<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-28428
AIRNET SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Ohio 31-1458309
-------------------------------- ------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3939 International Gateway, Columbus, Ohio 43219
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(Address of principal executive offices) (Zip Code)
(614) 237-9777
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Common Shares, $.01 Par Value,
Outstanding as of August 4, 1997 - 12,671,068
INDEX TO EXHIBITS AT PAGE 15
PAGE 1 OF 97 PAGES.
<PAGE>
AIRNET SYSTEMS, INC.
FORM 10-Q FOR FISCAL QUARTER ENDED JUNE 30, 1997
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1997 and
September 30, 1996 . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the three
months and six months ended June 30, 1997 and 1996 . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 1997 and 1996. . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . . 9
Item 3 Quantitative and Qualitative Disclosures About Market Risk . . 12
PART II: OTHER INFORMATION
Items 1 through 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
<PAGE>
PART I - INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
AIRNET SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, SEPTEMBER 30,
1997 1996
------------- ------------
(UNAUDITED)
(note 1)
ASSETS
Current assets:
Cash $7,771,103 $11,564,191
Accounts receivable:
Trade, less allowances 9,057,779 7,392,648
Shareholder, affiliates, and employees 254,406 260,220
Spare parts and supplies 5,841,166 5,195,917
Deposits and prepaids 5,167,207 3,039,249
------------- ------------
Total current assets 28,091,661 27,452,225
Net property and equipment 52,636,609 40,821,612
Other assets:
Intangibles, net of accumulated amortization 1,812,408 1,741,091
Other 3,233,551 48,103
Deferred tax asset 234,507 5,803,057
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Total assets $86,008,736 $75,866,088
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------------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 2,769,414 $3,959,016
Salaries and related liabilities 1,949,127 1,264,338
Accrued expenses 24,242 553,359
Deferred taxes 208,995 208,995
------------- ------------
Total current liabilities 4,951,778 5,985,708
Notes payable - 196,579
Deferred tax liability 3,397,062 3,397,062
Shareholders' equity:
Preferred stock, $.01 par value; 10,000,000
shares authorized; and no shares issued
and outstanding - -
Common stock, $.01 par value; 40,000,000
shares authorized; and 12,645,181 and
12,463,788 shares issued and outstanding
at June 30, 1997 and September 30, 1996,
respectively 126,452 124,638
Additional paid-in-capital 78,352,660 76,063,102
Retained earnings (819,216) (9,901,001)
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Total shareholders' equity 77,659,896 66,286,739
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Total liabilities and shareholders' equity $86,008,736 $75,866,088
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See notes to condensed consolidated financial statements
3
<PAGE>
AIRNET SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------------------------------------
1997 1996 1997 1996
------------- ------------ ------------ ------------
(note 1) (note 1)
<S> <C> <C> <C> <C>
Net revenues
Air transportation $22,742,116 $20,695,033 $44,534,687 $39,675,350
Fixed base operations 320,217 296,648 762,342 524,421
------------- ------------ ------------ ------------
Total net revenues 23,062,333 20,991,681 45,297,029 40,199,771
Costs and expenses
Air transportation 14,976,121 13,867,013 29,679,769 27,208,784
Fixed base operations 293,015 316,920 575,942 497,758
Selling, general and administrative 1,985,267 3,010,545 4,080,089 6,455,588
------------- ------------ ------------ ------------
Total costs and expenses 17,254,403 17,194,478 34,335,800 34,162,130
------------- ------------ ------------ ------------
Income from operations 5,807,930 3,797,203 10,961,229 6,037,641
Interest expense - 307,428 768 675,926
Offering related non-recurring expenses - 13,704,398 - 13,704,398
------------- ------------ ------------ ------------
Income (loss) before income taxes 5,807,930 (10,214,623) 10,960,461 (8,342,683)
Provision for income taxes (note 4) 2,304,000 2,025,039 4,364,000 2,029,105
------------- ------------ ------------ ------------
Net income (loss) $3,503,930 ($12,239,662) $6,596,461 ($10,371,788)
------------- ------------ ------------ ------------
------------- ------------ ------------ ------------
Net income per common share $0.28 - $0.52 -
------------- ------------
------------- ------------
Weighted average common shares outstanding 12,633,829 12,627,594
Pro forma information (note 5):
Historical loss before income taxes ($10,214,623) ($8,342,683)
Pro forma adjustments other than income taxes 1,345,629 2,942,320
------------ ------------
Pro forma loss before income taxes (8,868,994) (5,400,363)
Pro forma tax provision on pro forma loss 911,034 2,298,487
------------ ------------
Pro forma net loss ($9,780,028) ($7,698,850)
------------ ------------
------------ ------------
Pro forma net loss per common share ($1.02) ($0.86)
------------ ------------
------------ ------------
Weighted average common shares outstanding 9,623,076 8,981,587
</TABLE>
See notes to condensed consolidated financial statements
4
<PAGE>
AIRNET SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------------
1997 1996
------------ -------------
(note 1)
<S> <C> <C>
Operating activities
Net income (loss) $6,596,461 ($10,371,787)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Offering related non-recurring, non-cash expenses - 13,704,398
Depreciation 4,118,943 4,321,561
Amortization of intangibles 144,043 196,807
Deferred taxes 4,364,000 2,080,330
Provision for losses on accounts receivable 19,953 18,000
Deferred compensation - 403,139
Loss (gain) on disposition of assets 56,042 (26,280)
Cash provided by (used in) in operating assets and liabilities:
Accounts receivable (2,569,737) (70,445)
Spare parts and supplies (813,882) (251,187)
Prepaid expenses (1,430,199) (1,039,362)
Accounts payable (294,243) (2,064,554)
Accrued expenses (913,102) (63,136)
Salaries and related liabilities 259,718 309,796
Other, net (214,930) (55,099)
------------ ------------
Net cash provided by operating activities 9,323,067 7,092,182
Investing activities
Acquisition of Pacific Air Charter, Inc. net of cash acquired (Note 3) (164,188) -
Purchases of property and equipment (10,718,125) (4,236,002)
Payments for covenants not to compete (145,000) -
Proceeds from sales of property and equipment 419,019 -
------------ ------------
Net cash used in investing activities (10,608,294) (4,236,002)
Financing activities
Proceeds from the issuance of Common Shares - net (29) 83,015,980
Exercise of stock options 344,900 -
Purchase of Donald Wright Warrant - (29,901,785)
Proceeds from shareholder notes receivable - 282,508
Repayment of borrowings under the revolving credit facility - (6,375,000)
Repayment of long-term debt (920,204) (12,338,411)
Proceeds from the issuance of long-term debt - 1,004,000
Distributions to shareholders - (23,384,235)
------------ ------------
Net cash provided by (used in) financing activities (575,333) 12,303,057
------------ ------------
Net increase (decrease) in cash (1,860,560) 15,159,237
Cash and cash equivalents at January 1 9,631,663 151,115
------------ ------------
Cash and cash equivalents at June 30 $7,771,103 $15,310,352
------------ ------------
</TABLE>
See notes to condensed consolidated financial statements
5
<PAGE>
AIRNET SYSTEMS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
AirNet Systems, Inc. (the "Company") operates a fully integrated national air
transportation network which provides delivery service of time-critical
shipments for customers in the U.S. banking industry and other industries. The
Company also offers retail aviation fuel sales and related ground services for
customers in Columbus, Ohio.
The accompanying unaudited condensed consolidated financial statements include
the accounts of AirNet Systems, Inc. and its subsidiaries. These financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions for Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements. These financial statements should be read in
conjunction with the fiscal year ended September 30, 1996 consolidated financial
statements of AirNet Systems, Inc. contained in the Annual Report on Form 10-K
(File No. 0-28428) for additional disclosures including a summary of the
Company's accounting policies, which have not changed.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the results of interim periods. Operating
results for the six months ended June 30, 1997 are not necessarily indicative of
the results to be expected for the year ending December 31, 1997. On May 14,
1997, the Board of Directors of the Company approved a change in the fiscal year
end of the Company from September 30 to December 31.
The preparation of the condensed consolidated 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 thereto. Actual results could differ from
those estimates.
2. INITIAL PUBLIC OFFERING
In May, 1996, the Company completed its initial public offering (the "Offering")
which raised approximately $83.0 million, net of expenses. Proceeds were used
to repay outstanding debt, repurchase an outstanding warrant and make
distributions to former shareholders and to provide working capital to finance
future acquisitions and internal growth.
3. ACQUISITIONS
Effective June 6, 1997, the Company acquired all of the outstanding shares of
Pacific Air Charter, Inc. ("PAC") for approximately $400,000 in cash. PAC
operated a fleet of eight aircraft, primarily transporting canceled checks
between clearing banks along the West coast. The results of PAC's operations
since the effective date of the purchase have been included in the Company's
accompanying financial statements.
6
<PAGE>
Effective January 30, 1997, the Company acquired Express Convenience Center,
Inc. d/b/a ECC Worldwide Services ("ECC") in a business combination accounted
for as a pooling of interests. ECC's primary services included small package
delivery services within the United States and certain other countries. All of
the stock of ECC was exchanged for 145,953 Common Shares of the Company. The
financial statements of the Company have been restated to include ECC for all
periods presented.
On July 31, 1997, the Company acquired all of the outstanding shares of Data Air
Courier, Inc. ("Data Air") for approximately $4,000,000 in cash. Data Air's
primary business was transporting canceled checks between clearing banks
nationwide through the use of company owned ground vehicles, independent agents
and commercial airlines.
4. INCOME TAXES
Prior to the Offering, the Company's income was taxed under the provisions of
Subchapter S of the Internal Revenue Code of 1986, which provides that in lieu
of corporate income taxes, the shareholders of the S Corporation are taxed on
their proportionate share of the Company's taxable income. Therefore, provision
for federal and certain state income taxes has been included in net income for
the three months and six months ended June 30, 1996 only for the portion of
operations related to ECC operations and the period from May 30, 1996, the date
of the Offering, to June 30, 1996.
Upon completion of the Offering, the Company ceased to qualify as an S
Corporation and was subject to corporate income taxes. The Company recorded a
current tax benefit of $414,730 related to its operations for the period from
May 30, 1996 to June 30, 1996, which includes the deductibility of a $2,558,362
write-off of a covenant not to compete. In the same period, the Company also
recorded an additional net tax liability of $2,438,00 resulting from the
cumulative effect of deferred income taxes attributable to its change in tax
status. The income tax rate is based on statutory federal and state rates, and
an estimate of annual earnings adjusted for the permanent differences between
reported earnings and taxable income.
5. PRO FORMA INFORMATION
The pro forma statement of operations for the three months and six months ended
June 30, 1996 presents the pro forma effects on the historical financial
information reflecting certain Offering related transactions as if they had
occurred on January 1, 1996. The following is a summary of such pro forma
adjustments:
Three months Six months
ended ended
June 30, June 30,
1996 1996
---------- ----------
The elimination of interest expense related to the
debt repaid $ 302,543 $ 666,383
The elimination of the Wright Agreement not to compete 192,287 536,127
The elimination of deferred compensation and employee
stock purchase agreement expense for certain key
employees 723,594 1,429,799
The reduction of compensation expense for executive
officers based on new employment agreements 127,205 310,011
---------- ----------
Total pro forma adjustments other than income taxes $1,345,629 $2,942,320
---------- ----------
---------- ----------
The pro forma section of the statement of operations also includes an estimate
of taxes as if the Company were a C Corporation during the entire three months
and six months ended June 30, 1996.
7
<PAGE>
Pro forma earnings per share for the three months and six months ended June 30,
1996 are based on the weighted average number of Common Shares outstanding
during the periods, including the effect of the 2,650,764 Common Shares subject
to certain warrants which were outstanding during the three months and six
months ended June 30, 1996. One of the warrants was subsequently purchased by
the Company and the second warrant was exercised in conjunction with the
Offering.
6. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS
128"). FAS 128 establishes standards for computing and presenting earnings per
share ("EPS"). FAS 128 replaces the presentation of primary EPS with a
presentation of basic EPS which excludes dilution and is computed by dividing
income available to common shareholders by the weighted average number of common
shares outstanding during the period. This statement also requires dual
presentation of basic EPS and diluted EPS on the face of the income statement
for all periods presented. FAS 128 is effective for periods ending after
December 15, 1997. The Company plans to adopt FAS 128 in the period ending
December 31, 1997 and does not expect the impact on EPS to be significant.
The FASB has also recently issued Statement of Financial Accounting Standard No.
130, "Reporting Comprehensive Income" ("FAS 130") and Statement of Financial
Accounting Standard No. 131, "Disclosures about Segments of Enterprise and
Related Information" ("FAS 131"). FAS 130, effective for fiscal 1998, will
require separate reporting of certain items affecting shareholders' equity
outside of those included in arriving at net earnings. The Company does not
expect FAS 130 to have a material effect on its financial statements. FAS 131,
effective for fiscal 1998, establishes requirements for reporting information
about operating segments in annual reports and interim statements. The Company
has not determined the impact of FAS 131 on its financial reporting.
8
<PAGE>
AIRNET SYSTEMS, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Quarterly Report on Form 10-Q, including, but
not limited to, information regarding future economic performance and plans and
objectives of the Company's management are forward-looking statements which
involve risks and uncertainties. The following risks and uncertainties, in
addition to the other risks previously disclosed in the Company's filings with
the Securities and Exchange Commission and press releases, could cause actual
results to differ materially from those contemplated in any such forward looking
statement: potential regulatory changes by the Federal Aviation Administration,
the Federal Reserve or foreign governments, which could increase the level of
regulation of the Company's business; adverse weather conditions; the ability to
successfully integrate the operations of acquired companies; technological
advances and other economic, competitive and governmental factors affecting the
Company's markets, prices and other facets of its operations.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Revenues were $45.3 million for the six months ended June 30, 1997, an increase
of $5.1 million, or 12.7%, over the same period of fiscal 1996. Revenues from
check delivery increased $4.2 million, or 12.7%. Of the increase in revenues
from check delivery, $1.5 million is attributable to price increases effective
January 1, 1997, and approximately $1.5 million can be attributed to the Midway
Aviation ("Midway") and Pacific Air Charter, Inc. ("PAC") acquisitions, which
were completed in September, 1996 and June , 1997, respectively. The balance is
due to increased business activity and increases in total weight shipped,
despite a slight decrease in the number of flying days from 100 in the six
months ended June 30, 1996 to 99 for the same period in 1997. Small package
delivery revenues increased $0.7 million, or 10.1%, due primarily to increased
activity from both new and existing customers. These results and results from
comparable periods in fiscal 1996 include Express Convenience Center,
Inc.("ECC"), which was acquired in January, 1997 through a pooling of interests.
Revenues from fixed base operations increased $0.2 million, or 45.4%, due to an
increase in the retail sale of aviation parts.
Total costs and expenses were $34.3 million for the six months ended June 30,
1997, an increase of $0.2 million, or 0.5%, over the same period in fiscal 1996,
resulting in income from operations of $11.0 million for the six months ended
June 30, 1997 compared to $6.0 million for the same period of fiscal 1996. Air
transportation expenses were up $2.5 million, or 9.1%, while selling, general
and administrative expenses decreased $2.4 million, or 36.8%, for the six month
period.
Payroll costs associated with air transportation increased $0.4 million due to
the addition of air and ground personnel required to service a larger fleet of
aircraft and the increased volume of activity. A rise in fuel prices coupled
with increased flight hours contributed to a $0.9 million, or 22.0%, increase in
aircraft fuel expense. The increased fleet size, from 69 owned aircraft at June
30, 1996 to 110 at June 30, 1997, and increased flight hours resulted in a $0.2
million, or 7.2%, increase in maintenance expense. The fleet growth resulted in
increased insurance costs, hangar rentals and landing fees of $0.5 million. In
addition, travel costs associated with the integration of the Midway and ECC and
PAC acquisitions increased $0.2 million.
9
<PAGE>
Selling, general and administrative expenses decreased primarily due to the
restructuring of executive compensation plans (which resulted in a $0.3 million
decrease), the termination of stock purchase agreements (which resulted in a
$1.4 million decrease) and the termination of a covenant not to compete (which
resulted in a $0.5 million decrease). All were effective in conjunction with
the Company's initial public offering (the "Offering") in May 1996. The stock
purchase agreements were with certain executive officers and had been tied to
appreciation in the book value of the Common Shares of the Company. The
covenant not to compete required payments based on the Company's cash flow and
debt to equity ratio.
Interest costs decreased $0.7 million as a result of the repayment of all
outstanding debt in June 1996 with proceeds from the Offering.
The Company operated as an S Corporation under the Internal Revenue Code from
1988 until it elected to terminate its S Corporation status in conjunction with
the Offering. Under its Subchapter S election, shareholders of the Company were
taxed directly on the Company's income and, consequently, the Company was not
subject to federal and certain state income taxes at the corporate level for the
six months ended June 30, 1996, except for the portion of business that related
to the ECC acquisition, which was taxed as a C Corporation, and the period
subsequent to the Offering in May 1996. The Company recorded net deferred tax
expense of $4.4 million for the six months ended June 30, 1997 related to the
income tax expense on income for the period.
Pro forma information reflects the effects of certain Offering related
transactions on the statement of operations for the six months ended June 30,
1996 as if they occurred on January 1, 1996. See Note 5 to the Condensed
Consolidated Financial Statements included herein.
Adjusted pro forma net income per share was $0.40 for the six months ended June
30, 1996 with the assumptions that the $13.7 million non-cash, non-recurring
expenses incurred in conjunction with the Offering are excluded and the Common
Shares issued in the Offering were outstanding for the entire period.
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Revenues were $23.1 million for the three months ended June 30, 1997, an
increase of $2.1 million, or 9.9%, over the same period of fiscal 1996.
Revenues from check delivery increased $1.8 million, or 10.3%. Of the increase
in revenues from check delivery, $0.8 million is attributable to price increases
effective January 1, 1997 and approximately $0.8 million can be attributed to
the Midway and PAC acquisitions in September, 1996 and June, 1997, respectively.
The balance is due to increased business activity and increases in total weight
shipped. Small package delivery revenues increased $0.3 million, or 7.9%, due
primarily to increased activity from both new and existing customers. These
results and results from comparable periods in fiscal 1996 include ECC.
Total costs and expenses were $17.3 million for the three months ended June 30,
1997, an increase of $0.1 million, or 0.4%, over the same period in fiscal 1996,
resulting in income from operations of $5.8 million for the three months ended
June 30, 1997 compared to $3.8 million for the same period of fiscal 1996. Air
transportation expenses were up $1.1 million, or 8.0%, while selling, general
and administrative expenses decreased $1.0 million, or 34.1%, for the three
month period.
10
<PAGE>
Payroll costs associated with air transportation increased $0.2 million due to
the addition of air and ground personnel required to service a larger fleet of
aircraft and the increased volume of activity. In addition, a rise in fuel
prices coupled with an overall increase in flight hours contributed to a $0.4
million, or 18.2%, increase in aircraft fuel expense. Aircraft lease expense
decreased $0.2 million due to the purchase of eleven previously leased aircraft.
Aircraft insurance also increased $0.1 million due to the increased size of the
fleet.
Selling, general and administrative expenses decreased primarily due to the
restructuring of executive compensation (which resulted in a $0.3 million
decrease), termination of stock purchase agreements (which resulted in a $0.7
million decrease) and the termination of a covenant not to compete (which
resulted in a $0.2 million decrease). All were effective in conjunction with
the Company's Offering in May 1996.
Interest costs decreased $0.3 million as a result of the repayment of all
outstanding debt in June 1996 with proceeds from the Offering.
The Company operated as an S Corporation under the Internal Revenue Code from
1988 until it elected to terminate its S Corporation status in conjunction with
the Offering. Under its Subchapter S election, shareholders of the Company were
taxed directly on the Company's income and, consequently, the Company was not
subject to federal and certain state income taxes at the corporate level for the
three months ended June 30, 1996, except for the portion of business that
related to the ECC acquisition, which was taxed as a C Corporation, and the
period subsequent to the Offering in May 1996. The Company recorded net
deferred tax expense of $2.3 million for the three months ended June 30, 1997
related to the income tax expense on income for the period.
Pro forma information reflects the effects of certain Offering related
transactions on the statement of operations for the three months ended June 30,
1996 as if they occurred on January 1, 1996. See Note 5 to the Condensed
Consolidated Financial Statements included herein.
Adjusted pro forma net income per share was $0.23 for the three months ended
June 30, 1996, with the assumptions that the $13.7 million non-cash, non-
recurring expenses incurred in conjunction with the Offering are excluded and
the Common Shares issued in the Offering were outstanding for the entire period.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATING ACTIVITIES. Net cash flow from operating activities
was $9.3 million for the six months ended June 30, 1997, compared to $7.1
million for the six months ended June 30, 1996.
CURRENT CREDIT ARRANGEMENTS. The Company maintains a credit agreement with a
bank that provides a $50.0 million, five year, unsecured revolving credit
facility. The credit agreement limits the availability of funds to certain
specified percentages of accounts receivable, inventory and the wholesale value
of aircraft and equipment. In addition, the credit agreement requires the
maintenance of certain minimum net worth and cash flow levels, imposes certain
limitations on payments of dividends, restricts the amount of additional debt
and requires prior bank approval for certain acquisitions. There were no
borrowings under the credit agreement at June 30, 1997.
11
<PAGE>
INVESTING ACTIVITIES. Capital expenditures totaled $10.3 million for the six
months ended June 30, 1997 compared to $4.2 million for the same period in
fiscal 1996. Approximately $5.4 million was incurred in connection with the
purchase of fifteen (15) new aircraft, ten of which were previously leased by
the Company. The remainder was incurred primarily for flight equipment and
delivery vehicles. The Company anticipates it will spend an additional $10.0
million on capital items through December 31, 1997, excluding any acquisitions
of new businesses. The Company anticipates it will continue to acquire aircraft
and flight equipment as necessary to maintain growth and continue offering
quality service to its customers. The Company is also currently considering an
expansion of its facilities. However, no definitive arrangements or agreements
have been reached.
For the six months ended June 30, 1997, the Company has completed two
acquisitions of companies for approximately $0.4 million in cash and 145,953
Common Shares. On July 31, 1997, the Company acquired a third company for
approximately $4.0 million cash. See Note 3 to the Condensed Consolidated
Financial Statements included herein.
The Company anticipates that operating cash and capital expenditure requirements
will continue to be funded by cash flow from operations, cash on hand and bank
borrowings.
SEASONALITY AND VARIABILITY IN QUARTERLY RESULTS
The Company's operations historically have been somewhat seasonal and somewhat
dependent on the number of banking holidays falling during the week. Because
financial institutions are currently the Company's principal customers, the
Company's air system is scheduled around the needs of financial institution
customers. When financial institutions are closed, there is no need for the
Company to operate a full system. The Company's fiscal quarter ending December
31, is often the most impacted by bank holidays (including Thanksgiving and
Christmas) recognized by its primary customers. When these holidays fall on
Monday through Thursday, the Company's revenue and net income are adversely
affected. The Company's annual results fluctuate as well.
Operating results are also affected by the weather. The Company generally
experiences higher maintenance costs during its fiscal quarter ending March 31.
Winter weather requires additional costs for de-icing, hangar rental and other
aircraft services. The Company's cash flows are also influenced by the budget
cycles of its primary customers. Many financial institutions have calendar year
budget cycles and desire to pay for December services prior to year end. This
results in increased cash flows for the Company's fiscal quarter ending December
31, but decreased cash flows in January and February.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not
Applicable.
12
<PAGE>
AIRNET SYSTEMS, INC.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. Not Applicable
Item 2. Changes in Securities. Not Applicable
Item 3. Defaults Upon Senior Securities. Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable
Item 5. Other Information. Not Applicable
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
Exhibit No. Description
----------- -----------
Exhibit 2 Stock Purchase Agreement dated July 14, 1997 among
(i) AirNet Systems, Inc., (ii) Carole E. Aasen,
individually, and (iii) Carole E. Aasen, as sole
trustee under the Carole E. Aasen Revocable Living
Trust of October 28, 1996, and Thomas M. McQuaid
and Judith A. McQuaid, as joint tenants with right
of survivorship; and amendments thereto, dated as
of July 31, 1997. See pages 16 through 96.
Exhibit 27 Financial Data Schedule. See page 97.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the three months ended
June 30, 1997.
13
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AIRNET SYSTEMS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1997 By: /s/ Eric P. Roy
---------------------------
Eric P. Roy,
Executive Vice President
(Duly Authorized Officer)
(Principal Financial Officer)
14
<PAGE>
AIRNET SYSTEMS, INC.
INDEX TO EXHIBITS
Exhibit No. Description Page
2 Stock Purchase Agreement dated July 14, 1997 among 16
(i) AirNet Systems, Inc., (ii) Carole E. Aasen,
individually, and (iii) Carole E. Aasen, as sole
trustee under the Carole E. Aasen Revocable Living
Trust of October 28, 1996, and Thomas M. McQuaid
and Judith A. McQuaid, as joint tenants with right of
survivorship; and amendments thereto, dated as of
July 31, 1997. See pages 16 through 96.
27 Financial Data Schedule 97
15
<PAGE>
STOCK PURCHASE AGREEMENT
This AGREEMENT made and entered into as of July 14, 1997 among (i) AirNet
Systems, Inc., an Ohio corporation ("Buyer"), (ii) Carole E. Aasen
("Aasen"),individually, and (iii) Carole E. Aasen, as sole trustee under the
Carole E. Aasen Revocable Living Trust of October 28, 1996, and Thomas M.
McQuaid and Judith A. McQuaid, as joint tenants with right of survivorship
(sometimes collectively "Sellers" and sometimes individually "Seller").
WHEREAS, Sellers own all of the outstanding shares of capital stock of Data
Air Courier, Inc., a Missouri corporation (the "Company").
WHEREAS, Sellers desire to sell to Buyer and Buyer desires to purchase from
the Sellers, all of the outstanding capital stock of the Company, upon the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, intending to be legally bound, the parties hereto hereby
agree as follows:
l. PURCHASE AND SALE OF STOCK. Upon the terms and provisions of this
Agreement, Buyer agrees to purchase and accept delivery from Sellers of, and
Sellers each agree to sell, assign,
<PAGE>
transfer and deliver to Buyer, at the Closing provided for in Section 3, all of
the capital stock of the Company, consisting of 107.5 shares (hereinafter
sometimes the "Shares" or the "Stock"), free and clear of all liens, claims,
charges, restrictions, equities or encumbrances of any kind. The number of
Shares owned by each of the Sellers is set forth on Exhibit 1 hereto.
2. CONSIDERATION. The purchase price ("Purchase Price") for the Shares
is Three Million Six Hundred Thousand Dollars ($3,600,000.00). The Purchase
Price shall be adjusted after the Closing Date as provided herein.
2.1 MANNER OF PAYMENT. Subject to adjustment as provided in this
Agreement, as consideration for the Shares, Buyer, at the Closing, shall pay
against delivery of the Shares duly endorsed in blank or in a form appropriate
for transfer, the Purchase Price by certified or cashier's check on the Closing
Date to Seller.
2.2 PURCHASE PRICE ADJUSTMENT.
(a) The Purchase Price shall be increased or decreased (the "Purchase
Price Adjustment") on a dollar-for-dollar basis for the cumulative net
adjustment required by the amount (positive or negative) of the Net Working
Capital of the Company on the Closing Date. As used herein, the term "Net
Working Capital" shall mean the Company's current assets minus current
2
<PAGE>
liabilities, as such amounts are reflected on the Closing Date Balance Sheet (as
hereinafter defined).
(b) As promptly as practicable after the Closing Date (but in no
event later than 60 days thereafter) Sellers shall prepare and deliver to Buyer
for its review and comment (i) a balance sheet dated as of the close of business
on the Closing Date (the "Closing Date Balance Sheet"). The Closing Date Balance
Sheet shall fairly present, in reasonable detail, the financial position of the
Company as at the close of business on the Closing Date in accordance with
generally accepted accounting principles consistently applied ("GAAP") (except
for the omission of certain footnotes and other presentation items required by
GAAP with respect to such financial statements). If Buyer objects to any
amounts reflected on the Closing Date Balance Sheet, Buyer must, within 30 days
after Buyer's receipt of the Closing Date Balance Sheet, give written notice
(the "Notice") to Sellers specifying in reasonable detail its objections, or
Sellers' determination of the Purchase Price Adjustment shall be final, binding
and conclusive on the parties. With respect to any disputed amounts, the parties
shall meet in person and negotiate in good faith during the 30 day period (the
"Resolution Period") after the date of Sellers' receipt of the Notice to resolve
any such disputes. If the parties are unable to resolve all such
3
<PAGE>
disputes within the Resolution Period, then within five business days after the
expiration of the Resolution Period, all disputes shall be submitted to Ernst &
Young, LLP, or if such firm is unavailable or unwilling to resolve such
disputes, to another nationally recognized accounting firm mutually acceptable
to Buyer and Sellers (the "Independent Accountant") who shall be engaged to
provide a final and conclusive resolution of all unresolved disputes within 45
days after such engagement. The determination of the Independent Accountant
shall be final, binding and conclusive on the parties hereto. The first $10,000
of fees and expenses of the Independent Accountant for all such claims in the
aggregate shall be borne equally by each party. Any fees and expenses of the
Independent Account in excess of such $10,000 shall be borne by the party who,
in the Independent Accountant's determination, submitted a disputed amount that
differs more significantly from the amount finally determined by the Independent
Accountant. From and after the Closing Date, Buyer will provide Sellers with
access to the books, records and personnel of Buyer that Sellers reasonably
request.
(c) If the Acquisition Price Adjustment (as finally determined in
accordance with the provisions set forth above) is a positive (negative) amount,
then, within five business days
4
<PAGE>
after such final determination, Buyer (Sellers) shall pay to Sellers(Buyer) such
amount in immediately available funds.
2.3 ESCROW. There shall be placed in escrow with NationsBank Dallas
("Escrow Agent") $800,000.00 of the Purchase Price. Such $800,000.00 shall be
delivered by Sellers to the Escrow Agent at Closing and shall be held and
delivered by the Escrow Agent in accordance with the terms and provisions of an
escrow agreement substantially in form to Exhibit 2, which Buyer, Sellers and
the Escrow Agent will execute and deliver at Closing. Buyer shall be entitled
to recover from such funds held by the Escrow Agent for any liabilities or
claims arising (i) under the indemnification provisions of this Agreement,
including, but not limited to, provisions relating to misrepresentations and
nonfulfillment of this Agreement and (ii) for any period prior to the Closing
including, but not limited to, matters such as environmental, legal and taxes
except to the extent such matters are specifically listed and quantified in the
Schedules to this Agreement; provided that Buyer's aggregate claims must exceed
$5,000.00 before a claim may be filed. Interest on the funds in the Escrow
account shall accrue to the benefit of Sellers and shall be distributed in
accordance with the Escrow Agreement. On the date occurring one year after
Closing, the entire amount of $800,000.00 (less the amount of (i) any escrow
related expenses
5
<PAGE>
which are to be paid solely by Sellers from such Escrow account and (ii) any
claims filed) shall be released from such Escrow account to Seller, provided,
however, if Buyer has filed a claim, the Escrow agent will not distribute the
disputed amount to either party but shall continue to hold such funds until the
parties resolve the dispute. If the parties are unable to resolve the dispute
within thirty (30) days of the filing of such claim, the parties shall seek
resolution in accordance with the provisions set forth in Section 14.
3. CLOSING. The closing of the purchase and the sale of the Stock (the
"Closing") shall take place at the office of Vorys, Sater, Seymour and Pease, 52
E. Gay Street, Columbus, Ohio (or at such other place as the parties may
mutually agree) on such date as soon as practicable upon which the parties shall
mutually agree, but in no event later than July 30, 1997 (the "Closing Date",
"Closing" or "time of closing"). The Closing Date may be postponed to a later
time and date by mutual agreement of the parties. If the Closing Date is
postponed, all reference to the Closing Date in this Agreement shall refer to
the postponed date.
4. INSTRUMENTS OF CONVEYANCE AND TRANSFER AND FURTHER ASSURANCES. On the
Closing Date, the Sellers each shall deliver to Buyer the Shares with
appropriate endorsement or Stock Power
6
<PAGE>
attached, and in either event with the signature of such Seller in form and
substance satisfactory to Buyer and its counsel so as to vest in Buyer good and
marketable title to all of the Shares free and clear of any lien, security
interest, charge of encumbrance of any kind or nature.
Both at the Closing and from time to time after the Closing at the request
of either, the Sellers and Buyer agree that without further consideration such
party or parties will execute and deliver to the other such other instruments of
conveyance and transfer and will take such other action as reasonably may be
required effectively to consummate the transfers contemplated for Buyer to
acquire the Shares and to consummate and effectuate the purposes of this
Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. In order to induce
Buyer to enter into this Agreement, Aasen and Sellers, jointly and severally,
represent and warrant to Buyer as follows:
5.1 OWNERSHIP OF THE SHARES AND THE EXECUTION AND EFFECT OF THIS
AGREEMENT. Sellers have (i) good and valid title to the Shares, free and clear
of any and all liens, pledges, encumbrances, charges, agreements or claims of
any kind whatsoever and (ii) the full legal right, power, authority and capacity
to enter into and perform this Agreement and to sell,
7
<PAGE>
assign, transfer and deliver the Shares as provided in this Agreement; and such
delivery will convey to Buyer good and marketable title to the Shares, free and
clear of any and all liens, pledges, encumbrances, charges, agreements or claims
of any kind whatsoever. This Agreement constitutes the legal, valid and binding
obligation of each of the Sellers enforceable in accordance with its terms.
None of the Sellers have any legal obligation, absolute or contingent, to any
other person or firm to sell any of the Shares or to effect any merger,
consolidation, or other reorganization, or to enter into any agreement with
respect to any of the Shares or which would affect his title to or right to
deliver the Shares on the Closing Date free, clear and unencumbered. Neither
the execution nor delivery of this Agreement, nor the consummation of the
transactions contemplated hereby, nor compliance by the Sellers will (i) result
in a breach or constitute a default (or an event which with notice or lapse of
time, or both, would constitute a default) under any promissory note, bond,
mortgage, indenture, deed of trust, license, agreement, or other material
instrument or obligation to which any of the Sellers is a party or by the Seller
may be bound or affected or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to any of the Sellers, or any properties
or assets of any of the Sellers. No consent or
8
<PAGE>
approval by, notice to, or registration with any governmental authority is
required on the part of any of the Sellers prior to the Closing Date in
connection with the execution and delivery by any of the Sellers of this
Agreement or the consummation by any of the Sellers of any of the transactions
contemplated hereby.
5.2 CORPORATE ORGANIZATION AND GOOD STANDING. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Missouri and has the corporate power and authority to carry on
its business as now being conducted and to own and operate the properties and
assets now owned and being operated by it. Sellers have delivered to Buyer
completed and correct copies of the Company's Certificate of Incorporation and
By-Laws as in effect on the date hereof. The Company is duly qualified or
licensed to do business and is in good standing as a foreign corporation in each
of the jurisdictions set forth in Schedule 5.2. The Company is not required to
be qualified or licensed to do business and in good standing as a foreign
corporation in any other jurisdiction. Schedule 5.2 sets forth a true and
completed list of the names, addresses and titles of the directors and officers
of the Company.
9
<PAGE>
5.3 CORPORATE AUTHORITY. The Company's Board of Directors has duly
authorized the sale of the Shares to Buyer and the consummation of the other
transactions contemplated hereby.
The Company has no legal obligation, absolute or contingent, to any other
person or firm to sell any portion of its assets, other than those transactions
which would occur in the ordinary course of its business, or to effect any
merger, consolidation, or other reorganization or enter into any other agreement
with respect thereto which would in any way adversely affect the consideration,
business, or properties which would be indirectly acquired by Buyer through the
acquisition of the Shares. Neither the execution nor the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
violate or conflict with or result in a breach of any provision of or constitute
a default (or an event which with notice or lapse of time, or both, would
constitute a default) under or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge, or encumbrance of any kind or nature upon any of the terms,
conditions or provisions of the Company's Certificate of Incorporation or By-
Laws or any promissory note, bond, mortgage, indenture, deed of trust, license,
agreement, or other material instrument or obligation to which the Company is a
10
<PAGE>
party or by which the Company, any of its assets or any of the Shares may be
bound or affected, or (ii) violate any order, writ, injunction, decree, statute,
material rule or regulation applicable to the Company, any of its properties,
its assets or any of the Shares. No consent or approval by, notice to,
registration or qualification with any governmental authority is required on the
part of the Company prior to the Closing Date in connection with the execution
and delivery of this Agreement or the consummation of any of the transactions
contemplated hereby.
All of the Company's rights and the authority to conduct its business shall
remain in the same condition at and as of the Closing Date as they are at the
moment prior to the execution of this Agreement by the Sellers.
5.4 CAPITALIZATION. The authorized capital stock of the company
consists of 300 shares of Common Stock of the par value of $100 per share.
There are presently issued and outstanding 107.5 shares, all of which are owned
by the Sellers. All of the Shares have been duly authorized and validly issued
and are fully paid and non-assessable and none of them was issued in violation
or any preemptive or other right. The Company is not a party to or bound by any
contract, agreement or arrangement to issue, sell or otherwise dispose of or
redeem, purchase or otherwise acquire any capital stock or any other security of
the
11
<PAGE>
Company or any other security exercisable or exchangeable for or convertible
into any capital stock or any security of the Company, and, except for this
Agreement, there is no outstanding option, warrant or other right to subscribe
for or purchase, or contract, agreement or arrangement with respect to, any
capital stock or any other security of the Company or any other security
exercisable or convertible into any capital stock or any other security of the
Company.
5.5 SUBSIDIARIES. The Company has no subsidiaries.
5.6 FINANCIAL STATEMENTS. Sellers have delivered to Buyer copies of
the following financial statements (hereinafter sometimes collectively
"Financial Statements"):
(i) The audited balance sheets of the Company as of December 31,
1993, 1994, 1995 and 1996 and statements of income, changes
in stockholders' equity and cash flows for the fiscal years
ended on those dates, together with supporting schedules and
the reports thereon of Ernst & Young, LLP, certified public
accountants; and
(ii) The unaudited balance sheet of the Company as of April 30,
1997 and related statements of income, changes in
stockholders' equity and cash flows for the four month
period ended on
12
<PAGE>
such date, together with supporting schedules, identified by
the President of the Company and Ernst & Young, LLP (the
"April '97 Financial Statements").
Except as set forth in the notes thereto or as set forth in Schedule 5.6, all of
the Financial Statements are complete and correct and present fairly and
accurately the financial position of the Company at the respective dates of said
balance sheets and the results of the operations and changes in financial
position for the respective periods then ended in conformity with generally
accepted accounting principles applied on a basis consistent with that of the
preceding periods.
The Company has good and marketable title to all of the assets set forth in
the April '97 Financial Statements and to such additional assets as may have
been acquired by the Company after April 30, 1997.
The Company has no liabilities of any nature, whether absolute, accrued,
contingent or otherwise, other than (i) those expressly disclosed in any of the
Financial Statements and/or this Agreement and (ii) any liabilities incurred in
the ordinary course of business of the Company after April 30, 1997 which are
not, singly or in the aggregate, materially adverse to the Company.
13
<PAGE>
The Company has no liabilities of any nature, whether absolute, accrued,
contingent or otherwise, other than those disclosed in the Financial Statements
and/or this Agreement and any liabilities incurred in the ordinary course of
business of the Company.
5.7 NO MATERIAL CHANGE. Since April 30, 1997, except (i) for the
execution and delivery of this Agreement and (ii) as set forth in Schedule 5.7,
the Company has not:
(i) had any change in its condition (financial or otherwise),
operations (present or prospective), business (present or
prospective), properties, assets, or liabilities, other
than changes in the ordinary course of business, which
changes have not individually or in the aggregate been
materially adverse to the Company;
(ii) suffered any damage, destruction or loss of physical
property (whether or not covered by insurance) materially
adversely affecting its condition (financial or otherwise
or operations (present or prospective);
(iii) issued, sold or otherwise disposed of, or agreed to issue,
sell or otherwise dispose of,
14
<PAGE>
any capital stock or any other security of the Company and
has not granted or agreed to grant any option, warrant or
other right to subscribe for or to purchase any capital
stock or any other security of the Company;
(iv) incurred or agreed to incur any indebtedness for borrowed
money;
(v) paid or obligated itself to pay in excess of $5,000.00 in
the aggregate for any fixed assets;
(vi) suffered any substantial loss or waived any substantial
right;
(vii) sold, transferred or otherwise disposed of, or agreed to
sell, transfer or otherwise dispose of, any assets or
canceled, or agreed to cancel, any debts or claims, other
than in the ordinary course of business;
(viii) mortgaged, pledged or subjected to any charge, lien, claim
or encumbrance, or agreed to mortgage, pledge or subject
to any charge, lien, claim or encumbrance, any of its
properties or assets;
15
<PAGE>
(ix) declared, set aside or paid any dividend or made any
distribution (whether in cash, property or stock) with
respect to any of its capital stock or redeemed, purchased
or otherwise acquired, or agreed to redeem, purchase or
otherwise acquire, any of its capital stock;
(x) increased, or agreed to increase, the compensation payable
to any of its officer, employees or agents ("Company
Personnel"), adopted or increased or agreed to adopt or
increase or agreed to adopt or increase any benefit under
any insurance, pension or other employee benefit plan,
payment or arrangement made to, for or with any Corporate
Personnel or; paid or agreed to pay any bonus or incentive
compensation, or any other like benefit to any Corporate
Personnel; or entered into or agreed to enter into any
severance arrangement with any of the Company's employees;
16
<PAGE>
(xi) lost any major customer or had any material order canceled
or become aware of any threatened cancellation of any
material order;
(xii) made or permitted any amendment or termination of any
contract, agreement or license to which it is a party
other than in the ordinary course of business;
(xiii) had any resignation or termination of employment of any of
its officers or key employees or become aware of any
impending or threatened resignation or resignations or
termination or terminations of employment that would have
a material adverse effect on its operations (present or
prospective) or business (present or prospective);
(xiv) had any labor trouble or become aware of any impending or
threatened labor trouble;
(xv) experienced any shortage or difficulty in obtaining any
raw material;
(xvi) made any change in its accounting methods or practices
with respect to its condition, operations, business, or
practices with
17
<PAGE>
respect to its condition, operations, business,
properties, assets or liabilities;
(xvii) made any charitable or political contribution or;
(xviii) entered into any transaction not in the ordinary course of
its business;
(xix) entered into or become aware of any agreement with respect
to Shares; or
(xx) entered into agreements or commitments of any nature to do
any of the foregoing.
5.8 TITLE TO AND CONDITION OF PROPERTIES AND ASSETS. The Company has
good and marketable title to all of its properties and assets, including,
without limitation, (i) all those used in the business, and (ii) those reflected
in the April '97 Financials (except as thereafter sold or otherwise disposed of
in the ordinary course of business) subject to no mortgage, pledge, conditional
sales contract, lien, security interest, right of possession in favor of any
third party, claim or other encumbrance, except (i) the lien of current taxes
not yet due and payable and (ii) as set forth in Schedule 5.6. Subsequent to
April 30, 1997, the Company has not sold or disposed of any of its properties or
assets or obligated itself to do so except in the ordinary course of business.
The facilities, machinery,
18
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furniture, office and other equipment of the Company that are used in its
business are in good operating condition and repair, subject only to the
ordinary wear and tear, and neither the Company nor any property or asset owned
or leased by the Company is in violation of any applicable ordinance, regulation
or building, zoning, environmental or other law in respect thereof. Said
facilities, machinery, furniture, office and other equipment and assets of every
type and kind owned by the Company are sufficient to enable the Company to
operate its business.
5.9 CERTAIN PROPERTIES. Schedule 5.9 sets forth all real estate
either leased to the Company or owned by the Company and all personal property
leased, orally or in writing, to the Company and specifies, in the case of real
estate, the location of each property, the use of the facility thereon, the name
of the owner or the names of the lessor and the lessee, the square footage of
improvements and the acreage of land. Sellers have delivered to Buyer:
(i) a copy of each lease by which the Company acquired title
to or its interest in the leased real estate described in
Schedule 5.9,
(ii) a copy of all title abstracts and title insurance policies
the Company has for the real estate described in Schedule
5.9,
19
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(iii) a copy of the most recent survey or surveys the Company
has for the real estate described in Schedule 5.9,
(iv) a copy of all certificates of occupancy for the
improvements on the real estate described in Schedule 5.9
and a copy of any variance granted with respect to any of
such real estate described in Schedule 5.9 pursuant to
applicable zoning laws or ordinances and
(v) a copy of each lease by which the Company acquired its
interest in the personal property described in Schedule
5.9, all of which documents are true and complete copies
thereof as in effect on the date hereof.
The Company has not received any written notice from any governmental agency,
board, bureau, body, department or authority of any United States or foreign
jurisdiction, with respect to the use of any of the real estate described in
Schedule 5.9. Except as set forth in Schedule 5.9, there is no easement, right-
of-way agreement, license, sublease, occupancy agreement or like instrument with
respect to any of the real estate described in Schedule 5.9. Each lease
pursuant to which the Company leases any real or personal property is in full
force and effect and is
20
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valid and enforceable in accordance with its terms. There is not under any such
lease any default by the Company, or any event that with notice or lapse of time
or both would constitute such a default by the Company and with respect to which
the Company has not taken adequate steps to prevent such default from occurring;
all of such events, if any, and the aforesaid steps taken by the Company are set
forth in Schedule 5.9. There is not under any such lease any default by any
other party thereto or any event that with notice or lapse of time or both would
constitute such a default thereunder by the Company or any other party. Each
property used in the business of the Company is reflected in the April '97
Financials in the manner and to the extent required by generally accepted
accounting principles.
5.10 TAX MATTERS.
(i) All federal, state, local and foreign tax returns, reports
and statements required to be filed by the Company have
been properly and timely filed with the appropriate
governmental agencies in all jurisdictions in which such
returns, reports and statements are required to be filed,
and all Charges (as hereinafter defined) and other
impositions shown thereon to be due and payable have been
paid prior to the
21
<PAGE>
date on which any fine, penalty, interest, late charge or
loss may be added thereto for the nonpayment thereof,
unless any such amounts are being contested in good faith
by appropriate proceedings and an adequate reserve has
been established on the April '97 Financials, or any such
fine, penalty, interest, late charge or loss has been
paid. For purposes of this Agreement, "Charges" shall
mean all federal, state, county, city, municipal, local,
foreign or other governmental taxes, levies, assessments
and charges, liens, claims or encumbrances upon or
relating to:
(a) the Company's employees, payroll, income or gross
receipts,
(b) the Company's ownership or use of any of its
assets, or
(c) any other aspect of the Company's business, in
each case including any and all interest and
penalties.
(ii) The Company has paid when due and payable all Charges
required to be paid by it. The provisions for taxes due
in the April '97
22
<PAGE>
Financials are sufficient for all unpaid Charges.
(iii) Schedule 5.10 sets forth for the Company those taxable
years for which its tax returns are currently being
audited by the Internal Revenue Service ("IRS"). No issue
has been raised or settled in any such examination that,
by application of similar principles, reasonably may be
expected to result in an assertion of a material
deficiency for any other taxable year not so examined that
has not been accrued on the balance sheets of the Company
as of April 30, 1997. The Company has not settled, issued
or has entered into a closing agreement with respect to
any tax year for which an audit or examination has been
concluded that, by application of similar principles,
reasonably may be expected to result in a material
deficiency for any other taxable year not so examined (or
currently under examination) that has not been accrued on
the April '97 Financials in accordance with GAAP. There
is no issue known to the Company relating to any
23
<PAGE>
Charge (federal or otherwise) that, if determined
adversely to the Company, would result in the assertion of
any material deficiency for any taxable year that has not
been accrued on the April '97 Financials.
(iv) Except as set forth in Schedule 5.10, the Company has not
executed or filed with the IRS or any other governmental
authority any agreement or other document extending, or
having the effect of extending, the period for assessment
or collection of any Charge.
(v) Except as set forth in Schedule 5.10, the Company has not
filed a consent pursuant to Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"), or agreed
to have Section 341(f)(2) of the Code apply to any
disposition of subsection (f) assets (as such term is
defined in Section 341(f)(4) of the Code). The Company
has not made any payment, is obligated to make any
payment, or is a party to any agreement that could under
certain circumstances obligate it to make any payment,
that will not be deductible under Section 280G
24
<PAGE>
of the Code. The Company has disclosed on its federal
income tax returns all positions taken thereon that could
give rise to a substantial understatement of federal
income tax within the meaning of Section 6661 of the Code.
(vi) Except as set forth in Schedule 5.10, none of the property
owned by the Company is property which the Company is
required to treat as being owned by any other person
pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1986, as amended, and in effect
immediately prior to the enactment of the Tax Reform Act
of 1986 or is "tax-exempt use property" within the meaning
of Section 168(h) of the Code.
(vii) Except as set forth in Schedule 5.10, the Company has not
agreed or has been requested to make any adjustment under
Section 481(a) of the Code by reason of a change in
accounting method initiated by the Company and the Company
has no knowledge that the IRS has proposed any such
adjustment or change in accounting methods.
25
<PAGE>
(viii) Except as set forth in Schedule 5.10, the Company has no
obligation under any written tax sharing agreement.
5.11 CONTRACTS. Except as set forth in Schedule 5.11, the Company is
not a party to any written or oral:
(i) contract with any labor union;
(ii) employment or consulting contract or other contract for
services;
(iii) lease, whether as lessee or lessor, with respect to any
property, real or personal;
(iv) loan agreement or instrument relating to any indebtedness;
(v) contract of purchase or sale with respect to the assets or
business except in the ordinary course;
(vi) contract with any agent, dealer or distributor;
(vii) stand-by letter of credit, guarantee or performance bond;
(viii) contract or agreement restricting the ability of any
person from freely engaging in any business or competing
anywhere in the world;
(ix) severance or bonus agreements with current or past
employees;
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(x) contract not made in the ordinary course of business;
(xi) other contract, except insubstantial contracts for
supplies or services.
Except as set forth in Schedule 5.11, the Company is not a party to any contract
with any governmental authority. The Company is not a party to any contract
that materially and adversely affects its condition (financial or otherwise),
operations (present or prospective), business (present or prospective),
properties, assets or liabilities. Each contract or other agreement listed in
Schedule 5.11 is in full force and effect and is valid and enforceable by the
Company, in accordance with its, terms. Neither the Company nor any other party
is in default in the observance or the performance of any term or obligation to
be performed by them under any contract listed in Schedule 5.11. The Company is
not a party to nor has it made any outstanding bid or contract proposal that, if
accepted or entered into, might result in a loss to the Company. Sellers have
delivered to Buyer true and complete copies of all contracts listed in Schedule
5.11 in effect on the date hereof.
5.12 LITIGATION. Except as set forth in Schedule 5.12, there are no
pending or threatened actions, suits, claims, proceedings, arbitrations or
investigations, either at law or in
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equity, or before any commission or other administrative authority in any United
States or foreign jurisdiction, of any kind now pending or threatened or
proposed in any manner any circumstances which should or could reasonably form
the basis of any such action, suit, proceeding or investigation, involving any
of the Sellers, the Company or any of its properties or assets that (i) if
asserted and decided adversely to any of the Sellers or the Company, could
materially and adversely affect the operations (present or prospective) or the
business (present or prospective) of the Company, or (ii) questions the validity
of this Agreement or (iii) seeks to delay, prohibit or restrict in any manner
any action taken or to be taken by any of the Sellers under this Agreement.
Neither the Company nor any of its properties or assets, or any of the Sellers,
is subject to any judicial or administrative judgment, order, decree or
restraint. Schedule 5.12 lists all actions, arbitrations and lawsuits
instituted against the Company during the preceding ten-year period.
5.13 PATENTS AND TRADEMARKS. The Company owns the patents,
trademarks, service marks, copyrights, trade names ("Intellectual Property")
listed on Schedule 5.13 and it has the sole, exclusive and unqualified right to
use the Intellectual Property in connection with its business in the United
States and
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no other party has any rights to use any of the Intellectual Property. All of
the federal and state registrations relative to the Intellectual Property and
any licenses relative to the Intellectual Property are set forth on Schedule
5.13. The Company has not and is not infringing any patent, copyright,
trademark, service mark, trade name, know-how, trade secret or other proprietary
right of any other person. Neither any of the Sellers nor the Company knows of
any potential claim of infringement of any patent, copyright, trademark, service
mark, trade name, know-how, trade secret or other proprietary right of any other
person that has not been asserted but that, if asserted, would materially and
adversely affect the financial condition, business or operations of the Company.
5.14 COMPLIANCE WITH LAWS. The Company has complied with and is in
compliance with all federal, state, local and foreign statute, laws, ordinances,
regulations, rules, permits, judgments, orders and decrees applicable to it or
any of its properties, assets, operations and businesses, and there does not
exist any basis for any claim of default under or violation of any such statute,
law, ordinance, regulation, rule, judgment, order or decree except such defaults
or violations or such bases for any claims of such defaults or violations, if
any, that in the aggregate do not and will not materially and adversely affect
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the property, operations, financial condition or prospects of the Company.
Without limiting any of the foregoing or any other provisions of this Agreement
and for purposes of example only, included herein are violations arising in the
following areas: all matters relating to the environment, employee safety, fair
labor standards, product safety, equal employment opportunity, Workmen's
Compensation and Unemployment Compensation, federal, state and local taxes of
all types, ERISA, COBRA, Immigration and Naturalization, and zoning. None of
the Sellers know of any presently pending proceeding, hearing or investigation
with respect to the adoption of amendments or modifications to existing laws,
ordinances, rules, regulations or restrictions with respect to which matters
which, if adopted, would materially and adversely affect the business and/or
operations of the Company.
5.15 ENVIRONMENTAL MATTERS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders and decrees
applicable to it or any of its properties, assets, operations and businesses
relating to environmental protection including, without limitation, standards
relating to air, water, land and the generation, storage, transportation,
treatment or disposal of Hazardous Wastes and
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Hazardous Substances (as such terms are defined in any applicable state or
federal environmental law or regulation). The Company has obtained and adhered
to all necessary permits and other approvals, including, without limitation,
interim status under the Federal Solid Waste Disposal Act, necessary to store,
dispose of and otherwise handle Hazardous Wastes and Hazardous Substances and
has reported, to the extent required by all federal, state, local and foreign
statutes, laws, ordinances, regulations, rules, permits, judgments, orders and
decrees, all past and present sites owned and operated by the Company where
Hazardous Wastes or Hazardous Substances have been treated, stored or disposed
of. Sellers have made a diligent search and know of no location on any of the
property of the Company where Hazardous Wastes and Hazardous Substances have
entered or are likely to enter into the air, soil or groundwater. Sellers know
of no on-site or off-site location to which the Company has transported
Hazardous Wastes and Hazardous Substances or arranged for the transportation of
Hazardous Wastes and Hazardous Substances, which site is the subject of any
federal, state, local or foreign enforcement action or any other investigation
which could lead to any claim against the Company or Buyer for any clean-up
cost, remedial work, damage to natural resources or personal injury, including,
but not limited to, any claim under the Comprehensive
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Environmental Response, Compensation and Liability Act of 1980, as amended. The
Company has no contingent liability in connection with any release of any
Hazardous Waste or Hazardous Substance into the environment.
5.16 ERISA MATTERS. All employee pension benefit plans within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") maintained by the Company: (A) are qualified to the extent
required by law under Section 401(a) of the Internal Revenue Code of 1954; (B)
have been operated in all material respects in accordance with ERISA including,
but not limited to, the fiduciary standards required by Title I, subtitle B,
Part 4 of ERISA; (C) have not engaged in any prohibited transactions (as defined
in Section 406 of ERISA and Section 4975 of the Internal Revenue Code of 1954);
(D) have met the minimum funding standards contained in Title I, subtitle B,
Part 3 of ERISA and Section 412 of the Internal Revenue Code of 1954; (E) are
not subject to liability to any multi-employer pension plan on account of
"withdrawal" or plan "reorganization" (as those terms are defined in ERISA), or
to the Pension Benefit Guaranty Corporation for any reason; (F) have not and are
not currently undergoing (except as otherwise contemplated herein) a "partial"
or "complete" termination (as defined in ERISA); and (G) are not subject to any
"reportable
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events" (as defined in Section 4043 of ERISA), as of the Closing Date, except as
otherwise contemplated herein. All employee welfare benefit plans of the
Company, within the meaning of Section 3(1) of ERISA, have been operated in all
material respects in accordance with ERISA and none are underfunded.
5.17 GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. Schedule 5.17 lists
all licenses, franchises, permits and other governmental authorizations held by
the Company relative to the conduct of its business. Such licenses, franchises,
permits and other governmental authorizations are valid, and the Company has not
received any notice that any governmental authority intends to cancel, terminate
or not renew any such license, franchise, permit or other governmental
authorization. The Company holds all licenses, franchises, permits and other
governmental authorizations the absence of any of which could have a material
adverse effect on any of its business. The business of the Company is not being
conducted, and no properties or assets of the Company relating thereto are owned
or are being used by the Company, in violation of any statute, law, ordinance,
regulation, rule or permit of any governmental entity or any judgment, order or
decree. All services provided and/or products sold by the Company comply in all
material respects with all statutes, laws,
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ordinances, regulations and rules and criteria governing the design, manufacture
and intended use thereof.
5.18 SEC AND ANTITRUST FILINGS. The Company has not ever issued any
security covered by a registration statement filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, or the
Investment Company Act of 1940, as amended, and no security issued by the
Company has ever been registered pursuant to the Securities Exchange Act of
1934, as amended. The Company has not ever purchased or sold any security of
which it or any affiliate was the issuer at any time when the information
publicly available relating to the Company at the time was false or misleading
with respect to any material fact or omitted to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances under which they made it, not false or misleading. Sellers are
not required to file a Schedule 13E-3 Transaction Statement or a report under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any other antitrust
law in respect to any action pursuant to or contemplated by this Agreement.
5.19 CERTAIN TRANSACTIONS. Except as set forth in Schedule 5.19,
there is no transaction, and no transaction now proposed, to which the Company
was or is to be a party and in which any director or officer of the Company or
any person owning
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of record or beneficially more than 10% of the outstanding capital stock of any
class of the Company or any associate of any such person had or has a direct or
indirect material interest.
5.20 FOREIGN CORRUPT PRACTICES ACT. Neither the Company nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Company has used any corporate funds for any unlawful
contribution, gift, entertainment or other expense relating to political
activity or made any direct or indirect unlawful payment to any United States or
foreign government official or employee from corporate funds or violated or is
in violation of any provision of the Foreign Corrupt Practices Act of 1977 or
paid or made any bribe, rebate, payoff, influence payment, kickback, or other
unlawful payment.
5.21 ACCOUNTING PRACTICES. The Company makes and keeps accurate books
and records reflecting its assets and its business operations and the Company
maintains internal accounting controls that provide reasonable assurance that
(i) transactions are executed with management's authorization, (ii) transactions
are recorded as necessary to permit preparation of the Company's financial
statements and to maintain accountability for the assets of the Company, (iii)
access to the assets of the Company is permitted only in accordance with
management's authorization
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and (iv) the reported accountability of the assets of the Company is compared
with existing assets at reasonable intervals.
5.22 MINUTE BOOKS. The Company's minute books contain
complete and accurate records of all meetings and other corporate actions of its
stockholders and Board of Directors and committees thereof.
5.23 INSURANCE. All properties and operations of the
Company are insured for its benefit, in amounts deemed adequate by both the
Company's Board of Directors and its management, against all risks usually
insured against by persons operating similar properties or conducting similar
operations in the localities where such properties are located or such
operations are conducted under valid and enforceable policies issued by insurers
of recognized responsibility. Schedule 5.23 lists all such policies and the
policy amounts. Sellers have delivered to Buyer true and complete copies of all
such policies as in effect on the date hereof.
5.24 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 5.24 sets forth (i)
the name of each bank in which the Company has an account or safe deposit box
and the names of all persons authorized to draw thereon or to have access
thereto, and (ii) the names of all persons, if any, holding powers of attorney
from the Company and a summary statement of the terms thereof.
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5.25 PRODUCT/SERVICE WARRANTIES. Except as set forth in Schedule
5.25: (i) the Company has no unexpired, expressed, product or service warranty
with respect to any product that it manufactures or sells or that it has
heretofore manufactured or sold or any service that it provides or sells or has
heretofore provided or sold; (ii) the Company has not received any notice of any
claim based on any such product or service warranty; and (iii) Sellers do not
know or have reasonable ground to know of any claim (actual or threatened) based
on any such product or service warranty of which the Company has not received
notice.
5.26 CERTAIN DISCLOSURES. Schedule 5.26 contains:
(i) a list of all officers and other employees, agents and
consultants of the Company whose current annual salary or
rate of compensation (including bonus and incentive
compensation) is $10,000 or more or to whom the Company
has loaned funds.
5.27 CUSTOMER RELATIONS. None of the Sellers is aware of any facts,
conditions or circumstances which would indicate that any of the Company's
customers intend to materially alter (i) the amount of their purchases from the
Company or (ii) their relationship with the Company, or of any facts, conditions
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or circumstances which would have a material adverse effect upon the sales and
earnings of the Company.
5.28 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Company and Sellers
directly with Buyer and without the intervention of any other person and in such
manner as not to give rise to any valid claim against any of the parties for any
finder's fee, brokerage commission or like payment.
5.29 NO UNTRUE STATEMENTS. No statements by any of the Sellers
contained in this Agreement and no written statement furnished by any of the
Sellers or any officer, employee, counsel or other agent of any of the Sellers
to Buyer pursuant to or in connection with this Agreement, contains or will
contain any untrue statement of a material fact, or omits or will omit to state
a material fact necessary in order to make the statements therein contained not
misleading. There is no fact that affects, or in the future might reasonably be
expected to affect, adversely the condition (financial or otherwise), operations
(present or prospective), business (present or prospective), properties, assets
or liabilities of the Company or the Shares in any material respect that is not
set forth in this Agreement or the Schedules.
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6. REPRESENTATIONS AND WARRANTIES OF BUYER.
6.1 CORPORATE ORGANIZATION AND GOOD STANDING. Buyer is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Ohio and has the full power and authority to own its properties and to
carry on its business as now being conducted.
6.2 NO RESTRICTIONS. The execution and delivery of this Agreement
and the consummation of the transaction contemplated hereby will not result in
the breach of any agreement to which Buyer is a party, nor will it violate any
of the provisions of Buyer's articles of incorporation or code of regulations as
currently in effect.
6.3 EXECUTION AND EFFECT OF AGREEMENT. Buyer has the corporate power
to enter into and perform its obligations under this Agreement and the execution
and delivery of this Agreement, and the consummation of the transaction
contemplated hereby, has been duly authorized by all necessary corporate action
of Buyer. This Agreement constitutes the legal, valid and binding obligation of
Buyer enforceable in accordance with its terms.
6.4 CONSENTS. To the best of Buyer's knowledge, except as set forth
in Schedule 6.4 hereto, no consent, approval or authorization of, or
declaration, filing or registration with,
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any governmental or regulatory authority is required to be obtained or made by
or on behalf of Buyer in connection with the execution, delivery and performance
of this Agreement or any instrument contemplated hereby or the consummation of
the transaction contemplated hereby.
7. CONDUCT OF BUSINESS PENDING CLOSING. From and after the date of this
Agreement until the Closing Date:
(a) Sellers will cause the Company to furnish or cause to be
furnished to the Buyer and its authorized representatives complete access to all
books, records, customer lists, files and other information of Company relative
to its business and its assets as well as any other information pertaining to
the business and affairs of the Company as may reasonably be requested from time
to time by Buyer, and Buyer and its authorized representatives may make such
examinations and verifications of matters pertaining to the representations of
the Sellers herein made as Buyer may reasonably deem necessary.
(b) Sellers will cause the Company to conduct its business in the
usual, ordinary and regular course, except for matters to which Buyer has given
its prior consent. Sellers will cause the Company to maintain itself at all
times as a corporation duly organized, validly existing and in good standing
under the laws of Missouri.
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(c) The Company will not take any action which will result in, and
will use its best efforts to avoid, any material adverse change in the financial
condition, properties or operation of the business of the Company.
(d) There will be no dividends declared or paid or other
distributions made in respect of the Shares or any redemption of the Shares by
the Company.
(e) The Company shall maintain in full force and effect all of its
presently existing insurance coverage, or insurance comparable to such existing
coverage.
(f) The Sellers will not permit the Company to engage in any activity
or transaction or make any commitment to purchase or spend other than in the
ordinary course of business as heretofore conducted; provided, however, without
the prior written consent of Buyer, the Sellers will not permit the Company to
make any commitment to purchase or spend more than $1,000 or more;
(g) The Sellers will not permit the Company to declare, authorize or
pay any distribution or dividend to its stockholder and will not permit the
Company to redeem, purchase or otherwise acquire, or agree to redeem purchase or
otherwise acquire, any shares of its stock;
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(h) Except as set forth on Schedule 5.7, the Sellers will not permit
the Company to pay or obligate itself to pay any compensation, commission, bonus
or severance to any director, officer, employee or independent contractor as
such, except for the regular compensation and commissions payable to such
director, officer, employee or independent contractor at the rate in effect on
the date of this Agreement.
(i) The Sellers will cause the Company to use its best efforts to
preserve its business organization intact, to keep available to Buyer the
services of the Company's employees and independent contractors and to preserve
for Buyer the Company's relationships with suppliers, licensees, distributors
and customers and others having business relationships with the Company;
(j) The Sellers will not permit the Company to, or to obligate itself
to, sell or otherwise dispose of or pledge or otherwise encumber, any of its
properties or assets except in the ordinary course of business, and the Sellers
will cause the Company to maintain its facilities, machinery and equipment in
good operating condition and repair, subject only to ordinary wear and tear;
(k) The Sellers will not permit the Company to amend its Certificate
of Incorporation or By-Laws;
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(l) The Sellers will not permit the Company to engage in any activity
or transaction other than in the ordinary course of its business as heretofore
conducted;
(m) The Sellers will not permit the Company to create or allow to be
created any new liens, security interests, charges or encumbrances of any nature
whatsoever on any of its properties or assets; and
(n) Without limiting the foregoing, the Sellers will consult with
Buyer regarding all significant developments, transactions and proposals
relating to the business or operations or any of the assets or liabilities of
the Company.
8. BUYER'S OBLIGATION TO CLOSE. The obligation of Buyer to close the
transaction is subject to the condition that between the date of this Agreement
and the Closing Date:
(a) It shall not have discovered any material error or misstatement
in any representations and warranties of the Sellers and a certificate dated as
of the Closing Date signed by each of the Sellers certifying that the
representations and warranties as set forth in Section 5 are accurate as of the
Closing Date shall have been delivered to Buyer.
(b) All terms and conditions of this Agreement to be performed and
complied with by the Sellers shall have been performed and complied with on or
before the Closing Date.
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(c) Nothing shall have happened to the Shares, the Company's assets
or the Company's business nor will there have been any claim asserted against
the Company which would reasonably be likely to materially and adversely affect
(1) the operations or net worth of the Company, (2) its business, or (3) its
assets; and the Sellers shall have delivered to Buyer a certificate dated as of
the Closing Date, covering the time period from the date of this Agreement to
the Closing Date, signed by each of the Sellers to all such effects;
(d) The Sellers shall have delivered to Buyer a certificate or
certificates evidencing the Shares, which shall be duly endorsed for transfer as
required in Section 4 hereinbefore.
(e) The Sellers shall have delivered to Buyer an accurate list as of
the Closing Date showing all material contracts and commitments entered into by
Company since the date hereof;
(f) Buyer shall have received executed agreements from Aasen, Gene
Aasen and Michael Richler in the form attached hereto and incorporated herein as
Exhibits 8(f)(1), 8(f)(2) and 8(f)(3), with only such changes therein to which
the parties shall mutually agree.
(g) Buyer shall have received from the Company a certified copy of
resolutions of its directors, which shall
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approve and authorize the transactions contemplated by this Agreement;
(h) The Sellers shall have provided Buyer with a certificate of good
standing for the Company issued by the Secretary of State of Missouri as of a
date reasonably close to such Closing Date;
(i) The Sellers shall have obtained and delivered to Buyer all
consents, authorizations and approvals under all statutes, laws, ordinances,
regulations, rules, judgments, decrees and orders of any court or governmental
agency, board, bureau, body, department or authority or of any other person
required to be obtained by the Sellers in connection with the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby.
(j) Buyer shall have received an opinion, dated the Closing Date, of
Sumner & Sumner, P.C., counsel for Seller, in form and substance satisfactory to
Vorys, Sater, Seymour and Pease, counsel for Buyer, a copy of which is attached
hereto as Exhibit 8(j).
(k) The Sellers shall have delivered to Buyer the original corporate
record books of the Company and the written resignations of all of the Company's
directors and officers. All such resignation shall be effective as of the
Closing Date.
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(l) There shall have occurred no material damage to or destruction or
loss of (whether or not covered by insurance) any of the Company's facilities,
machinery, equipment or other assets.
(m) The Sellers and Company shall have used their best efforts to
obtain consents of all third parties and governmental bodies necessary for the
consummation of the transactions contemplated by this Agreement.
(n) The Company and the Sellers shall have diligently supported this
Agreement in any proceeding before any regulatory authority whose approval of
the transaction contemplated hereby is required.
(o) Sellers shall have delivered to Buyer true and complete copies,
certified by the Company's Secretary, of the resolutions which have been adopted
by the Company's Board of Directors authorizing such sale and the consummation
of such other transactions.
(p) Buyer shall have received the written resignations dated as of
the Closing Date of each of the directors and officers of the Company.
(q) Aasen, as Managing Partner of The Robert J. Aasen Limited
Liability Partnership, shall have executed and delivered to Buyer the Amendment
to Industrial Lease with respect
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to the primary office building of the Company located at 5420 Milton Parkway,
Rosemont, Illinois in the form attached hereto and incorporated herein as
Exhibit 8(q), with only such changes therein to which the parties shall mutually
agree.
(r) Buyer shall have received a completed Phase I Environmental
Report (at Buyer's direction and expense) satisfactory to Buyer in Buyer's sole
discretion; provided, however, that Buyer's decision to proceed with the closing
of this transaction following receipt and review of any such environmental
report shall in no way constitute a waiver of any claims Buyer may make under
the terms of this Agreement.
9. SELLERS' OBLIGATION TO CLOSE. The obligation of the Sellers to close
the transactions is subject to the condition that at or before the Closing:
(a) All representations and warranties of Buyer contained in
paragraph 6 hereof shall be accurate as of the Closing Date and all of the
terms, covenants and conditions of this Agreement to be complied with and
performed by Buyer have been performed and a certificate to the foregoing effect
dated as of the Closing Date and signed by an officer of Buyer shall have been
delivered to the Sellers;
(b) Sellers shall have received a certified copy of the resolutions
of the directors of Buyer authorizing the execution
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of this Agreement and the consummation of the transactions contemplated hereby;
(c) Buyer shall have delivered to the Sellers the consideration set
forth in paragraph 2 hereof and Buyer shall have delivered the Escrow Deposit to
the Escrow Agent;
(d) Buyer shall have executed and delivered to Carole E. Aasen the
Non-Competition Agreement in the forms attached hereto as Exhibit 8(f)(1), with
only such changes to which the parties have mutually agreed;
(e) Buyer shall have executed and delivered to Aasen, as Managing
Partner of The Robert J. Aasen Limited Liability Partnership Director, the
Amendment to Industrial Lease with respect to the primary office building of the
Company located at 5420 Milton Parkway, Rosemont, Illinois in the form attached
hereto and incorporated herein as Exhibit 8(q), with only such changes therein
to which the parties shall mutually agree.
(f) Sellers shall have received an opinion, dated the Closing Date,
of Vorys, Sater, Seymour and Pease, counsel for Buyer, in form and substance
satisfactory to Sumner & Sumner, P.C., counsel for Seller, a copy of which is
attached hereto as Exhibit 9(f);
(g) Buyer shall have obtained and delivered to the Sellers all
consents, authorizations and approvals under all
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statutes, laws, ordinances, regulations, rules, judgments, decrees and orders of
any court or governmental agency, board, bureau, body, department or authority
or of any other person required to be obtained by Buyer in connection with the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby;
(h) Buyer shall have diligently supported this Agreement in any
proceeding before any regulatory authority whose approval of the transactions
contemplated hereby is required and use its best efforts so that the other
conditions precedent to the obligations of the Sellers set forth in Section 9
hereof are satisfied;
(i) Buyer will not have knowingly taken any action which could
reasonably be expected to interfere unreasonably with the business or operations
of the Company.
10. GUARANTEE OF COLLECTIBILITY OF RECEIVABLES OF THE COMPANY. (A)
Subject to the limitations set forth in this Section 10, Sellers guarantee to
Buyer that, except to the extent of the reserve for doubtful accounts shown on
the April '97 Financials, all accounts and notes receivable and other
receivables reflected on said balance sheet (the "Receivables") are and will be
valid and legally binding obligations of the persons owing said amounts to the
Company and that the full
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amount of the Receivables will be paid to Company or Buyer on or before the date
occurring ninety (90) days after the Closing Date, provided that this guarantee
shall not be applicable or effective if the nonpayment of a Receivable results
from any claim or offset asserted against Company or Buyer by the account
debtor.
(B) If any part of the Receivables has not been paid on or before the
date occurring ninety (90) days after the Closing Date and such nonpayment does
not result from any claim or offset asserted against Company or Buyer by the
account debtor, then to the extent that such unpaid part of the Receivables
exceeds the reserve for doubtful accounts shown on the Closing Balance Sheet,
Company may reassign on or before thirty (30) days thereafter to the Sellers all
or any part of the unpaid part of the Receivables, free and clear of any
security interest, lien or other encumbrance arising on or after the Closing, in
which event the Sellers shall pay to Buyer in cash or by certified check that
amount equal to such reassigned part of the unpaid part of the Receivables.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; EFFECT OF CLOSING.
The parties hereto agree that the representations and warranties contained in
this Agreement, or in any Schedule, certificate, document or instrument
delivered in connection
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herewith, shall be deemed to have been relied upon notwithstanding any
investigation heretofore or hereafter made or omitted by any party hereto and
shall survive the Closing. The election of Buyer to proceed with the Closing
shall not be construed as a waiver of any of its rights hereunder and the waiver
or any such right shall not be deemed a waiver of any other right derived
hereunder.
12. SPECIFIC PERFORMANCE. The parties hereto acknowledge that
irreparable damage would result if this Agreement is not specifically enforced
and that, therefore, the rights of Buyer and obligations of the Sellers under
this Agreement, including, without limitation, Buyer's rights to purchase the
Shares and the Sellers' obligation to sell the Shares, may be enforced by a
decree of specific performance issued by a court of competent jurisdiction.
Such remedy to Buyer shall, however, not be exclusive and shall be in addition
to any other remedies which Buyer may have under this Agreement or otherwise.
13. SELLERS' INDEMNIFICATION OBLIGATIONS. (A) Subject to the terms
and conditions of this Section 13, the Sellers agree, jointly and severally, to
indemnify and hold Buyer harmless against any and all losses, costs and expenses
(including, without limitation, legal and other expenses) (each a
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"Loss" and collectively "Losses"), except as expressly limited by the terms of
Section 13(B) resulting from or relating to:
(i) any misrepresentation or breach of any warranty or
agreement by the Sellers contained in this Agreement or in
any Schedule of the Sellers or any certificate delivered
by the Sellers at the Closing;
(ii) any breach of any covenant of the Sellers contained in
this Agreement and any and all actions, suits, demands,
assessments or judgments with respect to any claim arising
out of or relating to the subject matter of the
indemnification;
(iii) consummation of the acquisition of the Company by Buyer to
any third party with whom Sellers or Sellers' agents have
had discussions regarding the disposition of the Company.
(B) LIMITATION ON SELLERS' INDEMNIFICATION OBLIGATIONS. The Sellers
shall have no obligation to provide indemnification pursuant to Section 13(A)
except to the extent that the aggregate amount of indemnification to which
Buyer, but for this Section 13(B) otherwise shall have become entitled
hereunder, shall exceed $5,000.00, in which case Sellers shall be
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<PAGE>
liable for the full amount of such Losses but not to exceed $4,000,000.00 in the
aggregate.
(C) BUYER'S INDEMNIFICATION OBLIGATIONS. Subject to the terms and
conditions of this Section 13, Buyer agrees to indemnify and hold the Seller's
harmless against any and all losses, costs and expenses (including, without
limitation, legal and other expenses), resulting from or relating to:
(i) any misrepresentation or breach of any warranty or
agreement by Buyer contained in this Agreement or in any
Schedule of the Sellers or any certificate delivered by
Buyer at the Closing;
(ii) any breach of any covenant of Buyer contained in this
Agreement and any and all actions, suits, demands,
assessments or judgments with respect to any claim arising
out of or relating to the subject matter of the
indemnification.
14. PROCEDURE FOR INDEMNIFICATION CLAIMS BY BUYER. (A) The
indemnification obligations of the Sellers pursuant to Section 13(A) shall be
conditioned upon compliance by Buyer with the following procedures for
indemnification claims based upon or arising out of any claim, action or
proceeding by any person not a party to this Agreement:
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<PAGE>
(i) If at any time a claim shall be made or threatened, or an
action or proceeding shall be commenced or threatened, by
Buyer hereto (the "Aggrieved Party") which could result in
liability of the Sellers (collectively the "Indemnifying
Party") under its indemnification obligations hereunder,
the Aggrieved Party shall give to the Indemnifying Party
prompt notice of such claim, action or proceeding. Such
notice shall state the basis for the claim, action or
proceeding and the amount thereof (to the extent such
amount is determinable at the time when such notice is
given) and shall permit the Indemnifying Party to assume
the defense of any such claim, action or proceeding
(including any action or proceeding resulting from any
such claim). Failure by the Indemnifying Party to notify
the Aggrieved Party of its election to defend any such
claim, action or proceeding within a reasonable time, but
in no event more than fifteen days after notice thereof
shall have been given to the Indemnifying Party, shall be
54
<PAGE>
deemed a waiver by the Indemnifying Party of its right to
defend such claim, action or proceeding; provided,
however, that the Indemnifying Party shall not be deemed
to have waived its right to contest and defend against any
claim of the Aggrieved Party for indemnification hereunder
based upon or arising out of such claim, action or
proceeding.
(ii) If the Indemnifying Party assumes the defense of any such
claim, action or proceeding, the obligation of the
Indemnifying Party as to such claim, action or proceeding
shall be limited to taking all steps necessary in the
defense or settlement thereof and, provided the
Indemnifying Party is held to be liable for
indemnification hereunder, to holding the Aggrieved Party
harmless from and against any and all losses, damages and
liabilities caused by or arising out of any settlement
approved by the Indemnifying Party or any judgment or
award rendered in connection with such claim, action or
proceeding. The Aggrieved Party may participate at its
expense, in the defense of
55
<PAGE>
such claim, action or proceeding provided that the
Indemnifying Party shall direct and control the defense of
such claim, action or proceeding. The Aggrieved Party
agrees to cooperate and make available to the Indemnified
Party all books and records and such officers, employees
and agents as are reasonably necessary and useful in
connection with the defense. The Indemnifying Party shall
not, in the defense of such claim, action or proceeding,
consent to the entry of any judgment or award, or enter
into any settlement, except in either event with the prior
consent of the Aggrieved Party, which does not include as
an unconditional term thereof the giving by the claimant
or the plaintiff to the Aggrieved Party of a release from
all liability in respect of such claim, action or
proceeding.
(iii) If the Indemnifying Party does not assume the defense of
any such claim, action or proceeding, the Aggrieved Party
may defend against such claim, action or proceeding in
56
<PAGE>
such manner as it may deem appropriate. The Indemnifying
Party agrees to cooperate and make available to the
Aggrieved Party all books and records and such officers,
employees and agents as are reasonably necessary and
useful in connection with the defense. If the
Indemnifying Party, within ten days after notice shall
have been given to it by the Aggrieved Party of the
latter's intention to effect a settlement of any such
claim, action or proceeding, which notice shall describe
with particularity the terms of any such proposed
settlement, shall not deposit with an escrowee mutually
satisfactory to the Aggrieved Party and the Indemnifying
Party a sum equivalent to the total amount demanded in
such claim, action or proceeding or deliver to the
Aggrieved Party a surety bond or an irrevocable letter of
credit for such sum in form and substance reasonably
satisfactory to the Aggrieved Party, then the aggrieved
Party may settle such claim, action or proceeding on the
terms detailed in its notice to the Indemnifying Party,
and the
57
<PAGE>
Indemnifying Party shall be deemed to have agreed to the
terms of such settlement and shall not thereafter in any
proceeding by the Aggrieved Party for indemnification
question the propriety of such settlement. If the
Indemnifying Party makes an escrow deposit or delivers a
surety bond or letter of credit as aforesaid and
thereafter the Aggrieved Party settles such claim, action
or proceeding, then in any proceeding by the Aggrieved
Party for indemnification in the event the Indemnifying
Party is held liable for indemnification hereunder, the
Aggrieved Party shall have the burden of proving the
amount of such liability of the Indemnifying Party, and
the amount of the payments made in settlement of any
claim, action or proceeding shall not be determinative as
between the Aggrieved Party and the Indemnifying Party of
the amount of such indemnification liability, except that
the amount of the settlement payments shall constitute the
maximum amount of the indemnification liability of the
Indemnifying
58
<PAGE>
Party. Such escrow deposit, surety bond or letter of
credit shall by their respective terms be payable to the
Aggrieved Party in an amount determined in accordance with
the last sentence of this paragraph (iii) and in the event
the Indemnifying Party is held liable for indemnification
hereunder. If the Indemnifying Party neither makes an
escrow deposit nor delivers a surety bond or letter of
credit as aforesaid, so that no settlement of such claim,
action or proceeding is effected, in any proceeding by the
Aggrieved Party for indemnification in the event the
Indemnifying Party is held liable for indemnification
hereunder, such liability shall be for the amount of any
judgment or award rendered with respect to such claim or
in such action or proceeding and of all expenses, legal
and otherwise, incurred by the Aggrieved Party in the
defense against such claim, action or proceeding.
(iv) In the event an Aggrieved Party or Indemnifying Party
shall cooperate in the defense or make
59
<PAGE>
available books, records, officers, employees or agents,
as required by the terms of paragraphs (ii) and (iii),
respectively, of this Section 14(A), the party to which
such cooperation is provided shall pay the out-of-pocket
costs and expenses (including legal fees and
disbursements) of the party providing such cooperation and
of its officers, employees an agents reasonably incurred
in connection with providing such cooperation but shall
not be responsible to reimburse the party providing such
cooperation for such party's time or the salaries or costs
of fringe benefits or other similar expenses paid by the
party providing such cooperation to its officers and
employees in connection therewith.
(B) PROCEDURE FOR INDEMNIFICATION CLAIMS BY SELLERS. The
indemnification obligations of Buyer pursuant to Section l3(C) shall be
conditioned upon compliance by the Sellers with the following procedures for
indemnification claims based upon or arising out of any claim, action or
proceeding by any person not a party to this Agreement:
60
<PAGE>
(i) If at any time a claim shall be made or threatened, or an
action or proceeding shall be commenced or threatened, by
Seller hereto (collectively the "Aggrieved Party") which
could result in liability of Buyer (the "Indemnifying
Party") under its indemnification obligations hereunder,
the Aggrieved Party shall give to the Indemnifying Party
prompt notice of such claim, action or proceeding. Such
notice shall state the basis for the claim, action or
proceeding and the amount thereof (to the extent such
amount is determinable at the time when such notice is
given) and shall permit the Indemnifying Party to assume
the defense of any such claim, action or proceeding
(including any action or proceeding resulting from any
such claim). Failure by the Indemnifying Party to notify
the Aggrieved Party of its election to defend any such
claim, action or proceeding within a reasonable time, but
in no event more than fifteen days after notice thereof
shall have been given to the Indemnifying Party, shall be
61
<PAGE>
deemed a waiver by the Indemnifying Party of its right to
defend such claim, action or proceeding; provided,
however, that the Indemnifying Party shall not be deemed
to have waived its right to contest and defend against any
claim of the Aggrieved Party for indemnification hereunder
based upon or arising out of such claim, action or
proceeding.
(ii) If the Indemnifying Party assumes the defense of any such
claim, action or proceeding, the obligation of the
Indemnifying Party as to such claim, action or proceeding
shall be limited to taking all steps necessary in the
defense or settlement thereof and, provided the
Indemnifying Party is held to be liable for
indemnification hereunder, to holding the Aggrieved Party
harmless from and against any and all losses, damages, and
liabilities caused by or arising out of any settlement
approved by the Indemnifying Party or any judgment or
award rendered in connection with such claim, action or
proceeding. The Aggrieved Party may participate at its
expense, in the defense of
62
<PAGE>
such claim, action or proceeding provided that the
Indemnifying Party shall direct and control the defense of
such claim, action or proceeding. The Aggrieved Party
agrees to cooperate and make available to the Indemnified
Party all books and records and such officers, employees
and agents as are reasonably necessary and useful in
connection with the defense. The Indemnifying Party shall
not, in the defense of such claim, action or proceeding,
consent to the entry of any judgment or award, or enter
into any settlement, except in either event with the prior
consent of the Aggrieved Party, which does not include as
an unconditional term thereof the giving by the claimant
or the plaintiff to the Aggrieved Party of a release from
all liability in respect of such claim, action or
proceeding.
(iii) If the Indemnifying Party does not assume the defense of
any such claim, action or proceeding, the Aggrieved Party
may defend against such claim, action or proceeding in
63
<PAGE>
such manner as it may deem appropriate. The Indemnifying
Party agrees to cooperate and make available to the
Aggrieved Party all books and records and such officers,
employees and agents as are reasonably necessary and
useful in connection with the defense. If the
Indemnifying Party, within ten days after notice shall
have been given to it by the Aggrieved Party of the
latter's intention to effect a settlement of any such
claim, action or proceeding, which notice shall describe
with particularity the terms of any such proposed
settlement, shall not deposit with an escrowee mutually
satisfactory to the Aggrieved Party and the Indemnifying
Party a sum equivalent to the total amount demanded in
such claim, action or proceeding or deliver to the
Aggrieved Party a surety bond or an irrevocable letter of
credit for such sum in form and substance reasonably
satisfactory to the Aggrieved Party, then the Aggrieved
Party may settle such claim, action or proceeding on the
terms detailed in its notice to the Indemnifying Party,
and the
64
<PAGE>
Indemnifying Party shall be deemed to have agreed to the
terms of such settlement and shall not thereafter in any
proceeding by the Aggrieved Party for indemnification
question the propriety of such settlement. If the
Indemnifying Party makes an escrow deposit or delivers a
surety bond or letter of credit as aforesaid and
thereafter the Aggrieved Party settles such claim, action
or proceeding, then in any proceeding by the Aggrieved
Party for indemnification in the event the Indemnifying
Party is held liable for indemnification hereunder, the
Aggrieved Party shall have the burden of proving the
amount of such liability of the Indemnifying Party, and
the amount of the payments made in settlement of any
claim, action or proceeding shall not be determinative as
between the Aggrieved Party and the Indemnifying Party of
the amount of such indemnification liability, except that
the amount of the settlement payments shall constitute the
maximum amount of the indemnification liability of the
Indemnifying
65
<PAGE>
Party. Such escrow deposit, surety bond or letter of
credit shall by their respective terms be payable to the
Aggrieved Party in an amount determined in accordance with
the last sentence of this paragraph (iii) and in the event
the Indemnifying Party is held liable for indemnification
hereunder. If the Indemnifying Party neither makes an
escrow deposit nor delivers a surety bond or letter of
credit as aforesaid, so that no settlement of such claim,
action or proceeding is effected, in any proceeding by the
Aggrieved Party for indemnification in the event the
Indemnifying Party is held liable for indemnification
hereunder, such liability shall be for the amount of any
judgment or award rendered with respect to such claim or
in such action or proceeding and of all expenses, legal
and otherwise, incurred by the Aggrieved Party in the
defense against such claim, action or proceeding.
(iv) In the event an Aggrieved Party or Indemnifying Party
shall cooperate in the defense or make
66
<PAGE>
available books, records, officers, employees or agents,
as required by the terms of paragraphs (ii) and (iii),
respectively, of this Section 14(A), the party to which
such cooperation is provided shall pay the out-of-pocket
costs and expenses (including legal fees and
disbursements) of the party providing such cooperation and
of its officers, employees and agents reasonably incurred
in connection with providing such cooperation but shall
not be responsible to reimburse the party providing such
cooperation for such party's time or the salaries or costs
of fringe benefits or other similar expenses paid by the
party providing such cooperation to its officers and
employees in connection therewith.
15. NO INDEMNIFICATION OF SELLERS BY THE COMPANY. The Sellers agree
that no provision in the Certificate of Incorporation or By-Laws of the Company
or otherwise for the indemnification of Sellers shall be invoked by them or on
their behalf to avoid or vitiate his indemnification obligations under Section
13.
67
<PAGE>
16. TERMINATION BY BUYER. Buyer may, without liability to Sellers,
terminate this Agreement by notice to Sellers at any time prior to the Closing.
17. TERMINATION BY SELLERS. The Sellers may, without liability to
Buyer, terminate this Agreement by notice to Buyer:
(i) at any time prior to the Closing if default shall be made
by Buyer in the observance or in the due and timely
performance of any of the terms hereof to be performed by
Buyer that cannot be cured at or prior to the Closing, or
(ii) at the Closing if any of the conditions precedent to the
performance of Sellers' obligations at the Closing shall
not have been fulfilled.
18. EFFECT OF TERMINATION. If this Agreement is terminated, this
Agreement shall no longer be of any force or effect (with the exception of the
indemnification obligations contained in Section 13(A) and Section 13(C), which
shall survive the termination of the Agreement) and there shall be no liability
on the part of any party or their respective directors, officers or shareholders
or agents except, in the case of termination because of a material default or
material breach resulting from the willful fault of another party, the aggrieved
party or
68
<PAGE>
parties may recover from the defaulting party the amount of expenses incurred by
such aggrieved party or parties in connection with this Agreement and the
transactions contemplated hereby which the aggrieved party or parties would
otherwise have to bear pursuant to Section 21 of this Agreement. If this
Agreement shall be terminated, each party will (i) redeliver all documents and
work papers, whether so obtained before or after the execution of this
Agreement, to the party furnishing the same, and (ii) destroy all documents,
work papers and other materials developed by its accountants, agents and
employees in connection with the transactions contemplated hereby which embody
proprietary information or trade secrets furnished by any party hereto or
deliver such documents, work papers and other materials to the party furnishing
the same or excise such information or secrets therefrom and all information
received by any party hereto with respect to the business of any other party or
any of its subsidiaries (other than information which is a matter of public
knowledge or which has heretofore been or is hereafter published in any
publication for public distribution or filed as public information with any
governmental authority) shall not at any time be used for personal advantage or
disclosed by such party to any third person to the detriment of the party
furnishing such information.
69
<PAGE>
19. UPDATING INFORMATION. The Company and the Sellers shall promptly
deliver to Buyer any information concerning events subsequent to the date of
this Agreement which is necessary to supplement the information contained in and
made a part of the representations and warranties of the Sellers contained
herein, including in the schedules thereto, in order that the information herein
is kept current, complete and accurate, it being understood and agreed that the
delivery of such information shall not in any manner constitute a waiver by
Buyer of any of the other provisions of this Agreement.
20. USE OF NAME. The Sellers shall not use the name "Data Air
Courier", or any derivatives thereof in any way whatsoever at any time after the
Closing.
21. EXPENSES. Whether or not the Closing is consummated, except as
otherwise provided in Section 18 and as specifically set forth below in this
Section 21, each of the parties will pay all of their own legal and accounting
fees and other expenses incurred in the preparation of this Agreement and the
performance of the terms and provisions of this Agreement. If Closing is
consummated, Buyer shall pay Sellers' legal, accounting and brokers fees
submitted in writing to Buyer by Sellers up to a maximum of $350,000.00 in the
aggregate and in proportion to ownership interest and to the extent such fees
may
70
<PAGE>
be payable by Buyer under present law. At Closing, said funds shall be paid by
Buyer by check issued to Sellers' attorney's trust account to be disbursed
therefrom. Remittance by Buyer to said account shall relieve Buyer of any
further obligation under this Section 21. In any event, whether or not the
Closing is consummated, the Sellers shall pay all sales, transfer, excise and
similar taxes, if any, which may be due to any jurisdiction or governmental body
as a result of the transfer of the Shares.
22. WAIVER. The parties hereto may by written agreement (i) extend
the time for or waive or modify the performance of any of the obligations or
other acts of the parties hereto or (ii) waive any inaccuracies in the
representations and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement.
23. NOTICES. All notices, requests or other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
mailed first class certified mail postage prepaid addressed as follows:
In the case of Buyer:
AirNet Systems, Inc.
Port Columbus International Airport
3939 International Gateway
Columbus, Ohio 43219
Attention: President
with a copy to:
71
<PAGE>
Russell M. Gertmenian, Esq.
Vorys, Sater, Seymour and Pease
52 East Gay Street
Columbus, Ohio 43212
In the case of Sellers:
Carole E. Aasen Revocable Trust of
October 28, 1996, Carole E. Aasen, sole trustee
27 W. 210 Fleming Drive
Winfield, IL 60190
with a copy to:
Lawrence C. Sumner, Esq.
Sumner & Sumner, P.C.
Commerce Bank Building
11 S. Meramec Avenue, Suite 1400
St. Louis, MO 63105-1793
Thomas M. McQuaid and Judith A. McQuaid,
as joint tenants with right of survivorship
18452 Basswood Street
Fountain Valley, CA 92708
with a copy to:
David Winfield, Esq.
578 Duane Street (Suite A)
Glen Ellyn, IL 60137
or to such other address as may have been furnished in writing to the party
giving the notice by the party to whom notice is to be given.
24. SEVERABILITY. In case any provision of this Agreement shall be
held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the validity and
72
<PAGE>
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
25. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
among the parties and there have been and are no agreements, representations or
warranties, oral or written among the parties other than those set forth or
provided for in this Agreement. This Agreement may not be modified or changed,
in whole or in part, except by a supplemental agreement signed by each of the
parties.
26. ASSIGNABILITY OF RIGHTS UNDER THIS AGREEMENT. This Agreement
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns, but shall not be assignable by any party without the
prior written consent of the other parties, except that Buyer shall have the
right at any time to assign its rights and/or obligations hereunder to any
entity affiliated with it. Nothing contained in this Agreement is intended to
confer upon any person, other than the parties to this Agreement and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
27. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of
73
<PAGE>
Ohio without regard to choice of law or conflicts of law principles.
28. HEADINGS; REFERENCES TO SECTIONS, EXHIBITS AND SCHEDULES. The
headings of the Sections, paragraphs and subparagraphs of this Agreement are
solely for convenience and reference and shall not limit or otherwise affect the
meaning of any of the terms or provisions of this Agreement. The reference
herein to Sections, Exhibits and Schedules, unless otherwise indicated, are
references to sections of and exhibits and schedules to this Agreement.
29. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but which
together constitute one and the same instrument.
THE REMAINDER OF THIS PAGE
INTENTIONALLY LEFT BLANK
74
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as
of the date first above written.
SELLERS By: /s/ Carole E. Aasen
---------------------
Carole E. Aasen
/s/ Carole E. Aasen
- --------------------------------
Carole E. Aasen, as sole trustee
under the Carole E. Aasen BUYER
Revocable Living Trust of
October 28, 1996 AIRNET SYSTEMS, INC.
/s/ Thomas M. McQuaid By: /s/ Eric P. Roy
- -------------------------------- --------------------------
Thomas M. McQuaid Eric P. Roy
Its: Executive Vice President
/s/ Judith A. McQuaid
- --------------------------------
Judith A. McQuaid
75
<PAGE>
LIST OF EXHIBITS AND SCHEDULES TO STOCK PURCHASE AGREEMENT
DATED AS OF JULY 14, 1997 AMONG (i) AIRNET SYSTEMS, INC.
(ii) CAROLE E. AASEN, INDIVIDUALLY, AND
(iii) CAROLE E. AASEN, AS SOLE TRUSTEE UNDER THE
CAROLE E. AASEN REVOCABLE LIVING TRUST OF OCTOBER 28, 1996,
AND THOMAS M. MCQUAID AND JUDITH A. MCQUAID,
AS JOINT TENANTS WITH RIGHT OF SURVIVORSHIP
Exhibits
- --------
Exhibit 1 - Ownership Interests
Exhibit 2 - Escrow Agreement
Exhibit 8(f)(1) - Covenant Not to Compete Agreement with Carole E. Aasen
Exhibit 8(f)(2) - Covenant Not to Compete Agreement with Gene Aasen
Exhibit 8(f)(3) - Covenant Not to Compete Agreement with Michael Richler
Exhibit 8(j) - Opinion of Sellers' Counsel
Exhibit 8(q) - Amendment to Industrial Building Lease
Exhibit 9(f) - Opinion of Buyer's Counsel
Schedules:
- ----------
Schedule 5.2 - Jurisdictions in which Data Air Courier, Inc. is
authorized to do business; Identification of officers and
directors of Data Air Courier, Inc.
Schedule 5.6 - Notes to Financial Statements
Schedule 5.7 - Statement of No Material Change
Schedule 5.8 - Title to and Condition of Properties
Schedule 5.10 - Tax Matters
Schedule 5.11 - Contracts
Schedule 5.12 - Litigation
Schedule 5.13 - Patents and Trademarks
Schedule 5.17 - Governmental Authorizations and Regulations
Schedule 5.19 - Certain Transactions
NOTE: AirNet Systems, Inc. hereby agrees to furnish supplementally a copy
of any omitted Exhibits and Schedules to the Securities and Exchange
Commission upon request.
<PAGE>
AGREEMENT
This Agreement, made and entered into as of July 31, 1997, among (i)
AirNet Systems, Inc., an Ohio corporation ("Buyer"), (ii) Carole E. Aasen
("Aasen"), individually and (iii) Carole E. Aasen, as sole trustee under the
Carole E. Aasen Revocable Living Trust of October 28, 1996, and Thomas M.
McQuaid and Judith A. McQuaid, as joint tenants with right of survivorship
(individually, "Seller" and collectively, "Sellers").
WITNESSETH:
WHEREAS, Buyer has entered into a Stock Purchase Agreement, dated as of
July 14, 1997 (the "Stock Purchase Agreement") with Sellers, to purchase the
outstanding shares of capital stock of Data Air Courier, Inc. (the
"Company"); and
WHEREAS, Buyer and Sellers have determined that certain provisions within
the Stock Purchase Agreement should be modified or clarified;
NOW, THEREFORE, Buyer and Sellers do hereby agree as follows:
1. Texas Commerce Bank National Association shall serve as the Escrow
Agent for purposes of Section 2.3 of the Stock Purchase Agreement instead of
NationsBank Dallas.
2. As permitted under Section 3 of the Stock Purchase Agreement, Buyer
and Sellers agree that the closing of the purchase and sale of the shares of
capital stock of the Company shall take place at the office of Vorys, Sater,
Seymour and Pease, 52 East Gay Street, Columbus, Ohio on July 31, 1997.
3. The first sentence of Section 2.2 (a) of the Stock Purchase
Agreement shall be modified to read as follows:
(a) The Purchase Price shall be increased or decreased (the "Purchase
Price Adjustment") on a dollar-for-dollar basis for the cumulative net
adjustment required by the amount (positive or negative) by which the
Net Working Capital of the Company on the Closing Date differs from
the Net Working Capital of the Company as reflected in the April '97
Financial Statements set forth in Schedule 5.6.
<PAGE>
4. Sellers hereby certify, as contemplated by Section 8(e) of the Stock
Purchase Agreement, that no material contracts or commitments have been
entered into by the Company since July 14, 1997.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the date
first set forth above.
Sellers: Buyer:
- -------- ------
AirNet Systems, Inc.
/s/ Carole E. Aasen By: /s/ William R. Sumser
- ------------------------------- -------------------------------
Carole E. Aasen
Its: Vice President-Finance
/s/ Carole E. Aasen
- -------------------------------
Carole E. Aasen, as sole
Trustee under the Carole E.
Aasen Revocable Living
Trust of October 28, 1996
/s/ Thomas M. McQuaid
- -------------------------------
Thomas M. McQuaid
/s/ Judith A. McQuaid
- -------------------------------
Judith A. McQuaid
-2-
<PAGE>
AGREEMENT
This Agreement, made and entered into as of July 31, 1997, among (i)
AirNet Systems, Inc., an Ohio corporation ("Buyer"), (ii) Carole E. Aasen
("Aasen"), individually and (iii) Carole E. Aasen, as sole trustee under the
Carole E. Aasen Revocable Living Trust of October 28, 1996, and Thomas M.
McQuaid and Judith A. McQuaid, as joint tenants with right of survivorship
(individually, "Seller" and collectively, "Sellers").
WITNESSETH:
WHEREAS, Buyer and Sellers have entered into a Stock Purchase Agreement,
dated as of July 14, 1997, and an Agreement, dated July 31, 1997
(collectively, the "Purchase Agreement"), providing for the purchase and sale
of the outstanding shares of capital stock of Data Air Courier, Inc. (the
"Company"); and
WHEREAS, Buyer and Sellers have determined that certain provisions within
the Purchase Agreement should be modified or clarified;
NOW, THEREFORE, Buyer and Sellers do hereby agree as follows:
1. The first sentence of Section 2.2(a) of the Purchase Agreement shall
be further modified to read as follows:
(a) The Purchase Price shall be increased or decreased (the "Purchase
Price Adjustment") on a dollar-for-dollar basis for the cumulative net
adjustment required by the amount (positive or negative) by which the
Net Working Capital of the
<PAGE>
Company on the Closing Date differs from the Net Working Capital of the
Company as reflected in the April 30, 1997 Financial Statements set
forth in Schedule 5.6; provided, however that no Purchase Price
Adjustment (positive or negative) shall be made unless the amount
thereof is at least $50,000 and the Purchase Price Adjustment shall
only be made to the extent that it exceeds $50,000.
2. Section 2.2(c) of the Purchase Agreement shall be amended to read as
follows:
(c) If the Purchase Price Adjustment (as finally determined in
accordance with the provisions set forth above) is a positive amount
in excess of $50,000, then Buyer shall pay to Sellers such excess
amount in immediately available funds on or before July 31, 1998.
If the Purchase Price Adjustment (as finally determined in accordance
with the provisions set forth above) is a negative amount in excess
of $50,000, then Sellers shall cause such excess amount, together with
any interest accrued thereon from the date of the final determination
of the Purchase Price Adjustment until July 31, 1998, to be disbursed
to Buyer from the escrow established pursuant to Section 2.3 of this
Agreement, on July 31, 1998.
3. Section 2.3 of the Purchase Agreement shall be amended to add the
following as a second paragraph thereof:
In addition to the recoveries which Buyer may make from the Escrow account
pursuant to the first paragraph of this Section 2.3, Buyer shall be
entitled to disbursement from the Escrow account of any negative amount of
the Purchase Price Adjustment in excess of $50,000, plus accrued interest,
as contemplated by Section 2.2(c) of this Agreement.
-2-
<PAGE>
4. Buyer and Sellers shall cause the Escrow Agreement contemplated by
Section 2.3 of the Agreement to be amended to the extent necessary to
accommodate and reflect the amendments to Section 2.2(c) and 2.3 of the
Purchase Agreement provided for in this Agreement. To the extent that the
provisions of the Escrow Agreement conflict with the provisions of the
Purchase Agreement, as amended by this Agreement, such provisions of the
Purchase Agreement shall control.
IN WITNESS WHEREOF, this Agreement has been executed as of the date first
set above.
Sellers Buyer:
- ------- ------
AirNet Systems, Inc.
/s/ Carole E. Aasen By: /s/ William R. Sumser
- ------------------------------- -------------------------------
Carole E. Aasen
Its: Vice President - Finance
-------------------------------
/s/ Carole E. Aasen
- -------------------------------
Carole E. Aasen, as Sole
Trustee under the Carole E.
Aasen Revocable Living Trust
/s/ Thomas M. McQuaid
- -------------------------------
Thomas M. McQuaid
/s/ Judith A. McQuaid
- -------------------------------
Judith A. McQuaid
-3-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from AirNet
Systems, Inc.'s Quarterly Report on Form 10-Q for the six months ended June 30,
1997 and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 7,771,103
<SECURITIES> 0
<RECEIVABLES> 9,377,710
<ALLOWANCES> 65,525
<INVENTORY> 5,841,166
<CURRENT-ASSETS> 28,091,661
<PP&E> 98,370,562
<DEPRECIATION> 45,733,953
<TOTAL-ASSETS> 86,008,736
<CURRENT-LIABILITIES> 4,951,778
<BONDS> 0
0
0
<COMMON> 126,452
<OTHER-SE> 77,533,444
<TOTAL-LIABILITY-AND-EQUITY> 86,008,736
<SALES> 762,642
<TOTAL-REVENUES> 45,297,029
<CGS> 575,942
<TOTAL-COSTS> 30,255,711
<OTHER-EXPENSES> 4,080,089
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 768
<INCOME-PRETAX> 10,960,461
<INCOME-TAX> 4,364,000
<INCOME-CONTINUING> 6,596,461
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,596,461
<EPS-PRIMARY> .52
<EPS-DILUTED> .52
</TABLE>
