February 7, 1995, the Company and McDonnell Douglas Corporation
("MDC") entered into a Debt Restructure Agreement and related agreements
(collectively the "Current Agreement") pursuant to which MDC canceled $7,658,500
of debt owed by the Company in exchange for 586,862 shares of Series A
Convertible Preferred Stock of FAS (the "Series A Shares") and a cash payment of
$850,000.
In connection with the Current Agreement, the Company and MDC entered
into a Securities Exchange Agreement of even date with the Current Agreement
(the "Exchange Agreement"). The Exchange Agreement provided for the mandatory
exchange of the Series A Shares for 25% of the issued and outstanding common
shares of the Company, par value $.05 per share (the "Common Shares"), on a
fully diluted basis within ten days following the date on which the Common
Shares are approved for quotation on, and are quoted for trading on, the Nasdaq
Stock Market as a Small Cap Market Security. The Exchange Agreement further
provides for the Company to register the Common Shares issued to MDC in
connection with the Exchange Agreement under certain circumstances.
On March 26, 1997, the Company's Common Shares began quotation on the
Nasdaq SmallCap Market. Accordingly, the Company anticipates that the MDC Series
A Shares will be exchanged for approximately 564,194 Common Shares prior to
April 5, 1997. This document does not take into account the exchange of the
Series A Shares.
Peter Frohlich, Alan Fields and Lawrence Troyna (each an officer and
director of the Company and collectively referred to as the "Fields' Group") and
the Company and MDC have entered into a Voting Agreement of even date with the
Current Agreement (the "Voting Agreement"). The Voting Agreement provides that
MDC will vote the Series A Shares and Common Shares owned by MDC (i) in favor of
directors proposed by the Fields' Group, provided MDC has the right to designate
up to 25% of the directors proposed if MDC so elects and (ii) in favor of any
matter reasonably deemed necessary by the Company to have the Common Shares
qualified and listed on the Nasdaq Stock Market.
The Current Agreement provides that where it is in the best interest of
the parties, MDC and the Company will move forward on a number of business
activities. The Company and MDC are currently exploring the following business
activities: 1) consignment of a portion of MDC's excess customer spares
inventory to the Company; 2) on a selective basis, MDC providing spare parts to
the Company at a discount; 3) MDC purchasing inventory from the Company, at
mutually agreed prices, when items that are in inventory are needed by MDC; 4)
MDC purchasing spare parts from the Company through brokerage arrangements where
items not in inventory, but which can be located by the Company, are needed by
MDC; and 5) MDC cooperating with the Company in identifying and acquiring
additional inventories of aircraft spare parts.
The Company is currently marketing spare parts that MDC considers to be
surplus to their needs. There are no other current agreements in place with
respect to any such various activities and there is no assurance any other
agreements will result from such discussions.
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Brokerage Sales
The Company receives requests from its customers for parts that are not
currently held in its inventory. The salesperson receiving this request checks
various computerized databases as well as utilizes the knowledge of the Company
and its staff to locate a suitable part. Once located, a purchase price is
agreed with the owner of the part. At that time, the sales person will contact
the customer and extend a quote. If the quote is accepted by the customer, the
part is purchased and shipment to the Company's warehouse is arranged. When
received at the warehouse, both the part and its accompanying paperwork are
inspected. After inspection and acceptance, the part is shipped to the customer.
Because of government and industry group guidelines, aircraft operators
have become increasingly more careful about from whom they buy parts. The
Company has had its quality control systems and procedures audited and evaluated
by MDC as well as by a number of major airlines and freight operators. Almost
every major U.S. airline, freight operator and overhaul facility has designated
the Company as either an approved or preferred vendor. This preferred status has
enabled the Company to act as a broker to purchase parts for airlines when the
Company does not have the parts in stock.
Because parts for brokerage are not purchased until a corresponding
sale has been made, it is less capital intensive than the purchase and sale of
inventory. Brokerage allows incremental increases in sales without corresponding
increases in overhead.
Marketing Arrangements
The Company is currently in negotiations with several parties on
exclusive and non-exclusive marketing arrangements. The basis of a marketing
arrangement is similar to a consignment agreement, except the Company does not
physically warehouse the spare parts.
Operations
The Company maintains an inventory consisting primarily of factory new
aircraft spare parts in its warehouse in Fillmore, California. The Company's
inventory is listed in two computerized data banks that are available to the
airline industry: SPEC 2000 and the Inventory Locator System. The Company pays a
fee to be listed on such systems and continually updates the systems to keep
them current. In addition, the Company provides an inventory listing in computer
readable form to many of its major customers. The Company receives orders for
spare parts from commercial aircraft operators servicing both the passenger and
cargo markets, from overhaul facilities and from brokers. The Company currently
has four full-time inside salespersons and three full-time outside salespersons.
Additionally, the Company is represented on an international basis by a number
of independent outside general sales agents.
Orders for parts in inventory are filled and shipped, 24 hours per day,
F.O.B. from the warehouse, generally within five hours of the receipt of the
order. The Company believes that the turn-around time between the time an
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order is taken and the part is delivered is a key service for which the customer
is willing to pay. Reducing the time that an aircraft is on the ground is a
major advantage the Company offers to its customers. The Company is 60 minutes
from Los Angeles International Airport and has a delivery service to the
airport. In addition, the Company utilizes commercial cargo carriers to deliver
spare parts to the Los Angeles airport and around the world. The Company
emphasizes its service, which is to respond quickly and assist customers in
obtaining parts.
Consignments
On June 27, 1995 the Company entered into a 3 year consignment
arrangement to warehouse and market spare parts for Airweld of Kentucky, Inc.
Other consignment arrangements are currently under negotiation, although no
assurances can be made that the Company will be successful in completing those
negotiations. Under such consignment arrangements the consignor retains
ownership and the Company arranges the sales for the consignor.
Parts warehoused by the Company under consignment arrangements are also
listed by the Company in the SPEC 2000 and the Inventory Locator System
computerized databanks. In addition, the Company adds the consignment
inventories to the inventory listings that it provides its customers in computer
readable form.
Pricing
The price at which the Company sells parts is based upon market
competition.
Marketing
The Company currently concentrates its marketing efforts in the
following areas:
(i) commercial airlines servicing the passenger market;
(ii) commercial airlines servicing the cargo market;
(iii) aircraft leasing companies; and
(iv) overhaul facilities.
The Company intends to continue concentrating its marketing efforts in
these areas as its business expands.
The Company has not conducted any formal market studies to determine
the actual size of each of its current and any proposed markets, and relies upon
the experience of its officers and key employees for such judgments.
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The Company sells its products through three primary methods:
1. The use of computerized parts database systems.
2. The use of its own sales staff which currently
includes 7 salespersons. This staff works at the
Company's corporate office by calling on customers
and potential customers to determine the needs of
such customers as well as responding to incoming
calls. Once the need is determined, the order is then
sent to the Company's warehouse.
3. The use of exclusive and non-exclusive general sales
agency agreements.
The Company markets its products primarily as follows:
The Company has developed literature and advertising material
describing the Company's products and services. The literature is distributed by
the Company's sales staff and agents, as well as by mail, to previous customers,
persons who have responded to previous advertising and companies believed to be
engaged in the relevant market.
The Company also uses media advertising directed toward specific market
segments such as trade journals and technical publications. In addition, the
Company attends trade shows and puts on exhibitions directed to specific market
segments.
During the fiscal year ended December 31, 1996, one customer of the
Company accounted for more than 10% of sales. No other single customer accounted
for more than 10% of the Company's sales. During the prior fiscal year, two of
the Company's customers each accounted for more than 10% of sales.
In an effort to increase foreign sales, the Company intends to engage
additional independent representatives to serve foreign markets.
Competition
The Company competes with a number of large and small sellers of
aircraft spare parts in various markets. For many of the Company's competitors,
the sale of aircraft spare parts is only a part of larger sales operations.
Many of the Company's competitors are larger and more established than the
Company and have greater financial resources and larger facilities and marketing
forces. The Company's increased emphasis during the past two years on
distributorships and foreign markets has exposed the Company to new competitors,
including foreign competitors.
Although the Company has not performed any market survey studies, it
believes that its competition is based primarily upon service, price and
reputation of the supplier. The Company believes that it is competitive and that
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it enjoys a good reputation. There can be no assurance, however, that the
Company has, or can maintain, a significant competitive advantage in any of
these areas.
Government Regulation
The Company's business is regulated by the Federal Aviation
Administration ("FAA"). The FAA has numerous regulations that must be complied
with by the Company.
The Company is subject to federal governmental regulation on foreign
sales of its products. Depending on the type of product, the Company may be
subject to review by the various federal agencies for a determination of whether
the specific product is a high technology product subject to restriction. Export
licenses may be denied for certain high technology products. If such a decision
is rendered, the Company may experience substantial time delays and expense in
the application and approval of export licenses. If export licenses are not
granted, the Company would be precluded from selling such products in certain
foreign markets.
The Company's sales in foreign countries are subject to various
applicable foreign governmental regulations. To date, compliance with such
regulations has not had a material adverse effect on the Company's operations.
Employees
The Company has 26 full-time employees, including its executive
officers, and two part-time employees. Eight are engaged in sales and marketing,
four in administration and the remainder in warehouse and support services. None
of the employees are unionized and management is of the opinion that its
relationship with its employees is good. Management believes that persons with
requisite training and experience are readily available to meet Company needs if
and when necessary.
Financing Arrangements
On February 7, 1995, the Company owed $7,658,000 to MDC made up of the
original note of $3,387,000 granted at the time of the Original Agreement,
deferred interest of $1,138,000 and deferred sales commissions of $3,133,000.
Additionally, the Company's bank lender was owed approximately $5,500,000. At
that time the Company closed the Current Agreement and Exchange Agreement with
MDC described above.
On February 9, 1995, the Company, through FAS, entered into a line of
credit arrangement (the "Credit Agreement") with Norwest Business Credit Inc.
("Norwest") providing originally for a line of credit in the amount of
$10,000,000 with interest payable monthly at 2.5% over the prime rate. Although
due on demand, it expires in February 1998. The line of credit was partially
used to repay the bank lender $5,500,000 and to pay $850,000 to MDC. All assets
of the Company and its subsidiaries are pledged as collateral.
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The Norwest credit line of $10,000,000 was initially divided into two
areas: an $8,000,000 inventory line and a $2,000,000 accounts receivable line.
Commencing April 1995 the available inventory credit reduced by $100,000 per
month. The available accounts receivable credit could increase up to a maximum
of $10,000,000 depending on the amount of accounts receivable; however, the
total of the inventory line and accounts receivable line cannot exceed
$10,000,000. In August 1996, The Fourth Amendment to Credit Agreement (the
"Fourth Amendment") reduced the maximum amount outstanding at any time under the
Credit Agreement to $6,900,000 with monthly reductions of $250,000 commencing
October 1996. Subsequent to the year end, the Fifth, Sixth and Seventh
Amendments to the Credit Agreement were signed which reduced the maximum amount
permitted to be outstanding to $6,150,000, $6,100,000 and $6,081,000,
respectively. In March 1997, an Eighth Amendment was entered into which
increased the maximum amount permitted to be outstanding to $6,131,000.
In June 1996, FAS entered into a Third Amendment to Credit Agreement
with Norwest whereby, among other things, the interest rate was increased to
5.5% over the prime rate. In August 1996, the Fourth Amendment further increased
the interest rate payable to Norwest by .5% per month commencing October 1996.
As of December 31, 1996, the interest rate was 15.25%.
As of December 31, 1996, the Company was in default with Norwest. The
Credit Agreement with Norwest required that the Company, as of June 30, 1996,
achieve net earnings from operations for the six months ending on that date of
$150,000 whereas the Company had a net loss from operations for that period of
$679,000. Subsequently, on March 12, 1997, Norwest waived all and any defaults
by the Company up to that date.
In connection with the Norwest credit facility, the Company retained a
financial advisor to assist the Company in obtaining and closing the Norwest
credit facility. At the closing of the Norwest facility, the Company paid the
financial advisor a fee of $200,000. The Company also entered into a two-year
contract with the financial advisor in February 1995 whereby the financial
advisor will provide ongoing consulting to the Company. The contract provides
for the Company to pay the financial advisor a non-refundable retainer of
$150,000, which was originally payable at a rate of $15,000 per month for the
first ten months of the contract. However, the parties subsequently agreed that
the retainer would be payable at a rate of $7,500 per month. The agreement with
the financial advisor is non-exclusive and does not provide for additional
completion fees which would be negotiated on a case by case basis.
On March 20, 1997, the Company received a conditional loan commitment
from a capable lender for a loan of up to $10 million on terms acceptable to the
Company. It is anticipated that the loan will fund during April, 1997, although
there can be no certainty that the loan will be consummated. If funded, the loan
will repay all amounts outstanding to Norwest and provide the Company with
additional funding for its business.
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ITEM 2. DESCRIPTION OF PROPERTY
The Company's warehouse is located at 341 "A" Street, Fillmore,
California. The executive offices are located at 2251-A Ward Avenue, Simi
Valley, California and its telephone number is (805) 583-0080. The warehouse
building was leased by the Company in 1988. In 1991 the Company exercised an
option to purchase the building for $885,000. The executive offices located at
the warehouse were severely damaged during the January 17, 1994 earthquake and
are no longer in use. The warehouse itself was only partially damaged, while the
inventory was not damaged. The building was insured against earthquake damage.
During 1996, the Company received $1,250,000 in final settlement of its claim.
The warehouse is an older produce-packing building of wood and concrete
construction with a high-ceiling upper floor and a concrete lower/basement
floor, all clear span except for wooden pillar supports. The total storage area
for both floors is 83,600 sq. ft. Exterior open- air storage area (secured) is
approximately 18,700 sq. ft.
A modern fire-prevention system with a ceiling water pressure sprinkler
system is installed on both floors. A visual/aural monitoring security system
operates inside the building and in all the exterior property contained within
the fenced area.
As a result of the damage to the Company's executive offices in the
warehouse, the Company leased its current executive offices from a third party
at a monthly rental of $4,451. The property is leased on a month to month basis.
On March 21, 1997 the Company signed a new lease effective August 1,
1997 for a facility to replace its current executive offices and to provide
additional warehousing capabilities. The facility consists of approximately
7,500 sq. ft. of offices and 16,500 sq. ft. of warehouse space. The monthly
rental is $12,000 and the lease expires in 2002.
The Company maintains an executive office located in London, England.
The office is leased from a third party by Belgravia Financial Services Limited,
an entity owned and controlled by certain officers of the Company, and is
sublicensed to the Company on a month to month basis at a monthly rental to the
Company of $1,900. The underlying lease expires September of 1999. See "Certain
Relationships and Related Transactions."
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The following chart provides more detailed information concerning the
Company's properties:
Approximate Size
in
Location Sq. Ft. of Facility Lease Expiration Primary Use
- -------- ------------------- ---------------- -----------
Fillmore, California 83,600(1) Owned Warehouse
Simi Valley, California 5,000 month to month Executive Offices
London, England 1,000(2) month to month Executive Offices
Simi Valley, California(3) 24,000 2002 Executive Offices
and Warehouse
(1) Located on two acres.
(2) Licensed from Belgravia Financial Services Limited. Belgravia
Financial Services Limited has a lease on the property that expires in
September 1999. See "Certain Relationships and Related Transactions."
(3) Effective August 1, 1997
ITEM 3. LEGAL PROCEEDINGS
The Company is currently not a party to any known litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the year ended
December 31, 1996 to a vote of the Company's shareholders.
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PART II.
ITEM 5. MARKET FOR COMMON SHARES AND RELATED SHAREHOLDER MATTERS
Market Information
During 1995 and until May 17, 1996, there was no market for the
Company's Common Shares. The Common Shares were quoted over-the-counter under
the symbol FASS until March 25, 1997. Commencing March 26, 1997, the Common
Shares were quoted on the Nasdaq SmallCap Market under the symbol FASI. The
following table sets forth, for the fiscal quarters indicated, the high and low
bid quotations as reported by the National Quotation Bureau and based on the
Company's records. The quotations reflect inter-dealer prices without retail
mark-up, mark-down or commission, and may not represent actual transactions.
1996 High Bid Low Bid
Second Quarter
(beginning May 17, 1996) 6 1/2 2 1/2
Third Quarter 5 4
Fourth Quarter 5 2 1/2
Shareholders.
At March 3, 1997, the number of record holders of the Company's Common
Shares was approximately 304. The Company has no outstanding preferred shares.
Dividends
The Company has utilized all available funds for working capital
purposes and has never paid a dividend. Management does not anticipate paying
dividends in the foreseeable future on Common Shares or preferred shares. In
addition, the Credit Agreement prevents the payment of dividends by the Company.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The following discussion should be read in conjunction with the
consolidated financial statements and related notes thereto set forth elsewhere
in this Annual Report. The following tables illustrate certain selected
financial information regarding the Company and its subsidiaries:
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<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
Statement of Operations Data: 1996 1995 1994
<S> <C> <C> <C>
Sales $ 5,734,000 $ 5,589,000 $ 2,965,000
Net income (loss) $ (242,000) $ 4,547,000 $(1,337,000)
Net income (loss) per common share $ (0.13) $ 3.47 $ (1.51)
Balance Sheet Date: December 31, 1996 1995 1994
Total Assets $11,499,000 $10,934,000 $10,217,000
Current Liabilities $ 7,418,000 $ 8,533,000 $14,206,000
Long Term Liabilities $ 268,000 -0- $ 457,000
Minority Interest -0- $ 2,050,000 --
Shareholders' Equity (Deficit) $ 3,813,000 $ 351,000 $(4,446,000)
</TABLE>
Results of Operations
To date, the Company has not achieved sustained profitable operations.
The Company may incur losses in the future. If such losses do occur, the Company
may be required to reduce its inventory and its marketing efforts and seek
additional financing.
The following table sets for the percentages which the items in the
Company's consolidated statement of operations bears to net sales for the
periods indicated:
Fiscal Year
1996 1995 1994
Statements of Operations Data:
Net Sales 100.0% 100.0% 100.0%
Cost of Sales 51.9 44.1 37.0
Gross Profit 48.1 55.9 63.0
General and administrative expenses 45.5 43.2 70.7
Interest expense, net 23.3 20.8 34.2
Operating Profit (loss) (20.7) (8.1) (41.9)
Other income 16.6 88.4 0.0
Income (loss) before income taxes (4.1) 80.3 (41.9)
Income tax expense (credit) 0.1 (1.0) 3.2
Net income (loss) (4.2) 81.3 (45.1)
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Years Ended December 31, 1996 and 1995
Sales for the year ended December 31, 1996 increased by $145,000, or
2.6%, to $5,734,000 as compared to $5,589,000 for the year ended December 31,
1995. The increase in net sales was attributable to a 71.4% increase in
distributorship and brokerage sales offset by a decrease of 36.2% in MDC
inventory gross sales. The trend of overall increasing net sales and the shift
to distributorship and brokerage sales is evidenced by 1997 sales through March
26, 1997 as compared to the quarter ended March 31, 1996 as follows: An increase
in net sales of 43.6%, an increase in distributorship and brokerage sales of
128.4% and a decrease in MDC inventory sales of 45.5%. The increase in
distributorship and brokerage sales is expected to continue and the decrease in
MDC inventory is expected to level off.
Cost of goods sold for 1996 increased by $513,000, or 20.8%, to
$2,975,000 from $2,462,000 in 1995. Cost of goods sold were 51.9% of sales in
1996 compared to 44.1% of net sales in 1995. The reduction in the gross margin
percentage is a result of the increasing proportion of total sales represented
by brokerage and distributorship transactions as opposed to MDC inventory where
the margins are larger.
Total operating expenses before non-recurring earthquake expense
reimbursement of $150,000 for 1996 increased by $519,000, or 14.5% to $4,096,000
as compared to $3,577,000 for 1995. Net operating expenses for 1996 after the
non-recurring earthquake expense reimbursement of $150,000 was $3,946.000. This
increase is principally attributable to additional expenses associated with the
increase in sales, the shift of sales and higher interest expense. General
administrative expenses increased $344,000 or 14.2% and interest expense
increased $175,000 or 15.0%. The major portion of the increase in general and
administrative expenses resulted from additional staffing costs incurred to
generate the increased distributorship and brokerage sales. Interest expense
increased because of an increase in the rate charged by the Company's primary
lender and because of the fees associated with several amendments to the Credit
Agreement.
Operations of the Company and its subsidiaries for 1996 generated a
loss of $1,187,000, as compared to a loss of $450,000 in the prior year. The
increase of $737,000 in the loss from operations in 1996 is attributable to an
increase in operating and interest expenses and a reduction in gross margin.
During 1996, the Company recognized a non-recurring gain of $949,000
from the recovery of a casualty insurance claim as a result of the 1994
earthquake. During 1995, the Company recognized a $4,759,000 gain on exchange of
debt as a result of the exchange of preferred stock of a subsidiary for
$6,809,000 of debt of that subsidiary. In addition, the Company recognized a
non-recurring gain of $183,000 from the sale of a subsidiary.
As a result of the foregoing, the Company had a net loss in 1996 of
$242,000, as compared to net income in 1995 of $4,547,000, a decrease of
$4,789,000.
13
<PAGE>
Years Ended December 31, 1995 and 1994
The Company had net income of $4,547,000 for the year ended December
31, 1995 compared to a net loss of $1,337,000 for the year ended December 31,
1994. The increase in net income is attributable to a decrease in operating loss
of approximately $792,000 and non-recurring gains recognized during 1995.
During 1995, the Company recognized a $4,759,000 gain on exchange of
debt as a result of the exchange of preferred stock of a subsidiary for
$6,809,000 of debt of that subsidiary. In addition, the Company recognized a
non-recurring gain of $183,000 from the sale of a subsidiary.
Operations of the Company and its subsidiaries for the year ended
December 31, 1995 generated a loss of $450,000 as compared to loss from
operations of $1,242,000 in the prior year. Sales for 1995 and 1994 were
$5,589,000 and $2,965,000, respectively. The reduction in the loss from
operations in 1995 is attributed to increased sales and a reduction in operating
expenses as a percentage of sales.
Among factors causing the increase in sales were an expansion of the
sales team, the completion of the Company's refinancing, which allowed
management to concentrate its efforts toward marketing, and the ability to
pursue brokerage transactions, which the new refinancing package allowed.
Costs of goods sold for the year ended December 31, 1995 were
$2,462,000 (approximately 44% of sales) compared to $1,096,000 (approximately
37% of sales) for the prior year. The reduction in the gross margin percentage
is a result of the increasing proportion of total sales represented by brokerage
transactions as opposed to sales of owned inventory where the margins are
larger.
Total operating expenses before non-recurring items were $3,577,000 for
the year ended December 31, 1995 compared with $3,111,000 for the prior year.
The increase is due principally to additional expenses associated with the
increase in sales, and the higher interest expense.
Liquidity
At December 31, 1996 the Company had working capital (current assets in
excess of current liabilities) of $2,434,000 compared to working capital of
$657,000 on December 31, 1995. The increase in liquidity is attributable
principally to a decrease in short term bank debt as a result of the Company's
receipt of both the proceeds of a casualty insurance claim and the proceeds of a
sale of Common Shares and Warrants to non-United States investors by means of a
private placement memorandum under Regulation S of the Securities Act of 1933
(the "Securities Act"). The Company received the proceeds of the casualty
insurance claim after it agreed on a final settlement with its insurance company
14
<PAGE>
on its claim following the January 17, 1994 Los Angeles earthquake. This change,
coupled with an increase in distributorship inventory, was partially offset by
an increase in accounts payable and accrued liabilities.
Operating activities used $350,000 and $820,000 of the Company's cash
flow for the year ended December 31, 1996 and the prior year, respectively.
Increases in accounts payable and accruals of $467,000 and depreciation and
amortization of $120,000 generated cash. Such amounts were partially offset by
an increase of $456,000 in inventories and $272,000 of other assets and an
increase in accounts receivable of $226,000.
In June 1996, FAS entered into a Third Amendment to Credit Agreement
with Norwest whereby, among other things, the interest rate was increased to
5.5% over the prime rate. In August 1996, FAS entered into a Fourth Amendment to
Credit Agreement further increasing the interest rate payable to Norwest by .5%
per month commencing October 1996. As of December 31, 1996, the interest rate
was 15.25%.
The Credit Agreement with Norwest required that the Company, as of June
30, 1996, achieve net earnings from operations for the six months ending on that
date of $150,000 whereas the Company had a net loss from operations for that
period of $679,000. Norwest had indicated to the Company that it did not intend
to take any action as a result of the default, but reserved its right to take
appropriate action at any time. Subsequently, on March 12, 1997, Norwest waived
any and all defaults by the Company up to that date.
The Company's credit facility with Norwest expires in February 1998 but
is payable on demand by Norwest. Accordingly, Norwest could require repayment of
all amounts owed by the Company at any time. The Company is currently
investigating possible alternative sources of financing. The Company believes
that alternative financing would be available to repay the amounts owed to
Norwest if demand for immediate payment was made. However, there is no assurance
that the Company would be able to arrange alternative financing in order to
timely repay the loan if demand for immediate payment was made. If that were to
occur, the Company could become subject to possible action by Norwest to enforce
its security interest in the Company's assets.
On March 20, 1997, the Company received a conditional loan commitment
from a capable lender for a loan of up to $10 million on terms acceptable to the
Company. It is anticipated that the loan will fund during April, 1997, although
there can be no certainty that the loan will be consummated. If funded, the loan
will repay all amounts outstanding to Norwest and provide the Company with
additional funding for its business.
Capital Resources
The Company's operations to date have been primarily funded through
bank loans and vendors deferred purchase notes.
15
<PAGE>
The Company had no commitments of capital resources at December 31,
1996. On February 9, 1995, the Company, through FAS, entered into a line of
credit arrangement with Norwest providing for a line of credit in the amount of
$10,000,000. At December 31, 1996, approximately $6,232,000 of credit had been
extended under the credit line of $10,000,000.
The Norwest credit line of $10,000,000 was initially divided into two
areas: an $8,000,000 inventory line and a $2,000,000 accounts receivable line.
Commencing April 1995 the available inventory credit reduces by $100,000 per
month. The available accounts receivable credit could increase up to a maximum
of $10,000,000 depending on the amount of accounts receivable; however, the
total of the inventory line and accounts receivable line cannot exceed
$10,000,000. The Fourth Amendment reduced the maximum amount outstanding at any
time to $6,900,000 with monthly reductions of $250,000 commencing October 1996.
Subsequent to the year end, the Fifth, Sixth, Seventh and Eighth
Amendments to the Credit Agreement were signed which reduced the maximum amount
permitted to be outstanding to $6,150,000, $6,100,000, $6,081,000 and
$6,131,000, respectively.
On February 7, 1995, the Company's wholly owned subsidiary, FAS, owed
MDC $7,658,000. In connection with the Norwest financing, MDC cancelled that
debt in exchange for $850,000 in cash and 586,862 Series A Shares of FAS. MDC's
investment in FAS is reflected as a minority interest in a subsidiary on the
Company's balance sheet dated December 31, 1995. The minority interest was
valued at $2,050,000. The valuation of the minority interest is based on the
estimated market value of the Common Shares of the Company into which the Series
A Shares of FAS may be converted. While the Company has valued the minority
interest on this basis for accounting purposes, the Series A Shares of FAS have
other rights and preferences in addition to their conversion rights that may
substantially increase their value.
During 1996 MDC filed with the Securities and Exchange Commission (the
"SEC") a Form 13(d) evidencing its beneficial ownership in the Company.
Accordingly, although the Series A Shares were not converted into Common Shares
of the Company prior to December 31, 1996, the December 31, 1996 financial
statements have been prepared as if such conversion had occurred and the
minority interest was reclassified as additional paid-in capital.
The Series A Shares became convertible into Common Shares of the
Company at MDC's upon the approval of the Common Shares for quotation and
commencement of trading on Nasdaq as a Small Cap Market Security. The Company's
Common Shares began quotation on the Nasdaq SmallCap Market beginning March 26,
1997. On or before approximately April 5, 1997 the Company anticipates that the
MDC Series A Shares will be exchanged for approximately 564,194 Common Shares.
During 1996, the Company began a private placement transaction by means
of a private placement memorandum to non-United States persons pursuant to
Regulation S of the Securities Act. 164,283 units (the "Units") representing
16
<PAGE>
328,566 Common Shares and warrants to acquire 164,283 Common Shares at $6.25 per
share (the "Warrants") were sold for $2,135,685 between September 1996 and
February 1997. The Warrants are exercisable at anytime prior to the second
anniversary of their issuance. Etablissement Pour Le Placement Prive, Zurich
Switzerland, acted as the Company's placement agent in connection with the
offering. After brokerage and issuance costs, the sales resulted in a net
infusion of capital of $1,654,000.
The Company will continue to actively seek equity capital infusions.
Unless operations of the Company generate a profit, additional capital will be
needed to continue operations in the future or operations may be reduced. There
is no assurance the Company will be successful in securing additional capital.
In addition, the Company will seek to acquire other companies in
similar or allied businesses. Any such acquisition will only be undertaken
following a careful analysis of the potential acquisition, its potential, any
potential synergism with the Company's existing business and the capital needs
of the acquired products compared to the capital needs and resources of the
Company. There is no assurance that any acquisitions will be successfully
completed.
Forward-Looking Statements
Statements regarding the Company's expectations as to its capital
resources and certain other information presented in this Form 10-KSB constitute
forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Although the Company believes that its
expectations are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not differ materially from its expectations. In addition to matters
affecting the economy and the Company's industry generally, factors that could
cause actual results to differ from expectations include, but are not limited
to, the following: (i) the Company's ability to obtain alternative debt
financing may be adversely affected by its past technical defaults on its
current debt financing and its uncertainty of future profitability; (ii) the
Company's ability to acquire other businesses in similar or allied businesses
may be adversely affected if the Company is not able to raise additional capital
and obtain any necessary debt financing; (iii) the Company's ability to raise
additional capital may be adversely affected by its lack of trading volume and
the Company's uncertainty of future profitability; (iv) regulation by
governmental authorities, and (v) growth of the airline industry.
ITEM 7. FINANCIAL STATEMENTS
The financial statements, supplementary data and report of independent
public accountants are filed as part of this report on pages F-1 through F-13.
The following financial statements of the Company are included beginning at page
F-1.
Independent Auditors' Report F-1
17
<PAGE>
Consolidated Balance Sheet as of December 31,
1996 and 1995 Exhibit A F-2
Consolidated Statement of Operations for the
years ended December 31, 1996, 1995 and 1994 Exhibit B F-3
Consolidated Statement of Shareholders' Equity
for the years ended December 31, 1996, 1995
and 1994 Exhibit C F-4
Consolidated Statement of Cash Flows for the
years ended December 31, 1996, 1995 and 1994 Exhibit D F-5
Notes to the Consolidated Financial Statements F-6 - F-13
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
18
<PAGE>
The Board of Directors
Fields Aircraft Spares, Inc.
Fillmore, California
Independent Auditors' Report
We have audited the accompanying consolidated balance sheet of Fields
Aircraft Spares, Inc., formerly known as Fields Industrial Group, Inc., as of
December 31, 1996 and 1995 and the related consolidated statements of
operations, shareholders' equity and cash flows for the years ended December 31,
1996, 1995 and 1994. 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 Fields Aircraft
Spares, Inc. as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for the years ended December 31, 1996, 1995 and 1994 in
conformity with generally accepted accounting principles.
/s/ Moore Stevens Frazier and Torbet, LLP
Certified Public Accountants
January 23, 1997
F-1
<PAGE>
FIELDS AIRCRAFT SPARES, INC. EXHIBIT A
FORMERLY KNOWN AS
FIELDS INDUSTRIAL GROUP, INC.
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31,
<TABLE>
<CAPTION>
A S S E T S
-----------
1996 1995
---- ----
CURRENT ASSETS:
<S> <C> <C>
Cash $ 88,000 $ 111,000
Accounts receivable, net of allowance for
doubtful accounts of $50,000 in 1996 and
$10,000 1995 1,507,000 1,281,000
Inventory 8,108,000 7,652,000
Prepaid expenses 149,000 146,000
-------------- -----------
Total current assets $ 9,852,000 $ 9,190,000
------------- ----------
LAND, BUILDING AND EQUIPMENT:
Land $ 210,000 $ 210,000
Building and building improvements 1,061,000 1,132,000
Furniture and equipment 548,000 536,000
-------------- -----------
Totals $ 1,819,000 $ 1,878,000
Less accumulated depreciation and amortization 734,000 635,000
-------------- -----------
Total land, building and equipment, net $ 1,085,000 $ 1,243,000
------------- ----------
OTHER ASSETS:
Debt issuance costs, net of accumulated
amortization of $388,000 in 1996 and
$177,000 in 1995 $ 300,000 $ 420,000
Other assets 262,000 81,000
-------------- -------------
Total other assets $ 562,000 $ 501,000
-------------- -----------
Total assets $ 11,499,000 $ 10,934,000
============ ==========
<CAPTION>
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
---------------------------------------------------------------- 1996 1995
------ -----
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable $ 864,000 $ 488,000
Accrued liabilities 230,000 139,000
Income taxes payable 1,000 1,000
Current portion of notes payable 6,323,000 7,905,000
------------- ------------
Total current liabilities $ 7,418,000 $ 8,533,000
------------- -----------
LONG-TERM LIABILITIES:
Notes payable, net of current portion $ 268,000 $
-------------- ---------------
MINORITY INTEREST $ $ 2,050,000
-------------------- -----------
SHAREHOLDERS' EQUITY:
Common stock $ 312,000 $ 297,000
Additional paid-in capital 5,065,000 1,376,000
Retained deficit (1,564,000) (1,322,000)
------------- -----------
Total shareholders' equity $ 3,813,000 $ 351,000
------------- ------------
Total liabilities and shareholders' equity $ 11,499,000 $ 10,934,000
============ ===========
</TABLE>
The accompanying notes are an integral part of this statement
F-2
<PAGE>
FIELDS AIRCRAFT SPARES, INC. EXHIBIT B
FORMERLY KNOWN AS
FIELDS INDUSTRIAL GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
SALES $ 5,734,000 $ 5,589,000 $ 2,965,000
COST OF SALES $ 2,975,000 $ 2,462,000 $ 1,096,000
----------- ----------- -----------
GROSS PROFIT $ 2,759,000 $ 3,127,000 $ 1,869,000
------------- ----------- ------------
OPERATING EXPENSES:
General and administrative $ 2,608,000 $ 2,414,000 $ 2,096,000
Interest, net 1,338,000 1,163,000 1,015,000
------------- ---------- -------------
Total operating expenses $ 3,946,000 $ 3,577,000 $ 3,111,000
------------- ---------- -------------
LOSS FROM OPERATIONS $ (1,187,000) $ (450,000) $ (1,242,000)
------------- ----------- -------------
OTHER INCOME:
Casualty gain $ 949,000 $ - $ -
Gain on exchange of debt - 4,759,000 -
Gain on sale of subsidiary - 183,000 -
--------------- -------------- -------------
Total other income $ 949,000 $ 4,942,000 $ -
-------------- -------------- -------------
(LOSS) INCOME BEFORE PROVISION
(CREDIT) FOR INCOME TAXES $ (238,000) $ 4,492,000 $ (1,242,000)
PROVISION (CREDIT) FOR INCOME TAXES 4,000 (55,000) 95,000
-------------- --------------- -------------
NET (LOSS) INCOME $ (242,000) $ 4,547,000 $ (1,337,000)
============== =============== =============
NET (LOSS) INCOME PER SHARE
(fully-diluted) $ (.13) $ 3.47 $ (1.51)
================= ============== ================
NET (LOSS) INCOME PER SHARE (primary) $ (.13) $ 3.47 $ (1.51)
================= ============== ================
</TABLE>
The accompanying notes are an integral part of this statement.
F-3
<PAGE>
FIELDS AIRCRAFT EXHIBIT CRATED
FORMERLY KNOWN AS
FIELDS INDUSTRIAL GROUP, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
COMMON STOCK
-------------
NUMBER ADDITIONAL TOTAL
OF SHARES PAID-IN RETAINED SHAREHOLDERS'
OUTSTANDING AMOUNT CAPITAL DEFICIT EQUITY (DEFICIT)
------------- -------- ---------- -------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCES, January 1, 1994 883,232 $ 44,000 $ 1,376,000 $ (4,532,000) $ (3,112,000)
Common stock issued for services 61,120 3,000 3,000
Net loss (1,337,000) (1,337,000)
------------- ------------- ------------ ------------ ------------
BALANCES, December 31, 1994 944,352 $ 47,000 $ 1,376,000 $ 5,869,000) $ (4,446,000)
Sale of common stock 40,000 250,000 250,000
Net income 4,547,000 4,547,000
------------- -------------- ------------ ------------ ------------
BALANCES, December 31, 1995 984,352 $ 297,000 $ 1,376,000 $(1,322,000) $ 351,000
Additional paid-in capital 2,050,000 2,050,000
Sale of common stock 317,785 15,000 1,639,000 1,654,000
Net loss (242,000) (242,000)
--------------- -------------- ------------- ------------- ------------
BALANCES, December 31, 1996 1,302,137 $ 312,000 $ 5,065,000 $ (1,564,000) $ 3,813,000
========= ======== ========== ============= ============
</TABLE>
The accompanying notes are an integral part of this statement.
F-4
<PAGE>
FIELDS AIRCRAFT SPARES, INC. EXHIBIT D
FORMERLY KNOWN AS
FIELDS INDUSTRIAL GROUP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net (loss) income $ (242,000) $ 4,547,000 $ (1,337,000)
Adjustments to reconcile net (loss)
income to net cash (used in)
provided by operating activities:
Depreciation and amortization 120,000 89,000 86,000
Amortization of debt issuance costs 211,000 177,000 112,000
Loss on sale of assets 51,000
Gain on exchange of debt (4,759,000)
Gain on sale of subsidiary (183,000)
Common stock issued for services 3,000
(Increase) decrease in accounts receivable (226,000) (925,000) 423,000
(Increase) decrease in inventory (456,000) 84,000 288,000
Increase in prepaid expenses (3,000) (93,000) (20,000)
Increase in other assets (272,000) (81,000)
Decrease in income tax refund receivable 711,000 95,000
Increase (decrease) in accounts payable 376,000 (225,000) 416,000
Increase in accrued interest payable 296,000
Increase (decrease) in other accrued liabilities 91,000 (127,000) (186,000)
Decrease in income taxes payable (35,000)
Increase in deferred sales commissions 71,000
Net cash (used in) provided by
operating activities $ (350,000) $ (820,000) $ 247,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of land, building and equipment $ (13,000) $ (156,000) $ (176,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (payments) borrowings on line of credit $ (1,195,000) $ 1,250,000 $
Principal payments on notes payable (193,000) (64,000) (76,000)
Borrowings on notes payable 74,000 64,000
Costs associated with issuance of notes payable (424,000) (170,000)
Proceeds from sale of common stock 1,654,000 250,000
Net cash provided by (used in)
financing activities $ 340,000 $ 1,076,000 $ (246,000)
NET (DECREASE) INCREASE IN CASH $ (23,000) $ 100,000 $ (175,000)
CASH, beginning of year 111,000 11,000 186,000
CASH, end of year $ 88,000 $ 111,000 $ 11,000
</TABLE>
The accompanying notes are an integral part of this statement.
F-5
<PAGE>
FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies
a. Principles of consolidation and company background
The consolidated Group financial statements include the
accounts of Fields Aircraft Spares, Inc., a Utah corporation, formerly known as
Fields Industrial Group, Inc., hereafter referred to as FASI, and its
wholly-owned subsidiaries Fields Aircraft Spares Incorporated (FASC), a
California corporation and Fields Aero Management, Inc. All significant
intercompany accounts and activity have been eliminated.
In 1995, Fields Industrial Group, Inc. changed its name to
Fields Aircraft Spares, Inc.
The Group distributes new aircraft parts and equipment for use
on international and domestic commercial and military aircraft and purchases and
sells parts on a brokerage basis.
b. Concentration of credit risk
Substantially all of the Group's trade accounts receivables
are due from companies in the airline industry located throughout the United
States and internationally. The Group performs periodic credit evaluations of
its customers' financial condition and does not require collateral. Credit
losses relating to customers in the airline industry have consistently been
insignificant and within management's expectations.
c. Concentration of sales
The Group had sales to foreign companies that amounted to 17%,
32% and 17% of total sales for the years ended December 31, 1996, 1995 and 1994,
respectively.
For the year ended December 31, 1996 two customers accounted
for sales of $657,000 and $351,000. For the year ended December 31, 1995, two
customers accounted for sales of $801,000 and $790,000. For the year ended
December 31, 1994, one customer accounted for $507,000 of sales.
d. Inventory
Inventory is valued at the lower of cost or market value using
the first-in, first-out method. Where a group of parts have been purchased
together as a lot, the cost of the lot is allocated to the individual parts by
management pro rata to the list selling price at the time of purchase.
Consistent with industry practice, inventory is carried as a current asset but
all inventory is not expected to be sold within one year.
F-6
<PAGE>
FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (continued):
e. Land, building and equipment
Land, building and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets which range from 3 to 25 years.
The cost and related accumulated depreciation of assets sold
or otherwise retired are eliminated from the accounts and any gain or loss is
included in the statement of operations. The cost of maintenance and repairs is
charged to income as incurred, whereas significant renewals and betterments are
capitalized. Depreciation expense for the years ended December 31, 1996, 1995
and 1994 amounted to $120,000, $89,000 and $86,000, respectively.
f. Debt issuance costs
The debt issuance costs relate to the issuance of new
financing. Amortization of debt issuance costs for the years ended December 31,
1996, 1995 and 1994 amounted to $211,000, $177,000 and $112,000, respectively.
g. Revenue recognition
The Group recognizes revenue from all types of sales under
the accrual method of accounting when title transfers. Title transfers at the
Group's facility.
h. Earnings per share
In March 1995, FASI's shareholders authorized the reverse
split of its common stock on the basis of fifty old shares for one new share.
This reverse split was effective as of November 1995. All references herein to
the number of shares are after the reverse split.
Earnings per share was computed using 1,840,543, 1,312,469 and
888,325 shares for the years ended December 31, 1996, 1995 and 1994,
respectively.
i. Income taxes
The Group files consolidated income tax returns. Deferred
income taxes relate to temporary differences between financial statement and
income tax reporting of certain accrued expenses, state income taxes, bad debts,
inventory, and depreciation.
F-7
<PAGE>
FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of significant accounting policies (continued):
The Group adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". SFAS 109 requires the
recognition of deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between tax basis and financial reporting
basis of other assets and liabilities. The income tax effect of the temporary
differences as of December 31 consisted of the following:
1996 1995
Deferred tax liability resulting from
taxable temporary differences for
accounting for inventory $ (314,000) $ (314,000)
Deferred tax asset resulting from
deductible temporary differences
for allowance for doubtful accounts 4,000 4,000
Deferred tax asset resulting from
deductible temporary differences
for utilization of net operating loss
carryforwards for income tax
purposes 1,344,000 921,000
Valuation allowance resulting from the
potential nonutilization of net operating
loss carryforwards for income tax
purposes (1,034,000) (611,000)
---------- ---------
Total deferred income taxes $ -0- $ -0-
============= ==========
j. Employee benefit plan
FASC has a 401(k) Plan under Section 401(k) of the Internal
Revenue Code. The Plan allows all employees who are not covered by a collective
bargaining agreement to defer up to 15% of their compensation on a pre-tax basis
through contributions to the Plan. Contributions to the Plan by FASC are
discretionary and are determined by the Board of Directors. No contributions
were made to the Plan during the years ended December 31, 1996, 1995 and 1994.
k. 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 amounts reported in the financial statements and
accompanying notes. Management believes that the estimated utilized in preparing
its financial statements are reasonable and prudent. Actual results could differ
from these estimates.
F-8
<PAGE>
FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Shareholders' equity
FASI has 50,000 shares authorized of its $.001 par value
preferred stock. At December 31, 1996 and 1995, there were no shares of
preferred stock issued or outstanding. The preferred shares, if issued, may be
granted the right to convert into common shares. On liquidation, the preferred
shares may be entitled to share in the liquidation proceeds after satisfaction
of creditors and prior to any distribution to the common shareholders to the
extent of the preference determined by the Board of Directors at the time of
issuance.
FASI has the following common stock as of December 31:
1996 1995
---- ----
Authorized 2,000,000 2,000,000
Issued and outstanding 1,302,137 984,352
Par value $.05 $.05
All of the common shares have equal voting rights. The common
shares have no pre-emptive or conversion rights, no redemption or sinking
provisions, and are not liable for further call or assessment. Each common share
is entitled to share ratably in any assets available for distribution to the
common shareholders upon liquidation of the Group.
In February 1995, the Group owed $7,658,000 to McDonnell
Douglas Corporation (MDC). MDC cancelled the debt in exchange for $850,000 plus
586,862 shares of Series A convertible preferred stock of FASC. This constituted
full and complete satisfaction of the MDC debt. The agreement provided for the
mandatory exchange of the Series A preferred stock of FASC for 25% of the total
outstanding common stock of FASI within 10 days following the date the common
stock is approved for quotation on, and is quoted for trading on, the Nasdaq
Stock Market. The Series A convertible preferred stock carries a liquidation
preference of $5,000,000; which, in the event of a liquidation of FASC, should
be paid pro rata to the holders of the Series A shares.
On April 17, 1996 the Securities and Exchange Commission
("Commission") notified FASI that it had no further comments on the Form 10-SB
that had been filed with the Commission on October 30, 1995. MDC was notified of
such event and accordingly filed a Form 3 and Schedule 13-D with the Commission
claiming beneficial ownership in 514,220 common shares of FASI based on its
right to convert Series A convertible preferred stock for 25% of the common
stock of FASI on a fully-diluted basis. FASI had stated to the Commission in
writing that upon MDC's filing of the Schedule 13-D or similar filing indicated
beneficial ownership in FASI, FASI's financial statements would thereafter
reflect the acquisition of the minority interest. Accordingly, the financial
statements have reported the acquisition of the minority interest as additional
paid-in capital even though the 514,220 common shares of FASI have not, and will
not, be issued until the Series A preferred shares of FASC have been converted.
F-9
<PAGE>
FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
2. Shareholders' equity (continued):
The exchange of the MDC debt for the preferred stock of FASC
was accounted for as a minority interest. A gain of $4,759,000 was recorded in
the financial statements in 1995 as a result of this transaction.
In 1995, FASI sold 40,000 shares of common stock for $250,000
($6.25 per share). FASI then paid $250,000 to FASC as additional paid-in
capital.
On February 9, 1995, FASC obtained new financing from Norwest
Business Credit, Inc., (Norwest). FASC obtained a line of credit in the maximum
amount of $10,000,000. As of December 31, 1996, FASC could borrow up to
$6,150,000 against eligible accounts receivable and inventory. Although due on
demand, it expires in February, 1998. The line of credit was partially used to
pay the note payable to the prior lending bank and to pay $850,000 to MDC. All
assets of the Group are pledged as collateral.
On February 9, 1995, FASI sold 100% of the outstanding common
stock of Fields Industrial Supply, Inc. to an unrelated party. A gain of
$183,000 was recorded in the financial statements in 1995 as a result of this
transaction.
In April 1996, the Group reached a final settlement with its
insurance company. Management elected to record a casualty gain as a result of
the January 1994 earthquake. A gain of $949,000 was recorded in the financial
statements in 1996 as a result of this transaction.
In 1996, FASI sold 317,785 shares of common stock for $6.25
per share and 158,000 warrants for $.50 each. Each warrant allows the holder to
purchase one share of common stock for $6.25. The net proceeds were $1,654,000
after deducting the costs of underwriting and issuance.
F-10
<PAGE>
FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. Notes payable
The notes payable at December 31 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Line of credit from Norwest, secured by all assets
of the Group, interest at prime plus 7.0% (15.25%
at December 31, 1996), payable monthly $ 6,232,000 $ 7,427,000
Notepayable to bank, secured by land and building,
payable monthly at $2,396 plus interest at prime
plus 2% (10.25% at December 31, 1996), due February 1998 331,000 457,000
Other notes payable 28,000 21,000
------------ ------------
Totals $ 6,591,000 $ 7,905,000
Less current portion 6,323,000 7,905,000
---------- -----------
Notes payable, net of current portion $ 268,000 $ -
=========== ===============
</TABLE>
Principal payment requirements on all notes payable based on
terms and rates in effect at December 31, 1996 are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
1997 $ 6,323,000
1998 268,000
Thereafter -
Total interest expense for the years ended December 31, 1996,
1995 and 1994 amounted to $1,338,000, $1,163,000 and $1,017,000, respectively.
Total interest paid for the years ended December 31, 1996, 1995 and 1994
amounted to $1,076,000, $936,000 and $761,000, respectively.
F-11
<PAGE>
FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
4. Provision (credit) for income taxes
-----------------------------------
The provision (credit) for income taxes for the years ended
December 31 consisted of the following:
1996 1995 1994
---- ---- ----
CURRENT:
Federal $ (55,000) $ 95,000
CURRENT:
State 4,000
Total provision (credit)
for income taxes $ 4,000 $ (55,000) $ 95,000
========== ========= =========
Total income taxes paid in 1996, 1995 and 1994 amounted to $3,000
each year. The Group has net operating loss carryovers available to offset
future taxable income. The amount and expiration date of the carryovers are as
follows:
YEAR ENDING
DECEMBER 31, FEDERAL STATE
----------- ------- -------
1997 $ $ 814,000
1998 750,000
1999 580,000
2000 126,000
2001 120,000
2008 942,000
2009 1,161,000
2010 255,000
2011 240,000
5. Commitments
-----------
The Group leases vehicles and equipment and office facilities
under operating leases. The minimum lease payments required under operating
leases as of December 31, 1996 are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------- --------
1997 $ 15,500
1998 14,200
Thereafter -
F-12
<PAGE>
FIELDS AIRCRAFT SPARES, INC.
FORMERLY KNOWN AS FIELDS INDUSTRIAL GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
5. Commitments (continued):
-----------------------
Lease expense for the years ended December 31, 1996, 1995 and
1994 was $102,000, $84,000 and $33,000 , respectively.
The Group has a contract with a financial advisor whereby the
financial advisor will provide consulting services to the Group. The minimum
payments required under the contract as of December 31, 1996 are as follows:
YEAR ENDING
DECEMBER 31, AMOUNT
------------- --------
1997 $ 37,500
Thereafter -
6. Related party transactions
--------------------------
The Group leases a small overseas office facility on a month
to month basis from an entity owned by certain officers of the Group.
In November 1995 FASI issued options to 25 employees of the
Group to acquire up to 82,525 common shares of FASI at a purchase price of $3.00
per share subject to certain requirements. The options must vest by November
1998.
7. Contingency
-----------
In the event of the death of a Director or Officer of the Group,
the Group is obligated to pay up to 100% of the Director's or Officer's annual
compensation to their beneficiary within the twelve months subsequent to their
death.
F-13
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Information regarding directors, executive officers, promoters and control
persons of the Company and Management's compliance with Section 16(a) of the
Securities Exchange Act of 1934, as amended, appears under the sections
"Executive Officers", "Election of Directors" and "Compliance with Section 16(a)
of the Securities Exchange Act of 1934" in the Company's Proxy Statement to be
filed within 120 days after December 31, 1996 with the Securities and Exchange
Commission relating to the Company's Annual Meeting of Shareholders and is
incorporated herein by reference thereto.
ITEM 10. EXECUTIVE COMPENSATION
Information regarding the compensation of the Company's executives appears under
the section "Management Compensation" in the Company's Proxy Statement to be
filed within 120 days after December 31, 1996 with the Securities and Exchange
Commission relating to the company's Annual Meeting of Shareholders and is
incorporated herein by reference thereto.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding beneficial security ownership of the Company's equity
securities appears under the section "Security Ownership of Directors, Nominees
and Principal Security Holders" in the Company's Proxy Statement to be filed
within 120 days after December 31, 1996 with the Securities and Exchange
Commission relating to the Company's Annual Meeting of Shareholders and is
incorporated herein by reference thereto.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Information regarding certain relationships and related transactions appears
under the section "Transactions With Related Parties" in the Company's Proxy
Statement to be filed within 120 days after December 31, 1996 with the
Securities and Exchange Commission relating to the Company's Annual Meeting of
Shareholders and is incorporated herein by reference thereto.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a) Index to Exhibits
The following documents are included as exhibits.
19
<PAGE>
SEC Exhibit Sequential
Number Number Description Page Number
3 3.1 Articles of Incorporation, as amended *
3 3.2 By-laws, as amended *
4 4.1 Form of Warrant Agreement
9 9.1 Voting Agreement dated February 7, 1995 *
among McDonnell Douglas Corporation,
the Registrant, Peter Frohlich, Alan Fields,
and Lawrence Troyna
10 10.1 Debt Restructure Agreement dated February 7, 1995 *
between McDonnell Douglas Corporation and
the Registrant
10 10.2 Securities Exchange Agreement dated February 7, *
1995 between McDonnell Douglas Corporation
and the Registrant
10 10.3 Discretionary Revolving Credit Facility and *
Credit and Security Agreement dated February 9,
1995 between Fields Aircraft Spares, Inc.,
a California corporation and Norwest Business
Credit, Inc. *
10 10.4 First Amendment to Credit Agreement, dated
November 20, 1995 **
10 10.5 Second Amendment to Credit Agreement, dated
February 19, 1996
10 10.6 Third Amendment to Credit Agreement, dated
June 30, 1996.
10 10.7 Fourth Amendment to Credit Agreement, dated
August 1996
10 10.8 Fifth Amendment to Credit Agreement, dated
January 1, 1997
10 10.9 Sixth Amendment to Credit Agreement, dated
February 1, 1997
10 10.10 Seventh Amendment to Credit Agreement, dated
March 1, 1997
10 10.11 Eighth Amendment to Credit Agreement, dated
March 1997
20
<PAGE>
10 10.12 Management Stock Option Plan ***
10 10.13 Employee Stock Option Plan ***
10 10.14 1997 Stock Option Plan
11 11.1 Statement re: Computation of Per Share Earnings
21 21.1 Subsidiaries of Registrant
27 27.1 Financial Data Schedule
* This exhibit is incorporated herein by reference to the exhibits filed
with the Company's Registration Statement on Form 10-SB, filed October
30, 1995.
** This exhibit is incorporated herein by reference to the exhibits filed
with the Company's Annual Report on Form 10-KSB for the fiscal year
ended December 31, 1995, filed April 11, 1996.
*** This exhibit is incorporated herein by reference to the exhibits filed
with the Company's Registration Statement on Form 10-SB/A, Amendment
No. 1, filed January 29, 1996.
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K, dated April 17, 1996, covering
Item 5, Other Events, with respect to the filing of certain documents by
McDonnell Douglas Corporation with the Securities and Exchange Commission.
The Company filed a Report on Form 8-K, dated December 27, 1996,
covering Item 9, Sales of Equity Securities Pursuant to Regulation S.
The Company filed a Report on Form 8-K, dated February 11, 1997,
covering item 9, Sales of Equity Securities Pursuant to Regulation S.
21
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 28, 1997
FIELDS AIRCRAFT SPARES, INC.
By /s/ Alan M. Fields
------------------
Alan M. Fields
President
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Company and in the capacities and on
the dates indicated.
Signature Title Date
/s/ Alan M. Fields Principal Executive Officer March 28, 1997
- ------------------- President and Director
Alan M. Fields
/s/ Lawrence J. Troyna Principal Financial Officer March 28, 1997
- ---------------------- and Director
Lawrence J. Troyna
/s/ Peter Frohlich Chairman, CEO and Director March 28, 1997
- ------------------
Peter Frohlich
/s/ Carlos Sedillo Secretary and Director March 28, 1997
- ------------------
Carlos Sedillo
/s/ Leonard I. Fields Director March 28, 1997
- ---------------------
Leonard I. Fields
SECOND AMENDMENT TO CREDIT AGREEMENT
This Second Amendment is made as of the 19th day of February,
1996 by and between FIELDS AIRCRAFT SPARES INCORPORATED, a California
corporation (the "Borrower"), and NORWEST BUSINESS CREDIT, INC., a Minnesota
corporation (the "Lender").
RECITALS
The Borrower and the Lender have entered into the Credit and
Security Agreement dated as of February 9, 1995 and amended by the First
Amendment to Credit Agreement dated November 21, 1995 (as amended, the "Credit
Agreement").
The Borrower may request certain advances from the Lender from
time to time pursuant to the Credit Agreement, and the Lender may, in its
discretion, choose to make loans to the Borrower pursuant to the Credit
Agreement. The Lender may demand repayment of the loans at any time pursuant to
the terms of the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by
the Borrower's demand promissory note dated as of February 9, 1995, in the
maximum principal amount of $10,000,000 and payable to the order of the Lender
(the "Note").
All indebtedness of the Borrower to the Lender is secured
pursuant to the terms of the Credit Agreement and all other Security Documents
as defined therein (collectively, the "Security Documents") and is guaranteed
pursuant to the unconditional guaranties of the Corporate Guarantors defined
therein and is further guaranteed pursuant to the validity guaranties of the
Individual Validity Guarantors (collectively, the "Guarantors").
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:
1. Definitions and Amendments.
(a) Terms used in this Second Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
23
<PAGE>
(b) The following definitions are added to the Credit
Agreement:
(i) "Consumable Inventory" means all Inventory other
than MDC Inventory.
(ii) "Eligible Consumable Inventory" means all
Consumable Inventory which is Eligible Inventory.
(iii) "Eligible MDC Inventory" means all MDC
Inventory which is Eligible Inventory.
(iv) "MDC Inventory" means all Inventory acquired
from MDC pursuant to Contract Numbers 88-28-D, 91-03-P and
91-04-P between MDC and the Borrower.
(c) The definition of the term "Borrowing Base" is hereby
amended to mean, at any time and subject to change from time to time in
the Lender's sole discretion, the lesser of:
(i) $10,000,000; or
(ii) the sum of:
(A) the lesser of (a) 75% of Eligible
Accounts or (b) $10,000,000, plus
(B) the lesser of (a) 50% of Eligible MDC
Inventory or (b) $6,900,000; provided, however, that
such maximum amount of Eligible MDC Inventory shall
be reduced by $100,000 on the first day of March,
1996 and on the same day of each successive month
thereafter, plus
(C) the lesser of (a) 50% of Eligible
Consumable Inventory or (b) $250,000; provided,
however, that:
(1) such maximum amount of Eligible
Consumable Inventory shall be increased to
$500,000 on May 1, 1996, provided the
Borrower demonstrates on its financial
statements to be delivered to the Lender
pursuant to Section 6.1(b) of the Credit
Agreement. Net Earnings of not less than
$100,000 for the three-month period ended
March 31, 1996; and
(2) such maximum amount of Eligible
Consumable Inventory shall be increased to
$750,000 on August 1, 1996,
24
<PAGE>
provided the Borrower has satisfied the
condition set forth in clause (1) above and
demonstrates on its financial statements to
be delivered to the Lender pursuant to
Section 6.1(b) of the Credit Agreement, Net
Earnings of not less than $100,000 for the
three-month period ended June 30, 1996; and
(3) such maximum amount of Eligible
Consumable Inventory shall be increased to
$1,000,000 on November 1, 1996, provided the
Borrower has satisfied the conditions set
forth in clauses (1) and (2) above and
demonstrates on its financial statements to
be delivered to the Lender pursuant to
Section 6.1(b) of the Credit Agreement, Net
Earnings of not less than $300,000 for the
three-month period ended September 30, 1996;
less
(D) the lesser of (a) the accrued and unpaid tax
liability of FIS, including interest and penalties or (b) such
other amount as determined from time to time by Lender in its
sole discretion.
2. No Other Amendments. Except as explicitly amended by this
Second Amendment, all of the terms and conditions of the Credit Agreement shall
remain in full force and effect and shall apply to any advance thereunder.
3. Amendment Fee. The Borrower agrees to pay the Lender a fully
earned, non- refundable fee in the amount of $5,000 in consideration of the
execution by the Lender of this Second Amendment.
4. Conditions. This Second Amendment shall be effective (the
"Effective Date") upon receipt by the Lender of an executed original hereof,
together with each of the following, each in substance and form acceptable to
the Lender in its sole discretion:
(a) The Acknowledgement and Agreement of Corporate Guarantors
and the Acknowledgement and Agreement of Validity Guarantors set forth
at the end of this Second Amendment, duly executed by each of the
Corporate Guarantors and Individual Validity Guarantors, respectively.
(b) Supplemental Secretary's Certificate certifying (i) the
resolutions of the board of directors of the Borrower approving the
execution and delivery of this Second Amendment and the performance by
the Borrower of its obligations under the Second Amendment and the
Credit Agreement as amended hereby, (ii) that the Articles of
Incorporation and the Bylaws of the Borrower which were certified and
delivered to the Lender pursuant to the Certificate of Secretary of
Borrower dated February 9, 1995 continue in full force and effect and
have not been altered, amended or revised, and (iii) the signatures of
the officer and agents of th Borrower authorized to execute and
25
<PAGE>
deliver this Second Amendment and other instruments, agreements and
certificates, including Advance requests, on behalf of the Borrower.
(c) Payment of the fees and expenses required to be paid
by the Borrower under Paragraphs 3 and 9 hereof.
(d) Such other documents as the Lender in its sole
discretion may require.
5. Representations and Warranties. The Borrower hereby represents
and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to
execute this Second Amendment and to perform all of its obligations
hereunder and under the Credit Agreement as amended hereby, and this
Second Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Second Amendment has been duly authorized by all necessary
corporate action and does not (i) require any authorization, consent or
approval by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ,
injunction or decree presently in effect, having applicability to the
Borrower, or the Articles of Incorporation of By-Laws of the Borrower,
or (iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement, as amended by this Second Amendment,
are correct on and as of the date hereof and on the Effective Date, as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
6. References. Upon the Effective Date, all references in the
Credit Agreement to "this Agreement" shall be deemed to refer to the Credit
Agreement as amended hereby; and any and all references in the Security
Documents to the Credit Agreement shall be deemed to refer to the Credit
Agreement as amended hereby.
7. No Waiver. The Borrower hereby acknowledges and agrees that the
execution of this Second Amendment and any documents related hereto shall not be
deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or
other document held by the Lender, whether or not known to the Lender and
whether or not existing on the date of this Second Amendment.
26
<PAGE>
8. Release. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Second Amendment, whether such claims, demands
and causes of action are matured or unmatured or known or unknown.
9. Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Second Amendment and the documents and instruments incidental hereto. The
Borrower hereby agrees that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and expenses
and the fee required under Paragraph 3 hereof.
10. Counterparts. This Second Amendment, the Acknowledgement and
Agreement of Corporate Guarantors and the Acknowledgement and Agreement of
Validity Guarantors may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed as of the day and year first above written.
BORROWER:
FIELDS AIRCRAFT SPARES INCORPORATED (SEAL)
By:____________________________________________
Its:___________________________________________
LENDER:
NORWEST BUSINESS CREDIT, INC. (SEAL)
By:_____________________________________________
Its:____________________________________________
28
THIRD AMENDMENT TO CREDIT AGREEMENT
This Amendment is made as of the ____ day of June, 1996 by and
between FIELDS AIRCRAFT SPARES INCORPORATED, a California corporation (the
"Borrower"), and NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the
"Lender").
RECITALS
The Borrower and the Lender have entered into the Credit and
Security Agreement dated as of February 9, 1995 and amended by the First
Amendment to Credit Agreement dated November 21, 1995 and the Second Amendment
to Credit Agreement dated February 29, 1996, (as amended, the "Credit
Agreement").
The Borrower may request certain advances from the Lender from
time to time pursuant to the Credit Agreement, and the Lender may, in its
discretion, choose to make loans to the Borrower pursuant to the Credit
Agreement. The Lender may demand repayment of the loans at any time pursuant to
the terms of the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by
the Borrower's demand promissory note dated as of February 9, 1995, in the
maximum principal amount of Ten Million Dollars ($10,000,000) and payable to the
order of the Lender (the "Note").
All indebtedness of the Borrower to the Lender is secured
pursuant to the terms of the Credit Agreement and all other Security Documents
as defined therein (collectively, the "Security Documents") and is guaranteed
pursuant to the unconditional guaranties of the Corporate Guarantors defined
therein and is further guaranteed pursuant to the validity guaranties of the
Individual Validity Guarantors (collectively, the "Validity Guarantors").
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:
29
<PAGE>
1. Definitions and Amendments.
(a) Terms used in this Third Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
(b) The definition of the term "Floating Rate" is hereby
amended to mean an annual rate equal to the sum of the Base Rate plus
five and one-half percent (5.5%), which Floating Rate shall change when
and as the Base Rate changes. Provided however, if and only if
Borrower's Net Worth increases by $5,000,000 over its Net Worth as of
June 30, 1996, exclusive of Net Earnings or Net Losses for the period
commencing June 30, 1996 and ending on the date of determination, then
the Floating Rate shall mean an annual rate equal to the sum of the
Base Rate plus four and one-half percent (4.5%), which Floating Rate
shall change when and as the Base Rate changes.
(c) Section 2.12 Fees, is hereby amended as follows:
(i) The Borrower hereby agrees to pay the Lender a
fully earned and non-refundable origination fee of $150,000,
due and payable upon the execution of this Agreement (of which
$100,000 has been paid to Lender prior to the execution
hereof).
(ii) Commencing April 1, 1995, the Borrower hereby
agrees to pay the Lender, in advance quarterly audit fees of
$1,500 per quarter, together with any out of pocket expenses
incurred by Lender in connection with any audits or
inspections by the Lender of any collateral or the operations
or business of the Borrower.
(iii) The Borrower hereby agrees to (a) reimburse the
Lender for all wire transfer charges and automated
clearinghouse charges and to (b) pay overadvance charges of
One Thousand Dollars ($1,000) per day.
(iv) The Borrower agrees to pay to Lender annually,
commencing with the fiscal year ending December 31, 1995, upon
delivery of its audited financial statements delivered in
accordance with Section 6.1 hereof, a fee equal to 2% of the
Gross Profit in excess of $2,000,000, as shown on such
financial statements, provided, however, that such fee shall
in no event be less than $50,000 nor more than $150,000.
(v) Commencing July 25, 1996, the Borrower hereby
agrees to pay the Lender monthly in advance an accommodation
fee of $7,500. This accommodation fee will be increased to
$15,000 per month beginning October 25, 1996. Provided
however, if and only if Borrower's Net Worth increases by
30
<PAGE>
$5,000,000 over its Net Worth as of June 30, 1996, exclusive
of Net Earnings or Net Losses for the period commencing June
30, 1996 and ending on the date of determination, then the
accommodation fee shall be decreased to zero as of such date
of determine but without adjustment or proration to any fee
previously paid.
2. No Other Amendments. Except as explicitly amended by this
Amendment, all of the terms and conditions of the Credit Agreement shall remain
in full force and effect and shall apply to any advance thereunder.
3. Conditions. This Third Amendment shall be effective (the
"Effective Date") upon receipt by the Lender of an executed original hereof,
together with each of the following, each in substance and form acceptable to
the Lender in its sole discretion:
(a) The Acknowledgement and Agreement of Guarantors set
forth at the end of this Amendment, duly executed by each of the
Guarantors.
(b) Supplemental Secretary's Certificate certifying (i) the
resolutions of the board of directors of the Borrower approving the
execution and delivery of this Amendment, (ii) the fact that the
Articles of Incorporation and the Bylaws of the Borrower, which were
certified and delivered to the Lender pursuant to the Certificate of
the Borrower's Secretary dated as of February 9, 1995 in connection
with the execution and delivery of the Credit Agreement continue in
full force and effect and have not been amended or otherwise modified
except as set forth in the Certificate to be delivered, and (iii)
certifying that the officers and agents of the Borrower who have been
certified to the Lender, pursuant to the Certificate of the Borrower's
Secretary dated as of February 9, 1995, as being authorized to sign and
to act on behalf of the Borrower continue to be so authorized or
setting forth the sample signatures of each of the officers and agents
of the Borrower authorized to execute and deliver this Third Amendment
and all other documents, agreements and certificates on behalf of the
Borrower.
(c) Current certificates issued by the Secretary of State of
the state of incorporation of each of Borrower and the Corporate
Guarantors, certifying that each of the Borrower and the Corporate
Guarantors, respectively, is in compliance with all corporate
organizational requirements of such state.
(d) UCC financing statements duly executed by FIG sufficient
to perfect the security interests granted under the Guarantors'
Security Agreement.
(e) Current searches of appropriate filing offices showing
that (i) no state or federal tax liens have been filed and remain in
effect against the Borrower or any Corporate Guarantor, (ii) no
financing statements have been filed and remain in effect against the
Borrower or any Corporate Guarantor, except those financing statements
31
<PAGE>
relating to liens permitted pursuant to Section 7.1 of the Credit
Agreement and those financing statements filed by the Lender, and (iii)
the Lender has duly filed all financing statements necessary to perfect
the Security Interests granted under the Credit Agreement or the
security interests granted under the Guarantors' Security Agreement, to
the extent the Security Interests or such other security interest are
capable of being perfected by filing.
(f) An opinion of counsel to the Borrower and each of the
Corporate Guarantors, addressed to the Lender.
(g) A supplemental certificate of the Secretary or an
Assistant Secretary of each of the Corporate Guarantors, certifying as
to (i) the resolutions of the directors and, if required, the
shareholders of such Corporate Guarantor, authorizing the execution and
delivery of the Acknowledgment and Agreement of Guarantor and the UCC
financing statements referred to herein, (ii) the articles of
incorporation and the bylaws of such Corporate Guarantor, and (iii) the
signatures of the officers or agents of such Corporate Guarantor
authorized to execute and deliver the Acknowledgement and Agreement of
Guarantor and the UCC financing statements on behalf of such Corporate
Guarantor.
(h) Such other documents as the Lender in its sole discretion
may require.
4. Representations and Warranties.
(a) The Borrower has all requisite power and authority to
execute this Third Amendment and to perform all of its obligations
hereunder, and this Amendment has been duly executed and delivered by
the Borrower and constitutes the legal, valid and binding obligation of
the Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by all necessary corporate
action and do not (i) require any authorization, consent or approval by
any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower, or the
articles of incorporation or by-laws of the Borrower, or (iii) result
in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound
or affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement are correct on and as of the date
hereof as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date.
32
<PAGE>
5. References. Upon the Effective Date, all references in
the Credit Agreement to "this Agreement" shall be deemed to refer to the Credit
Agreement as amended hereby; and any and all references in the Security
Documents to the Credit Agreement shall be deemed to refer to the Credit
Agreement as amended hereby.
6. No Waiver. The execution of this Third Amendment and any documents
related hereto shall not be deemed to be a waiver of any Default or Event of
Default under the Credit Agreement or breach, default or event of default under
any Security Document or other document held by the Lender, whether or not known
to the Lender and whether or not existing on the date of this Third Amendment.
7. Release. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
8. Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Third Amendment and the documents and instruments incidental hereto. The
Borrower hereby agrees that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and
expenses.
9. Counterparts. This Third Amendment and the Acknowledgement and
Agreement of Guarantors may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Third
Amendment to be duly executed as of the day and year first above written.
BORROWER:
FIELDS AIRCRAFT SPARES INCORPORATED (SEAL)
By:_____________________________________________
Its:_____________________________________________
LENDER:
NORWEST BUSINESS CREDIT, INC. (SEAL)
By:_____________________________________________
Its:_____________________________________________
34
FOURTH AMENDMENT TO CREDIT AGREEMENT
This Amendment is made as of the ____ day of August, 1996 by
and between FIELDS AIRCRAFT SPARES INCORPORATED, a California corporation (the
"Borrower"), and NORWEST BUSINESS CREDIT, INC., a Minnesota corporation (the
"Lender").
RECITALS
The Borrower and the Lender have entered into the Credit and
Security Agreement dated as of February 9, 1995 and amended by the First
Amendment to Credit Agreement dated November 21, 1995, the Second Amendment to
Credit Agreement dated February 29, 1996 and the Third Amendment to the Credit
Agreement dated June 30, 1996, (as amended, the "Credit Agreement").
The Borrower may request certain advances from the Lender from
time to time pursuant to the Credit Agreement, and the Lender may, in its
discretion, choose to make loans to the Borrower pursuant to the Credit
Agreement. The Lender may demand repayment of the loans at any time pursuant to
the terms of the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by
the Borrower's demand promissory note dated as of February 9, 1995, in the
maximum principal amount of Ten Million Dollars ($10,000,000) and payable to the
order of the Lender (the "Note").
All indebtedness of the Borrower to the Lender is secured
pursuant to the terms of the Credit Agreement and all other Security Documents
as defined therein (collectively, the "Security Documents") and is guaranteed
pursuant to the unconditional guaranties of the Corporate Guarantors defined
therein and is further guaranteed pursuant to the validity guaranties of the
Individual Validity Guarantors defined therein (the "Validity Guarantors"
collectively with the Corporate Guarantors the "Guarantors")
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:
35
<PAGE>
1. Definitions and Amendments.
(a) Terms used in this Fourth Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
(b) The definition of the term "Borrowing Base" is hereby
amended as follows: "Borrowing Base" means, at any time and subject to
change from time to time in the Lender's sole discretion, the lesser of
(i) $6,900,000 provided, however, that the Borrowing
Base shall be decreased by Two Hundred Fifty Thousand Dollars
($250,000) on the 1st day of October, 1996 and on the same day
of each successive month thereafter.
or
(ii) the sum of
(iii) the lesser of (A) 75% of Eligible Accounts or
(B) $6,900,000; provided, however, that such maximum amount of
Eligible Accounts shall be reduced by $250,000 on the first
day of October, 1996 and on the same day of each successive
month thereafter, plus
(iv) the lesser of (A) 50% of Eligible Inventory or
(B) $6,500,000; provided, however, that such maximum amount of
Eligible Inventory shall be reduced by $100,000 on the first
day of October, 1996 and on the same day of each successive
month thereafter, plus
(v) $250,000
(c) The definition of the term "Floating Rate" is hereby
amended to mean an annual rate equal to the sum of the Base Rate plus
five and one-half percent (5.5%), which Floating Rate shall change when
and as the Base Rate changes; provided, however that the Floating Rate
shall be increased by one-half percent (0.5%) on the first day of
October, 1996 and on the same day of each successive month thereafter.
(d) Paragraph (d) and (e) of Section 2.12 Fees, is hereby
amended as follows:
(i) The Borrower agrees to pay to Lender annually,
commencing with the fiscal year ending December 31, 1995 and
for each fiscal year (or portion thereof) thereafter during
the term of this Agreement, a fee equal to 2% of the Gross
Profit in excess of $2,000,000 as shown on the financial
statements delivered pursuant to Section 6.1 hereof, with
respect to each such fiscal year, privided that such fee shall
36
<PAGE>
in no event be greater than $150,000 or less than $50,000.
Such fee shall be payable annually upon the earliest of (i)
the delivery of the audited financial statements for the
fiscal year with respect to which such fee is paid as required
pursuant to Section 6.1 hereof, (ii) the termination of this
Agreement, or (iii) demand for repayment of the Advances. The
fee payable upon termination or demand shall be equal to the
sum of any unpaid fee for the fiscal year ended prior to
such termination regardless of whether the audited financial
statements have been delivered with respect to such year, plus
the fee for the portion of the fiscal year ended as of the
end of the month immediately proceeding the date of such
termination of demand. The fee for such partial year shall
be equal to 2% of the Gross Profit therefor in excess of
$2,000,000, as shown on the interim financial statements
delivered pursuant to Section 6.1 hereof for the month
immediately preceding the date of termination or demand,
provided that such fee shall in no event be greater than
$150,000 or less than $4,166.67 times the number of
months of such partial fiscal year prior to the date of
termination or demand.
(e) Commencing July 25, 1996, the Borrower hereby agrees to
pay the Lender monthly in advance an accommodation fee of $7,500. This
accommodation fee will be increased to $15,000 per month beginning
October 25, 1996.
1. Fee. Borrower agrees to pay a fee of Fifty-Thousand Dollars
($50,000) for this Amendment.
2. No Other Amendments. Except as explicitly amended by this
Amendment, all of the terms and conditions of the Credit Agreement shall remain
in full force and effect and shall apply to any advance thereunder.
3. Conditions. This Fourth Amendment shall be effective (the
"Effective Date") upon receipt by the Lender of an executed original hereof,
together with each of the following, each in substance and form acceptable to
the Lender in its sole discretion:
(a) The Acknowledgement and Agreement of Guarantors set forth
at the end of this Amendment, duly executed by each of the Guarantors
and the Acknowledgment and Agreement of Validity Guarantors.
(b) Supplemental Secretary's Certificate certifying (i) the
resolutions of the board of directors of the Borrower approving the
execution and delivery of this Amendment, (ii) the fact that the
Articles of Incorporation and the Bylaws of the Borrower, which were
certified and delivered to the Lender pursuant to the Certificate of
the Borrower's Secretary dated as of February 9, 1995 in connection
with the execution and delivery of the Credit Agreement continue in
full force and effect and have not been amended or otherwise modified
37
<PAGE>
except as set forth in the Certificate to bedelivered, and (iii)
certifying that the officers and agents of the Borrower who have been
certified to the Lender, pursuant to the Certificate of the Borrower's
Secretary dated as of February 9, 1995, as being authorized to sign and
to act on behalf of the Borrower continue to be so authorized or
setting forth the sample signatures of each of the officers and agents
of the Borrower authorized to execute and deliver this Third Amendment
and all other documents, agreements and certificates on behalf of the
Borrower.
(c) Such other documents as the Lender in its sole
discretion may require.
4. Representations and Warranties.
(a) The Borrower has all requisite power and authority to
execute this Fourth Amendment and to perform all of its obligations
hereunder, and this Amendment has been duly executed and delivered by
the Borrower and constitutes the legal, valid and binding obligation of
the Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Amendment have been duly authorized by all necessary corporate
action and does not (i) require any authorization, consent or approval
by any governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (ii) violate any provision of any
law, rule or regulation or of any order, writ, injunction or decree
presently in effect, having applicability to the Borrower, or the
articles of incorporation or by-Laws of the Borrower, or (iii) result
in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which
the Borrower is a party or by which it or its properties may be bound
or affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement are correct on and as of the date
hereof as though made on and as of such date, except to the extent that
such representations and warranties relate solely to an earlier date.
5. References. Upon the Effective Date, all references in the Credit
Agreement to "this Agreement" shall be deemed to refer to the Credit Agreement
as amended hereby; and any and all references in the Security Documents to the
Credit Agreement shall be deemed to refer to the Credit Agreement as amended
hereby.
6. No Waiver. The Borrower acknowledges that it failed to demonstrate
minimum Net Earnings as required by Section 6.13 of the Credit Agreement and
that this failure constitutes an Event of Default under the Credit Agreement. In
addition to any other rights under the Credit agreement, the Lender is entitled
to have the outstanding principal of the Advances bear interest at the Default
Rate. As of the date hereof, the Lender in its discretion has not elected to
38
<PAGE>
exercise such right. The execution of the Fourth Amendment and any documents
related hereto shall not be deemed to be a waiver of (i) such events of Default
or any other Event of Default under the Credit Agreement or breach, default or
event of default under any Security Document or other document held by the
Lender, whether or not known to the Lender and whether or not existing on the
date of this Fourth Amendment or (ii) any of Lender's rights and remedies under
the Loan Documents, including without limitation its rights under Section 2.3 of
the Credit Agreement to have the outstanding principal of the Advances bear
interest at the Default Rate.
7. Release. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
8. Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Fourth Amendment and the documents and instruments incidental hereto. The
Borrower hereby agrees that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and
expenses.
9. Counterparts. This Fourth Amendment and the Acknowledgement and
Agreement of Corporate Guarantors and the Acknowledgment and Agreement of
Validity Guarantors may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
39
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be duly executed as of the day and year first above written.
BORROWER:
FIELDS AIRCRAFT SPARES INCORPORATED (SEAL)
By:______________________________________
Its:_____________________________________
LENDER:
NORWEST BUSINESS CREDIT, INC. (SEAL)
By:_____________________________________
Its:____________________________________
ACKNOWLEDGMENT AND AGREEMENT OF CORPORATE GUARANTORS
The undersigned, a guarantor of the indebtedness of FIELDS AIRCRAFT
SPARES INCORPORATED (the "Borrower") to NORWEST BUSINESS CREDIT, INC. (the
"Lender") pursuant to Corporate Guaranty dated as of February 9, 1996 hereby (i)
acknowledge receipt of the foregoing Fourth Amendment.
40
FIFTH AMENDMENT TO CREDIT AGREEMENT
This Fifth Amendment is made as of the 1st day of January,
1997 by and between FIELDS AIRCRAFT SPARES INCORPORATED, a California
corporation (the "Borrower"), and NORWEST BUSINESS CREDIT, INC., a Minnesota
corporation (the "Lender").
RECITALS
The Borrower and the Lender have entered into the Credit and
Security Agreement dated as of February 9, 1995 and amended by the First
Amendment to Credit Agreement dated November 21, 1995, by the Second Amendment
to Credit Agreement dated February 29, 1996, by the Third Amendment to the
Credit Agreement dated June 30, 1996 and by the Fourth Amendment dated August
16, 1996 (as amended, the "Credit Agreement").
The Borrower may request certain advances from the Lender from
time to time pursuant to the Credit Agreement, and the Lender may, in its
discretion, choose to make loans to the Borrower pursuant to the Credit
Agreement. The Lender may demand repayment of the loans at any time pursuant to
the terms of the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by
the Borrower's demand promissory note dated as of February 9, 1995, in the
maximum principal amount of Ten Million Dollars ($10,000,000) and payable to the
order of the Lender (the "Note").
All indebtedness of the Borrower to the Lender is secured
pursuant to the terms of the Credit Agreement and all other Security Documents
as defined therein (collectively, the "Security Documents") and is guaranteed
pursuant to the unconditional guaranties of the Corporate Guarantors defined
therein and is further guaranteed pursuant to the validity guaranties of the
Individual Validity Guarantors (collectively, the "Validity Guarantors").
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:
41
<PAGE>
1. Definitions and Amendments.
(a) Terms used in this Fifth Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
(b) The definition of the term "Borrowing Base" is hereby
amended as follows: "Borrowing Base" means, at any time and subject to
change from time to time in the Lender's sole discretion, the lesser
of:
(i) $6,150,000 provided, however, that the Borrowing
Base shall be decreased by Two Hundred Fifty Thousand Dollars
($250,000) on the first day of February, 1997 and on the same
day of each successive month thereafter.
or
(c) the sum of:
(i) the lesser of (A) 75% of Eligible Accounts or (B)
$6,150,000; provided, however, that such maximum amount of
Eligible Accounts shall be reduced by $250,000 on the first
day of February, 1997 and on the same day of each successive
month thereafter, plus
(ii) the lesser of (A) 50% of Eligible Inventory or
(B) $6,000,000; provided, however, that such maximum amount of
Eligible Inventory shall be reduced by $100,000 on the first
day of February, 1997 and on the same day of each successive
month thereafter, plus
(iii) $250,000.
1. No Other Amendments.Except as explicitly amended by this Fifth
Amendment, all of the terms and conditions of the Credit Agreement shall remain
in full force and effect and shall apply to any advance thereunder.
2. Amendment Fee. The Borrower agrees to pay the Lender a fully
earned, non-refundable fee in the amount $0.00 in consideration of the execution
by the Lender of this Fifth Amendment.
3. Conditions. This Fifth Amendment shall be effective (the
"Effective Date") upon receipt by the Lender of an executed original hereof,
together with each of the following, each in substance and form acceptable to
the Lender in its sole discretion:
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<PAGE>
(a) The Acknowledgement and Agreement of Corporate Guarantors
and the Acknowledgment and Agreement of Validity Guarantors set forth
at the end of this Fifth Amendment, duly executed by each of the
Corporate Guarantors and Individual Validity Guarantors, respectively.
(b) Supplemental Secretary's Certificate certifying (i) the
resolutions of the board of directors of the Borrower approving the
execution and delivery of this Fifth Amendment and the performance by
the Borrower of its obligations under the Fifth Amendment and the
Credit Agreement as amended hereby, (ii) that the Articles of
Incorporation and the Bylaws of the Borrower which were certified and
delivered to the Lender pursuant to the Certificate of the Secretary of
Borrower dated February 9, 1995 continue in full force and effect and
have not been altered, amended or revised, and (iii) the signatures of
the officers and agents of the Borrower authorized to execute and
deliver this Fifth Amendment and other instruments, agreements and
certificates, including Advance requests, on behalf of the Borrower.
(c) Payment of the fees and expenses required to be paid
by the Borrower under Paragraphs 3 and 9 hereof.
(d) Such other documents as the Lender in its sole
discretion may require.
4. Representations and Warranties.
The Borrower hereby represents and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to
execute this Fifth Amendment and to perform all of its obligations
hereunder and under the Credit Agreement as amended hereby, and this
Fifth Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Fifth Amendment has been duly authorized by all necessary
corporate action and does not (i) require any authorization, consent or
approval by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ,
injunction or decree presently in effect, having applicability to the
Borrower, or the Articles of Incorporation or By-Laws of the Borrower,
or (iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
43
<PAGE>
(c) All of the representations and warranties contained in
Article V of the Credit Agreement, as amended by this Fifth Amendment,
are correct on and as of the date hereof and on the Effective Date, as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
5. References. Upon the Effective Date, all references in the Credit Agreement
to "this Agreement" shall be deemed to refer to the Credit Agreement as amended
hereby; and any and all references in the Security Documents to the Credit
Agreement shall be deemed to refer to the Credit Agreement as amended hereby.
6. No Waiver. The Borrower hereby acknowledges and agrees that the
execution of this Fifth Amendment and any documents related hereto shall not be
deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or
other document held by the Lender, whether or not known to the Lender and
whether or not existing on the date of this Fifth Amendment.
7. Release. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Fifth Amendment, whether such claims, demands
and causes of action are matured or unmatured or known or unknown.
8. Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Fifth Amendment and the documents and instruments incidental hereto. The
Borrower hereby agrees that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and expenses
and the fee required under Paragraph 3 hereof.
9. Counterparts. This Fifth Amendment, the Acknowledgement and
Agreement of Corporate Guarantors and the Acknowledgment and Agreement of
Validity Guarantors may be executed in any number of counterparts, each of which
44
<PAGE>
when so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Amendment to be duly executed as of the day and year first above written.
BORROWER:
FIELDS AIRCRAFT SPARES INCORPORATED (SEAL)
By:______________________________________
Its:_____________________________________
LENDER:
NORWEST BUSINESS CREDIT, INC. (SEAL)
By:_____________________________________
Its:____________________________________
45
SIXTH AMENDMENT TO CREDIT AGREEMENT
This Sixth Amendment is made as of the 1st day of February,
1997 by and between FIELDS AIRCRAFT SPARES INCORPORATED, a California
corporation (the "Borrower"), and NORWEST BUSINESS CREDIT, INC., a Minnesota
corporation (the "Lender").
RECITALS
The Borrower and the Lender have entered into the Credit and
Security Agreement dated as of February 9, 1995 and amended by the First
Amendment to Credit Agreement dated November 21, 1995, by the Second Amendment
to Credit Agreement dated February 29, 1996, by the Third Amendment to Credit
Agreement dated June 30, 1996, by the Fourth Amendment to Credit Agreement dated
August 16, 1996 and by the Fifth Amendment to Credit Amendment dated January 1,
1997 (as amended, the "Credit Agreement").
The Borrower may request certain advances from the Lender from
time to time pursuant to the Credit Agreement, and the Lender may, in its
discretion, choose to make loans to the Borrower pursuant to the Credit
Agreement. The Lender may demand repayment of the loans at any time pursuant to
the terms of the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by
the Borrower's demand promissory note dated as of February 9, 1995, in the
maximum principal amount of Ten Million Dollars ($10,000,000) and payable to the
order of the Lender (the "Note").
All indebtedness of the Borrower to the Lender is secured
pursuant to the terms of the Credit Agreement and all other Security Documents
as defined therein (collectively, the "Security Documents") and is guaranteed
pursuant to the unconditional guaranties of the Corporate Guarantors defined
therein and is further guaranteed pursuant to the validity guaranties of the
Individual Validity Guarantors (collectively, the "Validity Guarantors").
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:
46
<PAGE>
1. Definitions and Amendments.
(a) Terms used in this Sixth Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
(b) The term "Net Investment Proceeds" is hereby defined to
mean the proceeds received by the Borrower from any advance, loan,
extension of credit or capital contribution to, or any sale or
commitment to sell any stocks, bonds, notes, debentures or other
securities of or any other investment in, the Borrower (each such
transaction, an "Investment"), net of reasonable expenses incurred by
the Borrower in connection with said Investment.
(c) The definition of the term "Borrowing Base" is hereby
amended as follows: "Borrowing Base" means, at any time and
subject to change from time to time in the Lender's sole discretion,
the lesser of:
(i) $6,100,000 provided, however, that the Borrowing
Base (i) shall be decreased by the amount of Net Investment
Proceeds received by the Borrower on or after February 1, 1997
on each day of receipt of any of said proceeds, provided that
in any event the Borrowing Base shall be decreased by no less
than $450,000 on or before March 31, 1997, and (ii) shall
further be decreased by $250,000 on the first day of April,
1997 and on the same day of each successive month thereafter;
or
(d) the sum of:
(i) the lesser of (A) 75% of Eligible Accounts or (B)
$6,100,000; provided, however, that such maximum amount of
Eligible Accounts (i) shall be reduced by the amount of Net
Investment Proceeds received by the Borrower on or after
February 1, 1997 on each day of receipt of any said proceeds,
provided that in any event the maximum amount of Eligible
Accounts shall be reduced by no less than $450,000 on or
before March 31, 1997, and (ii) shall further be reduced by
$250,000 on the first day of April, 1997 and on the same day
of each successive month thereafter; plus
(ii) the lesser of (A) 50% of Eligible Inventory or
(B) $5,800,000; provided, however, that such maximum amount of
Eligible Inventory shall be reduced by $100,000 on the first
day of March, 1997 and on the same day of each successive
month thereafter, plus
47
<PAGE>
(iii) $250,000.
(e) Section 2.12 Fees is hereby amended by adding the
following subsection (f) at the end thereof:
(f) The Borrower agrees to pay to Lender daily a fee
in the amount of $1,000 for each day during February, 1997
when the Borrowing Base has not been reduced upon the receipt
of Net Investment Proceeds to or below $5,900,000 and for each
day during March, 1997 when the Borrowing Base has not been
reduced upon the receipt of Net Investment Proceeds to or
below $5,650,000. Such daily fee shall be payable commencing
on February 3, 1997 and continuing until the Borrowing Base
has been so reduced during February 1997 and commencing March
1, 1997 until the Borrowing Base has been so reduced during
March 1997.
(f) Section 6.10 Lockbox; Collateral Account is hereby
amended by adding the following subsection (c) at the end
thereof:
(c) The Borrower agrees to deposit in the Collateral
Account or, at the Lender's option, to deliver to the Lender
all Net Investment Proceeds which the Borrower may receive,
immediately upon receipt thereof, in the form received, except
for the Borrower's endorsement when deemed necessary. Until
delivered to the Lender or deposited in the Collateral
Account, no Net Investment Proceeds shall be commingled with
any other funds or property of the Borrower. All Net
Investment Proceeds deposited in the Collateral Account shall
be subject to the provisions set forth in Section 6.10(b)
above applicable to any other amount deposited in the
Collateral Account. Upon receipt of any Net Investment
Proceeds, the Borrower shall promptly provide a report to the
Lender describing the terms of the Investment giving rise to
such Net Investment Proceeds and itemizing all expenses paid
out of the proceeds of such Investment, together with such
further information as the Lender may in its discretion
require.
2. No Other Amendments. Except as explicitly amended by this
Sixth Amendment, all of the terms and conditions of the Credit Agreement shall
remain in full force and effect and shall apply to any advance thereunder.
3. Conditions. This Sixth Amendment shall be effective (the
"Effective Date") upon receipt by the Lender of an executed original hereof,
together with each of the following, each in substance and form acceptable to
the Lender in its sole discretion:
(a) The Acknowledgement and Agreement of Corporate Guarantors
and the Acknowledgment and Agreement of Validity Guarantors set forth
at the end of this Sixth Amendment, duly executed by each of the
Corporate Guarantors and Individual Validity Guarantors, respectively.
48
<PAGE>
(b) Supplemental Secretary's Certificate certifying (i) the
resolutions of the board of directors of the Borrower approving the
execution and delivery of this Sixth Amendment and the performance by
the Borrower of its obligation under the Sixth Amendment and the Credit
Agreement as amended hereby, (ii) that the Articles of Incorporation
and the Bylaws of the Borrower which were certified and delivered to
the Lender pursuant to the Certificate of Secretary Borrower dated
February 9, 1995 continue in full force and effect and have not been
altered, amended or revised, and (iii) the signatures of the officers
and agents of the Borrower authorized to execute and deliver this Sixth
Amendment and other instruments, agreements and certificates, including
Advance requests, on behalf of the Borrower.
(c) Payment of the fees and expenses required to be paid
by the Borrower under Paragraph 8.
(d) Such other documents as the Lender in its sole
discretion may require.
4. Representations and Warranties.
The Borrower hereby represents and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to
execute this Sixth Amendment and to perform all of its obligations
hereunder and under the Credit Agreement as amended hereby, and this
Sixth Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Sixth Amendment has been duly authorized by all necessary
corporate action and does not (i) require any authorization, consent or
approval by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ,
injunction or decree presently in effect, having applicability to the
Borrower, or the Articles of Incorporation or By-Laws of the Borrower,
or (iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement, as amended by this Sixth Amendment,
are correct on and as of the date hereof and on the Effective Date, as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
49
<PAGE>
5. References. Upon the Effective Date, all references in the
Credit Agreement to "this Agreement" shall be deemed to refer to the Credit
Agreement as amended hereby; and any and all references in the Security
Documents to the Credit Agreement shall be deemed to refer to the Credit
Agreement as amended hereby.
6. No Waiver. The Borrower acknowledges and agrees that the execution
of this Sixth Amendment and any documents related hereto shall not be deemed to
be a waiver of any Default or Event of Default under the Credit Agreement or
breach, default or event of default under any Security Document or other
document held by the Lender, whether or not known to the Lender and whether or
not existing on the date of this Sixth Amendment.
7. Release. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Sixth Amendment, whether such claims, demands
and causes of action are matured or unmatured or known or unknown.
8. Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Sixth Amendment and the documents and instruments incidental hereto. The
Borrower hereby agrees that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and
expenses.
9. Counterparts. This Sixth Amendment, the Acknowledgement and
Agreement of Corporate Guarantors and the Acknowledgment and Agreement of
Validity Guarantors may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
50
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Sixth
Amendment to be duly executed as of the day and year first above written.
BORROWER:
FIELDS AIRCRAFT SPARES INCORPORATED (SEAL)
By:______________________________________
Its:_____________________________________
LENDER:
NORWEST BUSINESS CREDIT, INC. (SEAL)
By:_____________________________________
Its:____________________________________
51
SEVENTH AMENDMENT TO CREDIT AGREEMENT
This SEVENTH AMENDMENT TO CREDIT AGREEMENT is made as of the
1st day of March, 1997 by and between FIELDS AIRCRAFT SPARES INCORPORATED, a
California corporation (the "Borrower"), and NORWEST BUSINESS CREDIT, INC., a
Minnesota corporation (the "Lender").
RECITALS
The Borrower and the Lender have entered into the Credit and
Security Agreement dated as of February 9, 1995 and amended by the First
Amendment to Credit Agreement dated November 21, 1995, by the Second Amendment
to Credit Agreement dated February 29, 1996, by the Third Amendment to the
Credit Agreement dated June 30, 1996, by the Fourth Amendment to Credit
Agreement dated August 16, 1996, by the Fifth Amendment to Credit Amendment
dated January 1, 1997 and by the Sixth Amendment to Credit Agreement dated
February 1, 1997 (as amended, the "Credit Agreement").
The Borrower may request certain advances from the Lender from
time to time pursuant to the Credit Agreement, and the Lender may, in its
discretion, choose to make loans to the Borrower pursuant to the Credit
Agreement. The Lender may demand repayment of the loans at any time pursuant to
the terms of the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by
the Borrower's demand promissory note dated as of February 9, 1995, in the
maximum principal amount of Ten Million Dollars ($10,000,000) and payable to the
order of the Lender (the "Note").
All indebtedness of the Borrower to the Lender is secured
pursuant to the terms of the Credit Agreement and all other Security Documents
as defined therein (collectively, the "Security Documents") and is guaranteed
pursuant to the unconditional guaranties of the Corporate Guarantors defined
therein and is further guaranteed pursuant to the validity guaranties of the
Individual Validity Guarantors (collectively, the "Guarantors").
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant to the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:
52
<PAGE>
1. Definitions and Amendments.
(a) Terms used in this Seventh Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
(b) The definition of the term "Borrowing Base" is hereby
amended as follows: "Borrowing Base" means, at any time and subject
to change from time to time in the Lender's sole discretion, the
lesser of:
(i) $6,081,000 provided, however, that the Borrowing
Base (a) shall be decreased by $25,000 on each of March 1,
April 1 and May 1, 1997, and (b) shall further be decreased by
$100,000 on the first day of June, 1997 and on the same day of
each successive month thereafter;
or
(c) the sum of:
(i) the lesser of (A) 75% of Eligible Accounts or (B)
$6,081,000, provided, however, that such maximum amount of
Eligible Accounts (1) shall be reduced by $25,000 on each of
March 1, April 1, and May 1, 1997, and (2) shall further be
reduced by $100,000 on the first day of June, 1997 and on the
same day of each successive month thereafter; plus
(ii) the lesser of (A) 50% of Eligible Inventory or
(B) $5,600,000; provided, however, that such maximum amount of
Eligible Inventory shall be reduced by $100,000 on the first
day of March, 1997 and on the same day of each successive
month thereafter, plus
(iii) $250,000.
(d) The definition of the term "Floating Rate" is hereby
amended to mean an annual rate equal to the sum of the Base Rate plus
eight percent (8%), which Floating Rate shall change when and as the
Base Rate changes.
(e) Section 2.12 "Fees" is hereby amended so that subsections
(e) and (f) read as follows:
(e) Commencing March 25, 1997, the Borrower agrees
to pay the Lender monthly in advance an accommodation
fee of $7,500.
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<PAGE>
(f) Commencing March 1, 1997, the Borrower agrees to
pay to Lender a daily overadvance fee in the amount of $100
for each day when the outstanding Advances exceed the
Borrowing Base; provided, however, that from the first day of
any month during which any Default or Event of Default occurs
or exists, such daily overadvance fee shall, at the option of
the Lender, be $200.
2. No Other Amendments. Except as explicitly amended by this Seventh Amendment,
all of the terms and conditions of the Credit Agreement shall remain in full
force and effect and shall apply to any advance thereunder.
3. Conditions. This Seventh Amendment shall be effective (the
"Effective Date") upon receipt by the Lender of an executed original hereof,
together with each of the following, each in substance and form acceptable to
the Lender in its sole discretion:
(a) The Acknowledgement and Agreement of Corporate Guarantors
and the Acknowledgment and Agreement of Validity Guarantors set forth
at the end of this Seventh Amendment, duly executed by each of the
Corporate Guarantors and Individual Validity Guarantors, respectively.
(b) Payment of the fees and expenses required to be paid
by the Borrower under Paragraph 8 hereof.
(c) Such other documents as the Lender in its sole
discretion may require.
4. Representations and Warranties.
The Borrower hereby represents and warrants to the Lender as follows:
(a) The Borrower has all requisite power and authority to
execute this Seventh Amendment and to perform all of its obligations
hereunder, and under the Credit Agreement as amended hereby, and this
Seventh Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Seventh Amendment has been duly authorized by all necessary
corporate action and does not (i) require any authorization, consent or
approval by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ,
injunction or decree presently in effect, having applicability to the
Borrower, or the Articles of Incorporation or By-Laws of the Borrower,
or (iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
54
<PAGE>
instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement as amended by this Seventh Amendment,
are correct on and as of the date hereof and on the Effective Date, as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
(d) The Articles of Incorporation and the Bylaws of the
Borrower which were certified and delivered to the Lender pursuant to
the Certificate of Secretary of Borrower dated February 9, 1995
continue in full force and effect and have not been altered, amended or
revised.
5. References. Upon the Effective Date, all references in the
Credit Agreement to "this Agreement" shall be deemed to refer to the Credit
Agreement as amended hereby; and any and all references in the Security
Documents to the Credit Agreement shall be deemed to refer to the Credit
Agreement as amended hereby.
6. No Waiver. The Borrower acknowledges and agrees that the execution
of this Seventh Amendment and any documents related hereto shall not be deemed
to be a waiver of any Default or Event of Default under the Credit Agreement or
breach, default or event of default under any Security Document or other
document held by the Lender, whether or not known to the Lender and whether or
not existing on the date of this Seventh Amendment.
7. Release. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Seventh Amendment, whether such claims,
demands and causes of action are matured or unmatured or known or unknown.
8. Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Seventh Amendment and the documents and instruments incidental hereto. The
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<PAGE>
Borrower hereby agrees that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and
expenses.
9. Counterparts. This Seventh Amendment, the Acknowledgement and
Agreement of Corporate Guarantors and the Acknowledgment and Agreement of
Validity Guarantors may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Seventh Amendment to be duly executed as of the day and year first above
written.
BORROWER:
FIELDS AIRCRAFT SPARES INCORPORATED (SEAL)
By:___________________________________________
Its:___________________________________________
LENDER:
NORWEST BUSINESS CREDIT, INC. (SEAL)
By:__________________________________________
Its:__________________________________________
56
EIGHTH AMENDMENT TO CREDIT AGREEMENT
This EIGHTH AMENDMENT TO CREDIT AGREEMENT is made as of the
_____ day of March, 1997 by and between FIELDS AIRCRAFT SPARES INCORPORATED, a
California corporation (the "Borrower"), and NORWEST BUSINESS CREDIT, INC., a
Minnesota corporation (the "Lender").
RECITALS:
The Borrower and the Lender have entered into the Credit and
Security Agreement dated as of February 9, 1995 and amended by the First
Amendment to Credit Agreement dated November 21, 1995, by the Second Amendment
to Credit Agreement dated February 29, 1996, by the Third Amendment to the
Credit Agreement dated June 30, 1996, by the Fourth Amendment to Credit
Agreement dated August 16, 1996, by the Fifth Amendment to Credit Amendment
dated January 1, 1997, by the Sixth Amendment to Credit Agreement dated February
1, 1997 and by the Seventh Amendment to Credit Agreement dated __________, 1997
(as amended, the "Credit Agreement").
The Borrower may request certain advances from the Lender from
time to time pursuant to the Credit Agreement, and the Lender may, in its
discretion, choose to make loans to the Borrower pursuant to the Credit
Agreement. The Lender may demand repayment of the loans at any time pursuant to
the terms of the Credit Agreement.
The loan advances under the Credit Agreement are evidenced by
the Borrower's demand promissory note dated as of February 9, 1995, in the
maximum principal amount of Ten Million Dollars ($10,000,000) and payable to the
order of the Lender (the "Note").
All indebtedness of the Borrower to the Lender is secured
pursuant to the terms of the Credit Agreement and all other Security Documents
as defined therein (collectively, the "Security Documents") and is guaranteed
pursuant to the unconditional guaranties of the Corporate Guarantors defined
therein and is further guaranteed pursuant to the validity guaranties of the
Individual Validity Guarantors (collectively, the "Guarantors").
The Borrower has requested that certain amendments be made to
the Credit Agreement, which the Lender is willing to make pursuant to the terms
and conditions set forth herein.
57
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and agreements herein contained, it is agreed as follows:
1. Definitions and Amendments.
(a) Terms used in this Eighth Amendment which are defined in
the Credit Agreement shall have the same meanings as defined therein,
unless otherwise defined herein.
(b) The definition of the term "Borrowing Base" is hereby
amended as follows: "Borrowing Base" means, at any time and subject
to change from time to time in the Lender's sole discretion, the
lesser of:
(i) $6,131,000 provided, however, that the Borrowing
Base (a) shall be decreased by $25,000 on each of April 1 and
May 1, 1997, and (b) shall further be decreased by $100,000 on
the first day of June, 1997 and on the same day of each
successive month thereafter;
or
(c) the sum of:
(i) the lesser of (A) 75% of Eligible Accounts or (B)
$6,131,000, provided, however, that such maximum amount of
Eligible Accounts (1) shall be reduced by $25,000 on each of
April 1 and May 1, 1997, and (2) shall further be reduced by
$100,000 on the first day of June, 1997 and on the same day of
each successive month thereafter; plus
(ii) the lesser of (A) 50% of Eligible Inventory or
(B) $5,500,000; provided, however, that such maximum amount of
Eligible Inventory shall be reduced by $100,000 on the first
day of April 1997 and on the same day of each successive month
thereafter, plus
(iii) $250,000.
(d) Section 2.12 "Fees" is hereby amended so that
subsections (e) reads as follows:
(e) Commencing March 25, 1997, the Borrower agrees to
pay the Lender monthly in advance an accommodation fee of
$7,500; provided, however, the Lender agrees that payment of
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<PAGE>
the accommodation fee otherwise due on March 25, 1997 may be
deferred until the earlier of (i) April 24, 1997 or (ii) the
date the Obligations are paid in full.
2. Amendment Fee. Borrower agrees to pay a fully earned, non-refundable
fee of Two Thousand Five Hundred Dollars ($2,500) in consideration of this
Eighth Amendment; provided, however, the Lender agrees that payment of this fee
may be deferred until the earlier of (i) April 24, 1997 or (ii) the date the
Obligations are paid in full.
3. No Other Amendments. Except as explicitly amended by this
Eighth Amendment, all of the terms and conditions of the Credit Agreement shall
remain in full force and effect and shall apply to any Advance thereunder.
4. Conditions. This Eighth Amendment shall be effective (the
"Effective Date") upon receipt by the Lender of an executed original hereof,
together with each of the following, each in substance and form acceptable to
the Lender in its sole discretion:
(a) The Acknowledgement and Agreement of Corporate Guarantors
and the Acknowledgment and Agreement of Validity Guarantors set forth
at the end of this Eighth Amendment, duly executed by each of the
Corporate Guarantors and Individual Validity Guarantors, respectively.
(b) Payment of the fees and expenses required to be paid
by the Borrower under Paragraph 9 hereof.
(c) Supplement Secretary's Certificate certifying (i) the
Resolutions of the Board of Directors of the Borrower approving the
execution and delivery of this Eighth Amendment and the performance by
the Borrower of its Obligations under the Eighth Amendment and the
Credit Agreement as amended hereby, (ii) that the Articles of
Incorporation and the By-Laws of the Borrower which were certified and
delivered to the Lender pursuant to the Certificate of Secretary of
Borrower dated February 9, 1995 continue in full force and effect and
have not been altered, amended or revised, and (iii) the signature of
the officers and agents of the Borrower authorized to execute and
deliver this Eighth Amendment and other instruments, agreement and
certificates, including advance requests, on behalf of the Borrower.
(d) Such other documents as the Lender in its sole
discretion may require.
5. Representations and Warranties.
The Borrower hereby represents and warrants to the Lender as follows:
59
<PAGE>
(a) The Borrower has all requisite power and authority to
execute this Eighth Amendment and to perform all of its obligations
hereunder and under the Credit Agreement as amended hereby, and this
Eighth Amendment has been duly executed and delivered by the Borrower
and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by the Borrower of
this Eighth Amendment has been duly authorized by all necessary
corporate action and does not (i) require any authorization, consent or
approval by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (ii) violate any
provision of any law, rule or regulation or of any order, writ,
injunction or decree presently in effect, having applicability to the
Borrower, or the Articles of Incorporation or By-Laws of the Borrower,
or (iii) result in a breach of or constitute a default under any
indenture or loan or credit agreement or any other agreement, lease or
instrument to which the Borrower is a party or by which it or its
properties may be bound or affected.
(c) All of the representations and warranties contained in
Article V of the Credit Agreement as amended by this Eighth Amendment,
are correct on and as of the date hereof and on the Effective Date, as
though made on and as of such date, except to the extent that such
representations and warranties relate solely to an earlier date.
6. References. Upon the Effective Date, all references in the
Credit Agreement to "this Agreement" shall be deemed to refer to the Credit
Agreement as amended hereby; and any and all references in the Security
Documents to the Credit Agreement shall be deemed to refer to the Credit
Agreement as amended hereby.
7. No Waiver. The Borrower hereby acknowledges and agrees that the
execution of this Eighth Amendment and any documents related hereto shall not be
deemed to be a waiver of any Default or Event of Default under the Credit
Agreement or breach, default or event of default under any Security Document or
other document held by the Lender, whether or not known to the Lender and
whether or not existing on the date of this Eighth Amendment.
8. Release. The Borrower hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent
corporations, subsidiary corporations, affiliated corporations, insurers,
indemnitors, successors and assigns thereof, together with all of the present
and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which the Borrower has had, now has or
has made claim to have against any such person for or by reason of any act,
60
<PAGE>
omission, matter, cause or thing whatsoever arising from the beginning of time
to and including the date of this Eighth Amendment, whether such claims, demands
and causes of action are matured or unmatured or known or unknown.
9. Expenses. The Borrower hereby reaffirms its agreement under the
Credit Agreement to pay or reimburse the Lender on demand for all costs and
expenses incurred by the Lender in connection with the Credit Agreement, the
Security Documents and all other documents contemplated thereby, including
without limitation all reasonable fees and disbursements of legal counsel.
Without limiting the generality of the foregoing, the Borrower specifically
agrees to pay all fees and disbursements of counsel to the Lender for the
services performed by such counsel in connection with the preparation of this
Eighth Amendment and the documents and instruments incidental hereto. The
Borrower hereby agrees that the Lender may, at any time or from time to time in
its sole discretion and without further authorization by the Borrower, make a
loan to the Borrower under the Credit Agreement, or apply the proceeds of any
loan, for the purpose of paying any such fees, disbursements, costs and
expenses.
10. Fees Due Upon Payment. The Borrower hereby acknowledges its
obligations pursuant to Section 2.5 and 2.12(d) of the Credit Agreement to pay
the fees described in such Sections which are due upon payment of all other
Obligations and termination of the Credit Agreement; provided, however that
notwithstanding the terms of such Sections the aggregate fees payable thereunder
shall not exceed $125,000.
11. Counterparts. This Eight Amendment, the Acknowledgement and
Agreement of Corporate Guarantors and the Acknowledgment and Agreement of
Validity Guarantors may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed an original and all of which
counterparts, taken together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Eighth
Amendment to be duly executed as of the day and year first above written.
BORROWER:
FIELDS AIRCRAFT SPARES INCORPORATED (SEAL)
By:___________________________________________
Its:__________________________________________
LENDER:
NORWEST BUSINESS CREDIT, INC. (SEAL)
61
<PAGE>
By:__________________________________________
Its:_________________________________________
62
FIELDS AIRCRAFT SPARES, INC.
1997 STOCK OPTION PLAN
ARTICLE I
Purpose
The purpose of the 1997 Stock Option Plan (the "Plan") is to
enable Fields Aircraft Spares, Inc., a Utah corporation (the "Company"), to
offer to certain of its officers, employees, directors, and consultants options
to acquire equity interests in the Company, thereby attracting, retaining, and
rewarding such persons, and strengthening the mutuality of interests between
such persons and the Company's shareholders.
ARTICLE II
Definitions
For purposes of the Plan, the following terms shall have the
following meanings:
2.1 "Administrator" shall mean the Board or, if the Board has
delegated its responsibility to administer the Plan pursuant to Section 3.1, the
committee of the Board to which such responsibility has been delegated.
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Change of Control" shall mean the occurrence of any one of
the following: (i) a reorganization, merger, or consolidation of the Company,
(ii) the Company sells substantially all its assets to a purchaser, or (iii)
shares of stock of the Company representing in excess of 50% of the total
combined voting power of all outstanding classes of stock of the Company are
acquired, in one transaction or a series of transactions, by a single purchaser
or group of related purchasers in any case other than in a transaction in which
the Company or a subsidiary of the Company is the surviving corporation or the
purchaser.
2.4 "Code" shall mean the Internal Revenue Code of 1986,
as amended.
63
<PAGE>
2.5 "Common Stock" shall mean the common stock, $.05 par value
per share, of the Company.
2.6 "Disability" shall mean a disability that results in a
Participant's Termination of Employment with the Company, as determined pursuant
to standard Company procedures.
2.7 "Effective Date" shall mean the date on which the Plan is
adopted by the Board.
2.8 "Fair Market Value" for purposes of the Plan, unless
otherwise required by any applicable provision of the Code or any regulations
issued thereunder, shall mean, as of any date, the average of the high and low
sales prices of a share of Common Stock as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if not listed or traded on any such exchange, on the Nasdaq SmallCap Market
("Nasdaq"), or, if such sales prices are not available, the average of the bid
and asked prices per share reported on Nasdaq, or, if such quotations are not
available, the fair market value as determined by the Board, which determination
shall be conclusive.
2.9 "Incentive Stock Option" shall mean any Stock Option that is
intended to be and is designated as an "incentive stock option" within the
meaning of Section 422 of the Code.
2.10 "Non-Qualified Stock Option" shall mean any Stock Option that
is not an Incentive Stock Option.
2.11 "Participant" shall mean an officer, employee, director or
consultant to whom an Option has been granted under the Plan.
2.12 "Stock Option" or "Option" shall mean any option to purchase
shares of Common Stock granted pursuant to Article VI of the Plan.
2.13 "Termination of Employment" shall mean, as appropriate, (a)
the termination of a Participant's employment with the Company and its
subsidiaries for reasons other than a military or personal leave of absence
granted by the Company, (b) termination of a Participant's consulting
relationship with the Company or (c) termination of a Participant's service as a
member of the Board.
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<PAGE>
ARTICLE III
Administration
3.1 The Administrator. The Plan shall be administered
and interpreted by the Board; provided, however, that the Board may delegate
this responsibility to a committee comprised of two or more members of the
Board.
3.2 Awards. The Administrator shall have full authority to grant,
pursuant to the terms of the Plan, Stock Options to persons eligible under
Article V. In particular, the Administrator shall have the authority:
(a) to select the officers, employees, directors
and consultants to whom Stock Options may from time to time be granted;
(b) to determine whether and to what extent
Stock Options are to be granted to one or more officers, employees, directors
and consultants eligible to receive Options under Article V;
(c) to determine the number of shares of Common
Stock to be covered by each Option granted pursuant to Article VI; and
(d) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option granted under Article VI
(including, but not limited to, the option price, the option term, installment
exercise or waiting period provisions and provisions relating to the waiver or
acceleration thereof).
3.3 Guidelines. Subject to Article VII hereof, the Administrator
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 Option
granted under the Plan (and any agreements relating thereto); and to otherwise
supervise the administration of the Plan. The Administrator may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or in any
Option in the manner and to the extent it shall deem necessary to carry the Plan
into effect. Notwithstanding the foregoing, no action of the Administrator under
this Section 3.3 shall impair the rights of any Participant without the
Participant's consent, unless otherwise required by law.
3.4 Decisions Final. Any decision, interpretation or other action
made or taken in good faith by the Administrator arising out of or in connection
with the Plan shall be final, binding and conclusive on the Company, all
officers, employees, directors and consultants, and their respective heirs,
executors, administrators, successors and assigns.
65
<PAGE>
ARTICLE IV
Share Limitation
4.1 Shares. The maximum aggregate number of shares of Common
Stock that may be issued under the Plan is 100,000 (subject to increase or
decrease pursuant to Section 4.3), which may be either authorized and unissued
shares of Common Stock or issued Common Stock reacquired by the Company. If any
Option granted under the Plan shall expire, terminate or be cancelled for any
reason without having been exercised in full, the number of unpurchased shares
shall again be available for the purposes of the Plan.
4.2 Changes. In the event of any merger, reorganization,
consolidation, recapitalization, dividend (other than a regular cash dividend),
stock split, or other change in corporate structure affecting the Common Stock,
such substitution or adjustment shall be made in the maximum aggregate number of
shares which may be issued under the Plan, the maximum number of shares with
respect to which Options may be granted to any individual during any year, and
the number and option price of shares subject to outstanding Options, as may be
determined to be appropriate by the Board, in its sole discretion, provided that
the number of shares subject to any Option shall always be a whole number.
ARTICLE V
Eligibility
5.1 Employees. Officers and other employees of the Company and
its subsidiaries are eligible to be granted both Incentive Stock Options and
Non-Qualified Stock Options under the Plan.
5.2 Directors and Consultants. Directors and consultants of the
Company and its subsidiaries are eligible to be granted Non-Qualified Stock
Options, but may not receive Incentive Stock Options unless they are employees
of the Company or a subsidiary corporation within the meaning of Section 424 of
the Code.
ARTICLE VI
Grant of Stock Options
6.1 Grants. The Administrator shall have the authority
to grant to any person, to the extent eligible under Article V, one or more
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
66
<PAGE>
Options. To the extent that any Stock Option does not qualify as an Incentive
Stock Option (whether because of its provisions or the time or manner of its
exercise or otherwise), such Stock Option or the portion thereof which does not
qualify as an Incentive Stock Option shall constitute a separate Non-Qualified
Stock Option.
6.2 Incentive Stock Options. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under Section
422 of the Code, or, without the consent of the Participants affected, to
disqualify any Incentive Stock Option under such Section 422 of the Code.
6.3 Terms of Options. Options granted under the Plan shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable:
(a) Stock Option Certificate. Each Stock Option
shall be evidenced by, and subject to the terms of, a Stock Option Certificate
executed by the Company. The Stock Option Certificate shall specify whether the
Option is an Incentive Stock Option or a Non- Qualified Stock Option, the number
of shares of Common Stock subject to the Stock Option, the option price, the
option term, and the other terms and conditions applicable to the Stock Option.
(b) Option Price. The option price per share of
Common Stock purchasable upon exercise of a Stock Option shall be determined by
the Administrator at the time of grant, but shall not be less than 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted
if the Stock Option is intended to be an Incentive Stock Option and shall not be
less than 85% of the Fair Market Value of the Common Stock on the date of grant
if the Stock Option is intended to be an Non-Qualified Stock Option.
(c) Option Term. The term of each Stock Option
shall be fixed by the Administrator at the time of grant, but no Stock Option
shall be exercisable more than ten years after the date it is granted.
(d) Exercisability. Stock Options shall be
exercisable at such time or times and subject to such terms and conditions as
shall be determined by the Administrator at the time of grant, and subject to
Section 6.3(k); provided, however, that the Administrator may waive any
installment exercise or waiting period provisions, in whole or in part, at any
time after the date of grant, based on such factors as the Administrator shall
deem appropriate in its sole discretion.
(e) Method of Exercise. Subject to such
installment exercise and waiting period provisions as may be imposed by the
Administrator, Stock Options may be exercised in whole or in part at any time
66
<PAGE>
during the option term by delivering to the Company written notice of exercise
specifying the number of shares of Common Stock to be purchased and the
aggregate option price therefor. The notice of exercise shall be accompanied by
payment in full of the option price and, if requested by the Company, by the
representation described in Section 9.2. Payment of the option price may be made
(i) in cash or by check payable to the Company, (ii) to the extent determined by
the Administrator on or after the date of grant, in shares of Common Stock duly
owned by the Participant (and for which the Participant has good title, free and
clear of any liens and encumbrances), or (iii) to the extent determined by the
Administrator on or after the date of grant, by reduction in the number of
shares of Common Stock issuable upon such exercise, based, in each case, on the
Fair Market Value of the Common Stock on the last business day preceding the
date of exercise. Upon payment in full of the option price and satisfaction of
the other conditions provided herein, a stock certificate representing the
number of shares of Common Stock to which the Participant is entitled shall be
issued and delivered to the Participant.
(f) Death. Unless otherwise determined by the
Administrator on or after the date of grant, in the event of a Participant's
Termination of Employment by reason of death, any Stock Option held by such
Participant which was exercisable on the date of death may thereafter be
exercised by the legal representative of the Participant's estate until the
earlier of one year after the date of death or the expiration of the stated term
of such Stock Option, and any Stock Option not exercisable on the date of death
shall be forfeited.
(g) Disability. Unless otherwise determined by
the Administrator on or after the date of grant, in the event of a Participant's
Termination of Employment by reason of Disability, any Stock Option held by such
Participant that was exercisable on the date of such Termination of Employment
may thereafter be exercised by the Participant until the earlier of one year
after such date or the expiration of the stated term of such Stock Option, and
any Stock Option not exercisable on the date of Termination of Employment shall
be forfeited. If the Participant dies during such one-year period, any
unexercised Stock Options held by the Participant at the time of death may
thereafter be exercised by the legal representative of the Participant's estate
until the earlier of one year after the date of the Participant's death or the
expiration of the option term of such Stock Option. 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.
(h) Termination of Employment. Unless otherwise
determined by the Administrator on or after the date of grant, in the event of a
Participant's Termination of Employment by reason of retirement or for any
reason other than death, Disability, or termination for commission of illegal
acts, any Stock Options held by such Participant on the date of such Termination
of Employment shall become fully exercisable, and may thereafter be exercised by
the Participant until the earlier of three months after such date or the
68
<PAGE>
expiration of the stated term of such Stock Option, and any Stock Option not
exercisable on the date of Termination of Employment shall be forfeited.
(i) Change of Control. In the event of a Change
of Control, all outstanding Stock Options shall immediately become fully
exercisable, and upon payment by the Participant of the option price (and, if
requested, delivery of the representation described in Section 9.2), a stock
certificate representing the Common Stock covered thereby shall be issued and
delivered to the Participant.
(j) Non-Transferability of Options. No Stock
Option shall be transferrable by the Participant otherwise than by will or by
the laws of descent and distribution, to the extent consistent with the terms of
the Plan and the Option, and all Stock Options shall be exercisable, during the
Participant's lifetime, only by the Participant.
(k) Incentive Stock Option Limitations. To the
extent that the aggregate Fair Market Value (determined as of the date of grant)
of the Common Stock with respect to which Incentive Stock Options are
exercisable for the first time by the Participant during any calendar year under
the Plan and/or any other stock option plan of the Company or any subsidiary or
parent corporation (within the meaning of Section 424 of the Code) exceeds
$100,000, the exercisability of such Stock Options shall be deferred until the
following calendar year, or such Options shall be treated as Options which are
not Incentive Stock Options, as determined by the Board.
Should any of the foregoing provisions not be necessary in order for the
Stock Options to qualify as Incentive Stock Options, or should any additional
provisions be required, the Board may amend the Plan accordingly, without the
necessity of obtaining the approval of the shareholders of the Company.
(l) Ten-Percent Shareholder Rule.
Notwithstanding any other provision of the Plan to the contrary, no Incentive
Stock Option shall be granted to any person who, immediately prior to the grant,
owns stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or any subsidiary or parent corporation
(within the meaning of Section 424 of the Code), unless the option price is at
least 110% of the Fair Market Value of the Common Stock on the date of grant and
the Option, by its terms, expires no later than five years after the date of
grant.
6.4 Rights as Shareholder. A Participant shall not be deemed to
be the holder of Common Stock, or to have any of the rights of a holder of
Common Stock, with respect to shares subject to an Option, unless and until the
Option is exercised and a stock certificate representing such shares of Common
Stock is issued to the Participant.
69
<PAGE>
ARTICLE VII
Termination or Amendment
7.1 Termination or Amendment of Plan. The Board may at any time
amend, discontinue or terminate the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article IX); provided, however, that,
unless otherwise required by law, the rights of a Participant with respect to
Options granted prior to such amendment, discontinuance or termination may not
be impaired without the consent of such Participant and, provided further, that
the Company will seek the approval of the Company's shareholders for any
amendment if such approval is necessary to comply with the Code, Federal or
state securities law or any other applicable rules or regulations.
7.2 Amendment of Options. The Board may amend the terms of any
Option previously granted, prospectively or retroactively, but, subject to
Article IV, no such amendment or other action by the Board shall impair the
rights of any holder without the holder's consent.
ARTICLE VIII
Unfunded Plan
8.1 Unfunded Status. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payment not yet
made to a Participant by the Company, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor of
the Company.
ARTICLE IX
General Provisions
9.1 Nonassignment. Except as otherwise provided in the Plan, any
Option granted hereunder and the rights and privileges conferred thereby may not
be sold, transferred, assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of an Option, right or privilege contrary to
the provisions hereof, or upon the levy of any attachment or similar process
thereon, such Option and the rights and privileges conferred thereby shall
immediately terminate and the Option shall immediately be forfeited to the
Company.
70
<PAGE>
9.2 Legend. The Company may require each person acquiring shares
upon exercise of an Option to represent to the Company in writing that the
Participant is acquiring the shares without a view to the distribution thereof.
The stock certificates representing such shares may include any legend which the
Company deems appropriate to reflect any restrictions on transfer.
All certificates representing shares of Common Stock delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Company may deem advisable under the rules, regulations and
other requirements of the Securities and Exchange Commission, any stock exchange
or stock market upon which the Common Stock is then listed or traded, any
applicable Federal or state securities law, and any applicable corporate law,
and the Company may cause a legend or legends to be put on any such certificates
to make appropriate reference to such restrictions.
9.3 Other Plans. Nothing contained in the Plan shall
prevent the Company from adopting other or additional compensation arrangements,
and such arrangements may be either generally applicable or applicable only in
specific cases.
9.4 No Right to Employment. Neither the Plan nor the grant of any
Option shall give any Participant or other employee, consultant or director any
right with respect to continuance of employment, consulting relationship or
directorship, as the case may be, with the Company or any subsidiary, nor shall
the Plan impose any limitation on the right of the Company or any subsidiary by
which a Participant is employed to terminate a Participant's employment or
consulting relationship at any time. Neither the Plan nor the grant of any
Option shall give any director the right to continue as a member of the Board or
obligate the Company to nominate any director for reelection by the Company's
shareholders.
9.5 Withholding of Taxes. The Company shall have the right to
reduce the number of shares of Common Stock otherwise deliverable upon exercise
of an Option by an amount that would have a Fair Market Value equal to the
amount of all Federal, state and local taxes required to be withheld, or to
deduct the amount of such taxes from any cash payment otherwise to be made to
the Participant, pursuant to the Plan or otherwise. In connection with such
withholding, the Company may make such arrangements as are consistent with the
Plan as it may deem appropriate.
9.6 Listing and Other Conditions.
(a) If the Common Stock is listed on a national
securities exchange or Nasdaq, the issuance of any shares of Common Stock upon
exercise of an Option shall be conditioned upon such shares being listed on such
exchange or Nasdaq. The Company shall have no obligation to issue any shares of
71
<PAGE>
Common Stock unless and until such shares are so listed, and the right to
exercise any Option shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall
be of the opinion that any sale or delivery of shares of Common Stock upon
exercise of an Option is or may in the circumstances be unlawful or result in
the imposition of excise taxes under the statutes, rules or regulations of any
applicable jurisdiction, the Company shall have no obligation to make such sale
or delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933, as amended, or
otherwise with respect to shares of Common Stock or Options, and the right to
exercise any Option shall be suspended until, in the opinion of such counsel,
such sale or delivery shall be lawful or shall not result in the imposition of
excise taxes.
(c) Upon termination of any period of suspension
under this Section 9.6, any Option affected by such suspension which shall not
then have expired or terminated shall be reinstated as to all shares available
before such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension shall
extend the term of any Option.
9.7 Governing Law. The Plan and actions taken in
connection herewith shall be governed and construed in accordance with the laws
of the State of Colorado without regard to the conflict of law principles
thereof.
9.8 Construction. Wherever any words are used in the Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
9.9 Liability of the Board. No member of the Board nor any
employee of the Company or any of its subsidiaries shall be liable for any act
or action hereunder, whether of omission or commission, by any other member of
the Board or employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything done or omitted to
be done by himself.
9.10 Costs. The Company shall bear all expenses incurred in
administering the Plan, including expenses related to the issuance of Common
Stock upon exercise of Options.
9.11 Severability. If any part of the Plan shall be determined to
be invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall continue
in full force and effect.
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9.12 Successors. The Plan shall be binding upon and inure
to the benefit of any successor or successors of the Company.
9.13 Headings. Article and section headings contained in
the Plan are included for convenience only and are not to be used in construing
or interpreting the Plan.
ARTICLE X
Term of Plan
10.1 Effective Date. The Plan shall be effective as of the
Effective Date, but the grant of any Option hereunder is subject to the express
condition that the Plan be approved by the shareholders of the Company within 12
months after the Effective Date.
10.2 Termination Date. Unless sooner terminated, the Plan
shall terminate ten years after the Effective Date and no Options may be granted
thereafter. Termination of the Plan shall not affect Options granted before such
date.
73
FIELDS AIRCRAFT SPARES, INC.
(Formerly Fields Industrial Group, Inc.)
Statement Regarding Computation of Net Income (Loss) per Share
EARNINGS PER SHARE
<TABLE>
<CAPTION>
For The Year
Ended For The Year For The Year
December 31, Ended December Ended December
1996 31, 1995 31, 1994
<S> <C> <C> <C>
Additional common stock if
preferred convertible option is
exercised:
25% of common stock
outstanding at date of
conversion $ 514,220 $ 355,625 $ --
Number of common stock
outstanding at the
beginning of the year $ 984,352 $ 944,352 $ 883,232
Total weighted average
common stock
equivalents at the end of
the year $1,840,543 $1,312,469 $ 883,232
Net income (loss) $ (242,000) $4,547,000 $(1,337,000)
Primary and fully diluted
earnings (loss) per share $ (.13) $ 3.47 $ (1.51)
</TABLE>
74
Subsidiaries of the Registrant
Subsidiary State of Incorporation
Fields Aircraft Spares Incorporated California
Fields Aero Management, Inc. California
Each of the subsidiaries listed above is a wholly owned subsidiary of
the Company, except that McDonnell Douglas Corporation owns Series A Preferred
Stock of Fields Aircraft Spares Incorporated.
75
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR THE YEAR ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY
REFRENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 88,000
<SECURITIES> 0
<RECEIVABLES> 1,557,000
<ALLOWANCES> (50,000)
<INVENTORY> 8,108,000
<CURRENT-ASSETS> 9,852,000
<PP&E> 1,819,000
<DEPRECIATION> 734,000
<TOTAL-ASSETS> 11,499,000
<CURRENT-LIABILITIES> 7,418,000
<BONDS> 6,591,000
0
0
<COMMON> 312,000
<OTHER-SE> 3,501,000
<TOTAL-LIABILITY-AND-EQUITY> 11,499,000
<SALES> 5,734,000
<TOTAL-REVENUES> 5,734,000
<CGS> 2,975,000
<TOTAL-COSTS> 2,975,000
<OTHER-EXPENSES> 2,608,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,338,000
<INCOME-PRETAX> (238,000)
<INCOME-TAX> (242,000)
<INCOME-CONTINUING> 4,000
<DISCONTINUED> (242,000)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (242,000)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
