<PAGE> 1
UNITED STATES
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 SEPTEMBER 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 000-22249
INTERNATIONAL AIRCRAFT INVESTORS
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4176107
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3655 TORRANCE BOULEVARD, SUITE 410 TORRANCE, CALIFORNIA 90503
(Address of principal executive offices) (Zip Code)
(310) 316-3080
(Registrant's telephone number, including area code)
N/A
- --------------------------------------------------------------------------------
(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 registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes No X
---- ----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at December 16, 1997
----- --------------------------------
COMMON STOCK, $.01 PAR VALUE 4,412,029
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<PAGE> 2
INTERNATIONAL AIRCRAFT INVESTORS
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
As of September 30, 1997 and December 31, 1996 3
Condensed Consolidated Statements of Income
Three months ended September 30, 1997 and 1996 4
Condensed Consolidated Statements of Income
Nine months ended September 30, 1997 and 1996 5
Condensed Consolidated Statement of Shareholders' Equity As of
December 31, 1996 and for nine months ended September 30, 1997 6
Condensed Consolidated Statements of Cash Flows
Nine months ended September 30, 1997 and 1996 7
Notes to Condensed Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 16
</TABLE>
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<PAGE> 3
INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 167,201 $ 1,174,369
Flight equipment, at cost less accumulated depreciation of
$23,313,000 at September 30, 1997 and $18,852,000
at December 31, 1996 138,330,257 89,884,974
Deferred fees 540,390 268,776
Cash, restricted 3,049,582 210,827
Other assets 1,032,639 1,080,641
------------- -------------
$ 143,120,069 $ 92,619,587
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accrued interest and other accrued expenses 1,430,040 827,693
Notes payable 126,745,064 82,710,293
Lease deposits 2,874,000 835,000
Maintenance reserves 3,238,740 468,060
Deferred rent 2,545,500 2,295,000
Deferred taxes, net 619,000 400,000
------------- -------------
137,452,344 87,536,046
Commitments and contingencies
Shareholders' equity
Convertible preferred stock, $.01 par value. Authorized
15,000,000 shares; issued and outstanding
4,941,000 shares; liquidation value of $1 per share 49,410 49,410
Common stock, $.01 par value. Authorized
20,000,000 shares; issued and outstanding
81,110 shares at September 30, 1997 and
70,000 shares at December 31, 1996 811 700
Additional paid-in capital 6,222,437 5,172,548
Deferred compensation (825,000)
Retained earnings (deficit) 220,067 (139,117)
------------- -------------
Net shareholders' equity 5,667,725 5,083,541
------------- -------------
$ 143,120,069 $ 92,619,587
============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE> 4
INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996
---------- ----------
(UNAUDITED)
<S> <C> <C>
REVENUES:
Rental of flight equipment $4,048,850 $3,171,749
Consulting fees 52,000
Interest income 102,334 39,101
---------- ----------
Total revenues 4,151,184 3,262,850
EXPENSES:
Interest 2,034,430 1,557,100
Depreciation 1,701,000 1,386,700
General and administrative 174,157 155,335
Stock compensation 75,000
---------- ----------
Total expenses 3,984,587 3,099,135
---------- ----------
Income before income taxes 166,597 163,715
Income tax expense 66,600 13,000
---------- ----------
Net income $ 99,997 $ 150,715
========== ==========
Net income per common and common
equivalent share $ 0.06 $ 0.08
========== ==========
Weighted average common and common
equivalent shares outstanding 1,755,512 1,836,762
========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE> 5
INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
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(UNAUDITED)
<S> <C> <C>
REVENUES:
Rental of flight equipment $10,527,731 $ 9,501,857
Consulting fees 12,000 234,750
Interest income 201,209 120,973
----------- -----------
Total revenues 10,740,940 9,857,580
EXPENSES:
Interest 5,055,478 4,787,855
Depreciation 4,461,000 4,160,400
General and administrative 463,678 421,317
Stock compensation 175,000
----------- -----------
Total expenses 10,155,156 9,369,572
----------- -----------
Income before income taxes 585,784 488,008
Income tax expense 226,600 33,000
----------- -----------
Net income $ 359,184 $ 455,008
=========== ===========
Net income per common and common
equivalent share $ 0.20 $ 0.25
=========== ===========
Weighted average common and common
equivalent shares outstanding 1,765,790 1,836,762
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE> 6
INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
RETAINED
CONVERTIBLE COMMON STOCK ADDITIONAL DEFERRED EARNINGS
PREFERRED ---------------------- PAID-IN STOCK (ACCUMULATED
STOCK SHARES AMOUNT CAPITAL COMPENSATION DEFICIT) NET
--------- ---------- --------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 $ 49,410 315,000 $ 3,150 $ 5,170,098 $(139,117) $ 5,083,541
Reverse stock split (245,000) (2,450) 2,450
--------- ---------- --------- ----------- ---------- ---------- -------------
Adjusted balance at
December 31, 1996 49,410 70,000 700 5,172,548 (139,117) 5,083,541
Issuance of common stock
from exercise of stock
options 11,110 111 49,889 50,000
Stock compensation 175,000 175,000
Deferred stock compensation 825,000 (825,000)
Net income 359,184 359,184
--------- ---------- --------- ----------- ----------- ---------- -------------
Balance at September 30, 1997 $ 49,410 81,110 $ 811 $ 6,222,437 $(825,000) $ 220,067 $ 5,667,725
========= ========== ========= =========== ========== ========== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE> 7
INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
------------ ------------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 359,184 $ 455,008
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation of flight equipment 4,461,000 4,160,400
Amortization of deferred transaction fees 138,775 113,870
Stock compensation 175,000
(Increase) decrease in assets:
Deferred fees (398,889) (23,139)
Cash, restricted (2,838,755)
Other assets 48,002 (22,977)
Increase (decrease) in liabilities:
Accrued interest and other assets 602,347 436,213
Lease deposits 2,039,000
Maintenance reserves 2,770,680 268,581
Deferred rent 250,500 (184,850)
Deferred taxes, net 219,000 30,741
------------ ------------
Net cash provided by operating activities 7,825,844 5,233,847
Cash flows from investing activities:
Purchase of flight equipment (52,906,283) (198,974)
------------ ------------
Net cash flows used in investing activities (52,906,283) (198,974)
Cash flows form financing activities:
Repayment of notes payable (3,786,017) (3,888,734)
Repayment of notes payable to ILFC (323,712) (459,798)
Proceeds from notes payable 23,500,000 198,974
Proceeds from notes payable to ILFC 24,433,000
Proceeds from notes payable to GLH 200,000 487,500
Issuance of common stock 50,000
Payable to ILFC (696,695)
------------ ------------
Net cash provided by (used in) financing
activities 44,073,271 (4,358,753)
------------ ------------
Net increase (decrease) in cash and cash
equivalents (1,007,168) 676,120
Cash and cash equivalents at beginning of period 1,174,369 33,898
------------ ------------
Cash and cash equivalents at end of period $ 167,201 $ 710,018
============ ============
Supplemental disclosure of cash flow information
Cash paid for interest $ 4,406,756 $ 4,106,423
</TABLE>
See accompanying notes to condensed consolidated financial statements
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<PAGE> 8
INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The accompanying unaudited interim condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Registration
Statement on Form S-1 (File No. 333-19875).
Certain reclassifications have been made to prior period amounts to conform to
the current period presentation.
In the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting of normal and recurring accruals)
necessary for a fair presentation of the financial position of the Company as of
September 30, 1997 and December 31, 1996 and the results of its operations for
the three and nine month periods ended September 30, 1997 and 1996 and its cash
flows for the nine months ended September 30, 1997 and 1996. Operating results
for the three and nine month periods ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997.
2. MANAGEMENT ESTIMATES
The preparation of condensed consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions. These affect the reported amounts of assets,
liabilities, revenues and expenses and the amount of any contingent assets or
liabilities disclosed in the condensed consolidated financial statements. Actual
results could differ from estimates made.
The Company leases flight equipment to various commercial airline fleets, on
short- to medium-term operating leases, generally three to five years. The
related flight equipment is generally financed by borrowings that become due at
or near the end of the lease term through a balloon payment. As a result, the
Company's operating results depend on management's ability to roll over debt
facilities, renegotiate favorable leases and realize estimated residual values.
3. FLIGHT EQUIPMENT
During 1997, the Company entered into agreements to purchase three aircraft from
ILFC with an aggregate purchase price of $89,200,000. As of September 30, 1997,
the Company took delivery of two of these aircraft. The Company financed these
acquisitions of flight equipment through bank loans, partially guaranteed by
ILFC, as well as loans from ILFC. The Company expects to take delivery of the
third aircraft prior to December 31, 1997.
4. NOTES PAYABLE
During the nine month period ended September 30, 1997, the Company entered into
each of the transactions described below in connection with the purchase of
flight equipment. The Company borrowed $4,433,000 from ILFC for the purchase of
flight equipment. The loan bears interest at 7.25% and matures May 2001,
including a balloon payment of $3,725,840. The Company also borrowed $18,000,000
from ILFC. The loan has an effective interest rate of 6.7% and
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<PAGE> 9
INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
matures December 31, 1999 with a balloon payment of $15,775,482. In addition,
the Company borrowed $2,000,000 from ILFC. The loan has an effective interest
rate of 6.9% and matures September 30, 2002 with a balloon payment of
$1,394,891. The Company borrowed $22,500,000 from a bank, secured by flight
equipment, guaranteed up to $5,000,000 by ILFC. The loan bears interest at 7.6%
and matures May 2001 with a balloon payment of $19,806,718. Also, the Company
obtained a $1,000,000 bridge loan from a bank bearing interest at 7% due
December 31, 1997. The loan was repaid in November 1997. The Company borrowed
$200,000 at an effective interest rate of 7% from Great Lakes Holdings ("Great
Lakes"), a company owned 100% by the Chief Executive Officer and the President
of the Company. The loan was repaid in November 1997.
5. EARNINGS PER SHARE
Net income per share has been computed using the weighted average number of
common and common stock equivalent shares outstanding for each of the periods
presented. Common stock equivalents represent the number of shares which would
be issued assuming the exercise of common stock options, conversion of preferred
stock and conversion of a note payable reduced by the number of shares which
could be purchased with the proceeds from such conversions using the treasury
stock method. Fully diluted net income per common and common stock equivalent
share is not presented since the amounts do not differ significantly from
primary net income per share presented.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128 (SFAS No. 128) "Earnings Per
Share." The statement changes the computation, presentation and disclosure
requirements for earnings per share in the financial statements for periods
ending after December 15, 1997. Early adoption is not permitted. Basic earnings
per share represents income available to common shareholders divided by the
weighted average number of common shares outstanding for the period. Pro forma
basic earnings per share for the three months ended September 30, 1997 and 1996
was $1.23 and $2.15, respectively. Pro forma basic earnings per share for the
nine months ended September 30, 1997 and 1996 was $4.87 and $6.50, respectively.
Diluted earnings per share is similar to the current presentation of fully
diluted earnings per share. Accordingly, pro forma diluted earnings per share
for the three and nine months ended September 30, 1997 and 1996 do not differ
from fully diluted earnings per share.
6. NEW ACCOUNTING STANDARDS
The FASB has issued SFAS No. 128, "Earnings per Share," SFAS No. 130, "Reporting
Comprehensive Income" and SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information." SFAS No. 128 changes the computation,
presentation and disclosure requirements for earnings per share (see Note 5).
SFAS No. 130 establishes standards for reporting and display of comprehensive
income and its components. SFAS No. 131 supersedes previous reporting
requirements for reporting on segments of a business enterprise. SFAS No. 130
and SFAS No. 131 are effective for periods beginning after December 15, 1997.
Accordingly, the Company plans to implement these two standards during 1998.
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<PAGE> 10
INTERNATIONAL AIRCRAFT INVESTORS AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
7. SUBSEQUENT EVENTS
On November 5, 1997, the Company issued 2.6 million shares of common stock in an
initial public offering (IPO). In connection with the IPO, the Company effected
a 1-for-4.5 reverse stock split of its common stock which has been applied
retroactively in the accompanying condensed consolidated financial statements.
Concurrent with the IPO, all outstanding shares of preferred stock were
converted to 1,097,973 shares of common stock and options to acquire 477,391
shares of common stock were exercised at between $4.50 and $5.18 per share after
giving effect for the 1-for-4.5 reverse stock split.
In November 1997, the convertible note was converted to 155,555 shares of common
stock.
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<PAGE> 11
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
OVERVIEW
The Company is primarily engaged in the acquisition of used, single-aisle jet
aircraft and engines for lease and sale to domestic and foreign airlines and
other customers. The Company leases aircraft under short- to medium-term
operating leases where the lessee is responsible for all operating costs and the
Company retains the potential benefit or risk of the residual value of the
aircraft, as distinct from finance leases where the full cost of the aircraft is
generally recovered over the term of the lease.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1997 and 1996
Revenues from rental of flight equipment increased by 28% to $4,049 in the three
months ended September 30, 1997 compared to the same period in 1996 principally
as a result of the re-lease of flight equipment at a higher lease rate and the
acquisition of one aircraft under lease.
The decrease in consulting fees of $52 is primarily the result of the
termination in January 1997 of an arrangement with Great Lakes Holdings ("Great
Lakes"), a company owned 100% by the Chief Executive Officer and the President
of the Company. No further consulting fees are expected to be received from
Great Lakes. The Company earned $36 from Great Lakes and $16 from an unrelated
company in the three month period ended September 30, 1996.
Interest income increased to $102 for the three months ended September 30, 1997
from $39 for the same period in 1996 principally as a result of interest on
increased cash and restricted cash balances.
Expenses as a percent of total revenues were 96% and 95% during the three months
ended September 30, 1997 and 1996, respectively. Interest expense increased to
$2,034 for the three months ended September 30, 1997 from $1,557 for the same
period in 1996 principally as a result of interest on financing related to the
acquisition of one aircraft, offset by the effect of loan paydowns. Depreciation
expense increased to $1,701 in the third quarter of 1997 from $1,387 in the
third quarter of 1996 primarily as a result of the acquisition of one aircraft.
General and administrative expenses increased to $174 in the three months ended
September 30, 1997 from $155 in the same period of 1996. The increase was
primarily the result of additional employees in 1997. During the three months
ended September 30, 1997, the Company incurred $75 of non-cash compensation
expense related to the vesting of options granted to executives officers.
As a result of the completion of the Company's initial public offering in
November 1997, the Company expects increased general and administrative expenses
as a result of additional requirements imposed due to maintaining the Company's
status as a public company and additional compensation as a result of new
employment agreements with the Company's Chief Executive Officer and President
and the addition of one employee in September 1997.
The $54 increase in income tax expense represents a non-cash provision for
deferred income taxes at an effective rate of 40%. The Company paid no federal
income taxes during the three months ended September 30, 1997 due to substantial
net operating loss carryforwards (NOL) resulting from accelerated tax
depreciation. At December 31, 1996, the Company had $23,082 of federal NOLs.
Net income decreased to $100 for the three months ended September 30, 1997 from
$151 for the same period in 1996 due to the factors described above.
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<PAGE> 12
Nine Months Ended September 30, 1997 and 1996
Revenues from rental of flight equipment increased by 10.8% to $10,528 in the
nine months ended September 30, 1997 compared to the same period in 1996
principally as a result of the re-lease of flight equipment at a higher lease
rate and the acquisition of one aircraft under lease.
The decrease in consulting fees of $223 is partly the result of the termination
in January 1997 of an arrangement with Great Lakes. No further consulting fees
are expected to be received from Great Lakes. The Company earned $12 from Great
Lakes in the nine month period ended September 30, 1997. The Company earned $108
from Great Lakes, $76 from International Lease Finance Corporation ("ILFC"), an
affiliate of the Company, and $51 from unrelated companies in the nine month
period ended September 30, 1996.
Interest income increased to $201 for the nine months ended September 30, 1997
from $121 for the same period in 1996 principally as a result of interest on
increased cash and restricted cash balances.
Expenses as a percent of total revenues were 94.5% and 95% during the nine
months ended September 30, 1997 and 1996, respectively. Interest expense
increased to $5,055 for the nine months ended September 30, 1997 from $4,788 for
the same period in 1996 principally as a result of interest on financing related
to the acquisition of one aircraft, offset by the effect of loan paydowns.
Depreciation expense increased to $4,461 in the nine months ended September 1997
from $4,160 in the same period of 1996 primarily as a result of the acquisition
of one aircraft. General and administrative expenses increased to $464 in the
nine months ended September 30, 1997 from $421 in the same period of 1996. The
increase was primarily the result of additional employees in 1997. During the
nine months ended September 30, 1997, the Company incurred $175 of non-cash
compensation expense related to the vesting of options granted to executives
officers.
As a result of the completion of the Company's initial public offering in
November 1997, the Company expects increased general and administrative expenses
as a result of additional requirements imposed due to maintaining the Company's
status as a public company and additional compensation as a result of new
employment agreements with the Company's Chief Executive Officer and President
and the addition of one employee in September 1997.
The $194 increase in income tax expense represents a non-cash provision for
deferred income taxes at an effective rate of 40%. The Company paid no federal
income taxes during the nine months ended September 30, 1997 due to substantial
net operating loss carryforwards resulting from accelerated tax depreciation. At
December 31, 1996, the Company had $23,082 of federal NOLs.
Net income decreased to $359 for the nine months ended September 30, 1997 from
$455 for the same period in 1996 due to the factors described above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal external sources of funds have been term loans from
banks and seller financing secured by flight equipment. As a result, a
substantial amount of the Company's cash flows from rental of flight equipment
is applied to principal and interest payments on secured debt. The terms of the
Company's loans generally require a substantial balloon payment at the end of
the noncancellable portion of the lease of the related flight equipment, at
which time the Company will be required to re-lease the flight equipment and
renegotiate the balloon amount of the loan or obtain other financing.
Refinancing of the balloon amount is dependent upon the Company re-leasing the
related flight equipment. Accordingly, the Company begins lease remarketing
efforts well in advance of the lease termination. The principal use of cash is
for financing the acquisition of the Company's flight equipment portfolio, which
is financed by loans secured by the applicable flight equipment. As a result,
the Company does not currently maintain a line of credit.
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<PAGE> 13
For the nine months ended September 30, 1997, net cash provided from operating
activities increased by $2,592 principally as a result of increased lease
deposits and increased rentals from the re-lease of one aircraft and the
acquisition of one aircraft under lease.
Net cash used in investing activities increased to $52,906 in the nine months
ended September 30, 1997 from $199 in the same period of 1996. In 1997, the
Company acquired two additional aircraft under lease for $52,875 from ILFC.
For the nine months ended September 30, 1997, net cash provided by financing
activities was $44,073 compared to net cash used in financing activities of
$4,359 during the nine months ended September 30, 1996. In 1997, the Company
borrowed $48,133 to finance the acquisition of flight equipment under lease and
received $50 from the exercise of management stock options. In 1997, the Company
also made payments on its outstanding borrowings of $4,110.
During the nine month period ended September 30, 1997, the Company entered into
each of the following transactions described below in connection with the
purchase of flight equipment. The Company borrowed $4,433 from ILFC. The loan
bears interest at 7.25% and matures May 2001, including a balloon payment of
$3,726. The Company also borrowed $18,000 from ILFC. The loan has an effective
interest rate of 6.7% and matures December 31, 1999 with a balloon payment of
$15,775. In addition, the Company borrowed $2,000 from ILFC. The loan has an
effective interest rate of 6.9% and matures September 30, 2002 with a balloon
payment of $1,395. The Company borrowed $22,500 from a bank, secured by flight
equipment, guaranteed up to $5,000 by ILFC. The loan bears interest at 7.6% and
matures May 2001 with a balloon payment of $19,807. Also, the Company obtained a
$1,000 bridge loan from a bank bearing interest at 7% due December 31, 1997. The
loan was repaid in November 1997. The Company borrowed $200 at an effective
interest rate of 7% from Great Lakes Holdings ("Great Lakes"), a company owned
100% by the Chief Executive Officer and the President of the Company. The loan
was repaid in November 1997.
During November 1997, the Company successfully completed an initial public
offering of 2,600,000 shares of its common stock and received net proceeds of
approximately $24,180. The Company used $1,200 of the net proceeds to repay
certain loans. The Company intends to use the remaining net proceeds, together
with debt financing to acquire additional aircraft for lease, as well as for
working capital and other general purposes.
Cash and cash equivalents vary from year to year principally as a result of the
timing of the purchase and sale of aircraft.
The Company uses interest swap arrangements to reduce the potential impact of
increases in interest rates on floating rate long-term debt and does not use
them for trading purposes. Premiums paid for purchased interest rate swap
agreements are amortized to interest expense over the terms of the swap
agreements.
The Company's ability to execute successfully its business strategy and to
sustain its operations is dependent, in part, on its ability to obtain financing
and to raise equity capital. There can be no assurance that the necessary amount
of such capital will continue to be available to the Company on favorable terms
or at all. If the Company were unable to continue to obtain any portion of
required financing on favorable terms, the Company's ability to add new aircraft
to its lease portfolio, renew leases, re-lease an aircraft, repair or
recondition an aircraft if required, or retain ownership of an aircraft on which
financing has expired would be impaired, which would have a material adverse
effect on the Company's business, financial condition and results of operations.
In addition, the Company's financing arrangements to date have been dependent in
part upon ILFC.
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<PAGE> 14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
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<S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company
3.2 Amended and Restated Bylaws of the Company
4.1 Specimen of Common Stock certificate. Filed as Exhibit 4.1 to
Registration Statement No. 333-19875, and incorporated herein
by reference
4.2 Amended and Restated Aircraft Loan Agreement dated November 4,
1996 between SWA I Corporation and Wells Fargo Bank, N.A..
Filed as Exhibit 4.2 to Registration Statement No. 333-19875,
and incorporated herein by reference
4.3 Secured Promissory Note in the original principal amount of
$13,700,000 made November 4, 1996 by SWA I Corporation in
favor of Wells Fargo Bank, N.A.. Filed as Exhibit 4.3 to
Registration Statement No. 333-19875, and incorporated herein
by reference
4.4 Amended and Restated Guaranty Agreement dated as of November
4, 1996 made by International Aircraft Investors in favor of
Wells Fargo Bank, N.A.. Filed as Exhibit 4.4 to Registration
Statement No. 333-19875, and incorporated herein by reference
4.5 Senior Term Loan Agreement dated as of May 17, 1996 between
IAI Alaska I Corporation and City National Bank. Filed as
Exhibit 4.5 to Registration Statement No. 333-19875, and
incorporated herein by reference
4.6 Aircraft Secured Promissory Note in the original principal
amount of $14,650,000 made May 17, 1996 by IAI Alaska I
Corporation in favor of City National Bank. Filed as Exhibit
4.6 to Registration Statement No. 333-19875, and incorporated
herein by reference
4.7 Secured Credit Agreement dated as of December 21, 1993 between
IAI II, Inc. and Continental Bank, N.A.. Filed as Exhibit 4.7
to Registration Statement No. 333-19875, and incorporated
herein by reference
4.8 Note in the original principal amount of $21,976,677 made by
IAI II, Inc. in favor of Continental Bank, N.A.. Filed as
Exhibit 4.8 to Registration Statement No. 333-19875, and
incorporated herein by reference
4.9 Loan Agreement, dated as of September 26, 1997, between IAI
IV, Inc. and International Lease Finance Corporation. Filed as
Exhibit 4.9 to Registration Statement No. 333-19875, and
incorporated herein by reference
4.10 Senior Term Loan Agreement, dated June 23, 1997, between IAI
III, Inc. and City National Bank. Filed as Exhibit 4.10 to
Registration Statement No. 333-19875, and incorporated herein
by reference
</TABLE>
-14-
<PAGE> 15
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
------ -----------
<S> <C>
4.11 The Company hereby agrees to furnish to the Commission upon
request a copy of any instrument with respect to long-term
debt where the total amount of securities authorized
thereunder does not exceed 10% of the consolidated assets of
the Company
10.1 Employment Agreement with William E. Lindsey
10.2 Employment Agreement with Michael P. Grella
11 Computation re earnings per share
27 Financial Data Schedule
</TABLE>
-15-
<PAGE> 16
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.
INTERNATIONAL AIRCRAFT INVESTORS
December 19, 1997 by: /S/ Michael P. Grella
----------------------------
Michael P. Grella
President
December 19, 1997 by: /S/ Rick O. Hammond
---------------------------
Rick O. Hammond
Vice President-Finance
And Treasurer
-16-
<PAGE> 1
EXHIBIT 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
INTERNATIONAL AIRCRAFT INVESTORS
ARTICLE I
The name of this corporation is International Aircraft Investors
(this "corporation" or the "Company").
ARTICLE II
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
This corporation is authorized to issue two classes of shares
designated, respectively, "Common Stock" and "Preferred Stock," and referred to
herein either as Common Stock or Common Shares and Preferred Stock or Preferred
Shares, respectively. The number of shares of Common Stock is 20,000,000, $0.01
par value, and the number of shares of Preferred Stock is 15,000,000, $0.01 par
value.
The Preferred Shares may be issued from time to time, in one or
more series. The Board of Directors is authorized to fix the number of shares of
any series of Preferred Shares and to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Shares, and within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, to increase or decease (but
not below the number of shares of such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series.
Upon filing of this Amended and Restated Articles of
Incorporation, all outstanding shares of Common Stock shall be subject to a
1-for-4.5 reverse stock split. No fractional shares of Common Stock are to be
issued in connection with the reverse stock split, but instead cash shall be
distributed to each shareholder who would otherwise have been entitled to
receive a fractional share, and the amount of cash to be distributed shall be
based upon a price of $10.00 per share.
<PAGE> 2
ARTICLE IV
The liability of the directors of the corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law.
ARTICLE V
Any action required or permitted to be taken by the shareholders
of the corporation must be effected at an annual or special meeting of
shareholders of the corporation and may not be effected by any consent in
writing of such shareholders.
ARTICLE VI
The corporation is authorized to indemnify its agents to the
fullest extent permissible under California law. For purposes of this provision,
the term "agent" has the meaning set forth from time to time in Section 317 of
the California Corporations Code.
ARTICLE VII
Advance notice of shareholder nominations for the election of
directors and of business to be brought by shareholders before any meeting of
the shareholders of the corporation shall be given in the manner provided in the
bylaws of the corporation.
ARTICLE VIII
The election of directors by the shareholders shall not be by
cumulative voting. At each election of directors, each shareholder entitled to
vote may vote all the shares held by that shareholder for each of the several
nominees for director up to the number of directors to be elected. The
shareholder may not cast more votes for any single nominee than the number of
shares held by that shareholder. This Article VIII shall become effective only
when the corporation becomes a "listed corporation" within the meaning of the
California Corporations Code Section 301.5(d).
ARTICLE IX
(A) The corporation reserves the right to repeal, alter, amend or
rescind any provision contained in the articles of incorporation, in the manner
now or hereafter prescribed by statute, except as provided in paragraph (B) of
this Article IX, and all rights conferred on shareholders herein are granted
subject to this reservation.
2
<PAGE> 3
(B) Notwithstanding any other provision of the articles of
incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of securities required by law, the articles of
incorporation or any Preferred Stock Designation, the affirmative vote of the
holders entitled to exercise at least 66-2/3% of the voting power of the
corporation, voting together as a single class, shall be required to alter,
amend or repeal Articles IV, V, VI, VII, VIII and IX hereof.
3
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
of
INTERNATIONAL AIRCRAFT INVESTORS
(a California corporation)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. OFFICES....................................................................... 1
SECTION 1. PRINCIPAL EXECUTIVE OFFICE.................................. 1
SECTION 2. OTHER OFFICES............................................... 1
ARTICLE II. SHAREHOLDERS.................................................................. 1
SECTION 1. PLACE OF MEETINGS........................................... 1
SECTION 2. ANNUAL MEETINGS............................................. 1
SECTION 3. SPECIAL MEETINGS............................................ 1
SECTION 4. NOTICE OF ANNUAL OR SPECIAL
MEETINGS.................................................... 2
SECTION 5. QUORUM...................................................... 3
SECTION 6. ADJOURNED MEETINGS AND NOTICE
THEREOF..................................................... 3
SECTION 7. VOTING...................................................... 4
SECTION 8. RECORD DATE................................................. 6
SECTION 9. CONSENT OF ABSENTEES........................................ 6
SECTION 10. ACTION WITHOUT MEETING...................................... 7
SECTION 11. PROXIES..................................................... 7
SECTION 12. INSPECTORS OF ELECTION...................................... 7
SECTION 13. CONDUCT OF MEETING.......................................... 8
SECTION 14. NOMINATION OF DIRECTORS..................................... 8
ARTICLE III. DIRECTORS..................................................................... 9
SECTION 1. POWERS...................................................... 9
SECTION 2. NUMBER OF DIRECTORS......................................... 10
SECTION 3. ELECTION AND TERM OF OFFICE................................. 10
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C> <C>
SECTION 4. VACANCIES................................................... 10
SECTION 5. PLACE OF MEETING............................................ 11
SECTION 6. REGULAR MEETINGS............................................ 11
SECTION 7. SPECIAL MEETINGS............................................ 11
SECTION 8. QUORUM...................................................... 12
SECTION 9. PARTICIPATION IN MEETINGS BY
CONFERENCE TELEPHONE........................................ 12
SECTION 10. WAIVER OF NOTICE............................................ 12
SECTION 11. ADJOURNMENT................................................. 12
SECTION 12. FEES AND COMPENSATION....................................... 13
SECTION 13. ACTION WITHOUT MEETING...................................... 13
SECTION 14. RIGHTS OF INSPECTION........................................ 13
SECTION 15. COMMITTEES.................................................. 13
ARTICLE IV. OFFICERS...................................................................... 14
SECTION 1. OFFICERS.................................................... 14
SECTION 2. ELECTION.................................................... 14
SECTION 3. SUBORDINATE OFFICERS........................................ 14
SECTION 4. REMOVAL AND RESIGNATION..................................... 14
SECTION 5. VACANCIES................................................... 15
SECTION 6. CHAIRMAN OF THE BOARD....................................... 15
SECTION 7. PRESIDENT................................................... 15
SECTION 8. VICE PRESIDENTS............................................. 15
SECTION 9. SECRETARY................................................... 15
SECTION 10. CHIEF FINANCIAL OFFICER..................................... 16
SECTION 11. COMPENSATION................................................ 16
ARTICLE V. INDEMNIFICATION................................................................ 17
SECTION 1. INDEMNIFICATION OF OFFICERS
AND DIRECTORS............................................... 17
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C> <C>
SECTION 2. INDEMNIFICATION OF EMPLOYEES
AND AGENTS.................................................. 18
SECTION 3. RIGHT OF DIRECTORS AND OFFICERS TO
BRING SUIT.................................................. 18
SECTION 4. SUCCESSFUL DEFENSE.......................................... 18
SECTION 5. INDEMNITY AGREEMENTS........................................ 19
SECTION 6. SUBROGATION................................................. 19
SECTION 7. NONEXCLUSIVITY OF RIGHTS.................................... 19
SECTION 8. INSURANCE................................................... 19
SECTION 9. EXPENSES AS A WITNESS....................................... 19
SECTION 10. NONAPPLICABILITY TO
FIDUCIARIES OF EMPLOYEE
BENEFIT PLANS............................................... 19
SECTION 11. SEPARABILITY................................................ 19
SECTION 12. EFFECT OF REPEAL OR
MODIFICATION................................................ 20
ARTICLE VI. OTHER PROVISIONS...................................................... 20
SECTION 1. INSPECTION OF CORPORATE
RECORDS..................................................... 20
SECTION 2. INSPECTION OF BYLAWS........................................ 21
SECTION 3. ENDORSEMENT OF DOCUMENTS;
CONTRACTS................................................... 21
SECTION 4. CERTIFICATES OF STOCK....................................... 21
SECTION 5. REPRESENTATION OF SHARES OF
OTHER CORPORATIONS.......................................... 22
SECTION 6. STOCK PURCHASE PLANS........................................ 22
SECTION 7. CONSTRUCTION AND DEFINITIONS................................ 23
SECTION 8. AMENDMENTS.................................................. 23
SECTION 9. ANNUAL REPORT TO SHAREHOLDERS............................... 23
</TABLE>
iii
<PAGE> 5
AMENDED AND RESTATED BYLAWS
for the regulation, except
as otherwise provided by statute or
its Articles of Incorporation,
of
INTERNATIONAL AIRCRAFT INVESTORS
(a California corporation)
The Bylaws of International Aircraft Investors are hereby
amended and restated in their entirety to read as follows:
ARTICLE I. OFFICES
SECTION 1. PRINCIPAL EXECUTIVE OFFICE. The corpo ration's principal
executive office shall be fixed and located at such place as the Board of
Directors (herein called the "Board") shall determine. The Board is granted full
power and authority to change said principal executive office from one location
to another.
SECTION 2. OTHER OFFICES. Branch or subordinate
offices may be established at any time by the Board at any place
or places.
ARTICLE II. SHAREHOLDERS
SECTION 1. PLACE OF MEETINGS. Meetings of share holders shall be
held either at the principal executive office of the corporation or at any other
place within or without the State of California which may be designated either
by the Board or by the written consent of all persons entitled to vote thereat,
given either before or after the meeting and filed with the Secretary.
SECTION 2. ANNUAL MEETINGS. The annual meetings of shareholders
shall be held on such date and at such time as may be fixed by the Board. At
such meetings, directors shall be elected and any other proper business may be
transacted.
SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders
may be called at any time by the Board, the Chairman of the Board, the
President, or by the holders of shares entitled to cast not less than ten
percent of the votes at such meeting. Upon request in writing to the Chairman of
the Board, the President, any Vice President or the Secretary by any person
(other than the Board) entitled to call a special meeting of shareholders, the
officer forthwith shall cause notice to be given to the shareholders entitled to
vote that a meeting will be
1
<PAGE> 6
held at a time requested by the person or persons calling the meeting, not less
than thirty-five nor more than sixty days after the receipt of the request. If
the notice is not given within twenty days after receipt of the request, the
persons entitled to call the meeting may give the notice.
SECTION 4. NOTICE OF ANNUAL OR SPECIAL MEETINGS. Written notice of
each annual or special meeting of shareholders shall be given not less than ten
nor more than sixty days before the date of the meeting to each shareholder
entitled to vote thereat. Such notice shall state the place, date and hour of
the meeting and (i) in the case of a special meeting, the general nature of the
business to be transacted, and no other businesses may be transacted, or (ii) in
the case of the annual meeting, those matters which the Board, at the time of
the mailing of the notice, intends to present for action by the shareholders,
but, subject to the provisions of applicable law, any proper matter may be
presented at the meeting for such action. To be properly brought before an
annual meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board, (b) otherwise
properly brought before the meeting by or at the direction of the Board, or (c)
otherwise properly brought before the meeting by a shareholder. For business to
be properly brought before an annual meeting by a shareholder, the shareholder
must have given timely notice thereof in writing to the Secretary of the
corporation. To be timely, a shareholder's notice must be delivered to or mailed
and received at the principal executive offices of the corporation, not less
than 60 days nor more than 90 days prior to the anniversary date of the
immediately preceding annual meeting of shareholders; provided, however, that in
the event that the annual meeting is called for a date that is not within 30
days before or after such anniversary date, notice by the shareholder to be
timely must be so received not later than the close of business on the 15th day
following the day on which such notice of the date of the annual meeting was
mailed or such public disclosure was made. A shareholder's notice to the
Secretary shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
corporation's books, of the shareholder proposing such business, (c) the class
and number of shares of the corporation which are beneficially owned by the
shareholder, and (d) any material interest of the shareholder in such business.
Notwithstanding anything in the Bylaws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this Section 4. The Chairman of the annual meeting shall, if the facts
warrant, determine and declare to the meeting that business was not properly
brought before the meeting and in accordance with the provisions of this Section
4, and if he should so determine, he shall so declare to the meeting and any
2
<PAGE> 7
such business not properly brought before the meeting shall not be transacted.
The notice of any meeting at which directors are to be elected shall
include the names of nominees intended at the time of the notice to be presented
by management for election.
Notice of a shareholders' meeting shall be given either personally
or by first-class mail or, if the corporation has outstanding shares held of
record by 500 or more persons on the record date for the meeting, notice may be
given by third-class mail, or by other means of written communication, addressed
to the shareholder at the address of such shareholder appearing on the books of
the corporation or given by the shareholder to the corporation for the purpose
of notice, or, if no such address appears or is given, at the place where the
principal executive office of the corporation is located or by publication at
least once in a newspaper of general circulation in the county in which the
principal executive office is located. Notice by mail shall be deemed to have
been given at the time a written notice is deposited in the United States mails,
postage prepaid. Any other written notice shall be deemed to have been given at
the time it is personally delivered to the recipient or is delivered to a common
carrier for transmission, or actually transmitted by the person giving the
notice by electronic means, to the recipient.
SECTION 5. QUORUM. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders. If a quorum is present, the affirmative vote of a majority of the
shares represented and voting at the meeting (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or voting by classes is
required by law or by the Articles, except as provided in the following
sentence. The shareholders present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
SECTION 6. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders'
meeting, whether or not a quorum is present, may be adjourned from time to time
by the vote of a majority of the shares represented either in person or by
proxy, but in the absence of a quorum (except as provided in Section 5 of this
Article) no other business may be transacted at such meeting.
It shall not be necessary to give any notice of the time and place
of the adjourned meeting or of the business to be transacted thereat, other than
by announcement at the meeting at which such adjournment is taken; provided,
however, when any shareholders' meeting is adjourned for more than 45 days or,
if after adjournment a new record date is fixed for the adjourned
3
<PAGE> 8
meeting, notice of the adjourned meeting shall be given as in the case of an
original meeting.
SECTION 7. VOTING. The shareholders entitled to notice of any
meeting or to vote at any such meeting shall be only persons in whose name
shares stand on the stock records of the corporation on the record date
determined in accordance with Section 8 of this Article.
The election of directors by the shareholders shall not be by
cumulative voting. At each election of directors, each shareholder entitled to
vote may vote all the shares held by that shareholder for each of the several
nominees for director up to the number of directors to be elected. The
shareholder may not cast more votes for any single nominee than the number of
shares held by that shareholder. This paragraph shall become effective only when
the corporation becomes a "listed corporation" within the meaning of Section
301.5(d) of the California General Corporation Law.
Elections need not be by ballot; provided, however, that all
elections for directors must be by ballot upon demand made by a shareholder at
the meeting and before the voting begins.
In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
Voting shall in all cases be subject to the provisions of Chapter 7
of the California General Corporation Law, and to the following provisions:
(a) Subject to clause (g), shares held by an administrator,
executor, guardian, conservator or custodian may be voted by such holder either
in person or by proxy, without a transfer of such shares into the holder's name;
and shares standing in the name of a trustee may be voted by the trustee, either
in person or by proxy, but no trustee shall be entitled to vote shares held by
such trustee without a transfer of such shares into the trustee's name.
(b) Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into the receiver's name if authority
to do so is contained in the order of the court by which such receiver was
appointed.
(c) Subject to the provisions of Section 705 of the California
General Corporation Law and except where otherwise agreed in writing between the
parties, a shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
4
<PAGE> 9
thereafter the pledgee shall be entitled to vote the shares so transferred.
(d) Shares standing in the name of a minor may be voted and the
corporation may treat all rights incident thereto as exercisable by the minor,
in person or by proxy, whether or not the corporation has notice, actual or
constructive, of the nonage, unless a guardian of the minor's property has been
appointed and written notice of such appointment given to the corporation.
(e) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent or proxyholder as the bylaws of
such other corporation may prescribe or, in the absence of such provision, as
the Board of Directors of such other corporation may determine or, in the
absence of such determination, by the chairman of the board, president or any
vice president of such other corporation, or by any other person authorized to
do so by the chairman of the board, president or any vice president of such
other corporation. Shares which are purported to be voted or any proxy purported
to be executed in the name of a corporation (whether or not any title of the
person signing is indicated) shall be presumed to be voted or the proxy executed
in accordance with the provisions of this clause, unless the contrary is shown.
(f) Shares of the corporation owned by its subsidiary shall not be
entitled to vote on any matter.
(g) Shares held by the corporation in a fiduciary capacity, and
shares of the issuing corporation held in a fiduciary capacity by any
subsidiary, shall not be entitled to vote on any matter, except to the extent
that the settlor or beneficial owner possesses and exercises a right to vote or
to give the corporation binding instructions as to how to vote such shares.
(h) If shares stand of record in the names of two or more persons,
whether fiduciaries, members of a partnership, joint tenants, tenants in common,
husband and wife as community property, tenants by the entirety, voting
trustees, persons entitled to vote under a shareholder voting agreement or
otherwise, or if two or more persons (including proxyholders) have the same
fiduciary relationship respecting the same shares, unless the secretary of the
corporation is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect:
(i) If only one votes, such act binds all;
(ii) If more than one vote, the act of the majority so
voting binds all;
5
<PAGE> 10
(iii) If more than one vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately.
If the instrument so filed or the registration of the shares shows that any such
tenancy is held in unequal interests, a majority or even split for the purpose
of this section shall be a majority or even split in interest.
SECTION 8. RECORD DATE. The Board may fix, in advance, a record date
for the determination of the shareholders entitled to notice of any meeting or
to vote or entitled to receive payment of any dividend or other distribution, or
any allotment of rights, or to exercise rights in respect of any other lawful
action. The record date so fixed shall be not more than 60 days nor less than 10
days prior to the date of the meeting nor more than 60 days prior to any other
action. When a record date is so fixed, only shareholders of record on that date
are entitled to notice of and to vote at the meeting or to receive the dividend,
distribution, or allotment or rights, or to exercise of the rights, as the case
may be, notwithstanding any transfer of shares on the books of the corporation
after the record date. A determination of shareholders of record entitled to
notice of or to vote at a meeting of shareholders shall apply to any adjournment
of the meeting unless the Board fixes a new record date for the adjourned
meeting. The Board shall fix a new record date if the meeting is adjourned for
more than forty-five days.
If no record date is fixed by the Board, the record date for
determining shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the close
of business on the business day next preceding the day on which the meeting is
held. The record date for determining shareholders for any purpose other than
set forth in this Section 8 or Section 10 of this Article shall be at the close
of business on the day on which the Board adopts the resolution relating
thereto, or the sixtieth day prior to the date of such other action, whichever
is later.
SECTION 9. CONSENT OF ABSENTEES. The transactions of any meeting of
shareholders, however called and noticed, and wherever held, are as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, signs a written waiver of notice, or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents or
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of and presence at such meeting, except when the person
objects, at the beginning of the meeting, to the transaction of
6
<PAGE> 11
any business because the meeting is not lawfully called or convened and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters required by the California General Corporation
Law to be included in the notice but not so included, if such objection is
expressly made at the meeting. Neither the business to be transacted at nor the
purpose of any regular or special meeting of shareholders need be specified in
any written waiver of notice, consent to the holding of the meeting or approval
of the minutes thereof, except as provided in Section 601(f) of the California
General Corporation Law.
SECTION 10. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the shareholders of the corporation must be effected at an annual
or special meeting of shareholders of the corporation and may not be effected by
any consent in writing of such shareholders.
SECTION 11. PROXIES. Every person entitled to vote shares has the
right to do so either in person or by one or more persons authorized by a
written proxy executed by such shareholder and filed with the Secretary with
respect to such shares. Any proxy duly executed is not revoked and continues in
full force and effect until revoked by the person executing it prior to the vote
pursuant thereto. Such revocation may be effected either, (i) by a writing
delivered to the Secretary of the Corporation stating that the proxy is revoked,
(ii) or by a subsequent proxy executed by the person executing the prior proxy
and presented to the meeting, or (iii) by attendance at the meeting and voting
in person by the person executing the proxy; provided, however, that no proxy
shall be valid after the expiration of eleven months from the date of its
execution unless otherwise provided in the proxy.
SECTION 12. INSPECTORS OF ELECTION. In advance of any meeting of
shareholders, the Board may appoint inspectors of election to act at such
meeting and any adjournment thereof. If inspectors of election be not so
appointed, or if any persons so appointed fail to appear or refuse to act, the
chairman of any such meeting may, and on the request of any shareholder or
shareholder's proxy shall, make such appointment at the meeting. The number of
inspectors shall be either one or three. If appointed at a meeting on the
request of one or more shareholders or proxies, the majority of shares present
shall determine whether one or three inspectors are to be appointed.
The duties of such inspectors shall be as prescribed by Section
707(b) of the California General Corporation Law and shall include: determining
the number of shares outstanding and the voting power of each; determining the
shares represented at the meeting; determining the existence of a quorum;
determining the authenticity, validity and effect of proxies; receiving votes,
ballots or consents; hearing and determining all challenges and questions in
any way arising in connection with
7
<PAGE> 12
the right to vote; counting and tabulating all votes or consents; determining
when the polls shall close; determining the result; and doing such acts as may
be proper to conduct the election or vote with fairness to all shareholders. If
there are three inspectors of election, the decision, act or certificate of a
majority is effective in all respects as the decision, act or certificate of
all.
SECTION 13. CONDUCT OF MEETING. The President shall preside as
chairman at all meetings of the shareholders. The chairman shall conduct each
such meeting in a businesslike and fair manner, but shall not be obligated to
follow any technical, formal or parliamentary rules or principles of procedure.
The chairman's rulings on procedural matters shall be conclusive and binding on
all shareholders, unless at the time of a ruling a request for a vote is made to
the shareholders holding shares entitled to vote and which are represented in
person or by proxy at the meeting, in which case the decision of a majority of
such shares shall be conclusive and binding on all shareholders. Without
limiting the generality of the foregoing, the chairman shall have all of the
powers usually vested in the chairman of a meeting of shareholders.
SECTION 14. NOMINATION OF DIRECTORS. Only persons who are nominated
in accordance with the procedures set forth in this Section 14 shall be eligible
for election as directors. Nominations of persons for election to the Board of
the corporation may be made at a meeting of shareholders by or at the direction
of the Board or by any shareholder of the corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 14. Such nominations, other than those made by or at the
direction of the Board, shall be made pursuant to timely notice in writing to
the Secretary of the corporation. To be timely, a shareholder's notice shall be
delivered to or mailed and received at the principal executive offices of the
corporation not less than 60 days nor more than 90 days prior to the anniversary
date of the immediately preceding annual meeting of shareholders; provided,
however, that in the event that the annual meeting is called for a date that is
not within 30 days before or after such anniversary date, notice by the
shareholder to be timely must be so received not later than the close of
business on the 15th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such shareholder's
notice shall set forth (a) as to each person whom the shareholder proposes to
nominate for election or re-election as a director, (i) the name, age, business
address and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as
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amended (including without limitation such persons' written consent to being
named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the shareholder giving the notice (i) the name and
address, as they appear on the corporation's books, of such shareholder and (ii)
the class and number of shares of the corporation which are beneficially owned
by such shareholder. At the request of the Board any person nominated by the
Board for election as a director shall furnish to the Secretary of the
corporation that information required to be set forth in a shareholder's notice
of nomination which pertains to the nominee. No person shall be eligible for
election as a director of the corporation unless nominated in accordance with
the procedures set forth in this Section 14. The Chairman of the meeting shall,
if the facts warrant, determine and declare to the meeting that a nomination was
not made in accordance with the procedures prescribed by the Bylaws, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.
ARTICLE III. DIRECTORS
SECTION 1. POWERS. Subject to limitations of the Articles, of these
Bylaws and of the California General Corporation Law relating to action required
to be approved by the shareholders or by the outstanding shares, the business
and affairs of the corporation shall be managed and all corporate powers shall
be exercised by or under the direction of the Board. The Board may delegate the
management of the day-to-day operation of the business of the corporation to a
management company or other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board. Without prejudice to such general powers,
but subject to the same limitations, it is hereby expressly declared that the
Board shall have the following powers in addition to the other powers enumerated
in these Bylaws:
(a) To select and remove all the other officers, agents and
employees of the corporation, prescribe the powers and duties for them as may
not be inconsistent with law, the Articles or these Bylaws, fix their
compensation and require from them security for faithful service.
(b) To conduct, manage and control the affairs and business of the
corporation and to make such rules and regu lations therefor not inconsistent
with law, the Articles or these Bylaws, as they may deem best.
(c) To adopt, make and use a corporate seal, and to prescribe the
forms of certificates of stock, and to alter the form of such seal and of such
certificates from time to time as they may deem best.
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(d) To authorize the issuance of shares of stock of the corporation
from time to time, upon such terms and for such consideration as may be lawful.
(e) To borrow money and incur indebtedness for the purposes of the
corporation, and to cause to be executed and delivered therefor, in the
corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages,
pledges, hypothecations or other evidences of debt and securities therefor.
SECTION 2. NUMBER OF DIRECTORS. The authorized number of directors
shall not be less than five nor more than nine until changed by amendment of the
Articles or by a Bylaw duly adopted by the shareholders amending this Section 2.
The exact number of directors shall be fixed, within the limits specified by
amendment to the next sentence duly adopted either by the Board or the
shareholders. The exact number of directors shall be seven until changed as
provided in this Section 2.
SECTION 3. ELECTION AND TERM OF OFFICE. The directors shall be
elected at each annual meeting of the shareholders, but if any such annual
meeting is not held or the directors are not elected thereat, the directors may
be elected at any special meeting of shareholders held for that purpose. Each
director shall hold office until the next annual meeting and until a successor
has been elected and qualified.
SECTION 4. VACANCIES. Any director may resign effective upon giving
written notice to the Chairman of the Board, the President, the Secretary or the
Board, unless the notice specifies a later time for the effectiveness of such
resignation. If the resignation is effective at a future time, a successor may
be elected to take office when the resignation becomes effective.
Vacancies in the Board, except those existing as a result of a
removal of a director, may be filled by a majority of the remaining directors,
though less than a quorum, or by a sole remaining director, and each director so
elected shall hold office until the next annual meeting and until such
director's successor has been elected and qualified.
A vacancy or vacancies in the Board shall be deemed to exist in case
of the death, resignation or removal of any director, or if the authorized
number of directors be increased, or if the shareholders fail, at any annual or
special meeting of shareholders at which any director or directors are elected,
to elect the full authorized number of directors to be voted for at that
meeting.
The Board may declare vacant the office of a director who has been
declared of unsound mind by an order of court or convicted of a felony.
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The shareholders may elect a director or directors at any time to
fill any vacancy or vacancies not filled by the directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of the director's term
of office.
SECTION 5. PLACE OF MEETING. Regular or special meetings of the
Board shall be held at any place within or without the State of California which
has been designated from time to time by the Board. In the absence of such
designation, regular meetings shall be held at the principal executive office of
the corporation.
SECTION 6. REGULAR MEETINGS. Immediately following
each annual meeting of shareholders the Board shall hold a
regular meeting for the purpose of organization, election of
officers and the transaction of other business.
Other regular meetings of the Board shall be held without call on
such dates and at such times as may be fixed by the Board. Call and notice of
all regular meetings of the Board are hereby dispensed with.
SECTION 7. SPECIAL MEETINGS. Special meetings of the
Board for any purpose or purposes may be called at any time by
the Chairman of the Board, the President, any Vice President, the
Secretary or by any two directors.
Special meetings of the Board shall be held upon four days' written
notice or forty-eight hours' notice given personally or by telephone, including
voice messaging system or other system or technology designed to record and
communicate messages, telegraph, facsimile, electronic mail or other electronic
means. Any such notice shall be addressed or delivered to each director at such
director's address as it is shown upon the records of the corporation or as may
have been given to the corporation by the director for purposes of notice or, if
such address is not shown on such records or is not readily ascertainable, at
the place in which the meetings of the directors are regularly held.
Notice by mail shall be deemed to have been given at the time a
written notice is deposited in the United States mails, postage prepaid. Any
other written notice shall be deemed to have been given at the time it is
personally delivered to the recipient or is delivered to a common carrier for
transmission, or actually transmitted by the person giving the notice by
electronic means, to the recipient. Oral notice shall be deemed to have been
given at the time it is communicated, in person or by telephone or wireless, to
the recipient or to a person at the office of the recipient who the person
giving the notice has reason to believe will promptly communicate it to the
recipient.
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SECTION 8. QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business, except to
adjourn as provided in Section 11 of this Article. Every act or decision done or
made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board, unless a greater
number be required by law or by the Articles. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
SECTION 9. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board may participate in a meeting through use of conference
telephone, electronic video screen communication or other communications
equipment. Participation in a meeting pursuant to this Section 9 constitutes
presence in person at that meeting if all of the following apply:
(A) Each member participating in the meeting can communicate with
all of the other members concurrently;
(B) Each member is provided the means of participating in all
matters before the Board, including the capacity to propose, or to
interpose an objection, to a specific action to be taken by the
corporation;
(C) The corporation adopts and implements some means of verifying
both of the following:
(i) A person communicating by telephone, electronic video
screen, or other communications equipment is a director entitled to
participate in the Board meeting; and
All statements, questions, actions, or votes were made by
that director and not by another person not permitted to participate
as a director.
SECTION 10. WAIVER OF NOTICE. Notice of a meeting need not be given
to any director who signs a waiver of notice or a consent to holding the meeting
or an approval of the minutes thereof, whether before or after the meeting, or
who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to such director. All such waivers, consents
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
SECTION 11. ADJOURNMENT. A majority of the directors present,
whether or not a quorum is present, may adjourn any directors' meeting to
another time and place. Notice of the time and place of holding an adjourned
meeting need not be given to absent directors if the time and place be fixed at
the meeting adjourned, except as provided in the next sentence. If the
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meeting is adjourned for more than 24 hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
SECTION 12. FEES AND COMPENSATION. Directors and member of
committees may receive such compensation, if any, for their services, and such
reimbursement for expenses, as may be fixed or determined by the Board. This
section shall not preclude any director from serving the corporation as an
officer, agent, employee, or in any other capacity, and receiving compensation
for those services.
SECTION 13. ACTION WITHOUT MEETING. Any action required or permitted
to be taken by the Board may be taken without a meeting if all members of the
Board shall individually or collectively consent in writing to such action. Such
consent or consents shall have the same effect as a unanimous vote of the Board
and shall be filed with the minutes of the proceedings of the Board.
SECTION 14. RIGHTS OF INSPECTION. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records and
documents of every kind and to inspect the physical properties of the
corporation and also of its subsidiary corporations, domestic or foreign. Such
inspection by a director may be made in person or by agent or attorney and
includes the right to copy and obtain extracts.
SECTION 15. COMMITTEES. The Board may appoint one or more
committees, each consisting of two or more directors, and delegate to such
committees any of the authority of the Board except with respect to:
(a) The approval of any action for which the General Corporation Law
also requires shareholders' approval or approval of the outstanding shares;
(b) The filling of vacancies in the Board or on any
committee;
(c) The fixing of compensation of the directors for serving on the
Board or on any committee;
(d) The amendment or repeal of bylaws or the adoption of new bylaws;
(e) The amendment or repeal of any resolution of the Board which by
its express terms is not so amendable or repealable;
(f) A distribution to the shareholders of the cor poration except at
a rate or in a periodic amount or within a price range determined by the
Board; or
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(g) The appointment of other committees of the Board or the members
thereof.
Any such committee must be designated, and the members or alternate
members thereof appointed, by resolution adopted by a majority of the authorized
number of directors and any such committee may be designated an Executive
Committee or by such other name as the Board shall specify. Alternate members of
a committee may replace any absent member at any meeting of the committee. The
Board shall have the power to prescribe the manner in which proceedings of any
such committee shall be conducted. In the absence of any such prescription, such
committee shall have the power to prescribe the manner in which its proceedings
shall be conducted. Unless the Board or such committee shall otherwise provide,
the regular and special meetings and other actions of any such committee shall
be governed by the provisions of this Article applicable to meetings and actions
of the Board. Minutes shall be kept of each of meeting of each committee.
ARTICLE IV. OFFICERS
SECTION 1. OFFICERS. The officers of the corporation shall be a
President, a Secretary and a Chief Financial Officer. The corporation may also
have, at the discretion of the Board, a Chairman of the Board, one or more
Vice-Presidents, one or more Assistant Secretaries, one or more Assistant Chief
Financial Officers, and such other officers as may be elected or appointed in
accordance with the provisions of Section 3 of this Article.
SECTION 2. ELECTION. The officers of the corpora tion, except such
officer as may be elected or appointed in accordance with the provisions of
Section 3 or Section 5 of this Article, shall be chosen annually by, and shall
serve at the pleasure of, the Board, and shall hold their respective offices
until their resignation, removal, or other disqualification from service, or
until their respective successors shall be elected.
SECTION 3. SUBORDINATE OFFICERS. The Board may elect, and may
empower the President to appoint, such other officers as the business of the
corporation may require, each of whom shall hold office for such period, have
such authority and perform such duties as are provided in these Bylaws or as the
Board may from time to time determine.
SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed,
either with or without cause, by the Board at any time or, except in the case of
an officer chosen by the Board, by any officer upon whom such power of removal
may be conferred by the Board. Any such removal shall be without prejudice to
the rights, if any, of the officer under any contract of employment of the
officer.
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Any officer may resign at any time by giving written notice to the
corporation, but without prejudice to the rights, if any, of the corporation
under any contract to which the officer is a party. Any such resignation shall
take effect at the date of the receipt of such notice or at any later time
specified therein and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 5. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in the
manner prescribed in these Bylaws for regular election or appointment to such
office.
SECTION 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if
there shall be such an officer, shall, if present, preside at all meetings of
the Board and exercise and perform such other powers and duties as may be from
time to time assigned by the Board.
SECTION 7. PRESIDENT. Subject to such powers, if any, as may be
given by the Board to the Chairman of the Board, if there be such an officer,
the President is the general manager and chief executive officer of the
corporation and has, subject to the control of the Board, general supervision,
direction and control of the business and officers of the corporation. The
President shall preside at all meetings of the shareholders and, in the absence
of the Chairman of the Board, or if there be none, at all meetings of the Board.
The President has the general powers and duties of management usually vested in
the office of president and general manager of a corporation and such other
powers and duties as may be prescribed by the Board.
SECTION 8. VICE PRESIDENTS. In the absence or disability of the
President, the Vice Presidents in order of their rank as fixed by the Board or,
if not ranked, the Vice President designated by the Board, shall perform all the
duties of the President and, when so acting, shall have all the powers of, and
be subject to all the restrictions upon, the President. The Vice Presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the Board.
SECTION 9. SECRETARY. The Secretary shall keep or cause to be kept,
at the principal executive office and such other place as the Board may order, a
book of minutes of all meetings of shareholders, the Board and its committees,
with the time and place of holding, whether regular or special, and if special,
how authorized, the notice thereof given, the names of those present at Board
and committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof. The Secretary shall keep,
or cause to be kept, a copy of the Bylaws of the corporation at the principal
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executive office or business office in accordance with Section 213 of the
California General Corporation Law.
The Secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, if one be appointed, a share register, or a duplicate share register,
showing the names of the shareholders and their addresses, the number and
classes of shares held by each, the number and date of certificates issued for
the same, and the number and date of cancellation of every certificate
surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
meetings of the shareholders and of the Board and any committees thereof
required by these Bylaws or by law to be given, shall keep the seal of the
corporation in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the Board.
SECTION 10. CHIEF FINANCIAL OFFICER. The Chief Financial Officer,
who may also be referred to as the Treasurer, is the chief financial officer of
the corporation and shall keep and maintain, or cause to be kept and maintained,
adequate and correct accounts of the properties and business transactions of the
corporation, and shall send or cause to be sent to the shareholders of the
corporation such financial statements and reports as are by law or these Bylaws
required to be sent to them. The books of account shall at all times be open to
inspection by any director.
The Treasurer shall deposit all moneys and other valuables in the
name and to the credit of the corporation with such depositaries as may be
designated by the Board. The Treasurer shall disburse the funds of the
corporation as may be ordered by the Board, shall render to the President and
the directors, whenever they request it, an account of all transactions as
Treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the Board.
SECTION 11. COMPENSATION. Salaries of officers and other
shareholders employed by the corporation shall be fixed from time to time by the
Board or established under employment agreements approved by the Board. No
officer shall be prevented from receiving this salary because he or she is also
a director of the corporation.
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ARTICLE V. INDEMNIFICATION
SECTION 1. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) Indemnification. Each person who was or is a party or is
threatened to be made a party or is otherwise involved in any action, suit, or
proceeding, whether civil, criminal, administrative, or investigative (a
"proceeding"), by reason of being or having been a director or officer of the
corporation, or of any predecessor corporation, or being or having been a
director or officer serving at the request of the corporation as a director,
officer, employee, or other agent of another corporation, partnership, joint
venture, trust, or other enterprise (including service with respect to
corporation- sponsored employee benefit plans), whether the basis of the
proceeding is alleged action or inaction in an official capacity as a director
or officer or in any other capacity while serving as a director or officer,
shall, subject to the terms of any agreement between the corporation and that
person, be indemnified and held harmless by the corporation to the fullest
extent permissible under California law and the Articles, against all expense,
liability, and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties, and amounts paid in settlement) actually and reasonably
incurred or suffered by that person in connection therewith, except that amounts
shall be payable in settlement of a proceeding only if the settlement is
approved in writing by the corporation. This indemnification shall continue as
to a person who has ceased to be a director or officer for acts performed while
a director or officer and shall inure to the benefit of his or her heirs,
executors, and administrators. Notwithstanding the foregoing, the corporation
shall indemnify any such person in connection with a proceeding (or part
thereof) initiated by that person only if the proceeding (or part thereof) was
authorized by the Board. The right to indemnification conferred in this Article
shall include the right to be paid by the corporation the expenses incurred in
defending and proceeding in advance of final disposition to the fullest extent
permitted by law, except that payment under this Article of such expenses in
advance of the final disposition of a proceeding shall be conditioned upon
delivery to the corporation of a written request for such payment and of an
undertaking by or on behalf of the director or officer to repay all amounts so
advanced if it shall be ultimately determined that the director or officer is
not entitled to be indemnified.
(b) Exclusions. Notwithstanding the foregoing or any other
provisions under this Article, the corporation shall not be liable under this
Article to indemnify a director or officer against expenses, liabilities, or
losses incurred or suffered in connection with, or to make any advances with
respect to, any proceeding against a director or officer: (i) as to which the
corporation is prohibited by applicable law from paying an indemnity; (ii) with
respect to expenses of defense or investigation, if the expenses were or are
incurred without the
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corporation's consent (which consent may not be unreasonably withheld); (iii)
for which final payment is actually made to the director or officer under an
insurance policy maintained by the corporation, except in respect of any excess
beyond the amount of payment under the policy; (iv) for which payment is
actually made to the director or officer under an indemnity by the corporation
otherwise than pursuant to this Article, except in respect of any excess beyond
the amount of payment under that indemnify; (v) based upon or attributable to
the director or officer gaining in fact any personal profit or advantage to
which not legally entitled; (vi) for an accounting of profits made from the
purchase or sale by the director or officer of securities of the corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law; or (vii) based upon acts or omissions involving intentional
misconduct or a knowing and culpable violation of law.
SECTION 2. INDEMNIFICATION OF EMPLOYEES AND AGENTS. A person who was
or is a party or is threatened to be made a party to or is involved in any
proceeding by reason of being or having been an employee or agent of the
corporation or being or having been an employee or agent of the corporation
serving at the request of the corporation as an employee or agent of another
enterprise, including service with respect to corporation- sponsored employee
benefit plans, whether the basis of such action is alleged action or inaction in
an official capacity or in any other capacity while serving as an employee or
agent, may, upon appropriate action by the corporation and subject to the terms
of any agreement between the corporation and that person, be indemnified and
held harmless by the corporation up to the fullest extent permitted by
California law and the Articles, against all expense, liability, and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties,
and amounts paid or to be paid in settlement) actually and reasonably incurred
or suffered by that person in connection therewith.
SECTION 3. RIGHT OF DIRECTORS AND OFFICERS TO BRING SUIT. If a claim
under Section 1 of this Article is not paid by the corporation or on its behalf
within 90 days after a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim, and, if successful in whole or in part,
the claimant also shall be entitled to be paid the expense of prosecuting the
claim.
SECTION 4. SUCCESSFUL DEFENSE. Notwithstanding any other provision
of this Article, to the extent that a director or officer has been successful on
the merits or otherwise (including the dismissal of a proceeding without
prejudice or the settlement with the written consent of the corporation of a
proceeding without admission of liability), in defense of any proceeding
referred to in Section 1 or in defense of any claim, issue, or matter therein,
that director or officer shall be indemnified
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against expenses (including attorneys' fees) actually and reasonably incurred in
connection therewith.
SECTION 5. INDEMNITY AGREEMENTS. The corporation may enter into
agreements with any director, officer, employee, or agent of the corporation
providing for indemnification to the fullest extent permissible under applicable
law and the Articles.
SECTION 6. SUBROGATION. In the event of payment by the corporation
of a claim under Section 1 or Section 2 of this Article, the corporation shall
be subrogated to the extent of such payment to all of the rights of recovery of
the indemnified person, who shall execute all papers required and shall do
everything that may be necessary or appropriate to secure such rights, including
the execution of such documents necessary or appropriate to enable the
corporation effectively to bring suit to enforce such rights.
SECTION 7. NONEXCLUSIVITY OF RIGHTS. The right to indemnification
provided by this Article shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, bylaw, agreement, vote
of shareholders or disinterested directors, or otherwise.
SECTION 8. INSURANCE. The corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee, or agent of the
corporation or another corporation, partnership, joint venture, trust, or other
enterprise against any expense, liability, or loss, whether or not the
corporation would have the power to indemnify that person against such expense,
liability, or loss under California law.
SECTION 9. EXPENSES AS A WITNESS. To the extent that any director,
officer, or employee of the corporation is by reason of that position a witness
in any action, suit, or proceeding, he or she will be indemnified against all
costs and expenses actually and reasonably incurred by him or her or on his or
her behalf in connection therewith.
SECTION 10. NONAPPLICABILITY TO FIDUCIARIES OF EMPLOYEE BENEFIT
PLANS. This Article does not apply to any proceeding against any trustee,
investment manager, or other fiduciary of an employee benefit plan in that
person's capacity as such, even though that person may also be an agent of the
corporation. The corporation shall have power to indemnify that trustee,
investment manager, or other fiduciary to the extent permitted by Corporations
Code Section 207(f).
SECTION 11. SEPARABILITY. Each and every paragraph,
sentence, term, and provision of this Article is separate and distinct so that
if any paragraph, sentence, term, or provision shall be held to be invalid or
unenforceable for any reason, its invalidity or unenforceability shall not
affect the validity or enforceability of any other paragraph, sentence, term, or
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provision of this Article. To the extent required, any paragraph, sentence,
term, or provision of this Article may be modified by a court of competent
jurisdiction to preserve its validity and to provide the claimant with, subject
to the limitations set forth in this Article and any agreement between the
corporation and the claimant, the broadest possible indemnification permitted
under applicable law.
SECTION 12. EFFECT OF REPEAL OR MODIFICATION. No repeal or
modification of this Article shall adversely affect any right of indemnification
of a director, officer, employee, or agent of the corporation existing at the
time of the repeal or modification with respect to any action or omission
occurring prior to such repeal or modification.
ARTICLE VI. OTHER PROVISIONS
SECTION 1. INSPECTION OF CORPORATE RECORDS.
(a) A shareholder or shareholders holding at least five percent in
the aggregate of the outstanding voting shares of the corporation or who hold at
least one percent of those voting shares and have filed a Schedule 14A with the
United States Securities and Exchange Commission relating to the election of
directors of the corporation shall have an absolute right to do either or both
of the following:
(i) Inspect and copy the record of shareholders' names and addresses
and shareholdings during usual business hours upon five business days'
prior written demand upon the corporation; or
(ii) Obtain from the transfer agent, if any, for the corporation,
upon five business days' prior written demand and upon the tender of its
usual charges for such a list (the amount of which charges shall be stated
to the shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses who are entitled to vote for the election
of directors and their shareholdings, as of the most recent record date for
which it has been compiled or as of a date specified by the shareholder
subsequent to the date of demand.
(b) The record of shareholders shall also be open to inspection and
copying by any shareholder or holder of a voting trust certificate at any time
during usual business hours upon written demand on the corporation, for a
purpose reasonably related to such holder's interest as a shareholder or holder
of a voting trust certificate.
(c) The accounting books and records and minutes of proceedings of
the shareholders and the Board and committees of the Board shall be open to
inspection upon written demand on the corporation of any shareholder or holder
of a voting trust
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certificate at any reasonable time during usual business hours, for a purpose
reasonably related to such holder's interests as a shareholder or as a holder of
such voting trust certificate.
(d) Any inspection and copying under this Article may be made in
person or by agent or attorney.
SECTION 2. INSPECTION OF BYLAWS. The corporation shall keep in its
principal executive office in the State of California, or if its principal
executive office is not in such State at its principal business office in such
State, the original or a copy of these Bylaws as amended to date, which shall be
open to inspection by shareholders at all reasonable times during office hours.
If the principal executive office of the corporation is located outside the
State of California and the corporation has no principal business office in such
state, it shall upon the written request of any shareholder furnish to such
shareholder a copy of these Bylaws as amended to date.
SECTION 3. ENDORSEMENT OF DOCUMENTS; CONTRACTS. Subject to the
provisions of applicable law, any note, mortgage, evidence of indebtedness,
contract, share certificate, conveyance or other instrument in writing and any
assignment or endorsements thereof executed or entered into between the
corporation and any other person, when signed by the Chairman of the Board, the
President or any Vice President and the Secretary, any Assistant Secretary, the
Treasurer or Chief Financial Officer or any Assistant Treasurer or Assistant
Chief Financial Officer of the corporation is not invalidated as to the
corporation by any lack of authority of the signing officers in the absence of
actual knowledge on the part of the other person that the signing offi cers had
no authority to execute the same. Any such instruments may be signed by any
other person or persons and in such manner as from time to time shall be
determined by the Board, and, un less so authorized by the Board, no officer,
agent or employee shall have any power or authority to bind the corporation by
any contract or engagement or to pledge its credit or to render it liable for
any purpose or amount.
SECTION 4. CERTIFICATES OF STOCK. Every holder of shares of the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman of the Board, the President or a Vice-President and
by the Treasurer or Chief Financial Officer or an Assistant Treasurer or
Assistant Chief Financial Officer or the Secretary or an Assistant Secretary,
certifying the number of shares and the class or series or shares owned by the
shareholder. Any or all of the signatures on the certificate may be facsimile.
If any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.
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<PAGE> 26
Certificates for shares may be issued prior to full payment under
such restrictions and for such purposes as the Board may provide; provided,
however, that on any certificate issued to represent any partly paid shares, the
total amount of the consideration to be paid therefor and the amount paid
thereon shall be stated.
Except as provided in this section, no new certificate for shares
shall be issued in lieu of an old one unless the latter is surrendered and
cancelled at the same time. The Board may, however, if any certificate for
shares is alleged to have been lost, stolen or destroyed, authorize the issuance
of a new certificate in lieu thereof, and the corporation may require that the
corporation be given a bond or other adequate security sufficient to indemnify
it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft or destruction of such
certificate or the issuance of such new certificate.
SECTION 5. REPRESENTATION OF SHARES OF OTHER COR PORATIONS. The
President or any other officer or officers authorized by the Board or the
President are each authorized to vote, represent and exercise on behalf of the
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of the corporation. The authority herein
granted may be exercised either by any such officer in person or by any other
person authorized so to do by proxy or power of attorney duly executed by said
officer.
SECTION 6. STOCK PURCHASE PLANS. The corporation may adopt and carry
out a stock purchase plan or agreement or stock option plan or agreement
providing for the issue and sale for such consideration as may be fixed of its
unissued shares, or of issued shares acquired or to be acquired, to one or more
of the employees or directors of the corporation or of a subsidiary or to a
trustee on their behalf and for the payment for such shares in installments or
at one time, and may provide for aiding any such persons in paying for such
shares by compensation for services rendered, promissory notes or otherwise.
Any such stock purchase plan or agreement or stock option plan or
agreement may include, among other features, the fixing of eligibility for
participation therein, the class and price of shares to be issued or sold under
the plan or agreement, the number of shares which may be subscribed for, the
method of payment therefor, the reservation of title until full payment
therefor, the effect of the termination of employment, an option or obligation
on the part of the corporation to repurchase the shares upon termination of
employment, restrictions upon transfer of the shares, the time limits of and
termination of the plan, and any other matters, not in violation of applicable
law, as may be included in the plan as approved or authorized by the Board or
any committee of the Board.
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<PAGE> 27
SECTION 7. CONSTRUCTION AND DEFINITIONS. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the General Provisions of the California Corporations
Code and in the California General Corporation Law shall govern the construction
of these Bylaws.
SECTION 8. AMENDMENTS. These Bylaws may be amended or repealed
either by the approval of the Board; or by the affirmative vote of the holders
entitled to exercise at least 66- 2/3% of the voting power of the corporation,
voting together as a single class; provided, however, that after the issuance of
shares, a bylaw specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable number of
directors or vice versa may only be adopted by the affirmative vote of the
holders entitled to exercise at least 66-2/3% of the voting power of the
corporation, voting together as a single class, and a bylaw reducing the fixed
number or the minimum number of directors to a number less than five shall be
subject to the provisions of Section 212(a) of the California General
Corporation Law.
SECTION 9. ANNUAL REPORT TO SHAREHOLDERS. The annual report to
shareholders referred to in Section 1501 of the California General Corporation
Law is expressly waived, but nothing herein shall be interpreted as prohibiting
the Board from issuing annual or other periodic reports to shareholders.
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<PAGE> 28
CERTIFICATE OF SECRETARY
OF
INTERNATIONAL AIRCRAFT INVESTORS
(a California corporation)
I hereby certify that I am the duly elected and acting Secretary of
said corporation and that the foregoing Bylaws, comprising __ pages, constitute
the Bylaws of said corporation as duly adopted at a meeting of the Board of
Directors thereof held on
------------------------------
Secretary
24
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of
November 5, 1997 by and between International Aircraft Investors,
a California corporation ("Employer") and William E. Lindsey
("Employee").
WITNESSETH:
WHEREAS, Employee has been employed by Employer in various
capacities, most recently as Chairman of the Board and Chief Executive Officer,
and Employer desires to obtain the benefit of continued service by Employee, and
Employee desires to render services to Employer;
WHEREAS, the Board of Directors of Employer (the "Board") has
determined that because of Employee's substantial experience and business
relationships in connection with the business of aircraft leasing and Employee's
familiarity with the clientele served by Employer, it is in Employer's best
interest and that of its stockholders to secure the services of Employee, to
secure certain additional commitments from Employee and to provide Employee
certain additional benefits; and
WHEREAS, Employer and Employee desire to set forth in this
Agreement the terms and conditions of Employee's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the parties agree as follows:
1. Term. Employer agrees to employ Employee and Employee agrees
to serve Employer, in accordance with the terms of this Agreement, for a term of
three years, commencing as of November 5, 1997 and ending December 31, 2000,
unless this Agreement is earlier terminated in accordance with the provisions
which follow; provided, however, that unless Employer or Employee gives written
notice to the other party to the contrary at least 30 days prior to any
anniversary of the date hereof, the term of this Agreement shall automatically
be extended for an additional term of one (1) year on such anniversary date. The
term of this Agreement shall include any automatic extensions pursuant to the
preceding sentence.
2. Services and Exclusivity of Services. So long as this
Agreement shall continue in effect, Employee shall devote his full business
time, energy and ability exclusively to the business, affairs and interests of
Employer and its subsidiaries and matters related thereto, shall use Employee's
best efforts and abilities to promote Employer's interests, and shall perform
<PAGE> 2
the services contemplated by this Agreement in accordance with policies
established by and under the direction of the Board.
Employee agrees to serve without additional remunera tion in such
official capacities for one or more direct or indirect subsidiaries of Employer
as the Board may from time to time request, subject to appropriate authorization
by the subsidiary or subsidiaries involved and any limitations under applicable
law. Employee agrees to faithfully and diligently promote the business, affairs
and interests of Employer and its subsidiaries.
Without the prior express written authorization of the Board,
Employee shall not, directly or indirectly, during the term of this Agreement:
(a) render services to any other person or firm for compensation or (b) engage
in any activity competitive with or adverse to Employer's business, whether
alone, as a partner, or as an officer, director, employee or significant
investor of or in any other entity; provided, however, that Employee may
continue to own an investment in Great Lakes Holdings, which is the parent of
Northern Lakes Financial Corp. and Northern Lakes Equity, which are special
purposes companies that each own one B 727-200 aircraft on lease to Sun Country
Airlines, Inc. (An investment of greater than 10% of the outstanding capital or
equity securities of an entity shall be deemed significant for these purposes.)
Employee may make and manage personal business investments of his
choice and serve in any capacity with any civic, educational or charitable
organization without seeking or obtaining approval by the Board, provided that
such activities and services do not substantially interfere or conflict with the
performance of duties hereunder or create any conflict of interest with such
duties. An investment that exceeds 10% of the equity securities or
capitalization of a competitor, supplier or customer of Employer shall be deemed
to constitute such a conflict. Employee shall not serve in any of such
capacities for any business enterprise unless such service is expressly
authorized by the Board in advance.
3. Specific Position; Duties and Responsibilities. Employer and
Employee agree that, subject to the provisions of this Agreement, Employer will
employ Employee and Employee will serve Employer as a senior officer for the
duration of this Agreement. The specific position in which Employee shall
initially serve shall be Chairman of the Board and Chief Executive Officer.
Employee agrees to observe and comply with the rules and regulations of Employer
as adopted by the Board respecting the performance of Employee's duties and
agrees to carry out and perform orders, directions and policies of Employer and
its Board as they may be, from time to time, stated either orally or in writing.
Employee shall have such corporate power
2
<PAGE> 3
and authority as shall reasonably be required to enable the discharge of duties
in any office that may be held.
4. Compensation.
(a) Base Compensation.
During the term of this Agreement, Employer agrees to pay
Employee a base salary at the rate set forth below, payable in equal twice
monthly installments. From the effective date of this Agreement through
September 30, 1998, Employee's base salary shall be $160,000 per year.
Thereafter, Employee's base salary shall be determined by the Board of Directors
for each subsequent 12-month period and the Board of Directors shall notify
Employee of his base salary in advance of the applicable period. Employee's base
salary in each successive 12-month period shall not be less than the preceding
12-month period. The Board of Directors will retain a qualified compensation
consultant to determine a competitive base salary range for the position. The
Board of Directors will then set the Employee's base salary at an appropriate
level based on the advice of the compensation consultant and the result of the
Employee's annual performance review.
(b) Bonus.
Employee shall be eligible to participate in Employer's current
long-term and annual bonus programs and any other incentive programs hereafter
established for senior officers of Employer. The bonus amounts (the "Bonus")
shall be determined each calendar year at the time of the annual salary review
and shall be based on Employee's performance against a mutually agreed upon
written performance criteria. The Bonus program for the first year shall be as
follows and for subsequent years shall in no event be less than the preceding
12-month period.
<TABLE>
<CAPTION>
% of Employee's % of Employer's
Base Compensation Target Pretax Income
----------------- --------------------
<S> <C>
50% 100%
75% 120%
100% 140%
125% 159%
</TABLE>
The Bonus shall be calculated on a pro rata basis between the bonus percentages
set forth above. If the Employer's consolidated pretax income is greater than
160% of Target Pretax Income, Employee shall be entitled to such other or
additional Bonus as the Employer's Board of Directors may deem appropriate. The
Employer's consolidated pretax income shall be calculated in accordance with
generally accepted accounting principles, except that consolidated pretax income
shall be calculated prior to any deductions for any bonuses payable to any
employees. "Target
3
<PAGE> 4
Pretax Income" means the targeted consolidated pretax income for a fiscal year
established by the Board of Directors. The Bonus for any fiscal year shall be
payable on or before the date 60 days after the end of such fiscal year and
shall be payable one-half in cash and one-half in Common Stock of Employer,
valued at the closing price of the Common Stock of Employer on NASDAQ on the
date three business days after the Employer publicly discloses its financial
results for the fiscal year.
(c) Additional Benefits.
Employee shall also be entitled to all rights and benefits for
which Employee is otherwise eligible under any bonus plan, incentive,
participation or extra compensation plan, pension plan, profit-sharing plan,
life, medical, dental, disability, or insurance plan or policy or other plan or
benefit that Employer or its subsidiaries may provide for Employee or (provided
Employee is eligible to participate therein) for senior officers or for
employees of Employer generally, as from time to time in effect, during the term
of this Agreement (collectively, "Additional Benefits"). The Additional Benefits
shall be provided at the level commensurate with the office held at the time.
(d) Perquisites.
Employee shall be entitled to paid vacation in accordance with
Employer's policies which are applicable to other executive employees of
Employer. Commencing with this Agreement, the annual paid vacation shall be four
(4) weeks.
During the term of this agreement, Employer shall provide
Employee a vehicle or vehicle allowance in accordance with Employer's automobile
policy as from time to time in effect.
(e) Limited Benefit Succession.
If Employee's full-time services are terminated hereunder, other
than pursuant to Section 5(c), and Employee is no longer eligible for Additional
Benefits because of such termination, Employee (or in event of death, such
person or persons as Employee shall have directed in writing or, in the absence
of a designation, the estate of Employee (the "Beneficiary")) shall be entitled
to and Employer shall provide benefits substantially equivalent to those
benefits in the nature of health and welfare type benefits to which Employee was
entitled immediately prior to such termination, but shall not be entitled to
option, equity, appreciation, profit sharing, deferred compensation, savings,
bonus, participation, pension, extra compensation and other incentive plan
benefits except to the extent otherwise expressly provided in any then
outstanding awards to such Employee, but in each case (1) only for the period
(if any) during which Employee (or (if expressly entitled
4
<PAGE> 5
thereto) Beneficiary, as the case may be) remains entitled to receive Base
Salary, (2) only to the extent that Employee or such Beneficiary is not entitled
to comparable benefits from another employer or provider, and (3) subject to any
other express limitations elsewhere in this Agreement or any applicable plan.
(f) Overall Qualification.
Employer reserves the right to modify, suspend or discontinue any
and all of the above referenced benefit plans, practices, policies and programs
at any time (whether before or after termination of employment) without notice
to or recourse by Employee so long as (i) such action is taken generally with
respect to other similarly situated persons and does not single out Employee,
and (ii) Employer makes provision that all benefits accrued to Employee to the
date such plan is terminated will be paid to Employee.
5. Termination. The employment of Employee by Employer, shall be
terminated prior to expiration of the term of this Agreement only as provided in
this Section 5 or Section 6:
(a) Disability.
In the event that Employee shall fail, because of illness,
incapacity or injury which is determined to be total and permanent by a
physician selected by Employer or its insurers and acceptable to
Employee or Employee's legal representative (such agreement as to
acceptability not to be withheld unreasonably) to render for three
consecutive months or for shorter periods aggregating 75 or more
business days in any twelve (12)-month period, the services contemplated
by this Agreement, Employee's employment hereunder may be terminated by
written notice of termination from Employer to Employee. Thereafter,
Employer shall continue for the then remaining term of this Agreement to
pay Base Salary to Employee at a rate and time and in an amount and
manner equal to (i) the Base Salary payable immediately prior to the
termination, minus (ii) the amount of any cash payments to Employee
under the terms of any Employer's disability insurance. Thereafter, no
further salary shall be paid.
(b) Death.
In the event of Employee's death during the term, Employee's Base
Salary and any other right or benefit which does not by its terms end at
the death of Employee shall be paid to the Beneficiary for the then
remaining term of this Agreement. This Agreement in all other respects
will terminate upon the death of Employee, except as otherwise expressly
provided in Section 4(f).
5
<PAGE> 6
(c) For Cause.
Employee's employment hereunder shall be terminated and all of
his rights to receive Base Salary, Bonus and (subject to the terms of
any plans relating thereto) Additional Benefits hereunder in respect of
any period after such termination, shall terminate upon a determination
by the Board, acting in good faith based upon actual knowledge at such
time, that Employee is engaging or has engaged in willful misconduct, or
has willfully violated any law, rule or regulation or has been convicted
of a felony. Notwithstanding the foregoing, Employee shall not be
terminated for cause pursuant to this Section 5(c) unless and until
Employee has received notice of a proposed termination for cause and
Employee has had an opportunity to be heard before at least a majority
of the members of the Board.
(d) Without Cause.
Notwithstanding any other provision of this Section 5, the Board
shall have the right to terminate Employee's employment with Employer at
any time, but any such termination other than as expressly provided in
Section 5(c) herein shall be without prejudice to Employee's rights to
receive Base Salary and the Additional Benefits provided under this
Agreement for the remainder of the term. If Employee is so terminated
without cause, Employee may elect to receive a lump sum payment
representing the present value of aggregate unpaid Base Salary
discounted to present value at a rate of 7% per annum in lieu of all
rights of Employee, including any rights to Additional Benefits
hereunder, all of which shall terminate upon the payment of such lump
sum amount.
(e) Exclusive Remedy. Employee agrees that the payments expressly
provided and contemplated by this Agreement shall constitute the sole
and exclusive obligation of Employer in respect of Employee's employment
with and relationship to the Company and that the payment thereof shall
be the sole and exclusive remedy for any termination of Employee's
employment. Employee covenants not to assert or pursue any other
remedies, at law or in equity, with respect to any termination of
employment.
6. Change in Control. If a "Change in Control" of Employer (or
any successor), as defined below, occurs during the term of this Agreement and
if, within one year after the Change in Control Employee's employment hereunder
is terminated for any reason other than pursuant to Section 5(c) hereof or
Employee terminates his employment hereunder for "good reason", as defined
below, then the Base Salary and all of the other benefits to
6
<PAGE> 7
which Employee is entitled under Section 4 hereof shall continue to the
expiration of the term of this Agreement.
For purposes of the foregoing provisions, "Change in Control"
shall mean the occurrence of any of the following: (i) approval by the
shareholders of Employer of the dissolution or liquidation of Employer; (ii)
approval by the shareholders of Employer of an agreement to merge or
consolidate, otherwise reorganize, with or into one or more entities, as a
result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity immediately after the reorganization are, or will
be, owned, directly or indirectly, by shareholders of the Employer immediately
before such reorganization (assuming for purposes of such determination that
there is no change in the record ownership of Employer's securities from the
record date for such approval until such reorganization and that such record
owners hold no securities of the other parties to such reorganization, but
including in such determination any securities of the other parties to such
reorganization held by affiliates of Employer); (iii) approval by the
shareholders of Employer of the sale, lease, conveyance or other disposition of
all or substantially all of Employer's business and/or assets to a person or
entity which is not a wholly-owned subsidiary of Employer; (iv) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), but excluding any person described in and satisfying
the conditions of Rule 13d- 1(b)(1) thereunder), other than a person who is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than
20% of the outstanding shares of Common Stock of Employer at the date of this
Agreement (or an affiliate, successor, heir, descendent or related party of or
to any such person), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Employer
representing more than 25% of the combined voting power of Employer's then
outstanding securities entitled to then vote generally in the election of
directors of Employer; or (v) a majority of the Board of Directors of Employer
not being comprised of Continuing Directors. For purposes of this clause,
"Continuing Directors" are persons who were (A) members of the Board of
Directors of Employer on the date of this Agreement or (B) nominated for
election or elected to the Board of Directors of Employer with the affirmative
vote of at least a majority of the directors who were Continuing Directors at
the time of such nomination or election.
For purposes of the foregoing provisions, "good reason" shall
mean: (i) the assignment to Employee of any duties inconsistent in any respect
with Employee's position (including status, offices and reporting requirements),
authority, duties or responsibilities as of the date immediately preceding the
Change in Control of Employer or any other action by Employer which results in a
diminishment in such position, authority, duties or
7
<PAGE> 8
responsibilities, excluding for this purpose an isolated and insubstantial
action not taken in bad faith and not intended to be inconsistent with this
Agreement and which is remedied by Employer promptly after receipt of notice
thereof given by Employee; (ii) any reduction in salary or percentages of
compensation available as target incentives, or any material change in fringe
benefits or perquisites not agreed to by Employee; (iii) the cessation of
Employee's eligibility to participate in any stock-based compensation plans
maintained by Employer for executives prior to the Change in Control of
Employer; (iv) Employer requiring Employee to be based in any office or location
other than one within 30 miles of the office at which Employee is based at the
time of the Change in Control of Employer, except for travel reasonably required
in the performance of Employee's responsibilities; and (v) failure of any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of Employer
to expressly assume this Agreement.
7. Business Expenses. During the term of this Agreement, to the
extent that such expenditures satisfy the criteria under the Internal Revenue
Code for deductibility by Employer (whether or not fully deductible by Employer)
for federal income tax purposes as ordinary and necessary business expenses,
Employer shall reimburse Employee promptly for reasonable business expenditures,
including travel, entertainment, parking, business meetings and professional
dues made and substantiated in accordance with policies, practices and
procedures established from time to time by the Board and incurred in pursuit
and furtherance of Employer's business and good will.
8. Indemnity. To the fullest extent permitted by applicable law
and the bylaws of Employer, as from time to time in effect, Employer shall
indemnify Employee and hold Employee harmless for any acts or decisions made in
good faith while performing services for Employer. To the same extent, Employer
will pay and, subject to any legal limitations, advance all expenses, including
reasonable attorneys' fees and costs of court approved settlements, actually and
necessarily incurred by Employee in connection with the defense of any action,
suit or proceeding and in connection with any appeal thereon, which has been
brought against Employee by reason of Employee's service as an officer or agent
of Employer or of a subsidiary of Employer.
9. Miscellaneous.
(a) Succession; Survival.
This Agreement shall inure to the benefit of and shall be binding
upon Employer, its successors and assigns, but without the prior written
consent of Employee this Agreement
8
<PAGE> 9
may not be assigned other than in connection with a merger or sale of
substantially all the assets of Employer or a similar transaction in
which the successor or assignee assumes (whether by operation of law or
express assumption) all obligations of Employer hereunder including
without limitation those in Section 6 hereof in respect of such
successor or assignee. The obligations and duties of Employee hereunder
are personal and otherwise not assignable. Employee's obligations and
representations under this Agreement will survive the termination of
Employee's employment, regardless of the manner of such termination.
(b) Notices.
Any notice or other communication provided for in this Agreement
shall be in writing and sent if to Employer to its office at:
International Aircraft Investors
3655 Torrance Boulevard
Suite 410
Torrance, California 90503
Attention: Chairman of the Board
or at such other address as Employer may from time to time in writing
designate, and if to Employee at such address as Employee may from time
to time in writing designate (or Employee's business address of record
in the absence of such designation). Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to)
this Section 9(b) and an appropriate answerback is received, (ii) if
given by mail, three days after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iii)
if given by any other means, when actually delivered at such address.
(c) Entire Agreement; Amendments.
This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and it supersedes any prior
agreements, undertakings, commitments and practices relating to
Employee's employment by Employer. No amendment or modification of the
terms of this Agreement shall be valid unless made in writing and signed
by Employee and, on behalf of Employer, by an officer expressly so
authorized by the Board.
(d) Waiver.
No failure on the part of any party to exercise or
delay in exercising any right hereunder shall be deemed a
9
<PAGE> 10
waiver thereof or of any other right, nor shall any single or partial
exercise preclude any further or other exercise of such right or any
other right.
(e) Choice of Law.
This Agreement, the legal relations between the parties and any
action, whether contractual or non-contractual, instituted by any party
with respect to matters arising under or growing out of or in connection
with or in respect of this Agreement, the relationship of the parties or
the subject matter hereof shall be governed by and construed in
accordance with the laws of the State of California applicable to
contracts made and performed in such State and without regard to
conflicts of law doctrines, to the extent permitted by law.
(f) Agreement to Mediate Dispute.
If any dispute, controversy or claim (collectively, a "Dispute")
under, arising out of, in connection with, or relating to this Agreement
or the respective obligations of the parties hereto including, without
limitation, any Dispute involving an alleged breach of this Agreement
shall arise, representatives of the parties hereto shall meet and
attempt to resolve the Dispute. If they cannot resolve the Dispute
within 15 days, the parties shall, in good faith, attempt to select a
third party to mediate the Dispute. The cost and expenses of the person
selected to mediate the Dispute shall be paid by Employer.
(g) Attorneys' Fees in Action on Contract.
If any litigation shall occur between Employee and Employer which
litigation arises out of or as a result of this Agreement or the acts of
the parties hereto pursuant to this Agreement, or which seeks an
interpretation of this Agreement. The prevailing party shall be entitled
to recover all costs and expenses of such litigation, including
reasonable attorneys' fees and costs.
(h) Waiver of Jury Trial. EMPLOYER AND EMPLOYEE HEREBY AGREE TO
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE EMPLOYMENT
RELATIONSHIP BETWEEN THEM OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT OR SUCH RELATIONSHIP. The scope of this
waiver is intended to be all-encompassing of any and all disputes that
may be filed in any court or that relate to the subject matter of this
Agreement, including without limitation, contract claims, tort claims,
breach of duty claims, and all other common law and statutory claims, to
the maximum extent permitted by law. Employer and Employee
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<PAGE> 11
each acknowledge that this waiver is a material inducement to enter into
this Agreement, that each has already relied on the waiver in entering
into this Agreement, and that each will continue to rely on the waiver
in their related future dealings. EMPLOYER AND EMPLOYEE FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT MODIFICATIONS TO OR EXTENSIONS OF
THIS AGREEMENT. In the event of litigation, this Agreement may be filed
as a written consent to a trial by the court.
(i) Confidentiality; Proprietary Information.
Employee agrees to not make use of, divulge or other wise
disclose, directly or indirectly any trade secret or other confidential
or proprietary information concerning the business (including but not
limited to its products, employees, services, practices or policies) of
Employer or any of its affiliates of which Employee may learn or be
aware as a result of Employee's employment during the Term or prior
thereto as stockholder, employee, officer or director of or consultant
to Employer, except to the extent such use or disclosure is (i)
necessary to the performance of this Agreement and in furtherance of
Employer's best interests, (ii) required by applicable law, (iii)
lawfully obtainable from other sources, or (iv) authorized in writing by
Employer. The provisions of this subsection (h) shall survive the
expiration, suspension or termination, for any reason, of this
Agreement.
(j) Trade Secrets.
Employee, prior to and during the term of employment, has had and
will have access to and become acquainted with various trade secrets,
consisting of customer lists, contracts, and compilations of
information, records and specifications, which are owned by Employer and
regularly used in the operation of their respective businesses and which
may give Employer an opportunity to obtain an advantage over
competitors, who do not know or use such trade secrets. Employee agrees
and acknowledges that Employee has been granted access to these valuable
trade secrets only by virtue of the confidential relationship created by
Employee's employment and Employee's prior relationship to, interest in
and fiduciary relationships to Employer. Employee shall not disclose any
of the aforesaid trade secrets, directly or indirectly, or use them in
any way, either during the term of this Agreement or at any time
thereafter, except as required in the course of employment by Employer
and for its benefit.
11
<PAGE> 12
All records, files, documents, specifications, equipment, and
similar items relating to the business of Employer or its affiliates,
including without limitation all records relating to customers (the
"Documents"), whether prepared by Employee or otherwise coming into
Employee's possession, shall remain the exclusive property of Employer
or such affiliates and shall not be removed from the premises of
Employer or its affiliates under any circumstances whatsoever without
the prior consent of a Senior Officer. Upon termination of employment,
Employee agrees to promptly deliver to Employer all Documents in the
possession or under the control of Employee.
(k) Severability.
If this Agreement shall for any reason be or become unenforceable
in any material respect by any party, this Agreement shall thereupon
terminate and become unenforceable by the other party as well. In all
other respects, if any provision of this Agreement is held invalid or
unenforce able, the remainder of this Agreement shall nevertheless
remain in full force and effect, and if any provision is held invalid or
unenforceable with respect to particular circumstances, it shall
nevertheless remain in full force and effect in all other circumstances,
to the fullest extent permitted by law.
(l) Withholding; Deductions.
All compensation payable hereunder, including salary, Bonus and
other benefits, shall be subject to applicable taxes, withholding and
other required, normal or elected employee deductions.
(m) Section Headings.
Section and other headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(n) Counterparts.
This Agreement and any amendment hereto may be executed in one or
more counterparts. All of such counterparts shall constitute one and the
same agreement and shall become effective when a copy signed by each
party has been delivered to the other party.
(o) Representation By Counsel; Interpretation.
Employer and Employee each acknowledge that each party to this
Agreement has been represented by counsel in connection with this
Agreement and the matters contemplated
12
<PAGE> 13
by this Agreement. Accordingly, any rule of law, including but not
limited to Section 1654 of the California Civil Code, or any legal
decision that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and
is expressly waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of the parties.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
"EMPLOYER"
INTERNATIONAL AIRCRAFT INVESTORS
By /s/ KENNETH D. TAYLOR
-------------------------------
Kenneth D. Taylor
Its Compensation Committee Chairman
"EMPLOYEE"
/s/ WILLIAM E. LINDSEY
-------------------------------
William E. Lindsey
3655 Torrance Blvd.
Torrance, CA 90503
--------------------------------
[address]
14
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of
November 5, 1997 by and between International Aircraft Investors,
a California corporation ("Employer") and Michael P. Grella
("Employee").
WITNESSETH:
WHEREAS, Employee has been employed by Employer in various
capacities, most recently as President, and Employer desires to obtain the
benefit of continued service by Employee, and Employee desires to render
services to Employer;
WHEREAS, the Board of Directors of Employer (the "Board") has
determined that because of Employee's substantial experience and business
relationships in connection with the business of aircraft leasing and Employee's
familiarity with the clientele served by Employer, it is in Employer's best
interest and that of its stockholders to secure the services of Employee, to
secure certain additional commitments from Employee and to provide Employee
certain additional benefits; and
WHEREAS, Employer and Employee desire to set forth in this
Agreement the terms and conditions of Employee's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and
covenants herein contained, the parties agree as follows:
1. Term. Employer agrees to employ Employee and Employee agrees
to serve Employer, in accordance with the terms of this Agreement, for a term of
three years, commencing as of November 5, 1997 and ending December 31, 2000,
unless this Agreement is earlier terminated in accordance with the provisions
which follow; provided, however, that unless Employer or Employee gives written
notice to the other party to the contrary at least 30 days prior to any
anniversary of the date hereof, the term of this Agreement shall automatically
be extended for an additional term of one (1) year on such anniversary date. The
term of this Agreement shall include any automatic extensions pursuant to the
preceding sentence.
2. Services and Exclusivity of Services. So long as this
Agreement shall continue in effect, Employee shall devote his full business
time, energy and ability exclusively to the business, affairs and interests of
Employer and its subsidiaries and matters related thereto, shall use Employee's
best efforts and abilities to promote Employer's interests, and shall perform
<PAGE> 2
the services contemplated by this Agreement in accordance with policies
established by and under the direction of the Board.
Employee agrees to serve without additional remuneration in such
official capacities for one or more direct or indirect subsidiaries of Employer
as the Board may from time to time request, subject to appropriate authorization
by the subsidiary or subsidiaries involved and any limitations under applicable
law. Employee agrees to faithfully and diligently promote the business, affairs
and interests of Employer and its subsidiaries.
Without the prior express written authorization of the Board,
Employee shall not, directly or indirectly, during the term of this Agreement:
(a) render services to any other person or firm for compensation or (b) engage
in any activity competitive with or adverse to Employer's business, whether
alone, as a partner, or as an officer, director, employee or significant
investor of or in any other entity; provided, however, that Employee may
continue to own an investment in Great Lakes Holdings, which is the parent of
Northern Lakes Financial Corp. and Northern Lakes Equity, which are special
purposes companies that each own one B 727-200 aircraft on lease to Sun Country
Airlines, Inc. (An investment of greater than 10% of the outstanding capital or
equity securities of an entity shall be deemed significant for these purposes.)
Employee may make and manage personal business investments of his
choice and serve in any capacity with any civic, educational or charitable
organization without seeking or obtaining approval by the Board, provided that
such activities and services do not substantially interfere or conflict with the
performance of duties hereunder or create any conflict of interest with such
duties. An investment that exceeds 10% of the equity securities or
capitalization of a competitor, supplier or customer of Employer shall be deemed
to constitute such a conflict. Employee shall not serve in any of such
capacities for any business enterprise unless such service is expressly
authorized by the Board in advance.
3. Specific Position; Duties and Responsibilities. Employer and
Employee agree that, subject to the provisions of this Agreement, Employer will
employ Employee and Employee will serve Employer as a senior officer for the
duration of this Agreement. The specific position in which Employee shall
initially serve shall be President. Employee agrees to observe and comply with
the rules and regulations of Employer as adopted by the Board respecting the
performance of Employee's duties and agrees to carry out and perform orders,
directions and policies of Employer and its Board as they may be, from time to
time, stated either orally or in writing. Employee shall have such corporate
power and authority as shall reasonably be required to enable the discharge of
duties in any office that may be held.
2
<PAGE> 3
4. Compensation.
(a) Base Compensation.
During the term of this Agreement, Employer agrees to pay
Employee a base salary at the rate set forth below, payable in equal twice
monthly installments. From the effective date of this Agreement through
September 30, 1998, Employee's base salary shall be $140,000 per year.
Thereafter, Employee's base salary shall be determined by the Board of Directors
for each subsequent 12-month period and the Board of Directors shall notify
Employee of his base salary in advance of the applicable period. Employee's base
salary in each successive 12-month period shall not be less than the preceding
12-month period. The Board of Directors will retain a qualified compensation
consultant to determine a competitive base salary range for the position. The
Board of Directors will then set the Employee's base salary at an appropriate
level based on the advice of the compensation consultant and the result of the
Employee's annual performance review.
(b) Bonus.
Employee shall be eligible to participate in Employer's current
long-term and annual bonus programs and any other incentive programs hereafter
established for senior officers of Employer. The bonus amounts (the "Bonus")
shall be determined each calendar year at the time of the annual salary review
and shall be based on Employee's performance against a mutually agreed upon
written performance criteria. The Bonus program for the first year shall be as
follows and for subsequent years shall in no event be less than the preceding
12-month period.
<TABLE>
<CAPTION>
% of Employee's % of Employer's
Base Compensation Target Pretax Income
----------------- --------------------
<S> <C>
50% 100%
75% 120%
100% 140%
125% 159%
</TABLE>
The Bonus shall be calculated on a pro rata basis between the bonus percentages
set forth above. If the Employer's consolidated pretax income is greater than
160% of Target Pretax Income, Employee shall be entitled to such other or
additional Bonus as the Employer's Board of Directors may deem appropriate. The
Employer's consolidated pretax income shall be calculated in accordance with
generally accepted accounting principles, except that consolidated pretax income
shall be calculated prior to any deductions for any bonuses payable to any
employees. "Target Pretax Income" means the targeted consolidated pretax income
for a fiscal year established by the Board of Directors. The Bonus
for any fiscal year shall be payable on or before the date 60
3
<PAGE> 4
days after the end of such fiscal year and shall be payable one-half in cash and
one-half in Common Stock of Employer, valued at the closing price of the Common
Stock of Employer on NASDAQ on the date three business days after the Employer
publicly discloses its financial results for the fiscal year.
(c) Additional Benefits.
Employee shall also be entitled to all rights and benefits for
which Employee is otherwise eligible under any bonus plan, incentive,
participation or extra compensation plan, pension plan, profit-sharing plan,
life, medical, dental, disability, or insurance plan or policy or other plan or
benefit that Employer or its subsidiaries may provide for Employee or (provided
Employee is eligible to participate therein) for senior officers or for
employees of Employer generally, as from time to time in effect, during the term
of this Agreement (collectively, "Additional Benefits"). The Additional Benefits
shall be provided at the level commensurate with the office held at the time.
(d) Perquisites.
Employee shall be entitled to paid vacation in accordance with
Employer's policies which are applicable to other executive employees of
Employer. Commencing with this Agreement, the annual paid vacation shall be four
(4) weeks.
During the term of this agreement, Employer shall provide
Employee a vehicle or vehicle allowance in accordance with Employer's automobile
policy as from time to time in effect.
(e) Limited Benefit Succession.
If Employee's full-time services are terminated hereunder, other
than pursuant to Section 5(c), and Employee is no longer eligible for Additional
Benefits because of such termination, Employee (or in event of death, such
person or persons as Employee shall have directed in writing or, in the absence
of a designation, the estate of Employee (the "Beneficiary")) shall be entitled
to and Employer shall provide benefits substantially equivalent to those
benefits in the nature of health and welfare type benefits to which Employee was
entitled immediately prior to such termination, but shall not be entitled to
option, equity, appreciation, profit sharing, deferred compensation, savings,
bonus, participation, pension, extra compensation and other incentive plan
benefits except to the extent otherwise expressly provided in any then
outstanding awards to such Employee, but in each case (1) only for the period
(if any) during which Employee (or (if expressly entitled thereto) Beneficiary,
as the case may be) remains entitled to receive Base Salary, (2) only to the
extent that Employee or such Beneficiary is not entitled to comparable benefits
from another
4
<PAGE> 5
employer or provider, and (3) subject to any other express limitations elsewhere
in this Agreement or any applicable plan.
(f) Overall Qualification.
Employer reserves the right to modify, suspend or discontinue any
and all of the above referenced benefit plans, practices, policies and programs
at any time (whether before or after termination of employment) without notice
to or recourse by Employee so long as (i) such action is taken generally with
respect to other similarly situated persons and does not single out Employee,
and (ii) Employer makes provision that all benefits accrued to Employee to the
date such plan is terminated will be paid to Employee.
5. Termination. The employment of Employee by Employer, shall be
terminated prior to expiration of the term of this Agreement only as provided in
this Section 5 or Section 6:
(a) Disability.
In the event that Employee shall fail, because of illness,
incapacity or injury which is determined to be total and permanent by a
physician selected by Employer or its insurers and acceptable to
Employee or Employee's legal representative (such agreement as to
acceptability not to be withheld unreasonably) to render for three
consecutive months or for shorter periods aggregating 75 or more
business days in any twelve (12)-month period, the services contemplated
by this Agreement, Employee's employment hereunder may be terminated by
written notice of termination from Employer to Employee. Thereafter,
Employer shall continue for the then remaining term of this Agreement to
pay Base Salary to Employee at a rate and time and in an amount and
manner equal to (i) the Base Salary payable immediately prior to the
termination, minus (ii) the amount of any cash payments to Employee
under the terms of any Employer's disability insurance. Thereafter, no
further salary shall be paid.
(b) Death.
In the event of Employee's death during the term, Employee's Base
Salary and any other right or benefit which does not by its terms end at
the death of Employee shall be paid to the Beneficiary for the then
remaining term of this Agreement. This Agreement in all other respects
will terminate upon the death of Employee, except as otherwise expressly
provided in Section 4(f).
5
<PAGE> 6
(c) For Cause.
Employee's employment hereunder shall be terminated and all of
his rights to receive Base Salary, Bonus and (subject to the terms of
any plans relating thereto) Additional Benefits hereunder in respect of
any period after such termination, shall terminate upon a determination
by the Board, acting in good faith based upon actual knowledge at such
time, that Employee is engaging or has engaged in willful misconduct, or
has willfully violated any law, rule or regulation or has been convicted
of a felony. Notwithstanding the foregoing, Employee shall not be
terminated for cause pursuant to this Section 5(c) unless and until
Employee has received notice of a proposed termination for cause and
Employee has had an opportunity to be heard before at least a majority
of the members of the Board.
(d) Without Cause.
Notwithstanding any other provision of this Section 5, the Board
shall have the right to terminate Employee's employment with Employer at
any time, but any such termination other than as expressly provided in
Section 5(c) herein shall be without prejudice to Employee's rights to
receive Base Salary and the Additional Benefits provided under this
Agreement for the remainder of the term. If Employee is so terminated
without cause, Employee may elect to receive a lump sum payment
representing the present value of aggregate unpaid Base Salary
discounted to present value at a rate of 7% per annum in lieu of all
rights of Employee, including any rights to Additional Benefits
hereunder, all of which shall terminate upon the payment of such lump
sum amount.
(e) Exclusive Remedy. Employee agrees that the payments expressly
provided and contemplated by this Agreement shall constitute the sole
and exclusive obligation of Employer in respect of Employee's employment
with and relationship to the Company and that the payment thereof shall
be the sole and exclusive remedy for any termination of Employee's
employment. Employee covenants not to assert or pursue any other
remedies, at law or in equity, with respect to any termination of
employment.
6. Change in Control. If a "Change in Control" of Employer (or
any successor), as defined below, occurs during the term of this Agreement and
if, within one year after the Change in Control Employee's employment hereunder
is terminated for any reason other than pursuant to Section 5(c) hereof or
Employee terminates his employment hereunder for "good reason", as defined
below, then the Base Salary and all of the other benefits to
6
<PAGE> 7
which Employee is entitled under Section 4 hereof shall continue to the
expiration of the term of this Agreement.
For purposes of the foregoing provisions, "Change in Control"
shall mean the occurrence of any of the following: (i) approval by the
shareholders of Employer of the dissolution or liquidation of Employer; (ii)
approval by the shareholders of Employer of an agreement to merge or
consolidate, otherwise reorganize, with or into one or more entities, as a
result of which less than 50% of the outstanding voting securities of the
surviving or resulting entity immediately after the reorganization are, or will
be, owned, directly or indirectly, by shareholders of the Employer immediately
before such reorganization (assuming for purposes of such determination that
there is no change in the record ownership of Employer's securities from the
record date for such approval until such reorganization and that such record
owners hold no securities of the other parties to such reorganization, but
including in such determination any securities of the other parties to such
reorganization held by affiliates of Employer); (iii) approval by the
shareholders of Employer of the sale, lease, conveyance or other disposition of
all or substantially all of Employer's business and/or assets to a person or
entity which is not a wholly-owned subsidiary of Employer; (iv) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934 (the "Exchange Act"), but excluding any person described in and satisfying
the conditions of Rule 13d- 1(b)(1) thereunder), other than a person who is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than
20% of the outstanding shares of Common Stock of Employer at the date of this
Agreement (or an affiliate, successor, heir, descendent or related party of or
to any such person), becomes the beneficial owner (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of Employer
representing more than 25% of the combined voting power of Employer's then
outstanding securities entitled to then vote generally in the election of
directors of Employer; or (v) a majority of the Board of Directors of Employer
not being comprised of Continuing Directors. For purposes of this clause,
"Continuing Directors" are persons who were (A) members of the Board of
Directors of Employer on the date of this Agreement or (B) nominated for
election or elected to the Board of Directors of Employer with the affirmative
vote of at least a majority of the directors who were Continuing Directors at
the time of such nomination or election.
For purposes of the foregoing provisions, "good reason" shall
mean: (i) the assignment to Employee of any duties inconsistent in any respect
with Employee's position (including status, offices and reporting requirements),
authority, duties or responsibilities as of the date immediately preceding the
Change in Control of Employer or any other action by Employer which
results in a diminishment in such position, authority, duties or
7
<PAGE> 8
responsibilities, excluding for this purpose an isolated and insubstantial
action not taken in bad faith and not intended to be inconsistent with this
Agreement and which is remedied by Employer promptly after receipt of notice
thereof given by Employee; (ii) any reduction in salary or percentages of
compensation available as target incentives, or any material change in fringe
benefits or perquisites not agreed to by Employee; (iii) the cessation of
Employee's eligibility to participate in any stock-based compensation plans
maintained by Employer for executives prior to the Change in Control of
Employer; (iv) Employer requiring Employee to be based in any office or location
other than one within 30 miles of the office at which Employee is based at the
time of the Change in Control of Employer, except for travel reasonably required
in the performance of Employee's responsibilities; and (v) failure of any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of Employer
to expressly assume this Agreement.
7. Business Expenses. During the term of this Agreement, to the
extent that such expenditures satisfy the criteria under the Internal Revenue
Code for deductibility by Employer (whether or not fully deductible by Employer)
for federal income tax purposes as ordinary and necessary business expenses,
Employer shall reimburse Employee promptly for reasonable business expenditures,
including travel, entertainment, parking, business meetings and professional
dues made and substantiated in accordance with policies, practices and
procedures established from time to time by the Board and incurred in pursuit
and furtherance of Employer's business and good will.
8. Indemnity. To the fullest extent permitted by applicable law
and the bylaws of Employer, as from time to time in effect, Employer shall
indemnify Employee and hold Employee harmless for any acts or decisions made in
good faith while performing services for Employer. To the same extent, Employer
will pay and, subject to any legal limitations, advance all expenses, including
reasonable attorneys' fees and costs of court approved settlements, actually and
necessarily incurred by Employee in connection with the defense of any action,
suit or proceeding and in connection with any appeal thereon, which has been
brought against Employee by reason of Employee's service as an officer or agent
of Employer or of a subsidiary of Employer.
9. Miscellaneous.
(a) Succession; Survival.
This Agreement shall inure to the benefit of and shall
be binding upon Employer, its successors and assigns, but
without the prior written consent of Employee this Agreement
8
<PAGE> 9
may not be assigned other than in connection with a merger or sale of
substantially all the assets of Employer or a similar transaction in
which the successor or assignee assumes (whether by operation of law or
express assumption) all obligations of Employer hereunder including
without limitation those in Section 6 hereof in respect of such
successor or assignee. The obligations and duties of Employee hereunder
are personal and otherwise not assignable. Employee's obligations and
representations under this Agreement will survive the termination of
Employee's employment, regardless of the manner of such termination.
(b) Notices.
Any notice or other communication provided for in this Agreement
shall be in writing and sent if to Employer to its office at:
International Aircraft Investors
3655 Torrance Boulevard
Suite 410
Torrance, California 90503
Attention: Chairman of the Board
or at such other address as Employer may from time to time in writing
designate, and if to Employee at such address as Employee may from time
to time in writing designate (or Employee's business address of record
in the absence of such designation). Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number so specified in (or pursuant to)
this Section 9(b) and an appropriate answerback is received, (ii) if
given by mail, three days after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iii)
if given by any other means, when actually delivered at such address.
(c) Entire Agreement; Amendments.
This Agreement contains the entire agreement of the parties
relating to the subject matter hereof and it supersedes any prior
agreements, undertakings, commitments and practices relating to
Employee's employment by Employer. No amendment or modification of the
terms of this Agreement shall be valid unless made in writing and signed
by Employee and, on behalf of Employer, by an officer expressly so
authorized by the Board.
(d) Waiver.
No failure on the part of any party to exercise or
delay in exercising any right hereunder shall be deemed a
9
<PAGE> 10
waiver thereof or of any other right, nor shall any single or partial
exercise preclude any further or other exercise of such right or any
other right.
(e) Choice of Law.
This Agreement, the legal relations between the parties and any
action, whether contractual or non-contractual, instituted by any party
with respect to matters arising under or growing out of or in connection
with or in respect of this Agreement, the relationship of the parties or
the subject matter hereof shall be governed by and construed in
accordance with the laws of the State of California applicable to
contracts made and performed in such State and without regard to
conflicts of law doctrines, to the extent permitted by law.
(f) Agreement to Mediate Dispute.
If any dispute, controversy or claim (collectively, a "Dispute")
under, arising out of, in connection with, or relating to this Agreement
or the respective obligations of the parties hereto including, without
limitation, any Dispute involving an alleged breach of this Agreement
shall arise, representatives of the parties hereto shall meet and
attempt to resolve the Dispute. If they cannot resolve the Dispute
within 15 days, the parties shall, in good faith, attempt to select a
third party to mediate the Dispute. The cost and expenses of the person
selected to mediate the Dispute shall be paid by Employer.
(g) Attorneys' Fees in Action on Contract.
If any litigation shall occur between Employee and Employer which
litigation arises out of or as a result of this Agreement or the acts of
the parties hereto pursuant to this Agreement, or which seeks an
interpretation of this Agreement. The prevailing party shall be entitled
to recover all costs and expenses of such litigation, including
reasonable attorneys' fees and costs.
(h) Waiver of Jury Trial. EMPLOYER AND EMPLOYEE HEREBY AGREE TO
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE EMPLOYMENT
RELATIONSHIP BETWEEN THEM OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS AGREEMENT OR SUCH RELATIONSHIP. The scope of this
waiver is intended to be all-encompassing of any and all disputes that
may be filed in any court or that relate to the subject matter of this
Agreement, including without limitation, contract claims, tort claims,
breach of duty claims, and all other common law and statutory claims, to
the maximum extent permitted by law. Employer and Employee
10
<PAGE> 11
each acknowledge that this waiver is a material inducement to enter into
this Agreement, that each has already relied on the waiver in entering
into this Agreement, and that each will continue to rely on the waiver
in their related future dealings. EMPLOYER AND EMPLOYEE FURTHER WARRANT
AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL,
AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING. THIS
WAIVER SHALL APPLY TO ANY SUBSEQUENT MODIFICATIONS TO OR EXTENSIONS OF
THIS AGREEMENT. In the event of litigation, this Agreement may be filed
as a written consent to a trial by the court.
(i) Confidentiality; Proprietary Information.
Employee agrees to not make use of, divulge or other wise
disclose, directly or indirectly any trade secret or other confidential
or proprietary information concerning the business (including but not
limited to its products, employees, services, practices or policies) of
Employer or any of its affiliates of which Employee may learn or be
aware as a result of Employee's employment during the Term or prior
thereto as stockholder, employee, officer or director of or consultant
to Employer, except to the extent such use or disclosure is (i)
necessary to the performance of this Agreement and in furtherance of
Employer's best interests, (ii) required by applicable law, (iii)
lawfully obtainable from other sources, or (iv) authorized in writing by
Employer. The provisions of this subsection (h) shall survive the
expiration, suspension or termination, for any reason, of this
Agreement.
(j) Trade Secrets.
Employee, prior to and during the term of employment, has had and
will have access to and become acquainted with various trade secrets,
consisting of customer lists, contracts, and compilations of
information, records and specifications, which are owned by Employer and
regularly used in the operation of their respective businesses and which
may give Employer an opportunity to obtain an advantage over
competitors, who do not know or use such trade secrets. Employee agrees
and acknowledges that Employee has been granted access to these valuable
trade secrets only by virtue of the confidential relationship created by
Employee's employment and Employee's prior relationship to, interest in
and fiduciary relationships to Employer. Employee shall not disclose any
of the aforesaid trade secrets, directly or indirectly, or use them in
any way, either during the term of this Agreement or at any time
thereafter, except as required in the course of employment by Employer
and for its benefit.
11
<PAGE> 12
All records, files, documents, specifications, equipment, and
similar items relating to the business of Employer or its affiliates,
including without limitation all records relating to customers (the
"Documents"), whether prepared by Employee or otherwise coming into
Employee's possession, shall remain the exclusive property of Employer
or such affiliates and shall not be removed from the premises of
Employer or its affiliates under any circumstances whatsoever without
the prior consent of a Senior Officer. Upon termination of employment,
Employee agrees to promptly deliver to Employer all Documents in the
possession or under the control of Employee.
(k) Severability.
If this Agreement shall for any reason be or become unenforceable
in any material respect by any party, this Agreement shall thereupon
terminate and become unenforceable by the other party as well. In all
other respects, if any provision of this Agreement is held invalid or
unenforce able, the remainder of this Agreement shall nevertheless
remain in full force and effect, and if any provision is held invalid or
unenforceable with respect to particular circumstances, it shall
nevertheless remain in full force and effect in all other circumstances,
to the fullest extent permitted by law.
(l) Withholding; Deductions.
All compensation payable hereunder, including salary, Bonus and
other benefits, shall be subject to applicable taxes, withholding and
other required, normal or elected employee deductions.
(m) Section Headings.
Section and other headings contained in this Agreement are for
convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
(n) Counterparts.
This Agreement and any amendment hereto may be executed in one or
more counterparts. All of such counterparts shall constitute one and the
same agreement and shall become effective when a copy signed by each
party has been delivered to the other party.
(o) Representation By Counsel; Interpretation.
Employer and Employee each acknowledge that each party to this
Agreement has been represented by counsel in connection with this
Agreement and the matters contemplated
12
<PAGE> 13
by this Agreement. Accordingly, any rule of law, including but not
limited to Section 1654 of the California Civil Code, or any legal
decision that would require interpretation of any claimed ambiguities in
this Agreement against the party that drafted it has no application and
is expressly waived. The provisions of this Agreement shall be
interpreted in a reasonable manner to effect the intent of the parties.
13
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first above written.
"EMPLOYER"
INTERNATIONAL AIRCRAFT INVESTORS
By /s/ KENNETH D. TAYLOR
------------------------------
Kenneth D. Taylor
Its Compensation Committee Chairman
"EMPLOYEE"
/s/ MICHAEL P. GRELLA
------------------------------
Michael P. Grella
3655 Torrance Blvd., Suite 410
Torrance, CA 90503
-------------------------------
[address]
14
<PAGE> 1
EXHIBIT 11
INTERNATIONAL AIRCRAFT INVESTORS
COMPUTATION OF PER SHARE EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Weighted average common shares outstanding 81,110 70,000
Weighted average common equivalent shares
outstanding 1,674,402 1,766,762
---------- ----------
Weighted average common and common equivalent
shares outstanding 1,755,512 1,836,762
========== ==========
Net income $ 99,997 $ 150,715
========== ==========
Net income per common and common equivalent
share $ 0.06 $ 0.08
========== ==========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1997 1996
---------- ----------
<S> <C> <C>
Weighted average common shares outstanding 73,703 70,000
Weighted average common equivalent shares
outstanding 1,692,087 1,766,762
---------- ----------
Weighted average common and common equivalent
shares outstanding 1,765,790 1,836,762
========== ==========
Net income $ 359,184 $ 455,008
========== ==========
Net income per common and common equivalent
share $ 0.20 $ 0.25
========== ==========
</TABLE>
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 167,201
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 161,643,257
<DEPRECIATION> 23,313,000
<TOTAL-ASSETS> 143,120,069
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
49,410
<COMMON> 0
<OTHER-SE> 811
<TOTAL-LIABILITY-AND-EQUITY> 143,120,069
<SALES> 10,527,731
<TOTAL-REVENUES> 10,740,940
<CGS> 0
<TOTAL-COSTS> 5,099,678
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,055,478
<INCOME-PRETAX> 585,784
<INCOME-TAX> 226,600
<INCOME-CONTINUING> 359,184
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 359,184
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
