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As filed with the Securities and Exchange Commission on March __, 1999
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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AVIATION HOLDINGS GROUP, INC.
(Name of Small Business Issuer in Its Charter)
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Delaware 5008 22-2945898
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(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
15675 Northwest 15th Avenue
Miami, Florida 33169
(305) 624-6700
(Address and telephone number of
Principal Executive Officers and Principal Place of Business)
Joseph J. Nelson, President
AVIATION HOLDINGS GROUP, INC.
15675 Northwest 15th Avenue
Miami, Florida 33169
(305) 624-6700
(Name, Address and Telephone Number of Agent For Service)
with copy to:
Michael C. Forman, Esq.
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
(215) 568-6060
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Approximate Date of Commencement of Proposed Sale to the Public: As soon as
practicable after registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities Amount To Be Offering Price Per Aggregate Offering Registration
To Be Registered Registered (1) Unit (2) Price (2) Fee
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Units, each Unit consisting of two
shares of Common Stock, $.0001
par value 825,000 $8.50 $7,012,500 $1,950
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(1) Includes up to 75,000 Units that may be purchased from the Company at the
option of the Underwriter solely to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating registration fee in
accordance with Rule 457(a) under the Securities Act of 1933, as amended.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the Registration Statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED MARCH ___, 1999
PROSPECTUS
AVIATION HOLDINGS GROUP, INC.
750,000 Units, each Unit Consisting of
Two shares of Common Stock
This is a public offering of units of Aviation Holdings Group, Inc.
Each unit consists of two shares of common stock of the Company. The two shares
of common stock of the Company that make up each unit may not be separated or
sold separately until twelve months after the date of issuance by the Company.
The Company expects that the offering price for the units will be approximately
$8.50 per unit.
Silver Capital Group, a division of LCP Capital Corp., will serve as
the underwriter for this public offering on a "firm commitment" basis. The
Company has granted an option to the underwriter, exercisable for a period of 30
days after the date of this prospectus, to purchase up to an additional 75,000
units from the Company at the public offering price set forth in this prospectus
less the underwriting discounts and commissions. The underwriter may exercise
this option only for the purpose of covering over-allotments, if any.
Prior to this public offering, shares of the Company's common stock
have been sold on the OTC Bulletin Board under the trading symbol "AHGI"
pursuant to the provisions of Rule 15c2-11 promulgated under the Securities
Exchange Act of 1934.
The Company intends to apply to have its common stock and the units
quoted on the American Stock Exchange under the trading symbols "_____________"
and "___________," respectively.
Investing in units involves certain risks. See "Risk Factors" on pages
11 to 15.
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Offering of Units Per Unit Total
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o Public Offering Price $ 8.50 $ 6,375,000
o Underwriting Discounts and Commissions $ 0.85 $ 637,500
o Proceeds to the Company $ 7.65 $ 5,737,500
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
Prospectus dated _______, 1999
<PAGE>
TABLE OF CONTENTS
Page
WHERE YOU CAN GET MORE INFORMATION...........................................5
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS............................5
PROSPECTUS SUMMARY...........................................................6
THE COMPANY..................................................................6
THE OFFERING.................................................................8
SELECTED FINANCIAL INFORMATION..............................................10
RISK FACTORS................................................................11
DILUTION ...................................................................15
USE OF PROCEEDS.............................................................16
MARKET PRICE OF THE COMMON STOCK............................................16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.......................................................18
BUSINESS ...................................................................23
MANAGEMENT..................................................................31
PRINCIPAL STOCKHOLDERS......................................................35
CERTAIN TRANSACTIONS........................................................36
UNDERWRITING................................................................39
LEGAL MATTERS...............................................................40
EXPERTS ...................................................................40
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WHERE YOU CAN GET MORE INFORMATION
At your request, we will provide you, without charge, a copy of any
exhibits to the Company's Registration Statement. If you would like more
information, write or call us at:
AVIATION HOLDINGS GROUP, INC.
15675 Northwest 15th Avenue
Miami, Florida 33169
Telephone: (305) 624-6700
Facsimile: (305) 624-2944
Our fiscal year ends on December 31. We intend to provide to our
shareholders annual reports containing audited financial statements and other
appropriate reports. In addition, we intend to become a reporting company and
file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any reports, statements or other
information we file at the SEC's public reference room in Washington, D.C. You
can request copies of these documents, upon payment of a duplicating fee, by
writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our SEC filings are
also available to the public on the SEC Internet site at http\\www.sec.gov.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions.
Important factors that may cause actual results to differ from
forward-looking statements may include for example,
o the success or failure of our efforts to implement our business
strategy, including expanding our international operations;
o our ability to raise sufficient capital to expand our business;
o the effect of changing economic conditions on the airline and aircraft
industries;
o changes in government regulations, tax rates and similar matters;
o our ability to attract and retain quality employees; and
o other risks which may be described in our future filings with the SEC.
We do not promise to update forward-looking information to reflect
actual results or changes in assumptions or other factors that could affect
those statements.
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<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. This summary is not complete and may not contain all of the
information you should consider before investing in the units offered by the
Company or in the shares of common stock of the Company offered by the selling
stockholders identified in this prospectus. You should read the entire
prospectus carefully. You should also read the Company's financial statements
and the notes to the financial statements. References in the prospectus to the
"Company" mean Aviation Holdings Group, Inc., a Delaware corporation, and to
"AHI" mean Aviation Holdings International, Inc., a Florida corporation formerly
known as Jet Aviation Trading, Inc. and prior to that as Schuylkill Acquisition
Corp., and a majority-owned subsidiary of the Company. The Company's fiscal year
ends on December 31.
THE COMPANY
The Company was formed in January 1998 as a Delaware corporation and a
wholly-owned subsidiary of EyeQ Networking, Inc. ("EyeQ"), a Colorado
corporation formed in May 1988. In February, 1998, EyeQ merged with and into the
Company, with the Company as the surviving entity under the name EyeQ
Networking, Inc. In September 1998, the Company changed its name from EyeQ
Networking, Inc. to Aviation Holdings Group, Inc.
The Company currently holds approximately 92% of the issued and
outstanding capital stock of AHI, making AHI a majority-owned subsidiary of the
Company. The Company acquired its majority stake in AHI in 1998 through a block
purchase of common stock and a series of common stock share exchanges (the
"Share Exchanges") whereby the Company issued shares of common stock of the
Company in exchange for shares of common stock of AHI.
The Company is a holding company and currently has no operations other
than its interest in AHI. The only significant asset of the Company, other than
its interest in AHI, is a note receivable in the amount of $940,000 which is
secured by a mortgage on a parcel of real property in Colchester, Connecticut.
On July 28, 1997, AHI, which at that time was known as Schuylkill
Acquisition Corp., merged with Jet Aviation Trading, Inc., a Florida corporation
("Jet"). AHI was the surviving entity in this merger and changed its name to Jet
Aviation Trading, Inc. Jet had commenced business on October 3, 1996. On
September 15, 1998, Jet changed its name to Aviation Holdings International,
Inc. Unless the context otherwise requires, references to AHI throughout this
Prospectus, including the Financial Statements contained herein, refer to the
operations of Jet prior to July 28, 1997 and AHI thereafter.
AHI specializes in the sale, lease, exchange and purchase of technical
spares for fixed-wing commercial jet transport aircraft manufactured by Boeing,
McDonnell Douglas, Airbus and Lockheed. Technical spares are aircraft or engine
parts affecting the performance of an aircraft or engine. Complimenting this
core business, AHI provides its customers with inventory management services
including new product distribution, technical purchasing, maintenance repair
management, consignment marketing and purchase/leaseback of technical spares
inventory. AHI also intends to pursue opportunities involving the purchase, sale
and lease of jet turbine engines, jet turbine aircraft and related aviation
industry equipment.
The majority of AHI's operations are in the United States. However, AHI
also conducts operations in Europe and South America, and in China and other
parts of Asia directly and through a joint venture with a third party and
through a number of subsidiaries (the "Asian Operations"). The Asian Operations
currently account for approximately 20% of AHI's gross revenues on a
consolidated basis, but management intends to expand the Asian Operations. The
bulk of the Asian Operations consists of operations similar to the core
operations conducted by AHI in the United States, but management intends to
expand the Asian Operations to include the arrangement of aircraft financing and
leasing, aircraft, engine and component repair and maintenance coordination,
technology consulting and the facilitation of contracts and cross-border
business arrangements between aviation- related entities from different
countries. In addition to the corporate headquarters of the Company and AHI in
Miami, Florida, AHI maintains offices and has employees in China in Beijing and
Hong Kong.
According to industry estimates, the annual worldwide market for
aircraft spare parts is approximately $10.2 billion, of which approximately $2.0
billion reflects annual sales of aircraft spare parts in the redistribution
market. Management expects these sales figures to grow in the near future, based
on continued cost pressures affecting the airlines, manufacturers and aircraft
maintenance service providers. The emphasis upon cost containment in recent
years has led to an increase in the average age of the worldwide airline fleet,
as commercial airlines seek to prolong the usable life of their aircraft.
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AHI seeks to exploit these key market trends by positioning itself as a
low-cost participant in the redistribution market through efficient staffing,
low debt, implementation of technological advances and experienced managerial
talent. In addition, AHI offers its customers a wide range of inventory
management services, allowing them to reduce operational expenses. This service
complements the recent trend of commercial airlines seeking to outsource certain
activities in order to focus upon their core business of passenger and cargo air
transportation. Finally, AHI believes that sufficient financial resources will
position it to successfully exploit opportunities for bulk purchases of
inventory and purchases of jet turbine engines and aircraft at favorable prices,
thereby increasing profitability. See "Business" and "Risk Factors," commencing
on page 11.
The Company's and AHI's executive offices are located at 15675
Northwest 15th Avenue, Miami, Florida 33169. Its telephone number is (305)
624-6700.
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THE OFFERING
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Common Stock Currently Outstanding (1)......... 3,974,815 shares of Common Stock
Securities Offered by the Company.............. 750,000 units, each unit consisting of two shares of
Common Stock (the "Units"), for an aggregate of
1,500,000 shares of Common Stock.
Common Stock to be Outstanding
after the Offering (2)......................... 5,474,815 shares of Common Stock
Dividend Policy................................ The Company intends to retain all future earnings to
fund the development and growth of its business.
Therefore, the Company does not currently anticipate
paying cash dividends. See "Dividend Policy," on page 16.
Use of Proceeds by the Company................. To fund the Company's financial commitment to the
SYNOR-A joint venture, to purchase additional inventory,
to purchase jet turbine engines and for general
corporate purposes. See "Use of Proceeds."
Proposed American Stock Exchange Symbols....... "______" and "_______"
for the Common Stock and the Units,
respectively.
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(1) Excludes 220,750 shares of Common Stock reserved for issuance upon the
exercise of stock options outstanding as of March 1, 1999 under the
Company's Stock Option Plan (the "Option Plan") and 529,250 shares of
Common Stock available for the future grant of stock options and other
equity securities under the Option Plan. Also excludes 200,000 shares of
Common Stock reserved for issuance to Joseph Nelson on the exercise of
options granted under the terms of his employment agreement. See
"Management," page 31. Also excludes 100,000 shares issuable to Argaman,
Inc. upon exercise of a warrant.
(2) Assumes the maximum number of Units being offered by the Company will be
sold. Does not include 75,000 Units issuable upon exercise of the
Underwriter's over-allotment option.
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RISK FACTORS
Investors should consider the material risks involved in connection
with an investment in the Units or the Common Stock and the impact to investors
from various events that could adversely affect the Company's business. See
"Risk Factors," beginning on page 11.
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<PAGE>
SELECTED FINANCIAL INFORMATION
Set forth below is the historical selected financial information with
respect to the Company for the fiscal year ended December 31, 1997, the nine
months ended September 30, 1998 and the nine months ended September 30, 1997.
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FISCAL YEAR NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, 1997 SEPTEMBER 30, SEPTEMBER 30, 1997
1998 (1) (unaudited)
------------- (unaudited) -------------
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INCOME STATEMENT INFORMATION
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Revenue ......................................... $ 0 $ 5,094,931 $ 0
Net Income (Loss) ............................... (57,437) (851,728) (8,125)
Net Income (Loss) per Share ..................... (0.06) (0.29) (0.01)
Weighted Average Shares
Outstanding .................................. 1,046,235 2,889,299 805,498
BALANCE SHEET INFORMATION AT
END OF PERIOD
Working Capital ................................. $ (36,128) $1,729,904
Total Assets .................................... 962,545 7,903,963
Total Liabilities ............................... 48,000 4,111,524
Stockholders' Equity ............................ 914,545 2,712,587
Net Tangible Book Value Per Share ............... 0.39 0.99
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(1) Reflects operations of Aviation Holdings International, Inc. from May 1998
through September 30, 1998.
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<PAGE>
RISK FACTORS
Investing in Units or Common stock of the Company is very risky. Investors
should carefully consider the following factors in addition to the other
information in this Prospectus, in evaluating an investment in the Company.
Limited Operating History
The Company was formed in May 1988 and acquired a majority of the
outstanding shares of common stock of AHI in May, 1998. The Company had no
significant operations prior to its acquisition of a majority of the outstanding
shares of AHI. In addition, AHI commenced operations in October 1996, and has a
correspondingly limited operating history. Accordingly, the Company and AHI are
subject to all of the risks associated with new business enterprises. Some of
those risks include cash flow difficulties, competition for customers and
employees and delays in implementing business plans. The Company intends to
expand AHI's operations, which will substantially increase the Company's
expenses and is likely to decrease cash flow and earnings in the near future.
The Company's ability to operate profitably will depend on increasing sales,
maintaining adequate profit margins and a continuing demand for AHI's products
and services. Expansion may have a negative impact on profitability, at least in
the near term as significant expenses will be incurred prior to the receipt of
additional revenues. See "Financial Statements" and "Business."
Default on Note Receivable
The Company has outstanding a note receivable with Environmental Waste
Solutions, Inc. ("EWS") with a principal amount of $1,475,100 and accrued
interest of $58,310 as of September 30, 1998. The note is secured by a mortgage
on real estate owned by EWS. The real estate, a 60 acre parcel awaiting approval
for use as a landfill in Colchester County, Connecticut, has an appraised value
of approximately $1 million. The Company has set up a reserve for nonpayment in
the amount of $593,410 and has ceased accruing interest on the note as of July
2, 1998. The note matured February 1, 1999. As of March 15, 1999 the note
remains unpaid and is in default. The Company may ultimately receive
substantially less in repayment of the note than its current carrying value.
Need for Additional Funding
The offering will result in net proceeds to the Company of approximately
$5,165,000. The Company believes that revenues from operations will be
sufficient to fund AHI's operational requirements for the foreseeable future and
that the net proceeds from the offering will be sufficient to expand AHI's
existing business. However, the Company may need to raise additional funds for
acquisitions and entry into the jet turbine engine business. We cannot assure
you that additional funds will be available on acceptable terms. If we need
additional funds and funds are not available, our inability to raise capital
will have an adverse effect on our growth plans.
Effects of the Economy on the Operations of AHI
Since our customers consist primarily of commercial airlines, original
equipment manufacturers, aircraft maintenance and repair facilities and aircraft
parts distributors, our business is impacted by all of the economic factors
which affect the aircraft and airline industry. When the airline industry
experiences a downturn, there is typically a corresponding reduction in demand
for spare aircraft parts and related services which causes price reductions and
increased credit risks associated with doing business. Additionally, the price
of aircraft fuel affects the spare aircraft parts market since older aircraft
(into which aircraft spare parts are most often placed), which tend to be less
fuel efficient, become less viable as the price of aircraft fuel increases. An
economic downturn could have a serious impact on AHI's business.
Consolidation in the Aircraft Parts Industry
Although AHI presently is an "approved" supplier of twenty-six airlines, no
assurances can be given that AHI will be able to maintain or expand this status.
During the last few years, a number of major airlines have reduced the number of
"approved" suppliers from as many as fifty to as few as five. Airlines choose
"approved" suppliers on the basis of a number of factors which include product
offerings and quality, management reputation and experience, financial strength
and cost. Also, the reduction in the supplier base for airlines has contributed
to a consolidation in redistribution market which is likely to continue. We
believe that we must be able to maintain extensive inventories, hire or develop
experienced management, maintain standards of part traceability and raise
sufficient capital in order operate profitably.
Risk Regarding Inventory
Our inventory consists principally of overhauled, serviceable, repairable
and new aircraft parts that are purchased from many sources. Before parts may be
installed in an aircraft or engine, they must meet certain standards of
condition established by the United States Federal Aviation Administration
("FAA") and/or similar regulatory agencies abroad. Specific regulations vary
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from country to country, although regulatory requirements in other countries
generally coincide with FAA requirements. Parts must also be traceable to
sources deemed acceptable by such agencies. Although we believe that the great
majority of our inventory meets industry requirements, some parts may not meet
applicable standards or standards may change in the future, in which case we
will have to modify or scrap such parts. Aircraft manufacturers may also develop
new parts which will cause parts in our inventory to become less valuable or
obsolete. See "Business -- Government Regulation and Traceability."
Risks Regarding the Purchase of Jet Turbine Engines and Aircraft
Although we have made only limited purchases of turbine engines, and no
purchases of turbine aircraft for resale in the past, we intend to expand these
activities in the future. Market prices and demand for this type of equipment
are subject to volatility, and we could suffer substantial losses if equipment
cannot be resold at prices above the prices we paid, or if we must hold
equipment in inventory for extended time periods. These activities will also
require AHI to commit substantial capital, which will not be available for other
activities. In addition, the equipment may need repair work, which increases the
costs associated with resale and may adversely affect our profitability.
Government Regulation
The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar agencies. While our business is not directly
regulated by the FAA, the aircraft and engine spare parts which we sell to our
customers must be accompanied by documentation which enables the customer to
comply with the FAA's or equivalent regulatory requirements. We believe that our
current compliance programs adequately address FAA and other applicable
requirements. However, new and more stringent government regulations may be
adopted, and compliance with, or any violation of, current or future laws or
regulations could require significant expenditures or could otherwise adversely
affect our business or financial results. See "Business -- Government Regulation
and Traceability."
Fluctuations in Operating Results
Our operating results will be affected by many factors, including the timing
of orders from customers, inventory purchases in anticipation of future sales,
bulk inventory purchases, and purchases and financing requirements for aircraft
engines or aircraft and the mix of available technical spare parts maintained,
at any time, in AHI's inventory. A significant portion of our operating expenses
are relatively fixed. Since we typically do not obtain long-term purchase orders
or commitments from our customers, we must anticipate the future volume of
orders based upon the historic purchasing patterns of our customers and upon our
discussions with them as to their future requirements. Cancellations, reductions
or delays in orders by a customer or group of customers could have a material
adverse effect on our business, financial condition and results of operations.
See "Financial Statements" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Reliance on Chief Executive Officer and Other Key Personnel
Our ability to successfully implement our business strategy and operate
profitability will be dependent to a significant degree upon the services of
Joseph J. Nelson, our President and Chief Executive Officer, and upon our
ability to attract and retain qualified personnel experienced in the various
phases of our business. While we have entered into an employment agreement with
Mr. Nelson, the loss of his services would jeopardize our operations. We will
also be dependent upon other employees as we expand operations. The loss of, or
failure to develop, such persons could negatively effect our business or
financial results. See "Management."
Competition
The aircraft engine and spare part industries in which AHI operates are
highly competitive. Customers have access to a broad array of suppliers,
directly and through inventory listing services, including the following:
o major aircraft manufacturers
o airline and aircraft service companies
o aircraft spare parts redistributors
Many of our competitors have substantially greater financial and other
resources than we possess. We may not be able to compete successfully with such
competitors. Competitive pressures could have a material adverse effect on AHI's
business or financial results.
Product Liability
Our business exposes us to possible claims for personal injury or death
which may result from a failure of equipment we sold. We believe that we have
taken adequate precautions to assure the quality and traceability of the parts
we sell, and we have not had any claims for product liability. However, there
can be no assurances that we will not be exposed to lawsuits and the possibility
of damage awards. Neither the Company nor AHI carries product liability
insurance and therefore any judgment could have a material adverse effect on the
business or financial condition of the Company or AHI. See "Business -- Product
Liability and Legal Proceedings."
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Growth Strategy and Risks Relating to Future Acquisitions
Our strategy involves both growth through increased sales and the
acquisition of additional inventories of aircraft spare parts and turbine
engines, the expansion into new markets and continuous improvement of the
customer base and the acquisition of other companies, assets or product lines
that would complement or expand our existing business. Our ability to expand
will be dependent upon, and may be limited by, the availability of:
o suitable aircraft parts inventories
o suitable turbine engines
o suitable acquisition candidates that can be acquired on attractive
terms
o capital and/or financing on competitive terms
In addition, acquisitions involve risks that could adversely affect our
operating results, including:
o the assimilation of the operations and personnel of acquired companies
o the potential loss of key employees, customers or suppliers of
acquired companies
o cash flow demands resulting from acquisition financing
There can be no assurance that we will be able to consummate acquisitions on
satisfactory terms.
Potential Influence by Certain Stockholders
Following the offering of the Units by the Company, one of the Company's
stockholders will beneficially own 17.4% of the issued and outstanding Common
Stock, and the Company's directors and executive officers, as a group, will
beneficially own an aggregate of 13.8% of the issued and outstanding Common
Stock. While each of these stockholders is an independent party, if these
parties were to act together as a group, they may have the ability to
effectively control the election of all of the members of the Company's Board of
Directors and, therefore, to control the business, policies and affairs of the
Company.
Risk of Dilution in Ownership of AHI
The Company has pledged 51% of the outstanding stock of AHI to secure
$250,000 in loans made to the Company in October, 1998 by Nancy Plotkin and the
John G. Jacobs Trust. These loans have a final maturity date of May 15, 1999. If
the Company is unable to pay these loans at maturity, the lenders will have the
right to sell shares of AHI common stock in an amount sufficient to repay the
loans, thus reducing the Company's ownership in AHI. In addition, certain
persons (including a affiliate of a director of the Company) hold warrants to
purchase 1,000,000 shares of AHI common stock, which on exercise would further
dilute the Company's ownership.
Default Under Comerica Credit Facility
AHI currently is in technical default under its credit facility with
Comercia Bank, although Comercia Bank has not declared an event of default and
continues to advance funds. In the event that AHI is unable to cure the default
or obtain other financing, Comercia could declare an event of default and
exercise its rights as a secured lender with respect to AHI's assets.
Restrictions on Payment of Dividends on Common Stock
The Company will be dependent on funds generated by AHI's operations for
the foreseeable future. AHI's existing bank lending agreements prohibit payment
of dividends without the bank's consent. We do not currently intend to declare
or pay cash dividends in the foreseeable future. Earnings, if any, are expected
to be retained to finance and develop our business. See "Dividend Policy."
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Year 2000 Compliance
We use a significant number of computer software programs and operating
systems in our internal operations, including applications used in inventory
management, distribution, financial business systems and various administrative
functions. All of our hardware and software has been upgraded or replaced so
that it can interpret appropriately the upcoming calendar year 2000, and our
computer software programs and operating systems are "Year 2000" compliant. The
Company has not determined the extent to which its vendors, customers and other
persons with which it transacts business have systems which are "Year 2000"
compliant.
Arbitrary Determination of Offering Price and Exercise Price
As of the date of this Prospectus, there has been no significant market for
or trading in any of the Company's securities. Consequently, in determining the
public offering price of the Common stock and the Units, the Company and the
underwriter considered a number of factors, including the following: (i) the
current financial position of the Company and AHI; (ii) the experience of
management; (iii) the ratio of the share price to book value; (iv) the position
of AHI in its industry and its prospects; and (v) the general status of the
securities market and other relevant factors.
Possible Volatility of Stock Prices
As of March 15, 1999, the Company had 3,974,815 shares of Common Stock
issued and outstanding. Taking into account the sale of the Units to be sold in
the offering (excluding the underwriter's over-allotment option), the Company
will have 5,474,815 shares of Common Stock issued and outstanding. We also
intend to list all of the Units for public trading. Although it is impossible to
predict market influences and prospective values for securities, it is possible
that the substantial increase in the number of shares of Common Stock available
for public sale could have a depressive effect upon the market value of the
Units or the Company's Common Stock.
Furthermore, although we intend to list the Common Stock and the Units for
trading on the American Stock Exchange, we can make no assurances that the
Common Stock or the Units will be approved for listing, that a regular trading
market will develop, or, if developed, that a regular trading market for the
Company's Common Stock or the Units will develop. There has been a history of
significant volatility in the market prices for securities of companies in a
similar stage of development. We expect that the market price of the Common
Stock and the Units following the offering will be highly volatile.
Possible Limitations Upon Trading Activities; Restrictions Imposed Upon
Broker-Dealers Effecting Transactions in Certain Securities
In the event that the Common Stock and the Units are not listed on the
American Stock Exchange, trading of the Company's securities may be subject to
material limitations as a consequence of certain provisions of the Securities
Exchange Act of 1934 (the "Exchange Act") which limit the activities of
broker-dealers effecting transactions in "penny stocks."
"Penny stocks" are defined as any equity securities with a market price
below $5.00 per share other than a security that is registered on a national
exchange; included for quotation in the NASDAQ system; or whose issuer has net
tangible assets of more than $2,000,000 and has been in continuous operation for
greater than three (3) years. Issuers who have been in operation less than three
(3) years must have net tangible assets of at least $5,000,000.
Rules promulgated by the Commission under Section 15(g) of the Exchange Act
require broker-dealers engaging in transactions in "penny stocks," to first
provide to their customers a series of disclosures and documents, including: (i)
a standardized risk disclosure document identifying the risks inherent in
investment in "penny stocks;" (ii) all compensation received by the
broker-dealer in connection with the transaction; (iii) current quotation prices
and other relevant market data; and (iv) monthly account statements reflecting
the fair market value of the securities. In addition, these rules require that a
broker-dealer obtain financial and other information from a customer, determine
that transactions in penny stocks are suitable for such customer and deliver a
written statement to such customer setting forth the basis for such
determination.
If the Common Stock and Units are not listed, they presently will constitute
"penny stocks." In that event, trading activities for the Common Stock and Units
will be made more difficult for broker-dealers than in the case of securities
not defined as "penny
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stock." This may have the result of depressing the market for the Company's
securities and an investor may find it difficult to dispose of such securities.
Further, under the Exchange Act, and the regulations thereunder, any person
engaged in a distribution of the Common Stock or Units offered by this
Prospectus may not simultaneously engage in market making activities with
respect to the Common Stock during the applicable "cooling off' periods prior to
the commencement of such distribution. In addition, and without limiting the
foregoing, each Selling Stockholder will be subject to applicable provisions of
the Exchange Act and the rules and regulations thereunder including, without
limitation, Regulation M, which provisions may limit the timing of purchases and
sales of Common Stock by the Selling Stockholders.
Underwriter's Limited Underwriting Experience
Silver Capital Group, a division of LCP Capital Corp. (the "Underwriter")
has agreed to act as underwriter in connection with the offering of Units by the
Company and the Common Stock by the selling stockholders described herein. The
Underwriter has engaged in only limited underwriting activities and has not
previously been a lead underwriter in any public offerings. Accordingly, the
Underwriter's lack of public offering experience may affect the offering of the
Units and the Common Stock or the subsequent development of a public trading
market for the Units or the Common Stock. Accordingly, purchasers of the Units
or the Common Stock may suffer a lack of liquidity in their investment. See
"Underwriting."
DILUTION
Officers, directors, promoters and affiliated persons of the Company
purchased their shares of Common Stock for cash and other consideration ranging
from $0.001 to $6.25 per share, or from $4.249 less than to $2.00 more than the
price per share in the offering.
As of September 30, 1998, the net tangible book value of the Company's
Common Stock was $3,432,277, or $0.99 per share of Common Stock, based upon
3,449,815 shares outstanding. "Net tangible book value" per share represents the
amount of total tangible assets of the Company reduced by the total liabilities
and divided by the number of shares of Common Stock outstanding. After giving
effect to the sale of 1,500,000 shares of Common Stock being offered by the
Company hereby, less underwriting discounts and commissions and estimated
offering expenses payable by the Company, the Company's pro forma net tangible
book value at September 30, 1998 would have been $8,597,277, or $1.74 per share
of Common Stock, based upon 4,949,815 shares outstanding. This represents an
immediate increase in net tangible book value of $0.75 per share to existing
stockholders and an immediate dilution per share of $2.51 to new investors
purchasing shares in this Offering. "Dilution per share to new investors"
represents the difference between the price per share of Common Stock paid for
shares issued in this Offering and the pro forma net tangible book value per
share at September 30, 1998, as adjusted to give effect to this Offering.
Public offering price per share(1)................................ $ 4.25
Net tangible book value per share before Offering......... $ 0.99
Increase per share attributable to new investors.. 0.75
Pro forma net tangible book value per share after Offering........ 1.74
Dilution per share to new investors.................... $ 2.51
- -----------
(1) Before deduction of underwriting discounts and commissions and estimated
offering expenses payable by the Company.
The foregoing computations exclude (i) an aggregate of 215,750 shares
of Common Stock reserved for issuance upon exercise of outstanding stock options
under the Company's Stock Option Plan, as amended, as of September 30, 1998 at a
weighted average exercise price of $2.50 per share; and (ii) 200,000 shares of
Common Stock reserved for issuance upon exercise of other outstanding options as
of September 30, 1998. Any exercise of such options or warrants may result in
further dilution to new investors.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the Units offered
hereby (at an assumed public offering price of $8.50 per Unit and after
deducting underwriting discounts and commissions and estimated Offering
expenses) are estimated to be $5,165,000 million ($5,720,000 million if the
Underwriter's over-allotment option is exercised in full).
Over the twelve months following completion of the sale of the Units,
the Company and AHI intend to use, (i) $0.4 million of the net proceeds to fund
the remaining portion of AHI's commitment to the SYNOR-A joint venture (see
"Business- Asian Operations"); (ii) approximately $0.8 million of the net
proceeds to fund purchases of additional inventory; (iii) approximately $1.25
million of the net proceeds for the retirement of debt; (iv) approximately $1.5
million of the net proceeds to fund purchases of aircraft and/or jet turbine
engines and (v) approximately $1.125 million of the net proceeds for general
corporate purposes, including possible acquisitions.
The amounts actually expended for the purposes described above could
vary significantly depending on, among other things, the Company's and AHI's
ability to obtain capital from other sources, the demand for AHI's services and
the availability of inventory, jet engines and aircraft at attractive prices.
Pending application of the net proceeds by the Company from the offering,
the Company intends to invest the funds in short-term interest-bearing,
investment grade securities or guaranteed obligations of the United States
government.
MARKET PRICE OF THE COMMON STOCK
As of the date of this Prospectus, the Company's Common Stock is traded
in the over-the-counter market through The OTC Bulletin Board (the "Bulletin
Board") under the symbol "AHGI." The market for the Company's Common Stock on
the Bulletin Board is sporadic, and the quarterly average daily volume of shares
traded since formation ranged from a low of 26,473 shares to a high of 24,105
shares. The following table presents the range of the high and low bid and
average daily volume information for the Company's Common Stock for the periods
indicated. The quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not represent actual transactions.
Average
Daily
High Low Volume (Shares)
---- --- ---------------
Year Ended December 31, 1998
First Quarter 4.75 3.469 27,172
Second Quarter 5.875 3.625 37,957
Third Quarter 5.875 4 26,473
Fourth Quarter 5 3 31,366
Year Ending December 31, 1999
First Quarter 5.375 3 24,105
(through March 23, 1999)
Records of the Company's stock transfer agent indicate that as of March
15, 1999, the Company had 57 record holders of its Common Stock.
DIVIDEND POLICY
Neither the Company nor AHI has paid any cash dividends to date, and
does not anticipate or contemplate paying cash dividends in the foreseeable
future. Under the terms of its Credit Agreement with Comerica Bank, AHI is
prohibited from declaring or paying cash dividends without the consent of
Comerica Bank. Management intends to utilize all available funds for the
purposes set forth above under "Use of Proceeds."
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Company's Financial
Statements, including the notes thereto. This Prospectus contains certain
forward- looking information which involves risks and uncertainties. The actual
results could differ from the results anticipated herein. See "Special Note
Regarding Forward-Looking Statements."
Overview
The Company's principal asset is its ownership of a controlling
interest in AHI. Accordingly, the Company's results of operations are highly
dependent upon the results of operations of AHI.
AHI was incorporated in Florida on May 28, 1997 as Schuylkill
Acquisition Corp. for the purpose of acquiring by merger the business and
operations of Jet. On July 28, 1997, AHI acquired 100% of the outstanding
common stock of Jet in exchange for 1,776,800 shares of common stock of AHI
in a one for one stock exchange. The merger was accounted for as a purchase. Old
AHI was incorporated in the state of Florida on October 3, 1996 for the purpose
of buying, selling, leasing and exchanging spare parts for fixed-wing commercial
jet transport aircraft. Effective July 28, 1997 AHI's name was changed from
Schuylkill Acquisition Corp. to Jet Aviation Trading, Inc. Effective September
15, 1998, AHI's name was changed to Aviation Holdings International, Inc.
The effect of the transaction was a reverse merger; accordingly, the
historical financial statements presented for AHI are those of the accounting
survivor, Jet, and the stockholders' equity of the merged company was
recapitalized to reflect the capital structure of the surviving legal entity
(AHI) and the retained earnings of Jet.
In February, 1998 AHI acquired all or a majority of the capital stock
of PASCO International Aviation Corp., PASCO International Aviation Corp.
Limited, PASCO Financial Services Limited and Aero-Link Flight Systems Limited
(collectively "PASCO").
Effective in May, 1998, the Company acquired a majority of the common
stock of AHI. Accordingly, the financial statements of the Company and AHI were
consolidated as of that date, and the financial statements of the Company for
the nine month period ending September 30, 1998 include the results of AHI's
operations for the period May, 1998 through September 30, 1998.
AHI currently derives its revenues from selling, leasing, exchanging
and purchasing spare parts for fixed-wing commercial jet transport aircraft,
selling turbine jet engines and management services.
The Company has only a limited operating history upon which an
evaluation of its operations and prospects can be based. Although the Company
has since inception experienced increasing net sales, the Company may experience
significant fluctuations in its gross margins and operating results in the
future, both on an annual and a quarterly basis. These fluctuations may be
caused by various factors, including general economic conditions, specific
economic conditions in the commercial aviation industry, the availability and
price of surplus aviation material, the size and timing of customer orders,
returns by and allowances to customers and the cost of capital to the Company.
Nine Months Ended September 30, 1998 v. Nine Months Ended September 30, 1997.
Results of Operations
Net sales of aircraft and engine parts were $5,094,931 for the nine
months ended September 30, 1998 as compared to $0 for the nine months ended
September 30, 1997. The increase in net sales of aircraft and engine parts was
primarily due to the acquisition of the controlling interest in AHI.
Cost of goods sold was $3,898,257 for the nine months ended September
30, 1998 as compared to $0 for the nine months ended September 30, 1997. Gross
profit increased from $0 in the nine months ended September 30, 1997 to
$1,196,674
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in the nine months ended September 30, 1998. The increase in gross profit was
due primarily to the acquisition of the controlling interest in AHI.
Salary and Wage expenses increased from $0 in the nine months ended
September 30, 1997 to $532,950 in the nine months ended September 30, 1998. This
increase is primarily a result of the acquisition of the controlling interest in
AHI.
General and administrative expenses increased from $8,125 in the nine
months ended September 30, 1997 to $1,157,850 in the nine months ended September
30, 1998. This increase is due to the acquisition of the controlling interest in
AHI and to a $593,410 reserve established against collection on a promissory
note held by the Company.
Other income increased from $0 in the nine months ended September 30,
1997 to $65,786 in the nine months ended September 30, 1998. This increase is
mainly due to the acquisition of the controlling interest in AHI.
Minority interest decreased from $0 in 1997 to ($3,140) in the nine
months ended September 30, 1998. This decrease is mainly due to the acquisition
of the controlling interest in AHI.
Net loss increased to ($851,728) for the nine months ended September
30, 1998 as compared to ($8,125) for the nine months ended September 30, 1997.
Basic and diluted loss per Common share increased from ($.01) for the nine
months ended September 30, 1997 to ($.29) for the nine months ended September
30, 1998.
Liquidity and Capital Resources
As of September 30, 1998, the Company's liquidity and capital resources
included cash and cash equivalents of $254,994 and working capital of
$1,729,904, compared with cash and cash equivalents of $2,175 and a working
capital deficit of ($36,128) as of December 31, 1997. As of September 30, 1998,
total outstanding debt was $692,257 as compared to $0 as of December 31, 1997.
AHI obtained a revolving line of credit with a maximum borrowing limit of
$3,500,000, of which $675,000 was outstanding as of September 30, 1998.
Cash used in operating activities for the nine months ended September
30, 1998 was $880,997 compared with $0 for the nine months ended September 30,
1997. The primary component of cash used for operating activities for the nine
months ended September 30, 1998 was to fund operating losses in addition to an
increase in accounts receivable, inventory, interest receivable, prepaid
expenses and a decrease in accrued expenses and income taxes payable, which
amounted to $1,147,573. The primary source of cash provided from operating
activities for the nine months ended September 30, 1998 was due to an increase
in accounts payable of $257,820.
Cash flows in investing activities for the nine months ended September
30, 1998 was $308,495 compared with $950,673 of cash used for the nine months
ended September 30, 1997. The primary components of cash used for investing
activities were the investments in the joint venture and subsidiary for
$300,000, the purchase of property and equipment for $55,830 and $535,100 of
additional advances in connection with a note receivable. The primary source of
cash from investing activities for the nine months ended September 30, 1998 was
derived from the acquisition of a controlling interest in AHI which had
approximaely $582,435 of cash in the month of acquisition.
Cash provided by financing activities for the nine months ended
September 30, 1998 was $1,442,361 compared with $0 for the nine months ended
September 30, 1997. The primary components of cash provided from financing
activities for the nine months ended September 30, 1998 resulted from the
proceeds from the bank line of credit of $675,000 and advances from shareholders
of $824,498 offset by repayments on long-term debt of $1,409 and payments for
deferred offering costs of $55,778.
AHI has obtained a revolving working capital line of credit from
Comerica Bank in 1998. At September 30, 1998, the amount outstanding was
$675,000. The Credit Agreement, which provides for a maximum aggregate borrowing
limit of $3,500,000 is a revolving line of credit and is secured by
substantially all of AHI's assets. The line of credit bears interest per annum
at Comerica's prime rate plus 1%. Although AHI is technical default of certain
covenants in the Comerica Credit Agreement, Comerica continues to make advances
thereunder.
The Company believes that existing cash balances, the Credit Agreement
and the proceeds of this offering will be sufficient to meet the Company's
capital requirements for at least the next 18 months. Thereafter, if the
Company's capital requirements increase, the Company could be required to secure
additional sources of capital. There can be no assurance the
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Company will be capable of securing additional capital or that the terms upon
which such capital will be available to the Company will be acceptable.
Since the Company's principal sources of funds are those generated by
AHI, the following sets forth certain information relating to the operations of
AHI for the period indicated. AHI maintains its accounting records on a fiscal
year basis ending August 31. AHI has changed its reporting to a calendar year
basis beginning January 1, 1999.
Year Ended August 31, 1997 v. Year Ended August 31, 1998
Results of Operations
AHI's operating revenues for the fiscal year ended August 31, 1998
increased $6,319,446 or 102% over the fiscal year ended August 31, 1997. During
this period, domestic sales increased by 121.1% from $3,559,585 to $7,870,786
and international sales increased 75.0% from $2,655,968 to $4,664,213. The
increase in net sales was due to the addition of new sales personnel, increased
customer penetration, increased investment in, and availability of, inventory
and the expansion of services offered to customers.
Cost of sales increased from $4,684,864 for the fiscal year ended
August 31, 1997, to $10,883,583 for the fiscal year ended August 31, 1998, for
an increase of 132.1%. The increase was primarily due to increased sales and the
establishment of reserves for slow and obsolete inventory of $515,421 during
the fiscal year ended August 31, 1998.
Selling, general and administrative expenses increased $778,226 in the
fiscal year ended August 31, 1998; or 52.5% compared to the fiscal year ended
August 31, 1997 due to the increase in operating revenues. Selling general and
administrative expenses were 18.0% of operating revenues for the fiscal year
ended August 31, 1998, compared to 23.8% for the fiscal year ended August 31,
1997. The decrease in selling, general and administrative expenses as a
percentage of revenues resulted from economics of scale derived as a result of
increased operating revenues from 1997 to 1998.
As a result of the above factors, AHI generated a loss from operations
of $171,400 for 1998, compared to a loss of $1,383,641 for the fiscal year ended
August 31, 1997. Included for the fiscal year ended August 31, 1997 were
non-cash compensation charges of $1,399,600 resulting from the issuance of
Common Stock to founding shareholders.
Liquidity and Capital Resources
AHI's principal sources of funds are those generated from its
operations. AHI's working capital was $2,490,001 as of August 31, 1998 compared
to $3,253,962 as of August 31, 1997. The principal reason for the decrease in
working capital was the reserves set up for slow and obsolete inventory and
uncollectible receivables.
Cash flows from operations were $90,180 for the fiscal year ended
August 31, 1998 compared to cash used of ($1,516,173) for the fiscal year ended
August 31, 1997. The primary components of cash from operations for the year
ended August 31, 1998 was $1,185,067 from increases in accounts payable and
accrued expenses. Primary uses of cash from operations for 1998 amounting to
$1,510,210 were used to fund increases in inventory and accounts receivable.
Cash flows used in investing activities increased by ($336,681) to
($458,411) for the fiscal year ended August 31, 1998 compared to ($121,730) for
the fiscal year ended August 31, 1997. Primary uses of cash for investing for
the year ended August 31, 1998 were for the acquisition of property and
equipment, funding of the joint venture commitment and repayment of officer
loans.
Cash flows provided from financing activities decreased by $1,393,414
to $586,149 for the fiscal year ended August 31, 1998 compared to $1,979,563 for
the fiscal year ended August 31, 1997. Primary sources of cash provided from
financing activities resulted from the issuance of stock and borrowings on the
line of credit.
On August 12, 1998, AHI entered into a revolving Credit Agreement with
Comerica Bank ("Comerica") which provides working capital up to $3,500,000 with
interest at prime plus 1% subject to an availability calculation based on the
eligible
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borrowing base. The eligible borrowing base includes certain receivables and
inventory of AHI. The revolving credit facility is due on demand and may be
terminated by Comerica at any time. The revolving line of credit is intended to
fund, if necessary, working capital needs, such as inventory purchases, and
subject to Comerica's approval, strategic acquisitions. The funds advanced to
AHI by Comerica are secured by the assets of AHI. As of August 31, 1998 the
outstanding balance was $675,000.
The Company believes that the cash flows expected to be generated by
operations will meet its anticipated short-term cash needs for working capital.
Year Ended December 31, 1997 v. Year Ended December 31, 1996.
Liquidity and Capital Resources
As of December 31, 1997, the Company's liquidity and capital resources included
cash and cash equivalents of $2,175 and working capital of ($36,128), compared
with no cash and cash equivalents and working capital of ($7,207) for the year
ended December 31, 1996.
Cash used in operating activities for the year ended December 31, 1997
was $41,009 compared with $0 for the year ended December 31, 1996. The primary
components of cash used in operating activities for the year ended December 31,
1997 was due to funding of losses from operations of $57,437 and an increase in
interest receivable, prepaid expenses and amounts due to a stockholder-related
party, which amounted to $16,904. The primary components of cash provided from
operating activities for the year ended December 31, 1997 was due to an increase
in accrued expenses.
Cash used in investing activities for the year ended December 31, 1997
was $950,673 compared with $0 of cash used for the year ended December 31, 1996.
The primary components of cash used in investing activities resulted from funds
paid in connection with a note receivable in the amount of $940,000 and $10,673
for payments of deferred acquisition costs.
Cash provided by financing activities for the year ended December 31,
1997 was $993,857 compared with $0 for the year ended December 31, 1996. The
primary sources of cash provided from financing activities for the year ended
December 31, 1997 related to the proceeds from a private placement offering of
stock.
Results of Operations
The Company has no sales for the years ended December 31, 1997 and
December 31, 1996.
The Company had no cost of goods sold for the years ended December 31,
1997 and December 31, 1996.
General and administrative expenses increased from $0 in the year ended
December 31, 1996 to $15,950 in the year ended December 31, 1997. This increase
is mainly due to the Company's activities to acquire an operating company. The
Company had no salary and wage expense for the years ended December 31, 1997 and
December 31, 1996.
Net loss increased from $0 in the fiscal year ended December 31, 1996
to ($57,437) in the fiscal year ended December 31, 1997. This increase is mainly
due to the recommencement of activities by the Company.
Basic and diluted loss per Common share was ($.06) for the year ended
December 31, 1997, as compared to ($.01) for the year ended December 31, 1996.
Inflation
Although the Company cannot accurately anticipate the effect of
inflation on its operations, the Company does not believe that inflation has
had, or is likely in the foreseeable future to have a material effect on its
results of operations or financial condition. Increases in fuel costs due to
inflation may adversely affect demand for used aircraft that typically are less
fuel efficient, thereby decreasing demand for aircraft and engine components and
spare parts for these aircraft.
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Year 2000 Issue
The Company has reviewed all of its current computer applications with
respect to the year 2000 issue. The Company believes that all of its
applications are year 2000 compliant. The Company is currently unable to
determine the effect on it, if any, of year 2000 compliance by its customers or
suppliers.
Plan of Operation
Following the completion of this offering the Company intends to use a
portion of the proceeds, as well as trade credit, to expand its inventory of
aircraft and engine spare parts and to acquire turbine jet engines and/or
aircraft. The Company also anticipates hiring additional employees, particularly
in the marketing area.
AHI owns a one-half interest in a DC10-30 flight simulator. See
"Certain Transactions." Management, and the co-owner of the DC10-30 flight
simulator, have determined that the flight simulator will be best utilized if
disassembled and sold as spare parts to current users of DC10 parts and
peripheral equipment. It is anticipated that this liquidation will be completed
by the end of 1999.
The Company believes that the cash flows expected to be generated by
operations, together with net proceeds received by the Company from the
offering, will meet its anticipated short term cash needs for working capital
and will enable AHI to make future inventory expenditures for the foreseeable
future. In addition, on August 12, 1998, AHI entered into a Credit Agreement
with Comerica Bank ("Comerica") whereby Comerica agreed to extend a revolving
line of credit to AHI in an amount not to exceed $3,500,000. The revolving line
of credit is intended to fund, if necessary, working capital needs, such as
inventory purchases, and, subject to Comerica's approval, strategic
acquisitions. The funds advanced to AHI by Comerica are secured by the assets of
AHI and may not at any time exceed the sum of (a) 85% of AHI's eligible accounts
receivable and (b) 35% of AHI's eligible inventory. As of March 1, 1999, the
maximum amount available to AHI under this formula was approximately $1.8
million, and the outstanding balance was approximately $1.5 million. Although
AHI is in technical default under certain covenants of the Comerica loan
documents, Comerica continues to make advances thereunder and the Company
anticipates curing the default shortly.
The Company's only anticipated material capital expenditure for the
coming fiscal year, other than possible acquisitions as described above under
"Use of Proceeds," is $400,000 that AHI is committed to contribute to the
Synor-A joint venture during the first quarter of 1999. Management intends to
fund this commitment with a portion of the proceeds from the offering. See
"Business."
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BUSINESS
General
The Company was formed in January 1998 as a Delaware corporation and
wholly-owned subsidiary of EyeQ, a Colorado corporation formed in May 1988. In
February, 1998, EyeQ merged with and into the Company, with the Company as the
surviving entity under the name EyeQ Networking, Inc. In September 1998, the
Company changed its name from EyeQ Networking, Inc.
to Aviation Holdings Group, Inc.
The Company currently holds approximately 92% of the issued and outstanding
capital stock of AHI, making AHI a majority-owned subsidiary of the Company. The
Company acquired its majority stake in AHI through a series of share exchanges
in which the former shareholders of AHI received newly-issued shares of common
stock of the Company in exchange for their shares of common stock of AHI.
The Company is a holding company and currently has no operations other than
its interest in AHI. The only significant asset of the Company, other than its
interest in AHI, is a note receivable in the amount of $940,000 which is secured
by a mortgage on a parcel of real property in Colchester, Connecticut. The note
receivable resulted from loans made by the Company during 1997 and 1998 in
connection with a proposed acquisition of another business entity by the
Company. That acquisition was never consummated, and the Company has no further
obligations in connection with that proposed acquisition.
On July 28, 1997, AHI, which was then known as Schuylkill Acquisition Corp.,
merged with Jet Aviation Trading, Inc., a Florida corporation ("Jet"), remained
the surviving entity and changed its name to Jet Aviation Trading, Inc. Jet had
commenced business on October 3, 1996. On September 15, 1998, Jet Aviation
Trading, Inc. changed its name to Aviation Holdings International, Inc. Unless
the context otherwise requires, references to AHI throughout this Prospectus,
including the Financial Statements contained herein, refer to the operations of
Jet prior to July 28, 1997 and AHI thereafter.
AHI specializes in the sale, lease, exchange and purchase of technical
spares for fixed-wing commercial jet transport aircraft manufactured by Boeing,
McDonnell Douglas, Airbus and Lockheed. Complimenting this core business, AHI
provides its customers with inventory management services including new product
distribution, technical purchasing, maintenance and repair management,
consignment marketing and purchase/leaseback of technical spares inventory. AHI
also pursues opportunities involving the purchase, sale and lease of jet turbine
engines, jet turbine aircraft and related aviation industry equipment.
Industry Overview
According to industry estimates, the annual worldwide market for
aircraft spare parts is approximately $10.2 billion, of which approximately $2.0
billion reflects annual sales of aircraft spare parts in the redistribution
market. The redistribution market is highly fragmented, with a limited number of
large, well-capitalized companies selling a broad range of aircraft spare parts,
and many smaller competitors servicing particular segments of the aircraft spare
parts industry. Management of the Company and AHI believes that significant
trends affecting the aircraft spare parts market will increase AHI's overall
size and at the same time eliminate some market participants and cause
consolidation in the industry due to the inability of some participants to
compete efficiently. These trends are:
Growth in Market for Aircraft Spare Parts
According to Boeing's Market Outlook (the "Boeing Report"), the worldwide
fleet of commercial passenger airplanes is expected to double from 11,066
airplanes at the end of 1995 to 26,200 airplanes by 2017. The Boeing Report also
projects that cargo jet aircraft will increase from 1,219 airplanes in 1995 to
2,260 airplanes by 2015. Seventy percent of the airplanes delivered to cargo
operators are expected to be used aircraft which were converted from commercial
passenger service. Further, the number of planes in service for more than 10
years is continuing to increase, and these older planes are the primary market
for redistributors. Finally, cost considerations are forcing many airlines and
repair and maintenance facilities to utilize aircraft spare parts sold by
redistributors, instead of purchasing new parts for inventory. Management
believes that all of these factors will increase the demand for aircraft spare
parts from the redistribution market.
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Increased Outsourcing of Inventory Management Function
Airlines incur substantial expenditures in connection with fuel, labor
and aircraft ownership. Further, during the last decade, airlines have come
under increasing pressure from consumers to reduce the costs associated with
providing air transportation services. Although several of the expenditures
required to operate an airline are beyond the direct control of airline
operators (e.g., the price of fuel and labor costs), management believes that
obtaining replacement parts from the redistribution market and outsourcing
inventory management functions are areas in which airlines can manage these
functions with less expense and greater efficiency.
Increasing Emphasis on Traceability
Due to concerns regarding unapproved aircraft spare parts, regulatory
authorities have increased the level of documentation which must be maintained
on aircraft and engine spare parts. This requirement has, in turn, been extended
by end-users to the vendors of the parts. The sophistication required to track
the history of an inventory consisting of thousands of aircraft spare parts is
considerable and has required companies to invest significantly in information
systems technology.
Increased Consignment
Certain of AHI's customers adjust inventory levels on a periodic basis
by disposing of excess aircraft spare parts. Traditionally, larger airlines have
used internal personnel to manage such dispositions. Management believes that
major airlines and other owners of aircraft spare parts, in order to concentrate
on their core businesses and to more effectively redistribute their excess parts
inventories, are increasingly entering into long-term consignment agreements
with redistributors. By consigning inventories to a redistributor such as AHI,
customers are able to distribute their aircraft spare parts to a larger number
of prospective inventory buyers, allowing the customer to maximize the value of
its inventory. Consignment also enables AHI to offer for sale significant parts
inventory at minimal capital cost to AHI.
Increased Leasing
Management believes that cost considerations will result in airlines'
increased use of leasing with respect to spare parts and engines. Increased
leasing of spare parts and engines would benefit AHI by providing it with a
steady income stream over a period of time from lease payments and upon
termination of the lease, AHI would regain the part or engine for subsequent
sale. In addition, leasing arrangements may afford AHI the ability to obtain
additional financing.
Operations
AHI's core business is the buying and selling of aircraft and engine
spare parts. AHI purchases spare parts from numerous unaffiliated sources,
including airlines, original equipment manufacturers and other parts
distributors. AHI has also pursued opportunities regarding the purchase and sale
of related aviation industry equipment. In this regard, AHI acquired a 50%
interest in a DC10 flight simulator and related support package and software.
AHI also provides value-added inventory management services to its customers.
Management believes that inventory management services provide significant
opportunities for expansion of AHI's business in the future. AHI also intends to
develop business as a redistributor of turbine jet engines and become involved
in the purchase, sale and lease of jet turbine aircraft and engines.
Aircraft and Engine Spare Parts
Aircraft and engine spare parts can be categorized by their ongoing ability
to be repaired and returned to service. The general categories are as follows:
(i) rotable; (ii) repairable; and (iii) expendable. A rotable is a part which is
removed periodically as dictated by an operator's maintenance procedures or on
an "as needed" basis and is typically repaired or overhauled and re-used an
indefinite number of times. An important subset of rotables is "life limited"
parts. A "life limited" part has a predetermined designated number of allowable
flight hours and/or cycles (one take-off and landing generally constitutes one
cycle) after which it is rendered unusable. A repairable is similar to a rotable
in that its life is limited; in this case by the number of times it can be
repaired before it must be discarded. An expendable is generally a part which is
used and not thereafter repaired for further use.
Aircraft and engine spare parts are classified within the repairable
aftermarket industry as (i) factory new, (ii) new surplus, (iii) overhauled,
(iv) serviceable, and (v) as removed. A factory new or new surplus part is one
that has never been installed or used. Factory new parts are purchased from
manufacturers or their authorized distributors, aircraft
-23-
<PAGE>
manufacturers and engine manufacturers. New surplus parts are purchased from
excess stock of airlines, repair facilities or other redistributors. An
overhauled part has been completely disassembled, inspected, repaired,
reassembled and tested by a licensed repair facility. An aircraft spare part is
classified serviceable if it is repaired by an approved maintenance center and
is functional and meets any manufacturer or time and cycle restrictions
applicable to the part. A factory new, new surplus, overhauled or serviceable
part designation indicates that the part can be immediately utilized on an
aircraft. A part in "as-removed" condition requires functional testing, repair
or overhaul by a licensed facility prior to being returned to service in an
aircraft or engine.
Inventory Purchases and Sales
The daily operations of AHI encompass inventory sales, brokering and
exchanging aircraft spare parts. AHI advertises its available inventories held
for sale or exchange on the Inventory Locator Service ("ILS"), the Airline
Inventory Redistribution System ("AIRS") and BCOM electronic databases. AHI is
currently developing an internet web site that will describe in detail the parts
and services offered by AHI. Buyers of aircraft spare parts can access the ILS,
AIRS and BCOM databases and determine the companies which have the desired
inventory available. Management estimates that 25% of AHI's daily sales activity
results from an ILS, AIRS or BCOM inquiry. All major airlines and repair
agencies subscribe to one or more of these databases and accordingly, AHI
maintains continual on-line direct access with them. ILS, AIRS and BCOM do not,
however, list price information relating to particular parts. The ability to
properly evaluate and price spare parts and to predict competitive supply and
demand trends derives from management experience in the industry.
AHI typically has over 50,000 line items in stock. AHI monitors market
availability, pricing and historical data on a continuous basis. AHI sells new,
overhauled and serviceable replacement parts from its inventory and by buying
them at the request of its customers against a specific order. AHI usually
purchases parts for its own account and sells them to its customers.
For the nine months ended September 30, 1998, inventory sales, engine
sales and consignment sales accounted for 77%, 20% and 3%, of AHI's revenues,
respectively.
Inventory Management Services
AHI provides a number of inventory management services to its
customers. These services assist airlines in downsizing their inventory
management operations, thus enabling them to utilize their capital more
efficiently and reduce costs. Through the offering of various services, AHI
believes it can provide an inventory management program geared to any particular
customer's requirements. Such services are supported by AHI's operating
agreements with various airlines and independent repair agencies.
Consignment
By consigning inventories to a redistributor such as AHI, consignors
are able to distribute their aircraft spare parts to a larger number of
prospective inventory buyers, allowing the consignor to maximize the value of
its inventory. Consignment also enables AHI to offer for sale a broad range of
parts at minimal capital cost. AHI currently has several consignment agreements
in place and its revenues from consignment arrangements have accounted for
approximately 3% of net sales for the nine months ended September 30, 1998.
Management anticipates that revenues from consignments will increase as a
percentage of total revenues in the future.
Purchasing Services
AHI provides services to customers whereby it purchases spare parts for
smaller and start-up airlines. These arrangements allow AHI's customers to take
advantage of AHI's greater purchasing power, repair management services,
information systems technology, quality and logistics systems and industry
expertise.
Asian Operations
While the majority of AHI's operations are conducted in the United
States, AHI also operates in Asia and the Pacific Rim directly and through a
joint venture with a third party and a number of subsidiaries (the "Asian
Operations"). The Asian Operations currently account for approximately 20% of
AHI's gross revenues on a consolidated basis. Management intends to continue to
expand the Asian Operations. The Asian Operations are supervised by Simon
Chiang, AHI's Vice President for Asia and the Pacific Rim. From AHI's Miami
headquarters, business is conducted through a number of entities controlled by
AHI that
-24-
<PAGE>
share employees and office facilities. There are two employees in Hong Kong, one
in Shenyang and one in Beijing, and the office space in Beijing and Hong Kong is
leased by Pasco-HK. The bulk of the Asian Operations consist of business similar
to the core operations conducted by AHI in the United States and Europe.
Management intends to expand the Asian Operations to include other lines of
business related to aviation.
AHI conducts its core operations consisting of the purchase, sale and
lease of aircraft components and engines in Asia and the Pacific Rim directly
and through its majority-owned subsidiary Pasco International Aviation Corp.
Ltd., a Hong Kong corporation ("Pasco-HK"). Since its acquisition, Pasco-HK has
accounted for approximately 5.7% of AHI's gross revenues on a consolidated
basis. The following is a list of some of the major customers of Pasco-HK: Ameco
Beijing, Air China Group, China Northern Airlines Sanya Branch, China Sandong
Airlines, China Southwest Airlines, China Northwest Airlines, China Shanghai
Airlines, China Airlines-Taiwan, HAECO-HK, Cathay Pacific Airlines and Thai
Airways.
Shenyang Northern Aircraft Maintenance & Engineering Co., Ltd.
(SYNOR-A) is a Sino-American joint venture company established in November 1997
by PASCO International Aviation Corporation, Inc., a Florida corporation and a
subsidiary of AHI ("Pasco-FLA") and China Northern Airlines ("CNA"), one of the
largest airlines in China. Pasco-FLA holds a 25% interest in SYNOR-A and CNA
holds the remaining 75%. SYNOR-A mainly deals with inspection, repair and
recertification of DC9, MD80 and A300-600 components, line replacement units
(LRUs), instruments and avionics. At the same, it represents some of the world's
leading original equipment manufacturers for certain items. SYNOR-A is the first
Sino-foreign joint venture approved by the Civil Aviation Administration of
China in the avionics and accessories repair field. SYNOR-A received all
necessary licenses in November 1997 and commenced operations in March 1998.
Pasco-FLA's total financial commitment to SYNOR-A is $1,000,000. As of
February 1, 1999, AHI has funded $600,000 of this total and intends to fund the
remaining $400,000 with proceeds from the sale of the Units offered hereby and
from internal operations. Under the terms of the joint venture, Pasco-FLA is
entitled to certain preferences in any distributions of net income of SYNOR-A.
This preference effectively ensures Pasco-FLA that it will recoup its investment
in SYNOR-A prior to any regular distributions being made to CNA. Pasco-FLA's
role in SYNOR-A is to provide technological advice to SYNOR-A and to promote,
market and sell the services of SYNOR-A. Currently, SYNOR-A serves approximately
14 airlines. To date, Pasco-FLA has not received any distributions from SYNOR-A.
The initial distribution of income by SYNOR-A is expected in the second quarter
of 1999.
Pasco Financial Services Ltd., Corp., a Hong Kong corporation and
majority-owned subsidiary of AHI ("Pasco- Financial"), specializes in providing
financing from banks for airlines' aircraft and aviation-related purchases.
Pasco-Financial was recently appointed by China Southwest Airlines to act as a
financial arranger to work with banks to provide financing for three
newly-purchased Boeing B737-800 aircraft which are expected to be delivered in
1999 and 2000. Pasco-Financial has also been appointed by certain airlines to
act as their agent for the sale or lease of aircraft on behalf of such airlines.
Pasco-Financial was also invited by China Southwest Airlines to arrange the
leasing of one of their B757-200 aircraft. To date, AHI has not recognized any
revenue from Pasco-Financial.
China Airlines, located in Taipei, Taiwan, has a sophisticated, quality
conscious engine overhaul facility and aircraft maintenance center. Its
maintenance base is located in Taipei, Taiwan. Their $150 million investment in
facilities, equipment, backshops and support mechanisms was completed in 1997
and is certified by every major aviation regulatory authority in the world.
Appointed by China Airlines, Taiwan, AHI, through its majority-owned
subsidiaries, Aero-Link Flight Systems Ltd., a Hong Kong corporation, and
Aero-Link Flight System, Inc., a Florida corporation (collectively,
"Aero-Link"), acts as China Airlines' global marketing representative (except
Taiwan region) for promoting China Airlines' aircraft checks, engine repair and
overhaul as well as component repair and overhaul business and for bringing
China Airlines' technology, expertise and quality to the International Market.
To date, AHI has recognized only minimal revenue from Aero-Link.
Revolving Line of Credit
On August 12, 1998, AHI entered into a Credit Agreement with Comerica
Bank ("Comerica") whereby Comerica agreed to extend a revolving line of credit
to AHI in an amount not to exceed $3,500,000. The revolving line of credit is
intended to fund, if necessary, working capital needs, such as inventory
purchases, and, subject to Comerica's approval, strategic acquisitions. The
funds advanced to AHI by Comerica are secured by the assets of AHI and may not
at any time exceed the sum of (a) 85% of AHI's eligible accounts receivable and
(b) 35% of AHI's eligible inventory. As of March 1, 1999, AHI had an outstanding
balance due to Comerica under the revolving line of credit of approximately $1.5
million.
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<PAGE>
Strategy
Management believes that AHI can become a low cost leader in the
redistribution market, as well as in the inventory management services industry,
by combining its managerial experience with increased capital and continuing to
build upon its present operations. The essential elements of management's
business strategy are:
Internal Growth
Management's strategy is to increase AHI's operating revenues and
operating income through continued customer penetration in its existing markets
and expansion into new markets. AHI intends to achieve such growth by continuing
to increase the size and scope of its inventory and by continuing to expand its
marketing efforts worldwide. AHI will also expand its inventory management,
leasing and consignment services to allow its customers to reduce their costs of
operations by outsourcing some or all of their inventory management and supply
functions and to take advantage of opportunities to maximize the value of their
spare parts inventory. AHI seeks to establish and maintain close working
relationships with its customers and to become their vendor of choice.
Capitalize on Large Bulk Purchase Opportunities
Although opportunities to purchase large inventories in bulk in the
aircraft spare parts industry cannot be predicted, historically they become
available on a regular basis. "Bulk" purchase opportunities arise when airlines,
in order to reduce capital requirements, sell large amounts of inventory in a
single transaction or when inventories of aircraft spare parts are sold in
conjunction with asset sales or bankruptcy proceedings, or when operators
upgrade their fleet. In these situations, AHI can obtain large inventories of
aircraft spare parts at a lower cost than can ordinarily be obtained by
purchasing on an individual basis. This results generally in higher gross
margins on sales of such parts. Since inception, AHI has successfully completed
approximately eight bulk inventory purchases in excess of $100,000. Management
believes that due to the experience of AHI's management, and as a result of
additional capital, it will be able to complete an increased number of larger
bulk purchases.
Initiate Purchase and Sale of Jet Turbine Engines and Aircraft
Management believes that with sufficient financial resources, AHI would
be in a position to enter the market for the purchase and sale of jet turbine
engines and aircraft. This market is extremely competitive and capital
intensive. However, management believes that it has the expertise and industry
contacts to make prudent purchases, the key to profitability in this market.
Pursue Acquisitions of Complementary Businesses
Another element of management's strategy involves acquisitions of other
companies, assets or product lines that would complement or expand AHI's
existing aircraft spare parts redistribution and inventory management services
business. Management believes that acquisitions will enable it to achieve
economies of scale and expand the product and service lines available to its
customers. The Company and AHI are currently evaluating a number of acquisition
opportunities. No commitments or binding agreements have been entered into to
date and accordingly, no assurance can be given that any of the acquisitions
currently being considered will be consummated.
Diversification
AHI is interested in contracting with manufacturers of specialty
products that could provide diversification of AHI's product line. New product
distribution agreements will allow AHI to exploit its established network of
customers, while providing a value-added service to smaller manufacturers who
lack marketing expertise and distribution capabilities. On a cost basis, such
contracts prove to be lucrative for AHI, as it is in a position to reap residual
commissions without any of the associated product costs or liability. On January
23, 1997, AHI entered into such an agreement with Mirandy Products Ltd., a
leading manufacturer of lavatory systems cleaner for aircraft. Management feels
that distribution sales of Mirandy's latest product, "Mirabowl," will serve to
augment its existing line of products and services. Mirabowl is essentially a
lavatory system cleaner and deodorizer that has been designed for flush tank
treatment of all types. Mirandy also manufacturers "Super Vinall," a
multi-purpose aircraft wash which removes carbon and hydraulic fluid buildup
from fuselage areas, degreases aircraft parts and may be used as an interior
cleaner for the cabin area. AHI intends to begin active marketing of these
products in the near future and
-26-
<PAGE>
has not realized revenues from sales of these products to date. AHI is currently
negotiating agreements with other manufacturers whose products relate to
aircraft environmental systems and fluid processing systems.
AHI, as part of its diversification strategy, has also been awarded the
opportunity to represent six FAA/JAA approved repair stations throughout
specific areas of the world. This representation applies to component, aircraft
and engine repair services originating from various national and international
customers. Management believes that this opportunity will allow AHI to recognize
additional income, receive volume discounts on products and obtain increased
recognition in the commercial aviation community, which will enhance overall
brand awareness. Management has entered into contracts with additional
maintenance providers and intends to pursue additional relationships.
AHI is also seeking to expand its operations in Asia and the Pacific
Rim to include the arrangement of aircraft financing and leasing, aircraft
repair and maintenance coordination, technology consulting and the facilitation
of contracts and cross-border business arrangements between aviation-related
entities from different countries. See "Business - Asian Operations."
Sales and Marketing; Customers
AHI utilizes twelve inside and outside salespersons and a network of
independent representatives in its sales and marketing efforts. The respective
Directors of Sales, Marketing and New Business Development provide the synergy
and management which is responsible for obtaining new customers and maintaining
relationships with existing customers. The majority of AHI's day-to-day sales
are accomplished through AHI's inside sales force.
AHI provides sales and delivery services seven days a week, 24 hours a
day. This service is critical to provide support to airline customers which, at
any time, may have an aircraft grounded in need of a particular part. AHI's
South Florida location, with easy access to Miami International Airport and Fort
Lauderdale International Airport, assists AHI in providing reliable and timely
delivery of purchased products. This location also provides access to
exceptional import and export facilities.
AHI has over 140 customers, which include aircraft and engine
manufacturers, commercial passenger airlines, air cargo carriers, maintenance
and repair facilities, original equipment manufacturers and other aircraft parts
redistribution companies. During the nine month period ended September 30, 1998,
AHI's top 10 customers accounted for approximately 30% of net sales, and one
customer accounted for more than 20% of net sales.
Management Information System
AHI has upgraded its management information systems by acquiring
computer hardware and software. AHI's data system is being developed to
incorporate state-of-the-art records imaging, archiving, inventory and asset
management analysis, financial recordation and other support systems. Management
believes that upon full implementation of its data management system, such
system will be adequate to manage the requirements of AHI in accordance with its
forecasted growth.
Competition
The aircraft spare parts redistribution market is highly-fragmented.
Competition in the redistribution market is generally based on price,
availability of product and quality, including traceability. AHI's major
competitors include AAR Corp., Aero Controls Corp., Solair, Inc., The Memphis
Group and Aviation Sales Company. There is also substantial competition, both
domestically and overseas, from smaller, independent dealers who generally
participate in niche markets. Several of AHI's competitors have greater
financial and other resources.
The jet turbine engine and jet turbine aircraft market is currently
dominated by various financial institutions, such as GE Capital, CIT Group, and
International Lease Finance Corp. as well as the major competitors from the
spare parts redistribution market. The market also includes many smaller
entities who engage in transactions on an infrequent basis.
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<PAGE>
Government Regulation and Traceability
The FAA regulates the manufacture, repair and operation of all
aircraft, engines and aircraft and engine parts operated in the United States.
Its regulations are designed to insure that all aircraft and aviation equipment
is continuously maintained in proper condition to ensure safe operation of the
aircraft. Similar rules apply in other countries. All aircraft must be
maintained under a continuous condition monitoring program and must periodically
undergo thorough inspection and maintenance. The inspection, maintenance and
repair procedures for the various types of aircraft and equipment are prescribed
by regulatory authorities and can be performed only by certified technicians at
certified repair facilities. Certification and conformance is required before
installation of a part on an aircraft. Presently, whenever necessary with
respect to a particular part, AHI utilizes FAA and/or Joint Aviation Authority
("JAA") certified repair stations to repair and certify parts to ensure
worldwide marketability. The operations of AHI may in the future be subject to
new and more stringent regulatory requirements. In that regard, the company
closely monitors the FAA and industry trade groups in an attempt to understand
how possible future regulations might impact AHI. See "Risk Factors -- Market
Trend" and "Government Regulation."
An important factor in the aircraft and engine spare parts
redistribution market relates to the documentation or traceability that is
supplied with an aircraft or engine spare part. AHI requires all of its
suppliers to provide adequate documentation as required by the industry and the
regulatory agencies. AHI is designing its data management system to image,
capture, manage and communicate this documentation.
Employees
As of September 30, 1998, the Company, exclusive of AHI employees,
employed 1 person and AHI employed 28 persons, including two in Hong Kong, one
in Shenyang and one in Beijing. None of the Company's employees or AHI's
employees are covered by collective bargaining agreements. Management believes
that its relations with its employees are good.
Properties
The Company's executive offices and AHI's offices and warehouse
facilities are located in Miami, Florida. These facilities comprise a total of
approximately 17,600 square feet. The premises are subject to a lease, under
which AHI is the tenant, dated January 1, 1997 and subsequently amended on
November 1, 1997, which expires on December 31, 2000, at an annual rental of
$78,348 plus pass-through of (1) utilities, (2) increases in real estate taxes,
(3) assessments, (4) increases in insurance and (5) AHI's share of assessments
imposed by the industrial park's association. Rent is subject to a cost of
living increase adjustment. AHI has two additional one year options to renew.
These facilities are adequate for the present and anticipated needs of the
Company and AHI. Pasco-HK, a majority-owned subsidiary of AHI, leases office
space in Hong Kong at a monthly rental of $2,500 under a two year lease that
expires December 31, 1999. Pasco-HK also leases twenty square meters of office
space in Beijing at an annual rental of $3,600 under a three year lease that
expires November 20, 2001.
Product Liability and Legal Proceedings
AHI's business exposes it to possible claims for personal injury or
death which may result from a failure of aircraft spare parts sold by it.
Management takes what it believes are adequate precautions to ensure the quality
and traceability of the aircraft parts which it sells. AHI has a director of
quality control whose responsibilities include implementation of AHI's quality
control system and supervision of the Company's licensed airframe and powerplant
inspectors and operations personnel. AHI's President, with over 20 years of
experience in the industry, also works with the director of quality control.
Parts that require maintenance are submitted to FAA/JAA certified facilities for
overhaul and recertification as required. AHI also ensures that all parts
received or shipped are accompanied by proper documentation. The director of
quality control also supervises AHI's document traceability program. AHI does
not carry product liability insurance. See "Risk Factors -- Product Liability"
on page 12.
Neither the Company nor AHI is currently involved in any litigation.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The Directors and executive officers of the Company and AHI, their ages
and positions are set forth below:
Joseph J. Nelson...... 49 President, Chief Executive
Officer and Director of AHI
and the Company
Simon Chiang.......... 44 Vice President-Asia and
Pacific Rim Operations of AHI
and Director of AHI and the
Company
Michael J. Cirillo.... 50 Director of AHI and the Company
Theodore H. Gregor.... 47 Director of AHI and the Company
Joseph F. Janusz...... 47 Vice President-Finance and
Chief Financial Officer of AHI
Joseph J. Nelson has been President, Chief Executive Officer and a
Director of AHI since October 1996 and President, Chief Executive Officer and a
Director of the Company since August 1998. Prior to October 1996 he was Senior
Vice- President of The AGES Group, L.P. ("AGES"), responsible for the operations
of four divisions with revenues of approximately $100 million, and held other
positions with AGES since October 1990. Prior thereto, Mr. Nelson was with Ryder
Corporation attaining the position of Vice President of Sales. Mr. Nelson holds
a B.S. degree from DePaul University and an M.B.A. in Finance from Farleigh
Dickinson University.
Simon Chiang has been Vice President of Asia and Pacific Rim
Operations and a Director of AHI since February 1998 and has been a Director of
the Company since August 1998. From 1986 to 1995, Mr. Chiang was President of
Simon International Trading Corp., a company engaged primarily in the import and
export of aviation tooling. Mr. Chiang is also the founder and has served as
President of Pacific Airlines Support Corp. and of Pasco-Financial. Mr. Chiang
holds a B.A. degree from Fu Ren University, Taipei, Taiwan.
Michael J. Cirillo has been President of The D.A.R. Group, Inc.,
an investment banking firm and President of CBM Consultants, Inc., a marketing
and consulting firm since 1995. From 1987 through 1995 Mr. Cirillo was an
officer and director of Flex Resources, Inc., a temporary and permanent
employment firm. Mr. Cirillo has been a Director of AHI since June 1997 and a
Director of the Company since August 1998. Mr. Cirillo holds a B.S. degree from
Farleigh Dickinson University.
Theodore H. Gregor has been a director of AHI since October 1997
and a director of the Company since August 1998. Since 1972, he has been the
President of Aero Kool Corporation, a privately-held company engaged in business
as an FAA approved repair facility. Mr. Gregor holds a B.S. degree in Mechanical
Engineering from the University of Miami.
Joseph F. Janusz has been Vice President of Finance and Chief
Financial Officer of AHI since June 1, 1997. From March 1996 through May 1997,
he was a practicing certified public accountant. From September 1993 through
March 1996, Mr. Janusz was the Chief Financial and Operations Officer of
Homeshield Industries, Inc. a privately-held manufacturing company. Mr. Janusz
received a B.S. degree in Accounting from the University of Florida. He is a
member of the American Institute of CPAs, the Florida Institute of CPAs and is a
licensed real estate broker in Florida.
Allen Beni, who may be deemed to have been an organizer of AHI,
was the President of Florida West Airlines, Inc., which filed for bankruptcy in
the United States Bankruptcy Court for the Southern District of Florida in
September 1994.
The officers of the Company and AHI are elected by the Board of
Directors of the Company and AHI, respectively, to serve until their successors
are elected and qualified. The Directors are elected at the annual meeting of
the stockholders.
The Company's Certificate of Incorporation and Bylaws and AHI's
Certificate of Incorporation and Bylaws provide for the indemnification of, and
advancement of expenses to, directors and officers. AHI has also entered into
agreements to provide indemnification for its Directors and executive officers.
Committees
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<PAGE>
Committees
The Company's Board of Directors has not to date established any
committees. The Company's Board of Directors intends to establish an Audit
Committee in connection with the listing of its securities on the American Stock
Exchange. The Audit Committee will recommend the independent accountants
appointed by the Board of Directors to audit the financial statements of AHI,
which includes an inspection of the books and accounts of AHI, and will review
with such accountants the scope of their audit and their report thereon,
including any questions and recommendations that may arise relating to such
audit and report of the Company's and AHI's internal accounting and auditing
procedures.
Director Compensation
The Directors of the Company do not receive any compensation for
their services as Directors. The Company intends to pay directors of the Company
who are not employed by the Company a fee at the rate of $500 for each meeting
of the Board of Directors attended and $500 for each committee meeting attended.
In addition, all Directors of the Company will receive on an
annual basis stock option grants under the Stock Option Plan for serving on the
Company's Board of Directors. Options to purchase 5,000 shares of Common Stock
will be automatically granted to each Director on December 31 of each year,
starting December 31, 1999, at an option exercise price equal to the closing bid
or sales price of the Common Stock on such date. Additionally, Directors
appointed to the Board of Directors of AHI in the future will be granted options
to purchase 10,000 shares of Common Stock at an exercise price equal to the
closing bid or sales price of the Common Stock on the date of their appointment
to the Board of Directors of the Company.
Executive Compensation
The Company has not paid or accrued any compensation for any of
its executive officers during the Company's last three completed fiscal years.
The following table reflects compensation paid or accrued by AHI
and the Company during the indicated fiscal years, which end on August 31 of the
indicated year with respect to compensation paid or accrued by AHI and which end
on December 31 of the indicated year with respect to compensation paid or
accrued by the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
All other
Name and Principal Position Year Salary Bonus Other(1) Compensation
- --------------------------------- ------------- -------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Joseph J. Nelson 1998 160,000 29,999 16,670 (2) 0.00
President, Chief 1997 160,000 11,153 0.00 0.00
Executive Officer
and Director
Simon Chiang 1998 87,653 21,500 0.00 0.00
Vice President and
Director
Joseph F. Janusz 1998 78,000 14,500 62,500 (3) 0.00
Vice President- 1997 29,500 0 0.00 0.00
Finance
</TABLE>
(1) Does not include prerequisites and other personal benefits, securities or
property if the aggregate amount of such compensation for each of the
persons listed did not exceed the lesser of (i) $50,000 or (ii) ten
percent of the combined salary and bonus for such person during the
applicable year.
(2) Represents 4,000 shares of the Company's common stock granted on August 1,
1998 by the Company's Board of Directors at $4.17 per share. The shares
were issued in consideration of services rendered.
(3) Represents 25,000 shares of AHI's common stock granted on June 11, 1998 by
AHI's Board of Directors at $2.50 per share. The shares were issued by AHI
in consideration of services rendered.
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<PAGE>
The following table contains information concerning stock options granted to
officers and directors through March 1, 1999
<TABLE>
<CAPTION>
% of Total
Number of Options Exercise
Options/Warrants Granted to or Base
Name Granted Employees Price Expiration Date
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Joseph Nelson 50,000 11.9% 2.50 December 23, 2007
Joseph Nelson 200,000 47.5% 2.50 May 30, 2008
Joseph Nelson 25,000 5.9% 2.50 May 30, 2008
Joseph Janusz 20,000 4.8% 2.50 October 28, 2007
Joseph Janusz 20,000 4.8% 2.50 December 23, 2007
Joseph Janusz 15,000 3.6% 2.50 May 30, 2008
Simon Chiang 15,000 3.6% 2.50 February 11, 2008
Simon Chiang 10,000 2.4% 2.50 May 30, 2008
Theodore Gregor 10,000 2.4% 2.50 November 5, 2007
</TABLE>
The following table sets forth information regarding the number and value of
options held as of March 1, 1999 by the Directors and Officers. No options
have been exercised to date.
<TABLE>
<CAPTION>
Value of Unexercised
Number of Unexercisable Options In-the Money Options
At March 1, 1999 At March 1, 1999(1)
Name Exerciseable Unexerciseable Exercisable Unexerciseable
------------------------------------ ------------------------------------
<S> <C> <C> <C> <C>
Joseph Nelson 275,000 - 481,250.00 -
Joseph Janusz 55,000 - 96,250.00 -
Simon Chiang 15,000 10,000 26,250.00 17,500.00
Theodore Gregor 10,000 - 17,500.00 -
</TABLE>
- -------------
(1) Based on the assumed public offering price of $4.25 per share of Common
Stock.
Employment Agreements
The Company and Mr. Nelson have entered into an employment
agreement dated as of May 31, 1998 providing for Mr. Nelson's employment as
President and Chief Executive Officer of the Company. The agreement has a term
of three years and, thereafter, continues on a month-to-month basis. The
agreement provides for compensation consisting of (i) annual base compensation
of $175,000, (ii) an annual bonus equal to 3% of the pre-tax net income of the
Company (exclusive of the pre-tax net income of AHI) and 3% of the pre-tax net
income of AHI, and (iii) certain fringe and other employee benefits that are
made available to the senior executives of the Company. Pursuant to the
agreement, Mr. Nelson was granted options to purchase 200,000 shares of Common
Stock at a price of $2.50 per share. The options are fully vested and expire on
May 31, 2003. In the event of a change in control of the Company other than one
approved by the Company's Board of Directors or in the event that Mr. Nelson's
employment is terminated by the Company for any reason other than his death or
disability or for "cause" (as defined in the agreement), Mr. Nelson will be
entitled to receive a lump sum payment equal to his annual base compensation
multiplied by three. In the event of Mr. Nelson's death or disability, Mr.
Nelson or his estate shall receive Mr. Nelson's base compensation for 24 months
or the remainder of the term of the agreement, whichever is shorter.
AHI and Simon Chiang have entered into an employment agreement
dated as of February 12, 1998 providing for Mr. Chiang's employment as Vice
President of AHI. The agreement has a term of three years and thereafter
continues on a month-to-month basis. The agreement provides for compensation
consisting of (i) annual base compensation of $95,000, (ii) an annual graduated
bonus based on a percentage of AHI's net sales from business conducted within
China (0% of first $1.5 million; 1% of next $1 million; 2% of next $1.5 million;
3% of next $1.5 million; and 4% of net sales in excess of $5.5 million), and
(iii) certain fringe and other employee benefits that are made available to
similarly situated executives of AHI. Pursuant to the agreement, Mr. Chiang was
granted options, under AHI's Stock Option Plan, to purchase 15,000 shares of AHI
common stock at a price of $2.50 per share. The options vest at the rate of
5,000 per year. In the event that Mr. Chiang's employment is terminated by AHI
for any reason other than his death or disability or for "cause" (as defined in
the agreement), Mr. Chiang will be entitled to receive any bonus due to the date
of such event and his annual base compensation for the unexpired term of the
agreement. In the event of Mr. Chiang's death, his estate shall be entitled to
receive Mr. Chiang's base compensation for sixty days.
AHI and Joseph F. Janusz have entered into an employment agreement
dated as of October 13, 1997 pursuant to which Mr. Janusz serves as Chief
Financial Officer of AHI. The agreement has a term of two years and provides for
(i) annual base compensation of $78,000, (ii) an annual bonus, and (iii)
benefits consistent with AHI's then current policies and reasonable expense
reimbursement. Pursuant to the agreement, Mr. Janusz was granted, under AHI's
Stock Option Plan, options to purchase 20,000 shares of AHI Common Stock. In the
event that Mr. Janusz's employment is terminated by AHI for reasons other than
his death or permanent disability or for "cause" (as definition the agreement),
-31-
<PAGE>
Mr. Janusz will be entitled to receive his annual base compensation for 12
months or the remainder of the term of the agreement, whichever is shorter. In
the event that Mr. Janusz's employment is terminated for disability, Mr. Janusz
shall be entitled to receive his base compensation for ninety days. In the event
of Mr. Janusz's death, his estate shall be entitled to receive Mr. Janusz's base
compensation for sixty days. The agreement provides that AHI will require any
successor to all or substantially all of the business or assets of AHI to assume
AHI's obligations under the agreement.
Stock Option Plan
On September 1, 1997, the Board of Directors of AHI adopted a
Stock Option Plan which was superseded, effective March 1, 1999, by a Stock
Option Plan of the Company (the "Plan"). This Plan provides for the grant of
Incentive Stock Options, Non-qualified Stock options and Stock Appreciation
Rights to employees selected by the Board of Directors of the Company, or
Compensation Committee. The Plan also sets forth applicable rules and
regulations for stock options granted to non-employee directors. To date,
220,750 options have been granted under the Plan, replacing the same number of
options granted under the predecessor plan, including 75,000 to Mr. Nelson,
25,000 to Mr. Chiang, 10,000 to Mr. Gregor and 55,000 to Mr. Janusz. The Plan is
subject to stockholder approval and will be submitted to the stockholders at the
Company's annual meeting in 1999.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Common Stock (including common stock acquirable
within 60 days pursuant to options, warrants, conversion privileges or other
rights) of the Company as of March 1, 1999 (i) by each of the Company's
directors, (ii) all executive officers and directors as a group, and (iii) all
persons known by the Company to own beneficially more than 5% of the Company's
Common Stock.
<TABLE>
<CAPTION>
PERCENT
NAME SHARES BEFORE OFFERING AFTER OFFERING
- ---- ------ --------------- --------------
<S> <C> <C> <C>
Joseph J. Nelson (1) (2) 475,800 10.6 7.9
Joseph F. Janusz (1) (3) 55,000 1.3 1.0
Simon Chiang (1) (4) 187,123 4.2 3.1
Michael J. Cirillo (1) (5) 30,000 0.7 0.5
Theodore H. Gregor (6) 10,000 0.2 0.2
1495 Southeast 10th Avenue
Hialeach, FL 33010
APP Investments, Inc. 951,000 21.2 15.9
401 City Avenue, Suite 725
Bala Cynwyd, PA 19004
Argaman, Inc. (7) 600,000 13.3 10.0
M.S.A. Trust Company, Ltd., Co.
Daniel Frisch Street
64731 Tel Aviv, Israel
All officers and directors
as a group (2) (3) (4) (7) 782,923 17.7 13.1
</TABLE>
(1) The addresses for Messrs. Nelson Janusz, Chiang and Cirillo are c/o
Aviation Holdings Group, Inc., 15675 N.W. 15th Avenue, Miami, Florida
33169
(2) Includes 275,000 shares subject to options presently exercisable.
(3) Includes 55,000 shares subject to options presently exercisable.
(4) Includes 55,556 shares held by Ann Chiang, Mr. Chiang's wife. Also
includes 15,000 shares subject to options presently exercisable.
(5) Includes 30,000 shares of common stock owned by the D.A.R. Group, Inc. of
which Mr. Cirillo is the President.
(6) Includes 10,000 shares subject to options presently exercisable.
(7) Includes warrants to purchase 100,000 shares of common stock.
(8) Does not include exercise of the underwriter's over-allotment option.
-32-
<PAGE>
CERTAIN TRANSACTIONS
Effective October 1, 1996, AHI sold 600,000 shares of its Common Stock to
Jet Avionics Systems, Inc. ("Jet Avionics") in consideration of a promissory
note in the principal amount of $175,000, payable on demand, together with
accrued interest at the applicable federal rate. AHI also entered into a
Consignment Agreement with Jet Avionics, whereby AHI agreed to sell certain
inventory of technical spares for the benefit of AHI and Jet Avionics. The
Consignment Agreement was for a period of one year and provided for the delivery
of inventory by Jet Avionics to AHI and the storage by AHI, on a segregated
basis, of such inventory. Title to such inventory remained with Jet Avionics
until sale to a third party, at which time title passed to AHI and then to the
third party. AHI insured the inventory. The Consignment Agreement provided that
AHI retained 25% of the selling price of the inventory and remitted the balance
of 75% to Jet Avionics. Jet Avionics certified that each item of inventory
covered by the Agreement was maintained by an FAA approved source and was
properly documented. Pursuant to such Consignment Agreement, AHI sold to third
parties certain of the consignment inventory for approximately $452,000 and owed
Jet Avionics $303,000 after giving effect to a $36,000 payment.
On August 29, 1997, AHI and Jet Avionics entered into a Consignment
Cancellation and Purchase Agreement whereby (i) Jet Avionics canceled the debt
of $303,000 and (ii) AHI purchased the remaining consignment inventory with a
value of approximately $336,000 from Jet Avionics all in exchange for 230,000
shares of AHI's Common Stock, $4,000 in cash, and the cancellation of $175,000
of indebtedness of Jet Avionics to AHI. The President and sole shareholder of
Jet Avionics is Sharon Taoz, the daughter of Allen Beni. Ms. Taoz was employed
by AHI, as an account executive, from October 3, 1996 through August 31, 1997
and was paid $37,000. From October 3, 1996 through October 2, 1997, Mr. Beni
served in a non-executive capacity as Vice President of Special Projects
pursuant to an employment agreement. Mr. Beni's activities involved sales
promotion and the pursuit of inventory purchase opportunities. During this
period of time, Mr. Beni was paid $88,615 for services rendered. On October 2,
1997, Mr. Beni and AHI terminated the aforementioned employment agreement and
entered into a one (1) year Consulting Agreement. This Consulting Agreement
provided for a monthly retainer of $4,000 and a commission of 15% which may be
earned based upon sales or purchases introduced by Mr. Beni to the Company. Mr.
Beni also owns an equity interest in the lessor of the Company's facilities. See
"Management -- Directors, Executive Officers and Promoters." The Consulting
Agreement was terminated in February 1998.
On October 3, 1996, AHI sold 70,000 shares of its Common Stock to IP
Services, Inc. ("IP") for $24,510. IP is an affiliate of Howard M. Appel. During
1996 FAC Enterprises, Inc. ("FAC"), an affiliate of Mr. Appel, loaned AHI
aggregate of $325,000. During the year, AHI repaid $125,000. The balance of
$200,000 was repaid on August 29, 1997 through the issuance of 100,000 shares
of AHI Common Stock. FAC was also issued 7,500 shares for advisory services
rendered. Mr. Appel may be deemed to have been an organizer of AHI.
On November 1, 1996, AHI sold 192,000 shares of its Common Stock to Joseph
J. Nelson in consideration of a promissory note in the principal amount of
$80,000 payable on demand, which note remains outstanding. The note bears
interest at the applicable federal rate.
On November 14, 1996, AHI entered into a contract with Fersam International
Ltd. ("Fersam") for the purchase of a one-half interest in a CAE Electronics
Ltd. Sigma six (6) axis DC-10 simulator (the "DC-10 simulator"). In
consideration for the purchase of this interest, AHI paid $125,000 in cash and
issued 40,000 shares of AHI Common Stock valued at $100,000. On March 28, 1997,
AHI entered into another contract with Fersam for the purchase of one (1)
Novoview 2000 Visual Support System, Simulator Spare Parts Package and
Maintenance Training Data Package to be used in connection with the DC-10
simulator. In consideration of and as payment for the purchase of these assets,
AHI issued 200,000 shares of AHI Common Stock valued at $500,000.
On March 27, 1997, Silvertown International Corp. ("Silvertown") loaned AHI
$120,000. This loan was evidenced by a promissory note payable to Silvertown,
due on June 27, 1997, together with interest at 6% per annum. In consideration
for this unsecured loan, AHI issued to Silvertown 4,800 shares of AHI Common
Stock. This note was extended for an additional three (3) months. On May 12,
1997, Silvertown loaned AHI $250,000. This loan was evidenced by a promissory
note payable to Silvertown, due on or about July 27, 1997, together with
interest at 6% per annum. In consideration for this unsecured loan, AHI issued
to Silvertown 10,000 shares of AHI Common Stock. On August 29, 1997, AHI
satisfied the principal amounts of these promissory notes through the issuance
of 185,000 shares of AHI Common Stock to Silvertown.
-33-
<PAGE>
On May 23, 1997, Joseph Laura loaned $500,000 to AHI. This loan was
evidenced by a promissory note payable to Mr. Laura, due on the earlier of May
31, 1998 or AHI obtaining equity financing in excess of $1,000,000, together
with interest at 12% per annum. AHI satisfied the principal amount of this note
through the issuance of 250,000 shares of Common Stock to Mr.
Laura on August 29, 1997.
On May 30, 1997, The D.A.R. Group, Inc., an affiliate of Michael J.
Cirillo, a director of AHI, was issued 200,000 shares of AHI Common Stock, for
$200. On June 1, 1997, The D.A.R. Group, Inc., was issued warrants to purchase
950,000 shares of AHI Common Stock for a fee in connection with advice
concerning the formation, capitalization and structure of Schuylkill Acquisition
Corp. See "Description of Securities."
On February 12, 1998, AHI consummated a transaction whereby AHI acquired
all or a majority of the outstanding capital stock of a number of companies
controlled by Simon Chiang in return for 150,000 shares of AHI Common Stock. The
entities acquired are as follows: 100% of the capital stock of PASCO
International Aviation Corp., a Florida corporation; 90% of the capital stock of
PASCO International Aviation Corp. Limited, a Hong Kong Corporation; 80% of the
capital stock of PASCO Financial Services Limited, a Hong Kong corporation; and
100% of the capital stock of Aero-Link Flight Systems Limited, a Hong Kong
Corporation. Simultaneously with the aforementioned transactions, AHI and Mr.
Chiang entered into an employment agreement pursuant to which Mr. Chiang serves
as AHI's Vice President for Asia and the Pacific Rim Operations. See "Management
- - Employment Agreements."
On October 15, 1998, Nancy Plotkin and the John G. Jacobs Trust loaned an
aggregate of $250,000 to the Company. These loans were evidenced by promissory
notes due March 15, 1999 (subject to extension by the Company to May 15, 1999),
bear interest at 10% per annum and are secured by the pledge of 51% of the
outstanding stock of AHI. As additional consideration for the loans, the Company
issued 20,000 shares of its common stock to Nancy Plotkin and 5,000 shares of
its common stock to the John G. Jacobs Trust.
In March, 1999, the Company purchased 600,000 shares of AHI common stock
from Argaman, Inc. ("Argaman") in exchange for 500,000 shares of the Company's
common stock and a warrant to purchase an additional 100,000 shares at an
exercise price of $3.75 per share.
DESCRIPTION OF SECURITIES
General
The Company is authorized to issue 20,000,000 shares of Common Stock,
$.0001 par value per share, of which 3,974,815 shares were outstanding as of
March 1, 1999. An additional 750,000 shares of Common Stock are reserved for
issuance pursuant to the Company's Stock Option Plan.
Within the limits and restrictions contained in the Certificate of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 2,000,000 shares of Preferred Stock, $.0001
par value per share (the "Preferred Stock"), in one or more series, and to fix,
as to any such series, the dividend rate, redemption prices, preferences on
liquidation or dissolution, sinking fund terms, if any, conversion rights,
voting rights, and any other preferences or special rights and qualifications.
As of the date hereof, the Company has no Preferred Stock issued and
outstanding.
Shares of Preferred Stock issued by the Board of Directors could be
utilized, under certain circumstances, to make an attempt to gain control of the
Company more difficult or time consuming. For example, shares of Preferred Stock
could be issued with certain rights which might have the effect of diluting the
percentage of Common Stock owned by a significant stockholder or issued to
purchasers who might side with management in opposing a takeover bid which the
Board of Directors determines is not in the best interests of the Company and
its stockholders. This provision may be viewed as having possible anti-takeover
effects. A takeover transaction frequently affords stockholders the opportunity
to sell their shares at a premium over current market prices. The Board of
Directors has not authorized any series of Preferred Stock, and there are no
agreements, understandings or plans for the issuance of any Preferred Stock.
-34-
<PAGE>
Units
Each Unit offered hereby consists of two shares of Common Stock. The two
shares of Common Stock that make up each unit may not be separated or sold
separately until twelve months after the date of issuance by the Company.
Common Stock
Holders of Common Stock have equal rights to receive dividends when, as and
if declared by the Board of Directors, out of funds legally available therefor.
Holders of Common Stock have one vote for each share held of record and do not
have cumulative voting rights.
Holders of Common Stock are entitled upon liquidation of the Company to
share ratably in the net assets available for distribution, subject to the
rights, if any, of holders of any preferred stock then outstanding. Shares of
Common Stock are not redeemable and have no preemptive or similar rights. All
outstanding shares of Common Stock are fully paid and non-assessable.
Outstanding Warrants
Certain warrants to purchase 1,000,000 shares of AHI common stock (the "AHI
Warrants") were issued in June 1, 1997 in connection with the organization of
AHI, including warrants to purchase 950,000 shares issued to D.A.R. Group, Inc.,
of which Michael J. Cirillo is the principal. Each Warrant entitles the holder
to purchase one share of AHI Common Stock at an exercise price of $4.50 until
June 30, 2002. The Warrants are redeemable by AHI at $.05 upon the occurrence of
both of the following events: (a) the listing of the AHI's shares of common
stock on a securities exchange and (b) AHI's common stock trading in excess of
$5.25 per share for a ten day period.
On March 4, 1999, the Company issued to Argaman, Inc. a warrant (the "AHG
Warrant') to purchase up to 100,000 shares of the Company's Common Stock at an
exercise price of $3.75 per share until March 4, 2002.
The AHI Warrants and the AHG Warrant provide for adjustment of the exercise
price and for a change in the number of shares issuable upon exercise to protect
holders against dilution in the event of a stock dividend, stock split,
combination or reclassification of AHI or AHG Common Stock, as the case may be.
The AHI Warrants and the AHG Warrant may be exercised upon surrender of the
Warrant Certificate on or prior to the expiration date (or earlier redemption
date) of such warrant at the offices of AHI's or AHG's transfer agent, as the
case may be, with the form of "Election to Purchase" completed and executed as
indicated, accompanied by payment of the full exercise price (by certified or
bank check, payable to the order of AHI) for the number of shares with respect
to which the warrant is being exercised. Shares issued upon exercise of warrants
and paid for in accordance with the terms of the warrants will be fully paid and
nonassessable.
The warrants do not confer upon the holder thereof any voting or other
rights of a stockholder.
Transfer Agent
StockTrans, Inc., 7 East Lancaster Avenue, Ardmore, Pennsylvania 19003,
serves as transfer agent for the Common Stock of AHI and the Company.
-35-
<PAGE>
UNDERWRITING
Silver Capital Group, a division of LCP Capital (the "Underwriter") has
agreed, subject to the terms and conditions contained in an underwriting
agreement (the "Underwriting Agreement") to purchase from the Company the
750,000 Units offered hereby at the offering price less the underwriting
discount set forth on the cover page of the Prospectus. The Units being offered
for sale by the Company are hereinafter sometimes referred to as the
"Securities." The Underwriter is committed to purchase all of such Securities,
if any are purchased.
The Underwriter has advised the Company that it proposes to offer the
Securities to the public at the public offering prices set forth on the cover
page of this Prospectus, and to certain securities dealers at such price less a
concession of not more than $_____ per Unit, and that the Underwriter and such
dealers may reallot to other dealers, including the Underwriter, a discount not
in excess of $_______ per Unit. After this offering, the public offering price
and concessions and discounts may be changed by the Underwriter. No reduction in
such terms will change the amount of proceeds to be received by the Company as
set forth on the cover page of this Prospectus.
The Company has granted an option to the Underwriter, exercisable for a
period of 30 days after the date of this Prospectus, to purchase up to an
additional 75,000 Units from the Company at the public offering prices set forth
on the cover page of this Prospectus less the underwriting discounts and
commissions. The Underwriter may exercise this option only for the purpose of
covering over-allotments, if any.
The Underwriting Agreement provides that the Company will indemnify the
Underwriter against certain liabilities, including liabilities under the
Securities Act, or will contribute to payments the Underwriter may be required
to make in respect thereof.
The Company, its executive officers and Directors have agreed not to,
directly or indirectly, offer, sell, offer to sell, contract to sell, pledge,
grant any option to purchase or otherwise sell or dispose (or announce any
offer, sale, offer of sale, contract of sale, pledge, grant of any option to
purchase or other sale or disposition) of any shares of Common Stock, Units or
other capital stock of the Company or any securities convertible into, or
exercisable or exchangeable for, any shares of Common Stock or other capital
stock of the Company or any right to purchase or acquire Common Stock or other
capital stock of the Company for a period of 360 days after the date of this
Prospectus without the prior written consent of the Underwriter, except for
options granted pursuant to the Company's Stock Option Plan. The Underwriter
may, in its sole discretion, at any time and without prior notice, release all
shares or any portion thereof subject to such lock-up agreements.
The public offering prices for the Common Stock and the Units have been
determined through negotiations between the Company and the Underwriter. Among
the factors considered in making such determination will be prevailing market
conditions, the Company's financial and operating history and condition, its
prospects and the prospects of the industry in general, the management of the
Company, and the market prices of securities for companies in businesses similar
to that of the Company. The offering prices of the Securities do not necessarily
bear any relationship to the assets, book value, net worth or earnings history
of the Company. The offering price of the Securities should not necessarily be
considered an indication of the actual value of the Securities.
In connection with the offering of the Securities, the Underwriter and its
affiliates may engage in transactions that stabilize, maintain or otherwise
affect the market price of the Common Stock or the Units. Such transactions may
include stabilization transactions effected in accordance with Rule 104 of
Regulation M, pursuant to which such persons may bid for or purchase Common
Stock for the purpose of stabilizing its market price. The Underwriter also may
create a short position for the account of the Underwriter by selling more
Common Stock in connection with the offering than they are committed to purchase
from the Company, and in such case may purchase Common Stock in the open market
following completion of the offering to cover all or a portion of such short
position. The Underwriters may also cover all or a portion of such short
position, up to 75,000 shares of Common stock, by exercising the Underwriter's
over-allotment option referred to previously. Any of the transactions described
in this paragraph may result in the maintenance of the price for the Common
Stock or the Units at a level above that which might otherwise prevail in the
open market. None of the transactions described in this paragraph are required
and, if they are undertaken, then they may be discontinued at any time.
The Underwriter has been actively engaged in the securities brokerage and
investment banking business since _____________. However, the Underwriter has
engaged in only limited underwriting activities, and the Underwriter has not
previously been a lead underwriter in any public offerings. Accordingly, there
can be no assurance that the Underwriter's lack
-36-
<PAGE>
of public offering experience will not affect the proposed public offering of
the Units or the Common Stock or the subsequent development of a trading market
for the Common Stock. Therefore, purchasers of the units or shares of common
stock offered hereby may suffer a lack of liquidity in their investment or a
material diminution of the value of their investments. See "Risk Factors - Risks
Related to the Offering - Underwriter's Limited Underwriting Experience."
LEGAL MATTERS
The validity of the Common Stock offered hereby will passed upon for the
Company by Klehr, Harrison, Harvey, Branzburg & Ellers LLP, Philadelphia,
Pennsylvania, and for the Underwriter by ___________________.
EXPERTS
The financial statements of the Company for the fiscal year ended December
31, 1997 included in this Prospectus have been audited by L J Soldinger
Associates certified public accountants, and are included herein in reliance
upon the authority of said firm as experts on accounting and auditing.
-37-
<PAGE>
Aviation Holdings Group, Inc.
(A Development Stage Entity)
Financial Statements and
Independent Auditors' Report
Years Ended December 31, 1997 and 1996
<PAGE>
Aviation Holdings Group, Inc.
INDEX TO THE FINANCIAL STATEMENTS
Page
AVIATION HOLDINGS GROUP, INC. FINANCIAL STATEMENTS
Independent Auditors' Report F2
Consolidated Balance Sheets as of December 31, 1997
and September 30, 1998 (Unaudited) F3
Consolidated Statements of Operation for the Years
Ended December 31, 1996 and 1997 and for the
Nine Months Ended September 30, 1997 and 1998 (Unaudited) F5
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1996 and 1997 and for the
Nine Months Ended September 30, 1998 (Unaudited) F6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996 and 1997 and for the Nine Months Ended
September 30, 1997 and 1998 (Unaudited) F7
Notes to Financial Statements F9
JET AVIATION TRADING, INC.
Independent Auditors' Report F23
Balance Sheet as of August 31, 1997 F24
Statement of Income, October 3, 1996 (Date of Inception)
to August 31, 1997 F25
Statement of Changes in Stockholders' Equity, October 3, 1996
(Date of Inception) to August 31, 1997 F26
Statement of Cash Flows October 3, 1996 (Date of Inception)
to August 31, 1997 F27
Notes to Financial Statements F28
UNAUDITED AVIATION HOLDINGS INTERNATIONAL, INC. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet as of May 31, 1998 F36
Condensed Consolidated Statements of Operations and
Accumulated Deficit For the Periods October 3, 1996
(Date of Inception) Through May 31, 1997 and the Nine Months
Ended May 31, 1998 F38
Condensed Consolidated Statements of Cash Flows For the Periods
October 3, 1996 (Date of Inception)Through May 31, 1997 and
the Nine Months Ended May 31, 1998 F39
Notes to Interim Financial Statements F40
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED
FINANCIAL STATEMENTS
Pro Forma Condensed Consolidated Combined Statement of
Operations for the Year Ended December 31, 1997 P2
Pro Forma Condensed Consolidated Combined Statement of
Operations for the Nine Months Ended September 30, 1998 P3
Notes to Unaudited Pro Forma Condensed Consolidated
Combined Financial Statements P4
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Aviation Holdings Group, Inc.
Bala Cynwyd, PA
We have audited the accompanying consolidated balance sheet of Aviation Holdings
Group, Inc. (the "Company") as of December 31, 1997, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended December 31, 1997 and 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Aviation Holdings
Group, Inc. as of December 31, 1997, and the consolidated results of its
operations, changes in stockholders' equity and cash flows for the years ended
December 31, 1997 and 1996 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As more fully discussed in Note 3 to
the financial statements, the Company's dependence on outside financing and its
inability to consummate a business combination to date raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
L J SOLDINGER ASSOCIATES
Arlington Heights, Illinois
February 25, 1998
(except for Note 5 as to which
the date is May 21, 1998 and
Note 14 as to which the date
is August 31, 1998)
F-2
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
-------------- ---------------
(Unaudited)
<S> <C> <C>
Current Assets
Cash $ 2,175 $ 254,994
Trade receivables (Net of allowance for doubtful
accounts of $151,000 on September 30, 1998) - 2,636,964
Inventory - 2,718,381
Interest receivable 6,740 -
Interest receivable from stockholder - related party - 19,951
Prepaid expenses 2,957 191,104
Deferred tax benefit - 4,000
-------- ----------
Total Current Assets 11,872 5,825,394
-------- ----------
Property and Equipment, Net - 288,591
-------- ----------
Other Assets
Investment in joint venture - 417,434
Deposits - 17,382
Note receivable (Net of valuation allowance of $0 at
December 31 and $593,410 at September 30) 940,000 940,000
Intangibles - 360,162
Deferred offering costs 10,673 55,000
-------- ----------
Total Other Assets 950,673 1,789,978
-------- ----------
Total Assets $962,545 $7,903,963
======== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
F-3
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, September 30,
1997 1998
-------------- ---------------
(Unaudited)
<S> <C> <C>
Short-term borrowings - bank $ - $ 675,000
Current portion of long-term debt - 3,223
Accounts payable - 2,220,246
Advances from stockholders - 841,737
Advances from stockholder - related party - 42,493
Accrued expenses 8,000 312,791
Accrued offering costs 40,000 -
-------- ----------
Total Current Liabilities 48,000 4,095,490
-------- ----------
Noncurrent Liabilities
Long-term debt, net of current portion - 14,034
Deferred income taxes - 2,000
-------- ----------
Total Noncurrent Liabilities - 16,034
-------- ----------
Total Liabilities 48,000 4,111,524
-------- ----------
Minority Interest - 1,079,852
-------- ----------
Commitments and Contingencies
Stockholders' Equity
Preferred stock; no par value; At December 31, 1997
authorized - 20,000,000 shares; issued - none.
At September 30, 1998 authorized -2,000,000; issued - none.
Common stock; $.0001 par value; At December 31, 1997 authorized -
150,000,000 shares; issued and outstanding - 2,350,000 shares
At September 30, 1998 authorized - 18,000,000 shares; issued
and outstanding - 3,449,815. 235 345
Additional paid-in capital 1,009,617 3,939,277
Less subsidiary stock subscription receivable - related parties - (280,000)
Accumulated deficit (95,307) (947,035)
-------- ----------
Total Stockholders' Equity 914,545 2,712,587
-------- ----------
Total Liabilities and Stockholders' Equity $962,545 $7,903,963
======== ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
F-4
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
-------------------------------- ------------------------------
1996 1997 1997 1998
--------- --------- -------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales $ - $ - $ - 5,094,931
Cost of Goods Sold - - - 3,898,257
-------- ---------- -------- ---------
Gross Profit - - - 1,196,674
-------- ---------- -------- ---------
Operating Expenses
Salaries and wages - - - 532,950
General and administrative - 15,950 8,125 1,157,850
Professional fees - 48,227 - 408,713
-------- ---------- -------- ---------
Total Operating Expenses - 64,177 8,125 2,099,513
-------- ---------- -------- ---------
Loss from Operations - (64,177) (8,125) (902,839)
Other Income - 6,740 - 65,786
-------- ---------- -------- ---------
Loss Before Income Taxes and Minority Interest - (57,437) (8,125) (837,053)
-------- ---------- -------- ---------
Income Tax (Expense) Benefit
Current - - - 62,354
Deferred - - - (73,889)
-------- ---------- -------- ---------
Total Income Tax Expense - - - (11,535)
-------- ---------- -------- ---------
Loss Before Minority Interest - (57,437) (8,125) (848,588)
Minority Interest - - - (3,140)
-------- ---------- -------- ---------
Net Loss $ - $ (57,437) $ (8,125) $(851,728)
======== ========== ======== =========
Basic and Diluted Loss Per Common Share $ - $ (0.06) $ (0.01) $ (0.29)
======== ========== ======== =========
Weighted Average Number of Common Shares
Outstanding: 637,000 1,046,235 805,498 2,889,299
======== ========== ======== =========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
F-5
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock Additional Stock
--------------------- Paid-In Subscription Accumulated
Shares Amount Capital Receivable Deficit
--------- ------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Balances as of December 31, 1995 637,000 $ 64 $ 30,599 - $ (37,870)
Net loss - - - - -
--------- ---- ---------- --------- ---------
Balances as of December 31, 1996 637,000 64 30,599 - (37,870)
Common stock issued for services -
related party 1,000,000 100 900 - -
Cancellation of common stock (87,000) (9) 9 - -
Common stock issued for cash 800,000 80 999,920 - -
Liabilities paid or forgiven by
stockholder - related party - - 24,332 - -
Offering costs - - (46,143) - -
Net loss - - - - (57,437)
--------- ---- ---------- --------- ---------
Balances as of December 31, 1997 2,350,000 235 1,009,617 - (95,307)
Common stock issued in the Aviation
Holdings, International Inc.
acquisition 1,095,815 110 2,912,990 - -
Stock subscription receivable from officers
subsidiary stock - related parties - - - (280,000) -
Common stock issued to officer -
related party 4,000 - 16,670 - -
Net loss - - - - (851,728)
--------- ---- ---------- --------- ---------
Balances as of September 30, 1998
(unaudited) 3,449,815 $345 $3,939,277 $(280,000) $(947,035)
========= ==== ========== ========= =========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
F-6
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
-------------------------------- -----------------------------
1996 1997 1997 1998
-------------- -------------- -------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net Loss $ - $(57,437) $(8,125) $(851,728)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Common stock issued for services - related parties - 1,000 1,000 32,295
Minority interest - - - 3,140
Earnings of joint venture - - - (5,057)
Depreciation and amortization - - - 28,023
Provision for bad debts - - - 632,410
Reserve for obsolete inventory - - - 39,000
Liability paid on behalf of Company by
stockholder - related party - 10,000 - -
Liability forgiven by stockholder - related party - 14,332 - -
Expensed deferred acquisition costs - - - 10,673
Deferred income taxes - - - 120,000
Change in assets and liabilities - - - -
Increase in
Trade receivables - - - (684,664)
Inventory - - - (84,046)
Interest receivable - (6,740) - (58,475)
Prepaid expenses - (2,957) - (138,472)
Increase (decrease) in
Due to stockholder - related party - (7,207) 7,125 -
Accounts payable - - - 257,820
Accrued expenses - 8,000 - (156,916)
Income taxes payable - - - (25,000)
---------- -------- ------- ---------
Total Adjustments - 16,428 8,125 (29,269)
---------- -------- ------- ---------
Net Cash Used in Operating Activities - (41,009) - (880,997)
---------- -------- ------- ---------
Cash Flows from Investing Activities
Note receivable - (940,000) - (535,100)
Purchases of equipment - - - (55,830)
Investment in subsidiary - - - (100,000)
Cash acquired in Aviation Holdings International
Inc. acquisition - - - 582,435
Investment in joint venture - - - (200,000)
Payments for deferred acquisition costs - (10,673) - -
---------- -------- ------- ---------
Net Cash Used in Investing Activities - (950,673) - (308,495)
---------- -------- ------- ---------
</TABLE>
The accompanying notes are an integral
part of the financial statements.
F-7
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
-------------------------------- -----------------------------
1996 1997 1997 1998
-------------- -------------- -------------- ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows From Financing Activities
Proceeds from bank line of credit $ $ $ - $ 675,000
Principal payments on long-term debt - - - (1,409)
Payments for deferred offering costs - - - (55,778)
Advances from stockholders - - - 824,498
Proceeds from sale of stock, net of
offering costs paid in 1997 - 993,857 - -
---------- -------- ------- ---------
Net Cash Provided by Financing Activities - 993,857 - 1,442,311
---------- -------- ------- ---------
Net Increase in Cash - 2,175 - 252,819
Cash, Beginning of Period - - - 2,175
---------- -------- ------- ---------
Cash, End of Period $ - $ 2,175 $ - $ 254,994
========== ======== ======= =========
Cash Paid for Interest and Income Taxes
Interest - - - 2,992
========== ======== ======= =========
Income Taxes - - - 20,815
========== ======== ======= =========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
F-8
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 1 - DESCRIPTION OF THE BUSINESS
Aviation Holdings Group, Inc., together with its subsidiaries, is hereinafter
referred to as the "Company." Aviation Holdings Group, Inc. (formerly EYEQ
Networking, Inc.) was incorporated under the laws of the State of Colorado on
May 19, 1988 and reincorporated in the State of Delaware in January 1998 (see
Notes 14 and 15). The Company was initially intended to serve as a public shell
company, defined as an inactive, publicly quoted company with nominal assets and
liabilities. It was intended that such a public shell would be attractive to
privately-held companies interested in becoming publicly traded by means of a
business combination with the Company rather than by offering their own
securities to the public.
The Company entered into a letter agreement dated November 20, 1997, pursuant to
which the Company intended to merge with Environmental Waste Solutions, Inc.
("EWS"), a Nevada corporation, whereby the Company would have remained as the
surviving entity (see Notes 3, 4 and 5). EWS was formed for the purpose of
serving as a holding company for operating subsidiaries which were to be
acquired and which engage in waste recycling and disposal. EWS failed to acquire
the operating subsidiaries and on June 2, 1998 the Company exercised its option
to terminate the letter agreement.
The Company's financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles, and have
been presented on a going concern basis which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business (see
Note 3). In order to commence a business activity the Company will need to
consummate a business combination, start a business or enter into a joint
business venture. It is likely that the Company will also need to raise
additional capital. No assurance can be given that the Company will be able to
enter into or complete any of the aforementioned activities or be profitable in
the future even if one or more of these activities are successfully completed.
During the period May through July 1998 the Company acquired 74.08% of Aviation
Holdings International, Inc. ("AHI") (formerly Jet Aviation Trading, Inc.)
through common stock share exchanges and by a block purchase of common stock
(see Note 9). AHI has two wholly-owned subsidiaries - PASCO International
Aviation Corp., a Florida corporation ("PASCO Florida") and Aero-Link Flight
Systems Limited, a Hong Kong corporation ("Aero HK") and two majority-owned
subsidiaries - PASCO International Aviation Corporation Limited, a Hong Kong
corporation ("PASCO HK") of which it owns 90% and PASCO Financial Services
Limited, a Hong Kong corporation ("PASCO Financial HK") of which it owns 80%.
AHI acquired its interests in these subsidiaries in February 1998. (PASCO
Florida, PASCO HK, PASCO Financial HK and Aero HK are sometimes hereinafter
referred to collectively as "PASCO"). Subsequent to its initial stock
acquisition of AHI the Company changed its name from EYEQ Networking, Inc. to
Aviation Holdings Group, Inc.
The nature of operations for each entity is as follows:
AHI is in the business of buying, selling, leasing and exchanging spare
parts for fixed-wing commercial jet transport aircraft.
PASCO HK operations consist of purchasing, selling and leasing of
aircraft components and engines in Asia and the Pacific Rim.
PASCO Florida holds a 25% interest in Shenyang Northern Aircraft
Maintenance & Engineering Co., Ltd. (SYNOR-A), a Sino-American joint
venture. The Company has recognized minimal revenue from PASCO Florida
as of September 30, 1998.
F-9
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 1 - DESCRIPTION OF THE BUSINESS (Continued)
PASCO Financial HK's objective is to procure financing from banks on
behalf of airlines for their aircraft and aviation-related purchases.
PASCO Financial HK also intends to function on behalf of certain
airlines and act as their agent in connection with the sale or lease of
aircraft. The Company had not recognized any revenue from PASCO
Financial HK as of September 30, 1998.
Aero HK and its wholly-owned subsidiary Aero-Link Flight Systems, Inc.,
a Florida Corporation ("AERO Florida"), (collectively, "Aero-Link")
have entered into an agreement to act as the global marketing
representative (except the Taiwan region) for China Airlines, Taiwan.
In this capacity they are responsible for promoting and marketing China
Airlines' aircraft maintenance, turbine engine and component repair and
overhaul business. AERO Florida also functions as a purchasing agent in
the United States on behalf of PASCO HK. The Company has recognized
minimal revenue from Aero-Link as of September 30, 1998.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Development Stage Enterprise
The Company is a Development Stage Enterprise, as defined in Statement of
Financial Accounting Standards No. 7 ("SFAS No. 7") "Accounting and Reporting
for Development Stage Enterprises." Under SFAS No. 7, certain additional
financial information is required to be included in the financial statements
which would normally be presented from the inception of the Company to the
current balance sheet date. However, Footnote 7 of SFAS No. 7 provides that
dormant enterprises which commence development stage activities should disclose
the required cumulative financial information from the inception of the
development stage. The Company started development stage activities in 1997 by
raising capital through a private placement offering in order to actively pursue
a merger with EWS (see Notes 1 and 4) as well as pursue other potential business
combinations. The Company ceased being in the development stage in 1998 upon the
acquisition of a majority interest in AHI.
Interim Consolidated Financial Statements
The interim consolidated financial data as of September 30, 1998 and for the
nine months ended September 30, 1998 and 1997 is unaudited. The information
reflects all adjustments, consisting only of normal recurring adjustments, that
in the opinion of management, are necessary to present fairly the financial
position and results of operations of the Company for the periods indicated.
Results of operations for the interim periods are not necessarily indicative of
the results of operations for a full fiscal year.
The accompanying unaudited consolidated interim financial statements include the
accounts of the Company and its 74.08% owned subsidiary, AHI. The operations of
AHI have been included in these interim consolidated financial statements since
the initial date of acquisition (May 1998), ratably based on the percentage of
ownership of AHI. The accounts of AHI included all its majority and wholly-owned
subsidiaries. Significant intercompany accounts and transactions have been
eliminated. The outside investors' interests have been recorded as minority
interest.
AHI maintains its accounting records on a fiscal year basis ending on August 31.
AHI's accounting records have been restated to a calendar year basis for
consolidation purposes. AHI intends to change its reporting to a calendar year
basis beginning on January 1, 1999.
For comparability purposes, the 1997 figures have been reclassified where
appropriate to conform with the financial statement presentation used in 1998.
F-10
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and the accompanying
notes. Actual results could differ from those estimates.
Loss Per Share
Loss per share is calculated in accordance with Statement of Financial
Accounting Standard No. 128 "Earnings Per Share" ("SFAS 128"). Basic loss per
share is computed based upon the weighted average number of shares of common
stock outstanding for the period and excludes any potential dilution. Diluted
earnings per share reflect potential dilution from the exercise of conversion of
securities into common stock.
Options and warrants to purchase common stock and convertible preferred stock
are not included in the computation of diluted loss per share because the effect
of including those instruments would be antidilutive for the periods presented.
At September 30, 1998 the potentially issuable common stock shares arising from
these instruments amounted to 200,000 shares. These shares were issuable in
connection with the stock options granted to the president of the Company as
part of his employment agreement (see Note 15).
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid instruments purchased with a maturity of three months or less to be cash
equivalents.
Credit Risk
The Company provides credit in the normal course of business and performs
ongoing credit evaluations of its customers while maintaining a provision for
potential credit losses which, when realized, have been within the range of
management's expectations.
Revenue and Cost Recognition
Revenue and the associated cost of sales are recognized when parts are shipped
to the customer. Amounts received or paid in advance are recorded as deferred
income or prepaid and are recognized in the period in which the parts are
shipped or received. Revenue and the related cost of consigned inventory are
recognized when the parts are shipped to the customer.
Inventories
Inventory is stated at the lower of cost or market. Cost of aircraft parts is
determined on a specific identification basis. When parts are purchased in lots,
costs are assigned to individual parts or the individual parts are expensed at a
predetermined percentage of the sales price until the cost of the lot is
recovered. Costs to repair, inspect and/or modify the parts are charged to the
specific part when incurred. Inventories held by the Company on consignment from
others are not included in the inventory in the accompanying financial
statements. Provisions have been made for the estimated effect of excess and
obsolete inventories. The allowance for excess and obsolete inventories at
September 30, 1998 was approximately $193,000. Such allowance was based on
management's best estimate, which is subject to change. Actual results could
significantly differ from this estimate.
F-11
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Risks Regarding Inventory
Inventory consists principally of overhauled, serviceable, repairable and new
aircraft parts that are purchased from many sources. Before parts may be
installed in aircraft, they must meet certain standards of condition established
by the Federal Aviation Administration ("FAA") and/or the equivalent regulatory
agencies in other countries. Specific regulations vary from country to country,
although regulatory requirements in other countries generally coincide with FAA
requirements. Parts owned or acquired by the Company may not meet applicable
standards or standards may change in the future, causing parts which are already
contained in the Company's inventory to be scrapped or modified.
Aircraft manufacturers may also develop new parts to be used in lieu of parts
already contained in the inventory. In all such cases, to the extent that such
parts are included in inventory, the value of such parts may be reduced.
Consignment Inventory
The Company currently maintains consignment inventories and its revenues from
consignment arrangements accounted for approximately 3% of net sales for the
period ended September 30, 1998. Consignment inventory is not included in
inventory amounts.
Deferred Offering Costs
Deferred offering costs consist of amounts paid or accrued for professional
fees, commissions, filing fees and other costs incurred by the Company in
connection with the filing of its registration statement with the Securities and
Exchange Commission for a public offering. These amounts will be recorded as a
reduction of the proceeds when the offering is completed. If the offering is not
completed, the costs will be expensed.
Property and Equipment
Property and equipment are recorded at cost. Property and equipment are
depreciated using the straight-line method over their estimated useful lives
ranging from five to seven years. Leasehold improvements are amortized over the
shorter of their useful lives or the remaining periods of the related leases.
Intangibles
Intangibles consist of goodwill. Goodwill which originated from the PASCO
acquisition is being amortized over fifteen years using the straight-line
method.
Fair Value of Financial Instruments
The carrying value of accounts receivable, accounts payable, accrued expenses
and accrued offering costs approximates the fair market value due to the
relatively short maturity of these instruments.
Segment Information
The Company did not have an industry segment in 1997. Upon acquiring a majority
interest in AHI in 1998 the Company became a supplier, distributor and broker of
commercial aircraft technical spares for commercial airlines worldwide.
The information with respect to revenue, by geographic area, is presented in the
table below for the period from May 1998, when the Company acquired a
controlling interest in AHI, through September 30, 1998.
F-12
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
May - Sept.
1998
---------------
(Unaudited)
United States $2,576,249
Africa and Middle East 61,659
Europe 552,579
Latin America 79,037
Asia 1,825,407
---------------
Total $5,094,931
===============
Income Taxes
The Company accounts for its income taxes under Statement of Financial
Accounting Standard No. 109 ("SFAS 109"), "Accounting for Income Taxes." Income
taxes are recorded in the period in which the related transactions have been
recognized in the financial statements, net of the valuation allowances which
have been recorded against deferred tax assets. Deferred tax assets and/or
liabilities are recorded for the expected future tax consequences of temporary
differences between the tax basis and the financial reporting of assets and
liabilities. At December 31, 1997, deferred tax assets, relating primarily to
the benefits of operating loss carryforwards, have been offset by a valuation
reserve, because future utilization of these assets cannot be determined.
Compensatory Stock-Based Arrangements
Management has elected to utilize the guidelines of Accounting Principles Board
Opinion No. 25 to account for the value of stock-based compensation arrangements
that will be entered into by the Company in exchange for services performed by
employees.
Subsequent Accounting Pronouncements Implementation
During June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components. The reporting
and display requirements of SFAS No. 130 are effective for fiscal years
beginning after December 15, 1997. The Company implemented this statement
commencing in 1998 but it had no effect on the Company's financial statements.
The Financial Accounting Standards Board recently issued Statement of Financial
Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS 131 establishes standards for the
way public business enterprises are to report information about operating
segments in annual financial statements and requires those enterprises to report
selected information about operating segments in interim financial reports. The
Company has adopted SFAS No. 131 in fiscal 1998. The Company implemented this
statement commencing in 1998 but no disclosures were required for the unaudited
interim periods in the initial year of implementation.
F-13
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 3 - CONTINGENCY - GOING CONCERN
At December 31, 1997 the Company had no business operations. In addition, as
disclosed in Note 5, the Company loaned $940,000 to EWS and at December 31,
1997, EWS had no business operations and had disbursed all of the funds received
from the Company.
The Company expects to obtain additional financing from future private
offerings. At December 31, 1997 management expects to utilize the proceeds of
its future offerings to facilitate a business combination, pay certain
obligations, invest in other companies and fund development stage cash
requirements. There can be no assurance that the Company will obtain such
additional financing or consummate a merger with EWS or complete any other
business combination. The failure of the Company to raise additional financing
would require the Company to adjust its current course of action or may require
the Company to cease operations and liquidate. As a result of the foregoing,
there is substantial doubt about the Company's ability to continue as a going
concern. These financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
NOTE 4 - DISCONTINUED MERGER
On November 20, 1997 the Company entered into a letter agreement (the "Letter
Agreement") which set forth the terms of a series of transactions that would
have resulted in EWS merging into the Company (the "Merger"). Under the terms of
the Letter Agreement, the Company would have been the surviving entity. As a
prerequisite of its merger with the Company, EWS was required to complete a
merger with three companies that had entered into agreements to be acquired by
EWS (the "Acquisitions"). The companies were: J. M. Container, Inc., a New
Hampshire corporation ("JMC") which operates a waste transfer station and
recycling center in New Hampshire; Waste Placement, Inc., a Connecticut
corporation ("WPI") which operates a waste brokerage business located in
Massachusetts; and Municipal Enterprises, Inc., a Connecticut corporation
("MEI") which owns a sixty-acre parcel of real estate in Colchester, Connecticut
which contains an inactive sanitary landfill currently approved for baled refuse
(see Note 5). In accordance with the Letter Agreement, the Company had the right
to consummate the Merger as soon as practicable following the completion of the
EWS Acquisitions, or prior to the completion of the EWS Acquisitions, the
Company had the option to terminate the Letter Agreement at its sole discretion.
On June 2, 1998, as a result of EWS not consummating the Acquisitions, the
Company exercised its option to terminate the Letter Agreement. As of December
31, 1997, the Company had incurred deferred acquisition costs in the amount of
$10,673. These costs were expensed during the interim period ending September
30, 1998. Several stockholders who own approximately 30% of the Company's
outstanding common stock also own approximately 27% of the outstanding common
stock of EWS.
NOTE 5 - NOTE RECEIVABLE AND CREDIT RISK
In December 1997 the Company agreed, subject to the availability of its funding,
to provide a $2,000,000 credit facility (the "Credit Facility") to EWS, JMC and
MEI. This Credit Facility was provided in anticipation of the contemplated
merger between EWS and the Company. At December 31, 1997 the Company had
advanced $940,000 to EWS in connection with the Credit Facility. The loan was
unsecured at December 31, 1997 and subsequently became evidenced by a promissory
note dated February 17, 1998 and secured by a mortgage on real estate owned by
MEI. Interest commenced on December 2, 1997 and accrues at the rate of 10% per
annum on the principal balance and on any overdue interest. Principal and
interest were due on the earlier of July 1, 1998 or the date of any event of
default. At December 31, 1997 EWS had disbursed all of the funds received from
the Company, EWS had no business operations, and EWS had not consummated the
acquisitions of the three companies it was to acquire before merging with the
Company. In the event these acquisitions are not consummated, the Company may
need to foreclose on the property to recover the principal and interest
receivable and foreclosure costs. This would have a materially adverse effect on
the pending
F-14
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 5 - NOTE RECEIVABLE AND CREDIT RISK (Continued)
merger and business plan of the Company since it would then own the real estate
but possess no operating entity or operating experience in the waste industry.
An independent Brokers Opinion of Value, dated April 21, 1998, that values the
secured real estate in the range of $1,300,000 to $1,600,000, has been furnished
to the Company.
During 1998 the Company and EWS restructured the loan by extending its maturity
date to February 1, 1999. Accrued interest as of July 1, 1998 of approximately
$58,000 was added to the existing principal balance at that date. The new
principal balance and additional advances are to accrue interest through the
maturity date. During the first two quarters of 1998 the Company advanced an
additional $535,100 to EWS under this Credit Facility. A valuation allowance has
been recorded in 1998 for these additional advances as well as for the accrued
interest through July 1, 1998. The Company ceased recording interest on this
receivable subsequent to July 1, 1998 since any interest recorded would be
offset with a valuation allowance. The amount recorded for this loan receivable
at September 30, 1998 was $940,000 (principal balance of $1,475,100 plus
interest receivable of $58,310 less a valuation allowance of $593,410).
NOTE 6 - PROPERTY AND EQUIPMENT
September 30,
1998
---------------
(Unaudited)
Property and equipment $72,813
Computer equipment 56,799
Leasehold improvements 143,321
Software 41,264
Trucks 28,676
---------------
342,873
Accumulated depreciation ( 54,282)
---------------
Total $288,591
===============
NOTE 7 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary timing
differences between the carrying amounts of assets and liabilities reflected on
the financial statements and the amounts used for income tax purposes. The tax
effects of temporary differences and net operating loss carryforwards that give
rise to significant portions of the deferred tax assets recognized at December
31, are presented below:
1996 1997
------------ ---------
Deferred tax assets:
Federal and state deferred tax benefit arising
from net operating loss carryforwards $ 12,873 $ 27,397
Less valuation allowance (12,873) (27,397)
---------- ---------
Net deferred tax asset $ - $ -
========== =========
The Company has a loss carryforward of $50,550 that may be offset against future
taxable income. The carryforward will expire between the years 2009 and 2012.
F-15
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 7 - INCOME TAXES (Continued)
The following table presents the principal reasons for the difference between
the Company's effective tax rates and the United States federal statutory income
tax rates in the lower brackets of 15% and 25%:
December 31,
-----------------
1996 1997
Federal income tax benefit at statutory rate $ - $ 9,359
State and local income tax benefits, net of
effect of federal income tax benefit - 5,165
----- -------
- 14,524
Valuation allowance for deferred
income tax benefit - (14,524)
----- -------
Income tax benefit $ - $ -
===== =======
Effective income tax rate 0% 0%
===== =======
Recognition of the benefits of the deferred tax assets will require that the
Company generate future taxable income. There can be no assurance that the
Company will generate any earnings or any specific level of earnings in future
years. Therefore, the Company has established valuation allowances for deferred
tax assets of $14,524 as of December 31, 1997.
NOTE 8 - CAPITAL STOCK ACTIVITY
Common Stock
On August 15, 1997, the Company issued 1,000,000 shares of restricted common
stock as partial payment for legal fees and costs advanced by a law firm owned
by a stockholder and related party of the Company. The stockholder is the son of
the former President and the sole Director of the Company at the time of the
transaction.
On November 17, 1997, the stockholders of the Company entered into an agreement
to sell 1,410,000 shares of common stock, representing approximately 86% of the
outstanding shares of the Company, to unrelated parties. As a condition of the
agreement, 87,000 shares of common stock were canceled and the officers and
directors of the Company were required to resign. On November 20, 1997, after
the close of the transaction, there were 1,550,000 shares of common stock
outstanding. Certain shares are subject to lock-up agreements or restrictions
which limit the holders' ability to sell them. The November 17, 1997 agreement
also required all debts and liabilities of the Company to be paid out of the
purchase price at the closing. Prior to the closing, the Company owed a
stockholder and related party $24,332. This liability was comprised of $10,000
of costs advanced on behalf of the Company and $14,332 for legal services
provided to the Company. The amount owed was paid from the proceeds of the sale
of stock and consequently the Company was released from its obligation. The
Company recorded the satisfaction of this liability as additional paid-in
capital.
In December 1997, the Company completed a private offering of 800,000 shares of
common stock at a price of $1.25 per share amounting to total gross proceeds of
$1,000,000. Offering costs amounted to $6,143.
During the second and third quarters of 1998, the Company entered into share
exchange agreements with various AHI stockholders. Based on the terms of the
underlying agreements, the Company exchanged one share of common stock for
between 1.667 to 2.5 shares of AHI's common stock. The Company issued 1,095,815
shares of common stock in connection with these share exchanges.
F-16
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 8 - CAPITAL STOCK ACTIVITY (Continued)
Preferred Stock
No shares of the Company's no par value preferred stock have been issued or are
outstanding. Dividends, voting rights and other terms, rights and preferences of
the preferred shares have not yet been designated but may be so designated by
the Board of Directors from time to time.
NOTE 9 - COMPENSATORY STOCK OPTION PLAN
In 1994 the Company adopted a Compensatory Stock Option Plan (the "CSO Plan")
which provides for the granting of options to employees, officers, directors and
consultants of the Company. The number of shares which can be purchased under
this plan is limited to 1,000,000 shares. The CSO Plan is not intended to
qualify as an "incentive stock option plan" under Section 422 of the Internal
Revenue Code. The exercise prices of the options granted under the CSO Plan are
to be determined by the Board of Directors or other CSO Plan administrators but
shall not be lower than eighty-five percent of the fair market value of a share
of common stock on the date the option is granted. The options under the CSO
Plan vest immediately upon grant unless otherwise specified and are valid for
ten years. The Company will incur compensation expense to the extent that the
market value of the stock at date of grant exceeds the amount the grantee is
required to pay for the options. There were no options granted under the CSO
Plan as of December 31, 1997.
NOTE 10 - EMPLOYEE STOCK COMPENSATION PLAN
In 1994 the Company adopted an Employee Stock Compensation Plan (the "ESC Plan")
which provides for shares of the Company's common stock to be granted to
employees, officers, directors and consultants of the Company. The number of
shares of common stock which can be awarded under this plan is limited to
1,000,000 shares. The Company will incur compensation expense to the extent of
the market value of the stock at the date of grant of the stock award to the
employee. The ESC Plan will be administered by the Board of Directors or a
committee of directors. There has been no stock awarded under the ESC Plan to
date.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Company supplies certain inventory parts to its customers through various
consignment agreements, under which the Company takes possession of a vendor's
inventory. These agreements are generally entered into on a long-term basis.
The Company neither manufacturers nor repairs aircraft parts and requires that
all of the parts that it sells are properly documented and traceable to their
original source. Although the Company has never been subject to product
liability claims, there is no guarantee that the Company could not be subject to
liability from its potential exposure relating to faulty aircraft parts in the
future. The Company maintains no product liability insurance to protect it from
such claims. An uninsured loss could have a materially adverse affect upon the
Company's financial condition.
NOTE 12 - SUBSEQUENT EVENTS
During the period from January 13, 1998 through February 25, 1998 the Company
borrowed $312,000 from a stockholder, evidenced by promissory notes. The
promissory notes are demand loans payable no later than January 1, 1999 and
accrue interest at an annual rate of 10%. As of February 28, 1998 the Company
had repaid $65,000 of these loans.
F-17
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 12 - SUBSEQUENT EVENTS (Continued)
During the period from January 21, 1998 through February 20, 1998 the Company
borrowed $115,000 from a related party, evidenced by promissory notes. The
promissory notes are demand loans payable no later than December 31, 1998 and
accrue interest at an annual rate of 10%.
During the period from January 21, 1998 through February 20, 1998 the Company
made additional advances under the existing credit facility to EWS amounting to
$198,000 (see Note 5).
The Company also loaned $170,000, as evidenced by promissory notes to an
unrelated party. Principal along with interest at an annual rate of 10% per
annum, is due on demand, but in no event later than December 31, 1998.
NOTE 13 - SUPPLEMENTAL CASH FLOW DISCLOSURES
In connection with the private offering completed in December 1997 (see Note 8),
$40,000 of offering costs were incurred but remain unpaid at December 31, 1997.
In accordance with generally accepted accounting principles, these offering
costs, as well as the related costs of $6,143 which were paid in 1997, were
reflected as a reduction of Additional-Paid-In-Capital on the Company's balance
sheet.
NOTE 14 - CHANGE OF CORPORATE NAME
On August 31, 1998, both the Company (formerly known as EyeQ Networking, Inc.)
and Jet Aviation Holdings, Inc. amended their Articles of Incorporation to
change their corporate names to Aviation Holdings Group, Inc. and Aviation
Holdings International, Inc., respectively.
NOTE 15 - EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS
REPORT
Reincorporation
In January 1998, the Company reincorporated in the State of Delaware, decreasing
its authorized common and preferred stock shares to 18,000,000 and 2,000,000,
respectively.
Acquisition
During the second and third quarters of 1998, the Company entered into share
exchange agreements ("Exchange Agreements") with various AHI stockholders. Based
upon the terms of the underlying agreements, the Company exchanged one share of
common stock for between 1.667 to 2.5 shares of the AHI's common stock. The
Company also purchased 80,000 shares of AHI common stock from an AHI stockholder
for $100,000. Through these exchanges and the purchase, the Company acquired
2,468,080 shares (74.08%) of the AHI's issued and outstanding common stock as of
September 30, 1998. The acquisition has been accounted for as a purchase by the
Company. The operations of AHI since the acquisition have been included in the
accompanying interim consolidated financial statements.
Commitments and Contingencies
Effective as of May 31, 1998, the president of AHI entered into an employment
agreement with the Company to serve as President and Chief Executive Officer of
the Company ("CEO"). In accordance with the employment agreement, the CEO also
became a director of the Company. The agreement reaffirms debt obligations
connected to a stock purchase of AHI shares by the CEO which was initiated under
a prior agreement. The term of the employment
F-18
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 15 - EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS
REPORT (Continued)
Commitments and Contingencies (Continued)
agreement is for a period of three years and may be extended on a month-to-month
basis thereafter. The employment agreement calls for a base compensation and a
bonus arrangement based upon a percentage of pre-tax income. In addition, the
CEO was granted options to purchase 200,000 shares of the Company's stock at an
exercise price of $2.50 per share. The options expire five years from the date
of issuance and became vested upon the execution of the CEO's employment
agreement.
Effective February 14, 1998, in conjunction with the purchase of the PASCO
entities by AHI, the majority stockholder of PASCO entered into an employment
agreement with the AHI to serve as Vice President ("Vice President"). In
accordance with the employment agreement, the Vice President also became a
director of AHI. His duties include the responsibility for, and the oversight
of, AHI's operations in Asia and the Pacific Rim. The term of his employment
agreement is for three years and may be extended on a month-to-month basis
thereafter. The agreement calls for a base salary and bonus arrangement whereby
one-half of any bonus earned annually in excess of $25,000 is to be applied
against the outstanding balance of the Vice President's obligation under a
three-year promissory note dated February 12, 1998. The Vice President was
granted options to purchase 15,000 shares of AHI's common stock at an exercise
price of $2.50 per share. One-third of these options vest annually over a
three-year period beginning February 14, 1999.
Advances and Borrowings - Stockholders
The Company advanced funds to and received advances from certain stockholders
during 1998. At September 30, 1998, the Company owed $797,500 of such advances
to IP Services, Inc. and $41,540 to Rozelle Holdings International. The amounts
owed to IP Services, Inc. are due on demand; however, demand may not be made
prior to repayment of funds due from EWS.
AHI owed $42,493 to an officer at September 30, 1998 in connection with the
purchase of PASCO.
Joint Venture
SYNOR-A is a Sino-American Joint venture company that was established in
November 1997 by PASCO Florida and China Northern Airlines ("CNA") under an
agreement with a term of eleven years. PASCO Florida holds a 25% interest in
SYNOR-A and CNA holds the remaining 75% interest. SYNOR-A primarily deals with
inspection, repair and recertification of DC9, MD80, and A300-600 components,
instruments and avionics. SYNOR-A has been approved by the Civil Aviation
Administration of China in the avionics accessories repair field. SYNOR-A
received licenses necessary to commence operations in November 1997. Operations
commenced in March 1998. The Company reports this investment on the equity
method of accounting.
PASCO Florida's total financial investment commitment to SYNOR-A is $1,000,000.
As of September 30, 1998, $408,332 of this commitment had been funded. Under the
terms of the joint venture, PASCO Florida is entitled to certain preferences in
any distributions of net income of SYNOR-A. These preferences effectively are
intended to provide that PASCO Florida will recover its investment in SYNOR-A
prior to any regular distributions made to CNA. PASCO Florida's role in SYNOR-A
is to provide technological advice to SYNOR-A and to promote, market and sell
the services of SYNOR-A. The Company has recognized minimal revenue from SYNOR-A
as of September 30, 1998.
Concentrations of Credit Risk Involving Cash
During the periods presented in these financial statements, AHI maintained cash
balances in excess of the Federal Deposit Insurance Corporation (FDIC) insured
limits. At September 30, 1998, the amount of funds that exceeded FDIC insurance
was $262,555. AHI also maintained funds in banks that were not FDIC insured. At
September 30, 1998 the
F-19
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 15 - EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS
REPORT (Continued)
Concentrations of Credit Risk Involving Cash (Continued)
AHI maintained a balance of $57,431 in the Israel Discount Bank Limited, an
international bank that operates in the United States under the Edge Act.
Management does not believe that a significant risk existed in having balances
in excess of the FDIC insured limit.
During the period from February 12, 1998 through May 31, 1998, PASCO HK
maintained bank accounts in Hong Kong with the Kwong On Bank, Limited. The
accounts were denominated in US Dollars, Hong Kong Dollars and German Deutsche
Marks. None of the accounts were FDIC insured. During the period, the accounts
denominated in foreign currencies and the effects of translation of foreign
currency accounts into US dollars were immaterial.
Stock Subscription Receivable
On February 12, 1998, AHI issued 160,000 shares of common stock to PASCO's
former majority stockholder (the "Vice President") in return for two promissory
notes aggregating $365,000 and the assignment from PASCO of inventory valued at
$35,000. AHI received a three-month non-interest bearing promissory note for
$165,000, which had recourse against the personal assets of the Vice President
("Recourse Note"). The Recourse Note was paid in full in May 1998. The other
note is a three-year promissory note for $200,000 bearing interest at 8.5%
secured solely by 80,000 shares of the Company's common stock ("Nonrecourse
Note"). The shares of common stock have been pledged as security and are held in
escrow in accordance with a stock pledge agreement dated February 12, 1998. The
Nonrecourse Note remained outstanding at September 30, 1998.
In October 1996 AHI issued 192,000 shares of its common stock to the CEO in
exchange for a demand promissory note of $80,000. The note bears interest at 6%
per annum.
AHI recorded interest income of approximately $13,968 for the nine months ended
September 30, 1998 on the outstanding stock subscription receivables. As of
September 30, 1998 accrued interest receivable was $19,951.
DC-10 Flight Simulator and Support Package
On November 1, 1996, AHI entered into an agreement with a company domiciled in
the Netherlands (the "Seller" or the "Netherlands Company") to purchase a
one-half ownership in a DC 10-30 flight simulator and all associated equipment
required to operate the flight simulator. The agreement called for the Seller
and AHI to equally participate in all revenues generated from the sale, lease or
disassembly of the hardware of the flight simulator. AHI paid the seller
$125,000 in cash and issued 40,000 shares of its common stock, which was valued
at $2.50 per share, for the flight simulator. AHI intended to sell the flight
simulator as a complete package.
On March 28, 1997, AHI entered into a second agreement with the Seller to
purchase one Novoview 2000 Visual System ("Novoview 2000") to be used in
conjunction with the DC 10-30 flight simulator. The purchase price of the
Novoview 2000 was $500,000 and AHI paid for the Novoview 2000 by issuing 200,000
shares of its common stock at $2.50 per share. AHI is to receive 100% of the
revenues generated from the sale of these items. The interest in the simulator,
Novoview 2000 and freight costs were recorded at AHI's cost of $734,421. In
1998, AHI changed its sales strategy. Instead of selling the simulator and the
Novoview 2000 as a complete unit, AHI decided to sell the components
individually as spare parts. In conjunction with this change in strategy, AHI
expensed $335,000 in 1998 in order to reflect the decrease in market value of
the avionics and structure as spare parts.
This Netherlands Company is also a purchaser and supplier of spare parts from
and to the Company.
F-20
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 15 - EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS
REPORT (Continued)
Leased Equipment
Commencing on May 20, 1998, AHI leased a $129,000 flight computer to a customer.
The lease term was for four months. Payments on the lease amounted to $9,000 per
month and the equipment was returned on September 20, 1998. AHI temporarily
reclassified the leased item from inventory to property and equipment and
depreciated the computer using the straight-line method over a five-year life
during the term of the lease.
Short-Term Borrowings
On August 12, 1998 AHI obtained a revolving working capital line of credit from
Comerica Bank. At September 30, 1998 the amount outstanding on the credit line
was $675,000. The loan agreement, which provides for a maximum aggregate
borrowing limit of $3,500,000, is a revolving line of credit, and is secured by
substantially all of AHI's assets. The line of credit bears interest at the
Bank's prime rate plus 1%. The loan agreement contains certain covenants which
require the Company to maintain minimum thresholds on specific financial ratios.
On October 15, 1998, the Company borrowed $250,000 from two unrelated investors.
The loans have a five month maturity date and bear interest at a rate of 10% per
annum. As additional consideration for such borrowings, the Company issued
25,000 shares of the Company's common stock to the investors. As an additional
inducement to the investors to loan money to the Company, a stockholder of the
Company granted the investors warrants to purchase 75,000 shares of the
Company's common stock, and agreed to transfer up to 45,000 shares of the
Company's common stock upon the occurrence of an event of default or an
extension of the maturity date by the Company. The Company has pledged 51% of
the issued and outstanding shares of common stock of AHI as security.
Long-Term Debt
In February 1998, AHI purchased a vehicle and financed the purchase through a
five-year note with General Motors Acceptance Corporation. The note bears
interest at an annual rate of 5.9% with monthly payments, principal and interest
of $371. As of September 30, 1998 the outstanding balance of the note was
$17,257.
Capital Stock
On June 11, 1998, AHI's Board of Directors granted its Chief Financial Officer
("CFO"), 25,000 shares of AHI's common stock. The shares of common stock were
issued by AHI in consideration of services rendered by the CFO.
Stock Options
During 1998 the Company granted options to purchase 200,000 shares of common
stock at an exercise price of $2.50 per share to its president. All of these
options vested upon the execution of the president's employment agreement and
expire five years later.
Restatement of Stock Option Plan
On October 29, 1997, the Board of Directors of AHI adopted a Stock Option Plan
(the "Plan") which became effective September 1, 1997. This Plan provided for
the grant of incentive stock options, non-qualified stock options and stock
appreciation rights not exceeding 750,000 shares, in the aggregate, to selected
employees. The Plan also set forth applicable rules and regulations for stock
options granted to non-employee directors. The Board of Directors authorized the
issuance of 255,750 stock options under the Plan, and of these options, 40,000
were subsequently canceled. No stock options had been exercised under this plan.
F-21
<PAGE>
Aviation Holdings Group, Inc.
Notes to Financial Statements
NOTE 15 - EVENTS (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITORS
REPORT (Continued)
Restatement of Stock Option Plan (Continued)
AHI subsequently amended and restated the Plan and all active participants of
the Plan became included in the stock option plan of the Company. The options to
acquire AHI stock outstanding at the time of the restatement were replaced by
options to acquire Company stock on a share-for-share basis.
Office and Warehouse Facility
The Company leases its office and warehouse facility from a company partially
owned by one of its stockholders. The lease expires December 31, 2000 with two
one-year options to renew. The monthly rental is $4,909 plus the pass through of
certain expenses. At December 31, 1997, AHI's minimum obligation under this
lease was as follows:
Years Ending December 31:
1998 $ 78,348
1999 78,348
2000 78,348
---------
$ 235,044
=========
Valuation of Collateral
On October 9, 1998 the Company obtained a valuation report from an independent
valuation firm which valued the real estate collateral for its loan to EWS, JMC
and MEI at $1,000,000.
Additional Share Exchange
In March 1999, the Company entered into a share exchange agreement with a
stockholder of AHI to purchase 600,000 shares of AHI stock, thereby increasing
the Company's ownership percentage of AHI to 92%. The Company exchanged 500,000
shares of its common stock along with a warrant to purchase 100,000 shares of
its common stock at an exercise price of $3.75 per share for the 600,000 AHI
shares.
F-22
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Jet Aviation Trading, Inc.
We have audited the accompanying balance sheet of Jet Aviation Trading,
Inc. as of August 31, 1997, and the related statements of income, stockholders'
equity, and cash flows for the period from October 3, 1996 (Date of Inception)
through August 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jet Aviation Trading, Inc.
as of August 31, 1997, and the results of its operations and cash flows for the
period from October 3, 1996 (Date of Inception) through August 31, 1997, in
conformity with generally accepted accounting principles.
Sweeney, Gates & Co.
Fort Lauderdale, Florida
October 9, 1997, except as to Note 12
which is as of October 29, 1997
F-23
<PAGE>
JET AVIATION TRADING, INC.
BALANCE SHEET
AUGUST 31, 1997
ASSETS
Current assets:
Cash...................................................... $ 341,660
Accounts receivable, less $93,000 allowance for doubtful
accounts............................................... 1,764,119
Inventory................................................. 1,532,333
DC-10 flight simulator held for resale (Note 3)........... 734,421
Deferred tax asset........................................ 23,000
Prepaid expenses and other current assets................. 29,610
----------
Total current assets.............................. 4,425,143
----------
Property and equipment, less accumulated depreciation of
$8,293.................................................... 88,437
Deferred offering costs..................................... 22,750
Deposit-Boeing.............................................. 25,000
----------
$4,561,330
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 977,706
Accrued expenses.......................................... 144,540
Accrued interest.......................................... 19,611
Income taxes payable...................................... 37,200
----------
Total current liabilities......................... 1,179,057
----------
Deferred tax liability...................................... 2,000
----------
Stockholders' equity:
Preferred stock, par value $.10 per share, 3,000,000
shares authorized, and no shares issued and
outstanding............................................ --
Common stock, par value $.001 per share; 30,000,000 shares
authorized, and 2,996,500 shares issued and
outstanding............................................ 2,997
Additional paid-in capital................................ 4,840,917
Accumulated Deficit....................................... (1,383,641)
----------
3,460,273
Less: Stockholders' notes receivable (Note 8)............... (80,000)
----------
Total stockholder's equity........................ 3,380,273
----------
$4,561,330
==========
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
JET AVIATION TRADING, INC.
STATEMENT OF OPERATIONS
OCTOBER 3, 1996 (DATE OF INCEPTION) TO AUGUST 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Sales, net of returns and allowances........................ $ 6,215,553
Cost of sales............................................... 4,684,864
-----------
Gross profit.............................................. 1,530,689
-----------
Selling, general and administrative expenses................ 2,881,660
-----------
Operating Loss.............................................. (1,350,971)
-----------
Other income (expense):
Interest income........................................... $ 21,867
Interest expense.......................................... (38,337) (16,470)
-------- -----------
Loss before income taxes.................................... (1,367,441)
Income tax expense:
Current................................................... 37,200
Deferred.................................................. (21,000) 16,200
-------- -----------
Net Loss.......................................... $(1,383,641)
===========
Net Loss per share................................ $ (.83)
===========
Weighted average number of common shares outstanding........ 1,672,968
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
JET AVIATION TRADING, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
OCTOBER 3, 1996 (DATE OF INCEPTION) TO AUGUST 31, 1997
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL STOCKHOLDER'S
------------------ PAID-IN ACCUMULATED NOTE
SHARES AMOUNT CAPITAL DEFICIT RECEIVABLE TOTAL
--------- ------ ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock to
founding stockholders...... 1,200,000 $1,200 $ 778,800 $ -- $(255,000) $ 525,000
Issuance of common stock in
connection with the
purchase of equipment and
aircraft parts............. 10,000 10 24,990 -- -- 25,000
Issuance of common stock in
connection with private
placement.................. 312,000 312 745,997 -- -- 746,309
Issuance of common stock in
connection with purchase of
DC-10 Simulator held for
resale..................... 240,000 240 599,760 -- -- 600,000
Issuance of common stock in
connection with debt....... 14,800 15 36,985 -- -- 37,000
Issuance of common stock to
founders of Schuylkill
Acquisition Corp........... 400,000 400 999,600 -- -- 1,000,000
Issuance of common stock in a
private offering by
Schuylkill Acquisition
Corp. ..................... 47,200 47 95,856 -- -- 95,903
Issuance of 1,000,000
warrants................... -- -- 50,000 -- -- 50,000
Accumulated deficit of
Schuylkill Acquisition
Corp. adjusted due to
merger..................... -- -- (35,298) -- -- (35,298)
Conversion of $370,000 of
notes payable to common
stock...................... 185,000 185 369,815 -- -- 370,000
Conversion of $200,000
stockholder loan to common
stock and payment of
$15,000 advisory fee in
common stock............... 107,500 108 214,892 -- -- 215,000
Conversion of $500,000 note
payable to common stock.... 250,000 250 499,750 -- -- 500,000
Issuance of common stock for
the payment of amounts due
to a stockholder and for
the purchase of remaining
consigned inventory........ 230,000 230 459,770 -- 175,000 635,000
Net Loss..................... -- -- -- (1,383,641) -- (1,383,641)
--------- ------ ---------- ----------- --------- ----------
Balance, August 31, 1997..... 2,996,500 $2,997 $4,840,917 $(1,383,641) $ (80,000) $3,380,273
========= ====== ========== =========== ========= ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
JET AVIATION TRADING, INC.
STATEMENT OF CASH FLOWS
OCTOBER 3, 1996 (DATE OF INCEPTION) TO AUGUST 31, 1997
Cash flows from operating activities:
Net (loss)................................................ $(1,383,641)
Adjustment to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.......................... 8,293
Allowance for doubtful accounts........................ 93,000
Noncash compensation expense related to sale of
founders shares....................................... 400,000
Noncash compensation expense related to sale of
Schuylkill Acquisition founders shares................ 999,600
Noncash compensation expense related to warrants....... 50,000
Noncash compensation relating to an advisory fee....... 15,000
Noncash compensation relating to loan origination
fee................................................... 37,000
Deferred tax asset, net of deferred tax liability...... (21,000)
Change in assets and liabilities:
Decrease (increase) in:
Accounts receivable.................................. (1,857,119)
Inventory (Note 6)................................... (872,333)
Cash paid in connection with purchase of DC-10 flight
simulator........................................... (134,421)
Prepaid expenses and other current assets............ (29,610)
Increase (decrease) in:
Accounts payable..................................... 977,706
Accrued expenses..................................... 144,541
Accured interest..................................... 19,611
Income tax payable................................... 37,200
-----------
Total adjustments................................. (132,532)
-----------
Net cash used for operating activities...................... (1,516,173)
-----------
Cash flows from investing activities:
Deposit--Boeing........................................... (25,000)
Purchase of property and equipment........................ (96,730)
-----------
Net cash used for investing activities............ (121,730)
-----------
Cash flows from financing activities:
Deferred offering costs................................... (22,750)
Proceeds from stockholder loans, subsequently converted to
common stock........................................... 1,195,000
Payments on stockholder loans............................. (125,000)
Proceeds from issuance of securities...................... 932,313
-----------
Net cash provided by financing activities......... 1,979,563
-----------
Cash, ending................................................ $ 341,660
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Interest paid............................................. $ 24,103
-----------
Income taxes paid......................................... $ --
===========
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
Organization and History -- Schuylkill Acquisition Corp. ("the Company" or
"SAC") was incorporated in Florida on May 28, 1997, for the purpose of acquiring
by merger the business and operations of Jet Aviation Trading, Inc. ("Old Jet")
upon the completion of a stock offering by the Company. On July 28, 1997, the
Company acquired 100% of the outstanding common stock of Old Jet in exchange for
1,776,800 shares of common stock of the Company in a one for one stock exchange.
Old Jet was incorporated in the state of Florida on October 3, 1996 for the
purpose of buying, selling, leasing and exchanging spare parts for fixed-wing
commercial jet transport aircraft. Effective July 28, 1997, the Company's name
was changed from Schuylkill Acquisition Corp. to Jet Aviation Trading, Inc.
Merger and Recapitalization -- The merger was completed on July 28, 1997,
whereby SAC acquired 100% of the outstanding common stock of Old Jet in exchange
for 1,776,800 shares of common stock of SAC in a one for one stock exchange. The
merger has been accounted for as a purchase.
The effect of the transaction was a reverse merger, whereas SAC changed its
name to Jet Aviation Trading, Inc. and Old Jet became the acquiring entity and
accounting survivor. Accordingly, the historical financial statements presented
are those of the accounting survivor, Old Jet, and the stockholders' equity of
the merged Company was recapitalized to reflect the capital structure of the
surviving legal entity and the accumulated deficit of Old Jet at the time of
merger.
Nature of Business and Credit Policies -- The Company buys, sells, leases
and exchanges spare parts for fixed-wing commercial jet transport aircraft. The
Company's customers are primarily commercial passenger and cargo operators,
original equipment manufacturers and Federal Aviation Administration and Joint
Aviation Authority repair stations throughout the world. The Company performs
ongoing credit evaluations of its customers' financial condition and extends
credit to its customers based upon its evaluations. If creditworthiness is
questionable, parts are shipped COD. The allowance for doubtful accounts is
based upon the expected collection of accounts receivable.
Cash Equivalents -- The Company considers all highly liquid instruments
purchased with a maturity of three months or less to be cash equivalents.
Revenue and Cost Recognition -- The Company recognizes revenue when parts
are shipped to the customer. Amounts paid in advance are recorded as deferred
income and recognized in the period in which the parts are shipped. The Company
recognizes revenue and the related cost of consigned inventory when the parts
are shipped to the customer.
Inventories -- Inventory is stated at the lower of cost or market. Cost of
aircraft parts is determined on a specific identification basis. When parts are
purchased in lots, the individual parts are expensed at a predetermined
percentage of the sales price until the cost of the lot is recovered. Costs to
repair, inspect and/or modify the parts are charged to the specific part when
incurred. Inventories held by the Company on consignment from others are not
included in the inventory in the accompanying financial statements.
Deferred Offering Costs -- Amounts paid or accrued for costs related to the
anticipated public offering will be recorded as a reduction of the proceeds when
the offering is completed. If the offering is not completed, the costs will be
expensed.
Income Taxes -- The Company accounts for income taxes on an asset and
liability approach for financial accounting. Deferred income tax assets and
liabilities are computed annually for temporary differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense is
the tax payable or refundable for the period plus or minus the change during the
period in deferred tax assets and liabilities.
F-28
<PAGE>
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Net Income Per Share -- Net income per common share is computed by dividing
net income by the weighted average number of shares outstanding during the
period. Warrants issued during the period are not considered dilutive, and
therefore, are not included in the computation of net income per share.
In February 1997, the Financial Accounting Standards Board issued SFAS 128,
"Earnings Per Share". The adoption of SFAS 128 did not have an effect on the
computation of earnings per share because the effective date is December 15,
1997, and earlier application is not permitted.
Recoverability of Long Lived Assets -- The Company has adopted Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." The Statement
requires that long-lived assets and certain identifiable intangibles be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company is not aware of
any events or circumstances which indicate the existence of an impairment which
would be material to the Company's financial statements.
Financial Instruments -- The carrying amount of cash, accounts receivable,
accounts payable and accrued expenses approximates fair value as of August 31,
1997. The carrying value of the stockholder's note receivable at August 31,
1997, approximates fair value.
Estimates -- The preparation of financial statements in conformity with
generally accepted accounting principles requires the use of estimates based on
management's knowledge and experience. Accordingly, actual results could differ
from those estimates.
2. RELATED PARTY TRANSACTIONS
CONSIGNMENT AGREEMENT WITH RELATED PARTY
The Company entered into a Consignment Agreement (the "Agreement") with a
related party, Jet Avionics Systems, Inc. ("Avionics"), effective October 3,
1996, wherein the Company agreed to sell certain consignment inventory of
technical spare parts belonging to Avionics and pay Avionics 75% of the sales
price collected for the inventory sold. The sales price is the gross sales price
less any costs involved if any item of inventory is required to be overhauled,
certified or modified in order to be sold. Total consideration to be paid for
the inventory under the Agreement was $675,000. Pursuant to such Agreement, the
Company sold approximately $452,000 of parts during the year to third parties
and Avionics was due $339,000 of this amount. During the year, the Company paid
Avionics $36,000 of the amount due. On August 29, 1997, the Company and Avionics
entered into a Consignment Cancellation and Purchase Agreement whereby the
Company purchased the remaining inventory not sold with a value of approximately
$336,000 from Avionics and thereafter paid the balance of $639,000 in exchange
for 230,000 shares of the Company's common stock valued at $2.00 per share, the
cancellation of $175,000 of indebtedness of Avionics due the Company, and $4,000
in cash.
The president and sole stockholder of Avionics was employed by the Company
from October 3, 1996 through October 2, 1997. The president and sole stockholder
is the daughter of an employee of the Company who served in a non-executive
capacity as Vice President of Special Projects.
F-29
<PAGE>
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OFFICE AND WAREHOUSE FACILITY
The Company leases its office and warehouse facility from a company
partially owned by a stockholder of the Company under a four year lease expiring
December 31, 2000 with two one year options to renew. The monthly rental is
$4,609 plus applicable sales tax and pass through of expenses. Rent expense was
$29,435 for the period ended August 31, 1997. At August 31, 1997, the Company
was obligated under this operating lease arrangement as follows:
YEARS ENDING AUGUST 31, AMOUNT
- ---------------------- --------
1998........................................................ $ 55,308
1999........................................................ 55,308
2000........................................................ 55,308
2001........................................................ 18,436
--------
$184,360
========
3. PURCHASE OF DC-10 FLIGHT SIMULATOR AND SUPPORT PACKAGE
On November 1, 1996, the Company entered into an agreement with a company
domiciled in the Netherlands (the "seller" or the "Netherlands Company") to
purchase one half (50%) ownership in a DC 10-30 six axis flight simulator and
all associated equipment required to operate the flight simulator. The agreement
calls for the seller and the Company to equally participate in all revenues
generated from the sale, lease or disassembly of the hardware of the flight
simulator. The Company paid the seller $125,000 in cash and issued 40,000 shares
of the Company's common stock valued at $2.50 per share for the flight simulator
The Company intends to sell the flight simulator as a complete package.
On March 28, 1997, the Company entered into a second agreement with the
seller to purchase one Novoview 2000 Visual System, one package of simulator
parts, one maintenance training/procedure manual and one data support package
used to support the DC 10-30 flight simulator. The price of the items purchased
was $500,000 and the Company paid for the items by issuing 200,000 shares of its
common stock at $2.50 per share. The Company will receive 100% of the revenues
generated from the sale of these items. The interest in the simulator, related
items and freight costs are reflected in the accompanying balance sheet as DC-10
flight simulator totaling $734,421.
This Netherlands Company is also a purchaser and supplier of spare parts
from and to the Company. During the year ended August 31, 1997, the Netherlands
Company purchased spare parts totaling $82,775 from the Company, and sold
$183,331 of spare parts to the Company in addition to the DC 10-30 flight
simulator. At August 31, 1997, the Company was owed $1,375 by the Netherlands
Company and the Company owed the Netherlands Company $47,750. Additionally, the
Netherlands Company held $22,400 of the Company's inventory in their warehouse
at August 31, 1997.
4. RISKS REGARDING THE COMPANY'S INVENTORY
The Company's inventory consists principally of new, overhauled,
serviceable and repairable aircraft parts that are purchased from many sources.
Before parts may be installed in an aircraft, they must meet certain standards
of condition established by the Federal Aviation Administration ("FAA") and/or
the equivalent regulatory agencies in other countries. Specific regulations vary
from country to country, although regulatory requirements in other countries
generally coincide with FAA requirements. Parts owned or acquired by the Company
may not meet applicable standards or standards may change in the future, causing
parts, which are already contained in the Company's inventory to be scrapped or
modified. Aircraft manufacturers may also develop new parts to be used in lieu
of parts already contained in the Company's inventory. In all such cases, to the
extent that the Company has such parts in its inventory, their value may be
reduced.
F-30
<PAGE>
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
5. CONSIGNMENT INVENTORY
By consigning inventories to a redistributor such as the Company, customers
are able to distribute their aircraft spare parts to a large number of
prospective inventory buyers, allowing the customer to maximize the value of its
inventory. Consignment also enables the Company to offer for sale significant
parts inventory at minimal capital cost. The Company currently maintains or
manages or has consignment agreement in place and its revenues from consignment
arrangement have accounted for approximately 5% of net sales for the period
ended August 31, 1997.
6. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at August 31, 1997:
Furniture and fixtures...................................... $28,715
Computer equipment.......................................... 27,068
Leasehold improvements...................................... 30,443
Software.................................................... 10,504
-------
96,730
Less: Accumulated depreciation.............................. (8,293)
-------
$88,437
=======
Property and equipment is depreciated on a straight-line basis with useful
lives ranging from 5 to 7 years. Depreciation expense for the period was $8,293.
7. CAPITAL STOCK
PREFERRED STOCK
Within the limits and restrictions contained in the Certificate of
Incorporation, the Board of Directors has the authority, without further action
by the stockholders, to issue up to 3,000,000 shares of Preferred Stock, $.10
par value per share, in one or more series, and to fix, as to any such series,
the dividend rate, redemption prices, preferences on liquidation or dissolution,
sinking fund terms, if any, conversion rights, voting rights, and any other
preferences or special rights and qualifications.
COMMON STOCK
Founders' shares totaling 400,000 common shares were issued on May 28,
1997, to four entities for par value of $.001. Net proceeds from the issuance of
founders' shares was $400. Compensation expenses was charged for the difference
between the fair market value per share of $2.50 and $.001 per share paid or a
total charge of $999,600.
During 1997, the Company sold 47,200 shares of common stock for $2.50 per
share resulting in total proceeds of $118,000. Deferred offering costs of
$22,098 have been reflected as a reduction of the proceeds of the private
placement offering.
On July 17, 1997, the Company issued 1,776,800 shares of common stock to
acquire 100% of the outstanding common stock of Jet Aviation in a 1 for 1 stock
exchange.
WARRANTS
On June 1, 1997, 1,000,000 warrants were issued in connection with the
organization of Schuylkill Acquisition Corp. to related parties for an advisory
fee. The Company has reserved 1,000,000 shares of its common stock for exercise
of the warrants. Each warrant entitles the holder to purchase one share of
common
F-31
<PAGE>
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
stock at an exercise price of $4.50 until June 30, 2002. The warrants are
redeemable by the Company at $.05 upon the occurrence of both of the following
events: (a) the listing of the Company's shares of common stock on a securities
exchange, and (b) the Company's common stock is trading in excess of $5.25 per
share for a ten day period.
The Company has adopted SFAS No. 123, Accounting for Stock-Based
Compensation, for non-employee stock compensation. Accordingly, the warrants
referred to above have been valued at $.05 per warrant and expensed.
CONVERSION OF DEBT
During October and November, 1996, an affiliate of a stockholder loaned the
Company $325,000. The loans were payable on demand and did not bear a stated
interest rate. During the year $125,000 was repaid. On August 29, 1997, the
Company converted $200,000 of the loan to 100,000 shares of common stock at
$2.00 per share.
On March 27 and May 12, 1997, the Company borrowed $370,000 from a
stockholder and entered into two short term notes payable, bearing interest at
6% per annum. One of the notes was extended on June 19, 1997, and interest was
increased to 10% per annum. On August 29, 1997, the Company and stockholder
converted the notes payable to 185,000 shares of common stock at $2.00 per share
and the Company paid the interest accrued on the short term notes payable
through that date.
On May 23, 1997, prior to the merger, Schuylkill Acquisition Corp. borrowed
$500,000 from a stockholder, evidence by a promissory note bearing interest at
12%. On August 29, 1997, the promissory note was converted to 250,000 shares of
common stock at $2.00 per share, and the Company paid the accrued interest
through that date.
COMMON STOCK TRANSACTIONS OF JET AVIATION TRADING, INC. (OLD JET) PRIOR TO
MERGER
On October 3, 1996, Old Jet sold 408,000 founders' shares of common stock
for total proceeds of $125,000. Effective October 1, 1996, Old Jet issued
600,000 shares of the Old Jet's common stock for a $175,000 note bearing
interest of 6% to Avionics. Further, effective November 1, 1996, Old Jet issued
192,000 shares of common stock to its President for a $80,000 note bearing
interest of 6%. See Note 2 and Note 8. Compensation expenses was charged for the
difference between the fair market value of $2.50 per share and $.417 per share
or a total charge of $400,000. See Note 2 and Note 8.
On October 22, 1996, Old Jet issued 10,000 shares valued at $2.50 per share
in partial payment of the purchase of equipment and aircraft parts totaling
$50,000.
On January 22, 1997, Old Jet issued 40,000 shares of Old Jet's common stock
in partial payment for the purchase of a DC-10 flight simulator. See Note 3.
Also, on January 22, 1997, and June 2, 1997, Old Jet issued 312,000 shares of
common stock in private placement transactions. Net proceeds from the private
placement totaled $746,309, after giving effect to $33,691 in offering costs.
On March 31, 1997, Old Jet issued 200,000 shares of common stock valued at
$2.50 per share in connection with the purchase of a DC-10 flight simulator
support package. See Note 3.
On April 4, 1997, and May 12, 1997, Old Jet issued a total of 14,800 shares
valued at $2.50 per share, for a total of $37,000, to a stockholder as
additional incentive for providing stockholder loans. The expense has been
recorded as debt issue costs.
F-32
<PAGE>
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
8. STOCKHOLDERS' NOTES RECEIVABLE
Stockholders' notes receivable relate to the issuance of Old Jet's common
stock as follows:
- Effective October 1, 1996, Old Jet issued 600,000 shares of common stock
to Avionics for a $175,000 note bearing interest at 6%. The note was
canceled in partial payment of the amounts due under the Consignment
Cancellation and Purchase Agreement. See Note 2.
- On November 1, 1996, Old Jet issued 192,000 shares of common stock to its
president for an $80,000 note bearing interest at 6%. Should the
president earn bonuses per his employment contract, one half of the
bonuses in excess of $25,000 earned annually, may be applied to the
outstanding note balance. The note is due on demand and is unsecured.
9. INCOME TAXES
The income tax provision was comprised of the following at August 31, 1997:
Current:
Federal................................................... $ 30,500
State..................................................... 6,700
Deferred:
Federal................................................... (16,700)
State..................................................... (4,300)
--------
Income tax provision........................................ $ 16,200
========
A reconciliation between the statutory rate and the effective rate is as
follows for the year ended August 31, 1997:
Federal statutory tax rate.................................. 34.0%
State statutory rate, net of federal benefit................ 3.6
Permanent difference and other.............................. 12.8
----
Effective tax rate.......................................... 50.4%
====
Significant components of the Company's deferred tax assets and
liabilities, computed using currently enacted tax rates, are as follows at
August 31, 1997:
Current items:
Assets:
Allowances for doubtful accounts which are currently
nondeductible......................................... $23,000
-------
Net current deferred tax assets............................. $23,000
=======
Long-term items:
Property and equipment principally due to the use of
accelerated depreciation for tax purposes.............. $(2,000)
-------
Net long-term deferred tax liabilities...................... $(2,000)
=======
10. COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AGREEMENT
Effective November 1, 1996, Old Jet entered into an employment contract
with its president for a three year period and the agreement automatically
extends on a month to month basis thereafter. Base compensation
F-33
<PAGE>
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
is $160,000 per year, plus 3% of the pretax net income of the Company. The
agreement also calls for one half of the bonus in excess of $25,000 earned
annually by the president to be applied to reduce the outstanding balance of the
president's obligation under his promissory note given to Old Jet for his stock.
See Note 6.
Effective October 3, 1996, Old Jet entered into an employment contract with
an individual who is an affiliate of Avionics as an employee for a three year
period. Base compensation is $120,000 per year, plus a bonus determined by the
Board of Directors. On October 2, 1997, the Company and the employee mutually
agreed to the termination of said employment agreement dated October 3, 1996.
The Company and individual have entered into a Consulting Agreement on October
3, 1997, for a twelve month period ending October 2, 1998. Base compensation is
$4,000 per month, plus a commission of 15% of the collected purchase price of
sales, and 15% of the purchase price of material for resale which the individual
introduces to the Company.
11. SALES TO MAJOR CUSTOMERS
The Company sells, leases and exchanges spare parts for fixed-wing
commercial jet transport aircraft to foreign and domestic customers.
The information with respect to revenue, by geographic area, is presented
in the table below for the period from October 3, 1997 (inception) through
August 31, 1997.
United States............................................... $3,559,585
Africa and Middle East...................................... 36,119
Europe...................................................... 938,896
Latin America............................................... 25,140
Asia........................................................ 1,655,813
----------
Total............................................. $6,215,553
==========
One Asian customer accounted for 20% of the Company's sales in fiscal 1997.
12. SUPPLEMENTAL NON-CASH FLOW INFORMATION
Effective October 3, 1996, Old Jet issued 192,000 shares of common stock to
its President for a $80,000 note bearing interest of 6%. Compensation expenses
was charged for the difference between the fair market value of $2.50 per share
and $.417 per share or a total charge of $400,000.
During the year the Company purchased equipment and aircraft parts with a
value of $50,000 by issuing 10,000 shares of common stock at $2.50 per share and
paying the remainder in cash.
As part of the purchase of the DC-10 flight simulator and support package
for $734,421, the Company issued 240,000 shares of common stock at $2.50 per
share and paid the remainder in cash.
As part of its cost of borrowing money during the year the Company issued
14,800 shares of common stock valued at $2.50 per share to a stockholder of the
Company.
On August 29, 1997, the Company issued 230,000 shares of common stock
valued at $2.00 per share, canceled a $175,000 note due to the Company by
Avionics and paid $4,000 in cash in satisfaction of a $303,000 debt due Avionics
and the purchase of the remaining consigned inventory valued at $336,000.
Schuylkill Acquisition Corp. (prior to merging with Old Jet) issued
founders' shares totaling 400,000 on May 28, 1997 to four entities for par value
of $.001. Net proceeds from the issuance of founders' shares was $400.
Compensation expenses was charged for the difference between the fair market
value of $2.50 per share and $.001 per share paid or a total charge of $999,600.
F-34
<PAGE>
JET AVIATION TRADING, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
On August 29, 1997, the Company converted four notes payable totaling
$1,070,000 by issuing 535,000 shares of common stock at a value of $2.00 per
share.
On August 29, 1997, the Company paid $15,000 as an advisory fee to a
related party by issuing 7,500 shares of common stock at a value of $2.00 per
share.
13. CONCENTRATION OF CREDIT RISK INVOLVING CASH
During the year, the Company maintained cash balances in excess of the
Federally insured limits. The Company maintained the balances in four banks, one
of which is a major money center bank. Three of the banks are Federally insured.
A fourth bank, Israel Discount Bank Limited is a major international bank and
operates in the United States under the Edge Act, but is not Federally insured.
At August 31, 1997, the Company had balances under $100,000 in the three
Federally insured banks, but maintained a balance of $264,550 in Israel Discount
Bank Limited. However, the Company does not believe a significant risk existed
in having the balance with Israel Discount Bank Limited.
14. SUBSEQUENT EVENTS
On October 29, 1997, the Board of Directors adopted a Stock Option Plan
(the "Plan") effective September 1, 1997. This Plan provides for the grant to
employees selected by the Board of Directors, or Compensation Committee, of
incentive stock options, non-qualified stock options and stock appreciation
rights in the aggregate not exceeding 750,000 shares. The Plan also sets forth
applicable rules and regulations for stock options granted to non-employee
directors. The Board of Directors authorized the issuance of 74,500 stock
options. The Plan is subject to stockholder approval and will be submitted to
the stockholders at the Company's annual meeting in 1998.
F-35
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC
Condensed Consolidated Balance Sheet
ASSETS
May 31,
1998
--------------
(Unaudited)
Current Assets
Cash $555,742
Trade receivables (Net of allowance for doubtful
accounts of $112,000) 1,991,302
Inventory 2,544,335
Interest receivable from stockholder - related party 13,046
Prepaid expenses 49,676
Deferred tax benefit 119,000
--------------
Total Current Assets 5,273,101
--------------
Property and Equipment, Net 381,428
--------------
Other Assets
Investment in joint venture 212,564
Deposits 17,385
Intangibles - goodwill 367,740
--------------
Total Other Assets 597,689
--------------
Total Assets $6,252,218
==============
See notes to financial statements.
F-36
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC
Condensed Consolidated Balance Sheet
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
May 31,
1998
----------------
(Unaudited)
<S> <C>
Current Liabilities
Accounts payable $1,962,426
Current portion of long-term debt 14,334
Advances from stockholder - related party 57,035
Income taxes payable 21,000
Accrued expenses 424,407
----------------
Total Current Liabilities 2,479,202
----------------
Noncurrent Liabilities
Long-term debt, net of current portion 4,332
Deferred income taxes 1,000
----------------
Total Noncurrent Liabilities 5,332
----------------
Total Liabilities 2,484,534
----------------
Commitments and Contingencies
Stockholders' Equity
Preferred stock, par value $.10 per share; 3,000,000 shares
authorized, and no shares issued and outstanding -
Common stock, par value $.001 per share; 30,000,000 shares
authorized, and
authorized and 3,306,500 shares issued and outstanding 3,307
Additional Paid-In Capital 5,615,608
Less stock subscriptions receivable (280,000)
Accumulated deficit (1,571,231)
----------------
Total Stockholders' Equity 3,767,684
----------------
Total Liabilities and Stockholders' Equity $6,252,218
================
</TABLE>
See notes to financial statements.
F-37
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC
Condensed Consolidated Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
October 3,
1996 Nine Months
Through Ended
May 31, May 31,
1997 1998
---------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net Sales $3,644,071 $9,841,005
Cost of Goods Sold 2,644,623 8,414,735
---------------- ----------------
Gross Profit 999,448 1,426,270
---------------- ----------------
Operating Expenses
Salaries and wages 371,107 845,245
General and administrative 511,216 849,090
Non-compensation stock expense 1,399,601 -
---------------- ----------------
Total Operating Expenses 2,281,924 1,694,335
---------------- ----------------
Loss from Operations (1,282,476) (268,065)
---------------- ----------------
Other Income (Expense)
Interest income 10,806 18,583
Interest expense (23,060) (16,340)
Interest in earnings of joint venture - 4,232
---------------- ----------------
Total Other Income (Expense) (12,254) 6,475
---------------- ----------------
Loss Before Income Taxes (1,294,730) (261,590)
---------------- ----------------
Income Tax Benefit (Expense)
Current (34,000) (21,000)
Deferred 19,000 95,000
---------------- ----------------
Total Income Tax Benefit (Expense) (15,000) 74,000
---------------- ----------------
Net Loss (1,309,730) (187,590)
Accumulated Deficit, Beginning of Period - (1,383,641)
---------------- ----------------
Accumulated Deficit, End of Period $(1,309,730) $(1,571,231)
================ ================
Basic and Diluted Loss Per Common Share (.91) (.06)
================ ================
Weighted Average Number of Common Shares
Outstanding: 1,439,742 3,119,137
================ ================
</TABLE>
See notes to financial statements
F-38
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
October 3, 1996 Nine Months
Through Ended
May 31, 1997 May 31,
1998
----------------- -------------
(Unaudited) (Unaudited)
Cash Flows from Operating Activities
<S> <C> <C>
Net Loss $(1,309,730) $(187,590)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities
Depreciation and amortization 4,374 33,583
Provision for doubtful accounts 93,000 19,000
Earnings of joint venture - (4,232)
Reserve for obsolete inventory - 488,421
Noncash compensation expenses related to sale of
founders shares 1,399,601 -
Withdrawn offering costs - 22,750
Deferred income taxes (19,000) (95,000)
Change in assets and liabilities
Increase in
Accounts receivable (1,934,179) (248,183)
Inventory (1,554,418) (860,002)
Prepaid expenses and other current assets (43,804) (8,112)
Deposits - (17,385)
Increase (decrease) in
Accounts payable 1,770,308 984,720
Income taxes payable 34,000 (16,200)
Accrued expenses 97,372 260,256
----------------- -------------
Total Adjustments (152,746) 559,616
----------------- -------------
Net Cash (Used in ) Provided by Operating Activities (1,462,476) 372,026
----------------- -------------
Cash Flows from Investing Activities
Purchase of property and equipment (79,914) (168,637)
Investment in joint venture - (100,000)
----------------- -------------
Net Cash Used in Investing Activities (79,914) (268,637)
----------------- -------------
Cash Flows From Financing Activities
Principal payments on long-term debt - (3,010)
Deferred offering costs (21,285) -
Advances from stockholders - related party 121,727 -
Payments on acquired stockholder obligation - related party - (51,297)
Loans from stockholders, net of repayments 640,000 -
Proceeds from sales of securities 871,309 165,000
----------------- -------------
Net Cash Provided by Financing Activities 1,611,751 110,693
----------------- -------------
Net increase in cash 69,361 214,082
Cash, Beginning of Period - 341,660
----------------- -------------
Cash, End of Period $69,361 $555,742
================= =============
</TABLE>
See notes to financial statements
F-39
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
NOTE 1- BASIS OF PRESENTATION
Interim Condensed Consolidated Financial Statements
The interim condensed consolidated financial statements include the accounts of
Aviation Holdings International, Inc. (formerly Jet Aviation Trading, Inc.) and
its majority-owned subsidiaries (collectively "AHI" or the "Company") after
elimination of significant intercompany accounts and transactions.
The interim consolidated financial data as of May 31, 1998 and for the nine
months then ended and the period October 3, 1996 (date of inception) through May
31, 1997 is unaudited. The information reflects all adjustments, consisting only
of normal recurring adjustments, that in the opinion of management, are
necessary to present fairly the financial position and results of operations of
the Company for the periods indicated. Results of operations for the interim
periods are not necessarily indicative of the results of operations for a full
fiscal year.
The interim consolidated condensed financial statements should be read in
conjunction with the financial statements and notes thereto contained elsewhere
in the Prospectus for the year ended August 31, 1997.
Change of Majority Ownership
Effective May 31, 1998, various Company shareholders entered into share exchange
agreements ("Exchange Agreements") with Aviation Holdings Group, Inc. (formerly
EYEQ Networking, Inc.) ("AHGI"). Under the Exchange Agreements, one share of
AHGI's common stock was exchanged for between 1.667 to 2.5 shares of the
Company's common stock depending on the terms of the underlying agreement. AHGI
also purchased a block of 80,000 shares of the Company's common stock from a
stockholder for $100,000. Through these exchanges and the purchase, AHGI
acquired 2,016,280 shares (60.98%) of the Company's issued and outstanding
common stock as of May 31, 1998.
Additional Exchange Agreements were executed in June and July 1998. As of
September 30, 1998, AHGI had acquired an aggregate of 2,468,080 shares (74.08%)
of the Company's issued and outstanding common stock.
This interim consolidated financial data is presented as of the most recent
fiscal quarter of the Company coinciding with the change of ownership.
Subsequent operations are consolidated in the AHGI financial statements. The
acquisition has been accounted for as a purchase by AHGI.
NOTE 2 -ACQUISITIONS AND MERGERS
Effective February 12, 1998, the Company entered into a stock purchase agreement
(the "Purchase Agreement") with PASCO International Aviation Corp., a Florida
corporation ("PASCO Florida"), PASCO International Aviation Corporation Limited,
a Hong Kong corporation ("PASCO HK"), PASCO Financial Services Limited, a Hong
Kong corporation ("PASCO Financial HK"), and Aero-Link Flight Systems Limited, a
Hong Kong corporation ("Aero HK"), and their major stockholder ("Seller").
(PASCO Florida, PASCO HK, PASCO Financial HK and Aero HK are hereinafter
referred to collectively as "PASCO").
The Seller received 150,000 shares of the Company's common stock, entered into a
three-year employment contract with the Company (see Note 4), and retained
primarily all of the operating tangible assets and liabilities of the acquired
companies. An interest in a joint venture owned by PASCO and a corresponding
liability that were approximately equivalent in value were transferred to the
Company under the terms of the Purchase Agreement.
F-40
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
NOTE 2 -ACQUISITIONS AND MERGERS (Continued)
The acquisition was apportioned as follows:
The Company acquired 90% of the outstanding common stock of PASCO HK in
exchange for 40,000 shares of the Company's common stock. PASCO HK
operations consist of purchasing, selling and leasing of aircraft
components and engines in Asia and the Pacific Rim.
The Company acquired 100% of the outstanding common stock of PASCO
Florida in exchange for 100,000 shares of the Company's common stock.
PASCO Florida holds a 25% interest in Shenyang Northern Aircraft
Maintenance & Engineering Co., Ltd., a Sino-American joint venture
(SYNOR-A) (see Note 3). The Seller retained a 22% interest in future
distributions to be received by PASCO Florida after its capital
investment is recovered. The Company recognized minimal revenue from
PASCO Florida as of May 31, 1998.
The Company acquired 80% of the outstanding common stock of PASCO
Financial HK in exchange for 1,000 shares of the Company's common stock.
The objective of PASCO Financial HK is to procure financing from banks on
behalf of airlines for their aircraft and aviation-related purchases.
PASCO Financial HK also intends to function on behalf of certain airlines
and act as their agent in connection with the sale or lease of aircraft.
The Company has not recognized any revenue from PASCO Financial HK as of
May 31, 1998.
The Company acquired 100% of the outstanding common stock of Aero HK in
exchange for 9,000 shares of the Company's common stock. Aero HK and its
wholly owned subsidiary Aero-Link Flight Systems, Inc., a Florida
Corporation ("AERO Florida"), (collectively, "Aero-Link") have entered
into an agreement to act as the global marketing representative (except
the Taiwan region) for China Airlines, Taiwan. In this capacity they are
responsible for promoting and marketing China Airlines' aircraft
maintenance, turbine engine and component repair and overhaul business.
AERO Florida also functions as a purchasing agent in the United States on
behalf of PASCO HK.
All of the aforementioned acquisitions have been accounted for as purchases, and
all operations have been included in the accompanying consolidated financial
statements since the date of the acquisitions.
The Seller assigned inventory to the Company as partial payment for common stock
purchased by the Seller (see Note 6). The Company was responsible for collecting
the pre-purchase receivables of PASCO and applying those proceeds against the
pre-purchase payables of PASCO, a stock subscription payable to the Company on
behalf of the Seller (see Note 6) and the balance to an assumed Seller
obligation.
NOTE 3 - JOINT VENTURE
SYNOR-A is a Sino-American Joint venture company which was established in
November 1997 by PASCO Florida and China Northern Airlines ("CNA") under the
terms of an eleven-year agreement. PASCO Florida holds a twenty-five percent
interest in SYNOR-A and CNA holds the remaining 75% interest. SYNOR-A primarily
deals with inspection, repair and recertification of DC9, MD80, and A300-600
components, instruments and avionics. SYNOR-A has been approved by the Civil
Aviation Administration of China in the avionics accessories repair field. In
November 1997, SYNOR-A received the licenses necessary to commence operations.
Operations commenced in March 1998. The term of the joint venture arrangement is
eleven years. The Company reflects this investment on its financial statements
using the equity method of accounting.
PASCO Florida's total financial investment commitment to SYNOR-A is $1,000,000.
As of May 31, 1998, the Company had funded $208,332 of this commitment. Under
the terms of the joint venture, PASCO Florida is entitled to certain preferences
in any distributions of the net income of SYNOR-A. This distribution preference
is effectively
F-41
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
NOTE 3 - JOINT VENTURE (Continued)
intended to provide that PASCO Florida recovers its investment in SYNOR-A prior
to any regular distributions being made to CNA. PASCO Florida's role in SYNOR-A
is to provide technological advice to SYNOR-A and promote, market and sell the
services of SYNOR-A. The Company has recognized minimal revenue from SYNOR-A as
of May 31, 1998.
NOTE 4 - COMMITMENTS AND CONTINGENCIES
Effective May 31, 1998, the President of the Company entered into an employment
agreement with AHGI to serve as President and Chief Executive Officer of AHGI
("CEO"). In accordance with the employment agreement the CEO also became a
director of AHGI. The agreement reaffirms debt obligations of the CEO to the
Company which were initiated under a prior agreement in connection with the
purchase of common stock. The term of the employment agreement is three years
and may be extended on a month to month basis thereafter. In addition to base
compensation, the CEO is entitled to a bonus arrangement based upon a percentage
of pretax income. In addition, the CEO was granted options to purchase 200,000
shares of AHGI's common stock at an exercise price of $2.50 per share. All of
these options are vested and expire five years from the effective date of the
new employment agreement.
Effective February 14, 1998, in conjunction with the Purchase Agreement, the
Seller, PASCO's majority shareholder, entered into an employment agreement with
the Company to serve as Vice President. In accordance with the employment
agreement, the Seller also became a director of the Company. Duties include
responsibility for and oversight of the Company's operations in Asia and the
Pacific Rim. The term of the employment agreement, which includes base
compensation and a bonus as defined in the agreement, is three years and may be
extended on a month-to-month basis thereafter. The agreement requires one-half
of the bonus in excess of $25,000 earned annually to be applied as a reduction
of the outstanding balance of the Seller's obligation under a three-year
promissory note dated February 12, 1998 (see Note 6). The Seller was granted
options to purchase 15,000 shares of the Company's common stock at an exercise
price of $2.50 per share. One-third of these options vest annually over a
three-year period beginning February 14, 1999 and expire five years from the
date of grant.
NOTE 5 - SALES TO MAJOR CUSTOMERS
The Company sells, leases and exchanges spare parts for fixed-wing commercial
jet transport aircraft to foreign and domestic customers.
The information with respect to revenue, by geographic area, is presented in the
table below for the period from October 3, 1996 (inception) through May 31, 1997
and for the nine months ended May 31, 1998.
May 31,
-----------------------------------
1997 1998
---------------- ---------------
United States $2,185,179 $6,317,145
Africa and Middle East 33,869 47,595
Europe 421,104 1,332,712
Latin America 9,520 73,925
Asia 994,399 2,069,628
---------------- ---------------
Total $3,644,071 $9,841,005
================ ===============
For the period October 3, 1996 (inception) through May 31, 1997, AHI had sales
to three customers of $840,850, $618,530 and $377,201, respectively, of more
than ten percent of total revenues. For the nine months ended May 31, 1998, AHI
had sales to one customer in the amount of $2,195,000 that accounted for more
than twenty percent of total revenues.
F-42
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
NOTE 6 - STOCK SUBSCRIPTIONS RECEIVABLE
On February 12, 1998, the Company issued 160,000 shares of common stock to the
Seller in exchange for two promissory notes aggregating $365,000 and the
assignment from PASCO of inventory valued at $35,000. One of the notes received
by the Company was a three-month non-interest bearing promissory note for
$165,000 which had recourse against the personal assets of the Seller ("Recourse
Note"). The Recourse Note was paid in full prior to May 31, 1998. The other note
is a three-year promissory note for $200,000 which bears interest at 8.5% and is
secured solely by 80,000 shares of the Company's common stock ("Nonrecourse
Note"). The shares of common stock which have been pledged as security are held
in escrow in accordance with a stock pledge agreement dated February 12, 1998.
The Nonrecourse Note remained outstanding at September 30, 1998.
The Company was responsible to collect all of the pre-purchase accounts
receivable of PASCO on behalf of the Seller. A portion of these funds, amounting
to $165,000, was used to pay the principal due on the Recourse Note prior to May
31, 1998.
The Company recorded interest income on outstanding stock subscription
receivables of approximately $8,700 for the nine months ended May 31, 1998 and
$3,156 for the period October 3, 1996 through May 31, 1997. As of May 31, 1998
and 1997, accrued interest receivable on subscription receivables was $13,045
and $3,156, respectively.
NOTE 7 - CONCENTRATIONS OF CREDIT RISK INVOLVING CASH
During the periods presented in these financial statements, the Company
maintained cash balances in excess of the Federal Deposit Insurance Corporation
(FDIC) insured limits. At May 31, 1998, the amount of funds that exceeded FDIC
insurance was $297,745. The Company also maintained funds in banks that were not
FDIC insured. At May 31, 1998 and 1997 the Company maintained balances of
$367,067 and $176,389, respectively in Israel Discount Bank Limited, an
international bank that operates in the United States under the Edge Act. The
Company does not believe a significant risk existed in having the balances in
excess of the FDIC-insured limit.
During the period from February 12, 1998 through May 31, 1998, PASCO HK
maintained bank accounts in Hong Kong with the Kwong On Bank, Limited. The
accounts were denominated in US Dollars, Hong Kong Dollars and German Deutsche
Marks. None of the accounts were FDIC insured. During the period, the accounts
denominated in foreign currencies and the effects of translation of foreign
currency accounts into US dollars were immaterial.
NOTE 8 - FLIGHT SIMULATOR AND SUPPORT PACKAGE
In 1998, the Company changed its sales strategy regarding a flight simulator
maintained in inventory. Instead of selling the simulator as a complete unit,
the Company decided to sell the individual components of the unit. In
conjunction with this change in strategy, the Company has taken a charge against
income of $335,000 during the nine-month period ended May 31, 1998 in order to
reflect the decrease in market value of the avionics and the structure as spare
parts.
NOTE 9 - LONG TERM DEBT
In February 1998, the Company purchased a delivery van. The Company financed the
purchase through a five-year note with General Motors Acceptance Corporation
having an interest rate of 5.9% and monthly payments of $371. As of May 31, 1998
the balance of the note was $18,666.
F-43
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
NOTE 10 - LEASED EQUIPMENT
Commencing on May 20, 1998, the Company leased a flight computer with a cost of
$129,000 to a customer. The lease term was for four months. Payments on the
lease amounted to $9,000 per month and the equipment was returned by the
customer on September 20, 1998. The Company temporarily reclassified the leased
item from inventory to property and equipment and depreciated the computer using
the straight-line method over a five-year life during the term of the lease.
NOTE 11 - STOCK OPTION PLAN
Effective September 1, 1997 the Company adopted a qualified incentive stock
option and stock appreciation rights plan that has a term of ten years. A
maximum of 750,000 shares of common stock may be issued under the plan to any
employee or consultant of the Company or any of its subsidiaries. The option
price, the number of shares, the grant date and the vesting are determined at
the discretion of the Company's Board of Directors. Options granted under the
plan are generally exercisable for a period not to exceed ten years. Upon
termination, an employee has three months to exercise any vested options. If any
individual or entity acquires an eighty percent interest in the voting classes
of stock of the Company, the plan automatically terminates.
The Company has elected to account for the stock option plan under Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and
related interpretations. Accordingly, no compensation expense has been
recognized for the stock options issued.
Following is a summary of option transactions during the nine months ended May
31, 1998:
Weighted
Number Average
of Exercise
Shares Price
--------- -----------
Outstanding at September 1, 1997 0
Granted 234,750 $ 2.50
Exercised 0
Canceled (40,000) $ 2.50
--------- -----------
Outstanding at May 31, 1998 194,750 $ 2.50
========= ===========
Shares Available for Grant 555,250
=========
The following table summarizes information about fixed stock options
outstanding at May 31, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------------- --------------------------------------
Weighted
Average Weighted Weighted
Number Remaining Average Number Average
Exercise of Contractual Exercise of Exercise
Price Options Life Price Options Price
- ---------------- ------------------ ----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
$ 2.50 194,750 9.67 $ 2.50 166,500 $ 2.50
======= =======
</TABLE>
The Company subsequently amended and restated this plan, and all active
participants became included in the stock option plan of AHGI. The options to
acquire the Company's stock, outstanding at the time of the restatement, were
replaced by options to acquire AHGI Company stock on a share-for-share basis.
F-44
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
NOTE 12 - INTANGIBLES
The resulting goodwill from the purchase of the PASCO entities is being
amortized on a straight-line basis over 15 years.
NOTE 13 - SUPPLEMENTAL CASH FLOW DISCLOSURES
Cash was paid for the following items as follows:
Period Ended May 31,
------------------------------------------
1997 1998
-------------------- ------------------
Interest $ 12,285 $ 27,115
==================== ==================
Taxes $ 0 $ 16,200
==================== ==================
The Company had the following non-cash transactions:
In October 1996, the Company issued stock in the amount of $625,000 as
consideration for the purchase of inventory.
In October 1996, the Company issued stock in exchange for promissory notes
aggregating $255,000.
In connection with the acquisition of PASCO in February 1998, the Company issued
stock with a value of $375,000 to the Seller. The company issued additional
stock to the Seller in exchange for a promissory note in the amount of $200,000
and inventory valued at $35,000.
In February 1998, the Company financed the purchase of a delivery van in the
amount of $21,676.
F-45
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated combined financial
statements are based on the historical financial statements of Aviation Holdings
Group, Inc. ("AHGI") and the historical financial statements of Aviation
Holdings International, Inc. ("AHI"), an entity in which AHGI acquired a
majority interest during May 1998 and additional interests in June and July 1998
(both entities collectively referred to as the "Company"). Specifically, the
following unaudited pro forma condensed consolidated combined financial
statements present, as if the acquisition of AHI had been consummated as of
January 1, 1997, the pro forma results of operations of the Company for the nine
months ended September 30, 1998 and for the year ended December 31, 1997. The
information presented is derived from, should be read in conjunction with, and
is qualified in its entirety by reference to, the separate historical financial
statements and the notes thereto appearing elsewhere in this Prospectus/SB2 or
incorporated elsewhere in this Prospectus/SB2 by reference. The unaudited pro
forma condensed combined financial data has been included for comparative
purposes only and does not purport to be indicative (i) of the results of
operations or financial position which actually would have been obtained if the
AHI acquisition had been effected at January 1, 1997 or (ii) of the financial
position or results of operations which may be obtained in the future.
The post-acquisition results of operations of AHI have been included in the
historical operations of the Company. Pro forma adjustments to record the
pre-acquisition results of operations of AHI are included in the accompanying
pro forma financial information.
P-1
<PAGE>
AVIATION HOLDINGS GROUP, INC
Unaudited Pro Forma Condensed Consolidated Combined Statement of Operations
For the Year Ended December 31, 1997
<TABLE>
<CAPTION>
Aviation
Aviation Holdings
Holdings International As
Group, Inc. Inc. Adjustments Restated
--------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Net Sales $0 $8,720,804 $0 $8,720,804
Cost of Goods Sold 6,908,423 6,908,423
--------------- -------------- --------------- -------------
Gross Profit 0 1,812,381 0 1,812,381
Operating Expenses
Salaries and wages 858,173 858,173
General and administrative 15,950 805,919 821,869
Professional fees 48,227 132,558 180,785
Non-compensation stock expense 999,600 999,600
--------------- -------------- --------------- -------------
Total Operating Expenses 64,177 2,796,250 0 2,860,427
--------------- -------------- --------------- -------------
Loss from Operations (64,177) (983,869) 0 (1,048,046)
Other (Expense) Income 6,740 (23,159) (16,419)
--------------- -------------- --------------- -------------
Loss Before Income Taxes and Minority Interest (57,437) (1,007,028) 0 (1,064,465)
--------------- -------------- --------------- -------------
Income Tax (Expense) Benefit
Current (111,000) (111,000)
Deferred 122,000 122,000
--------------- -------------- --------------- -------------
Total Income Tax Benefit 0 11,000 0 11,000
--------------- -------------- --------------- -------------
Loss Before Minority Interest (57,437) (996,028) 0 (1,053,465)
Minority Interest 258,173 258,173
--------------- -------------- --------------- -------------
Net Loss $(57,437) $(996,028) $258,173 $(795,292)
=============== ============== =============== =============
Basic and Diluted Loss Per Common Share (0.37)
=============
Weighted Average Number of Common Shares
Outstanding 2,142,050
=============
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma condensed consolidated combined statement of operations.
P-2
<PAGE>
AVIATION HOLDINGS GROUP, INC
Unaudited Pro Forma Condensed Consolidated Combined Statement of Operations
For the Nine Months Ended September 30, 1998
<TABLE>
<CAPTION>
Aviation
Aviation Holdings
Holdings International As
Group, Inc. Inc. Adjustments Restated
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Net Sales $0 $11,170,875 $0 $11,170,875
Cost of Goods Sold 9,201,862 9,201,862
--------------- --------------- --------------- -------------
Gross Profit 0 1,969,013 0 1,969,013
Operating Expenses
Salaries and wages 16,670 929,304 945,974
General and administrative 12,378 993,712 1,006,090
Professional fees 286,211 220,504 506,715
--------------- --------------- --------------- -------------
Total Operating Expenses 315,259 2,143,520 0 2,458,779
--------------- --------------- --------------- -------------
Loss from Operations (315,259) (174,507) 0 (489,766)
Other (Expense) Income
Income from joint venture 9,102 9,102
Interest income (net of interest expense) 51,774 16,119 67,893
Provision for doubtful accounts (593,410) 0 (593,410)
--------------- --------------- --------------- -------------
Total Other (Expense) Income (541,636) 25,221 0 (516,415)
--------------- --------------- --------------- -------------
Loss Before Income Taxes and Minority Interest (856,895) (149,286) 0 (1,006,181)
--------------- --------------- --------------- -------------
Income Tax (Expense) Benefit
Current (1,193) 114,385 113,192
Deferred (133,000) (133,000)
--------------- --------------- --------------- -------------
Total Income Tax Expense (1,193) (18,615) 0 (19,808)
--------------- --------------- --------------- -------------
Loss Before Minority Interest (858,088) (167,901) 0 (1,025,989)
Minority Interest 43,520 43,520
--------------- --------------- --------------- -------------
Net Loss $(858,088) $(167,901) $43,520 $(982,469)
=============== =============== =============== =============
Basic Loss Per Common Share (.28)
=============
Weighted Average Number of Common Shares
Outstanding 3,446,416
=============
</TABLE>
The accompanying notes are an integral part of this unaudited
pro forma condensed consolidated combined statement of operations.
P-3
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
COMBINED FINANCIAL STATEMENTS
(1) The unaudited pro forma information for the year ended December 31, 1997 and
for the nine months ended September 30,1998 has been prepared using the
hypothetical assumption that the acquisition of 74.08% of the outstanding
stock of AHI occurred as of January 1, 1997. A 60.98% majority interest in
AHI was acquired through various share exchange agreements and a block
purchase of common stock in May 1998. Additional exchange agreements were
executed in June and July 1998 which increased the ownership percentage of
AHI to 74.08%. These transactions have been accounted for as a purchase.
(2) This presentation assumes that the issuance of approximately 1,095,815
shares of AHGI's common stock, exchanged in the acquisition, were exchanged
at January 1, 1997 instead of at the time of the acquisitions in 1998.
(3) There were no intercompany sales during the periods presented. Any
intercompany transactions have been eliminated.
(4) Outside interests have been recorded as minority interest.
P-4
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesman or any other person has been authorized in connection with
this offering to give any information or to make representations other than
those contained in this Prospectus. This Prospectus does not constitute an offer
or a solicitation in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create any implication that
there has been no change in the circumstances, create an implication that there
has been no change in the circumstances of the Company or the facts herein set
forth since the date hereof.
-------------------
Until _________, 1999 (90 days after the date of the Prospectus), all
dealers effecting transactions in the registered securities, whether or not
participating in this distribution, may be required to deliver a Prospectus.
This is in addition to the dealers' obligation to deliver a Prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
750,000 Units, each Unit Consisting of
Two Shares of Common Stock
----------------------
AVIATION HOLDINGS
GROUP, INC.
-------------------
PROSPECTUS
-------------------
________, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24. Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation Law permits a corporation
to include in its charter documents, and in agreements between the corporation
and its directors and officers, provisions expanding the scope of
indemnification beyond that specifically provided by the current law.
The Company's Bylaws provide for the indemnification of officers, directors
and third parties acting on behalf of the Company if such person acted in good
faith and in a manner reasonably believed to be in and not opposed to the best
interest of the Company, and, with respect to any criminal action or proceeding,
the indemnified party had no reason to believe his conduct was unlawful.
The Company intends to enter into indemnification agreements with its
directors and executive officers in addition to the indemnification provided for
in the Company's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
The form of Underwriting Agreement filed as an Exhibit hereto provides for
the indemnification of the Company's directors and officers in certain
circumstances as provided therein.
The Company intends to procure insurance, which would afford officers and
directors insurance coverage for losses arising from claims based on breaches of
duty, negligence, error and other wrongful acts, including liabilities under the
Securities Act.
Pursuant to Section 607.0850 of the Florida Business Corporation Act, AHI
has the power to indemnify directors, officers, employees or agents. AHI's
Articles of Incorporation and Bylaws provide for indemnification of directors
and officers. In addition, AHI's executive officers and directors have entered
into agreements with the AHI which also indemnifies them for certain acts and
omissions.
Item 25. Other Expenses of Issuance and Distribution.
The estimated expenses in connection with the issuance of the securities
being registered are as follows:
SEC Registration Fee................................. $ 1,950
Printing Expenses.................................... 50,000
Accounting Fees and Expenses......................... 150,000
Legal Fees and Expenses.............................. 150,000
Blue Sky Fees and Expenses........................... 10,000
Transfer Agent and Registrar Fees and Expenses....... 5,000
Miscellaneous........................................ 15,000
Total....................................... $381,950
- -------------
All amounts, except the SEC registration fee, are estimated.
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
The Company
The following sets forth all sales of unregistered securities during
the past three years by the Company, AHI and its predecessors:
In August 1997, EyeQ Networking, Inc. issued 1,000,000 shares of its
common stock to John D. Basher, Jr., pursuant to Rule 701 promulgated under the
Securities Act as payment of professional services rendered to the Company by
Mr. Basher.
In December 1997, EyeQ Networking, Inc. issued 800,000 shares of its
common stock to nine accredited investors pursuant to Rule 504 promulgated under
the Securities Act in return for $1,000,000 in cash, less $40,000 in investment
banking fees.
In May, June and July 1998, EyeQ Networking, Inc. issued 1,095,815
shares of its common stock to 25 shareholders of Jet Aviation Trading, Inc.
pursuant to Rule 506 promulgated under the Securities Act in consideration of
the receipt of 2,468,080 shares of common stock of Jet Aviation Trading, Inc.
Each of the shareholders of Jet Aviation Trading, Inc. who participated in the
transaction made representations stating that he or she was an "accredited
investor" (as defined in Rule 501(a) of Regulation D promulgated under the
Securities Act).
On August 1, 1998, the Company issued 4,000 shares of its common stock
to Joseph J. Nelson pursuant to Section 4(2) of the Securities Act as
consideration for services rendered.
In October, 1998, the Company issued a $200,000 promissory note and
20,000 shares of its common stock to Nancy Plotkin, and a $50,000 promissory
note and 5,000 shares of its common stock to the John G. Jacobs Trust, in
consideration of loans totalling $250,000, pursuant to Rule 506 promulgated
under the Securities Act.
In March 1999, the Company issued 500,000 shares of the Company's
common stock and a warrant to purchase an additional 100,000 shares of the
Company's common stock at an exercise price of $3.75 per share, to Argaman, Inc.
under Section 4(2) of the Securities Act in exchange for 600,000 shares of AHI
common stock.
AHI
The following sets forth all sales of unregistered securities during
the past three years by AHI or its predecessors:
In connection with the initial capitalization of Jet Aviation Trading,
Inc. in October and November of 1996, Jet Aviation Trading, Inc. issued a total
of 1,200,000 shares of its common stock for a total consideration of $780,000
consisting of $125,000 in cash, $255,000 in promissory notes and $400,000 in
non-cash compensation expense. The seven investors consisted of six business
entities and one individual, and all of the seven investors made representations
regarding their status as accredited investors.
On December 31, 1996, Jet Aviation Trading, Inc. issued 10,000 shares
of its common stock to William Seidel pursuant to Section 4(2) of the Securities
Act in return for spare parts that became part of the inventory of Jet Aviation
Trading, Inc.
In February and March 1997, Jet Aviation Trading, Inc. issued an
aggregate of 292,000 shares of its common stock to eleven accredited investors
pursuant to Rule 506 promulgated under the Securities Act for an aggregate
consideration of $730,000 in cash, less $33,691 paid as broker-dealer costs in
connection with the offering.
On March 14, 1997, Jet Aviation Trading, Inc. issued 40,000 shares of
its common stock to Fersam International Ltd. ("Fersam") in return for inventory
consisting of a one-half interest in certain flight-simulation equipment. On
March 28, 1997, Jet Aviation Trading, Inc. issued 200,000 shares of its common
stock to Fersam in return for computer software and training materials to be
used in connection with aforementioned flight-simulation equipment. On June 2,
1997, Jet Aviation Trading, Inc. issued 20,000 shares of common stock to Fersam
in return for $50,000 in cash. All of the issuances to Fersam were made pursuant
to Section 4(2) of the Securities Act.
II-2
<PAGE>
On June 2, 1997, Jet Aviation Trading, Inc. issued 14,800 shares of its
common stock to Silvertown International Corp. ("Silvertown") pursuant to
Section 4(2) of the Securities Act as an inducement for loans made by Silvertown
to Jet Aviation Trading, Inc.
In June and July 1997, Jet Aviation Trading, Inc. (i) issued an
aggregate of 47,200 shares of its common stock to 99 investors pursuant to Rule
504 promulgated under the Securities Act for an aggregate consideration of
$118,000 in cash and payment of certain professional fees, (ii) issued 100,000
shares of its common stock to FAC Enterprises pursuant to Section 4(2) of the
Securities Act in repayment of a $250,000 loan and 7,500 shares to FAC
Enterprises as consulting fees, and (iii) issued 150,000 shares of its common
stock to Fersam International, Ltd. pursuant to Section 4(2) of the Securities
Act as payment for inventory previously held on consignment for Fersam
International, Ltd..
On August 29, 1997, Jet Aviation Trading, Inc. issued (i) 80,000 shares
of its common stock to Jet Avionics Systems, Inc. in return for spare parts
inventory, (ii) 250,000 shares of its common stock to Joseph Laura in repayment
of a $500,000 loan and (iii) 185,000 shares of its common stock to Silvertown in
repayment of $370,000 of outstanding notes Each of the issuances was made
pursuant to Section 4(2) of the Securities Act.
On June 1, 1997, Jet Aviation Trading, Inc. issued warrants to purchase
950,000 shares of common stock to the D.A.R. Group and warrants to purchase
50,000 shares of its common stock to Dallas Investment Group in return for
certain services. These issuances were made pursuant to Section 4(2) of the
Securities Act.
On February 12, 1998, AHI issued 150,000 shares of its common stock to
Simon Chiang pursuant to Section 4(2) of the Securities Act in exchange for the
outstanding capital stock in various companies owned by Simon Chiang, and issued
160,000 shares to Mr. Chiang in exchange for inventory valued at $35,000 and two
prmissory notes totalling $365,000.
On June 11, 1998, AHI issued 25,000 shares of its common stock to
Joseph F. Janusz pursuant to Section 4(2) of the Securities Act as consideration
for services rendered.
In connection with the initial capitalization of Schuylkill Acquisition
Corp. (which later merged with Jet Aviation Trading, Inc. and changed its name
to "Jet Aviation Trading, Inc.") in May 1997, Schuylkill Acquisition Corp.
issued an aggregate of 400,000 shares of its common stock to four accredited
investors for an aggregate consideration of $400 in cash and $999,600 in
non-cash compensation expense.
No Commissions or other remuneration was paid in connection with the
above described sales of Common Stock.
Item 27. Exhibits.
<TABLE>
<CAPTION>
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 (a) Certificate of Incorporation, as amended
(b) Articles of Merger or Share Exchange
(c) Certificate of Ownership and Merger
(d) Certificate of Amendment
3.2 Bylaws of the Company, as amended to date
4.1 Form of Common Stock Certificate
5.1 Opinion of Klehr, Harrison, Harvey, Branzburg & Ellers LLP
10.1 1999 Stock Option Plan
10.2 Employment Agreement of Joseph J. Nelson
10.3 Employment Agreement of Simon Chiang*
10.4 Lease for Company Headquarters
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
10.5 Share Exchange Agreements
(a) Share Exchange Agreement between The D.A.R. Group and EYEQ Networking, Inc.
(b) Share Exchange Agreement between The Eastwind Group, Inc. and EYEQ Networking, Inc.
(c) Share Exchange Agreement between KAB Investments, Inc. and EYEQ Networking, Inc.
(d) Share Exchange Agreement between Godwin Finance Ltd. and EYEQ Networking, Inc.
(e) Share Exchange Agreement between Clifton Capital Ltd. and EYEQ Networking, Inc.
(f) Share Exchange Agreement between Elanken Family Trust and EYEQ Networking, Inc.
(g) Share Exchange Agreement between Joseph Laura and EYEQ Networking, Inc.
(h) Share Exchange Agreement between Dallas Investments, Ltd. and EYEQ Networking, Inc.
(i) Share Exchange Agreement between Joseph Nelson and EYEQ Networking, Inc.
(j) Share Exchange Agreement between Fersam International Ltd. and EYEQ Networking, Inc.
(k) Share Exchange Agreement between I.P. Services Inc. and EYEQ Networking, Inc.
(l) Share Exchange Agreement between Discretionary Investment Trust dated 7/7/93 and EYEQ Networking, Inc.
(m) Share Exchange Agreement between Brian Due and EYEQ Networking, Inc.
(n) Share Exchange Agreement between Bill Seidle and EYEQ Networking, Inc.
(o) Share Exchange Agreement between Leonard Bloom and EYEQ Networking, Inc.
(p) Share Exchange Agreement between Sheng Kuang Chiang and EYEQ Networking, Inc.
(q) Share Exchange Agreement between Bing Ju Chiang and EYEQ Networking, Inc.
(r) Share Exchange Agreement between Impact Investment Company, Ltd. and EYEQ Networking, Inc.
(s) Share Exchange Agreement between Silvertown International Corp. and EYEQ Networking, Inc.
(t) Share Exchange Agreement between Janet and Robert Weinstein and EYEQ Networking, Inc.
(u) Share Exchange Agreement between Amaury Borges and EYEQ Networking, Inc.
(v) Share Exchange Agreement between SPH Equities, Inc. and EYEQ Networking, Inc.
(w) Share Exchange Agreement between Bella Shrem and EYEQ Networking, Inc.
(x) Share Exchange Agreement between Mustang Electronics Inc. Affiliated Defined Benefits Pension Plan and
EYEQ Networking, Inc.
10.6 (a) Share Purchase Agreement with Argaman, Inc.
(b) Argaman, Inc. Stock Purchase Warrant
10.7 (a) Plotkin Promissory Note
(b) Collateral Pledge Agreement
(c) Plotkin Securities Transfer Agreement
(d) Plotkin Stock Purchase Agreement
10.8 (a) Jacobs Promissory Note
(b) Jacobs Securities Transfer Agreement
(c) Jacobs Stock Pledge Agreement
10.9 (a) Comerica Bank Credit Agreement dated August 12, 1998*
(b) Comerica Bank Master Revolving Note dated August 12, 1998*
(c) Comerica Bank Security Agreement dated August 12, 1998*
(d) Advance Formula Agreement dated August 12, 1998*
10.10 (a) Consignment Agreement
(b) Consignment, Cancellation and Purchase Agreement
10.11 Indemnity Agreement with Directors and Officers
10.12 Consulting Agreement
10.13 Simulator Purchase Agreement
10.14 Purchase Agreement*
10.15 Stock Purchase Agreement among Jet Aviation Trading, Inc., PASCO International Aviation Corp., et al.*
10.16 Form of Lock-up Agreement*
10.17 Employment Agreement with Joseph J. Janusz*
21.1 Subsidiaries of the Company
23.1 Consent of Klehr, Harrison, Harvey, Branzburg & Ellers LLP (included in Exhibit 5.1)
23.2 Consent of LJ Soldinger Associates
27 Financial Data Schedule
</TABLE>
- -------------
* To be filed by amendment
II-4
<PAGE>
Item 28. Undertakings.
The undersigned registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a) (3)
of the Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the registration statement; and
notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b),
if, in the aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum aggregate
offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement.
(iii) Include any additional or changed material information
on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) Provide to the underwriter at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriter to permit prompt delivery to each
purchaser.
(5) Treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the undersigned under Rule 424(b)(1), or (4), or
497(h) under the Securities Act as part of this registration statement as of the
time the Commission declared it effective.
(6) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
person of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the undersigned of expenses incurred or paid by a
director, officer or controlling persons of the undersigned in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
undersigned will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form SB-2 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Miami, State of Florida on this 25th day of
March, 1999.
AVIATION HOLDINGS GROUP, INC.
By: JOSEPH J. NELSON
--------------------------------------
Joseph J. Nelson
President and Chief Executive Officer
POWER OF ATTORNEY
Each of the undersigned officers and directors of Aviation Holdings Group, Inc.
whose signature appears below hereby appoints Joseph J. Nelson and Joseph F.
Janusz as true and lawful attorney-in-fact for the undersigned with full power
of substitution, to execute in his name and on his behalf in each capacity
stated below, any and all amendments (including post-effective amendments) to
this Registration Statement as the attorney-in-fact shall deem appropriate, and
to cause to be filed any such amendment (including exhibits thereto and other
documents in connection therewith) to this Registration Statement with the
Securities and Exchange Commission, as fully and to all intents and purposes as
such person might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact, or any of them, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on this 24th day of March, 1999.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
JOSEPH J. NELSON President and Chief Executive March 25, 1999
- -------------------------------------- Officer, Director
Joseph J. Nelson (Principal Executive Officer)
JOSEPH F. JANUSZ Vice President and Chief Financial March 25, 1999
------------------------------------ Officer
Joseph F. Janusz (Principal Accounting and
Financial Officer)
SIMON CHIANG Vice President and Director March 25, 1999
-----------------------------------
Simon Chiang
MICHAEL J. CIRILLO Director March 25, 1999
- --------------------------------------
Michael J. Cirillo
THEODORE H. GREGOR Director March 25, 1999
- --------------------------------------
Theodore H. Gregor
</TABLE>
II-6
<PAGE>
Exhibit 3.1(a)
CERTIFICATE OF INCORPORATION
OF
EYEQ NETWORKING, INC.
* * * * * *
1. The name of the corporation is:
EYEQ NETWORKING, INC.
2. The address of its registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801, located in the County of New Castle, Delaware. The name of its registered
agent at such address is The Corporation Trust Company.
3. The nature of the business or purposes to be conducted or
promoted is: To engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
4. The authorized capital stock of the Corporation shall
consist of 20,000,000 shares of capital stock, of which 18,000,000 shares shall
be Common Stock, with a par value of $.0001 per share and 2,000,000 shares shall
be Preferred Stock, with a par value of $.0001 per share.
The Board of Directors is authorized to amend this Certificate
of Incorporation so as to divide the Preferred Stock into one or more series and
to determine the number of shares and the designation of the series and the
relative voting, dividend, liquidation and other rights, preferences and
limitations of the shares of each series.
5. The name and mailing address of the sole incorporator is as
follows:
Steven C. Bravato
KLEHR, HARRISON, HARVEY, BRANZBURG & ELLERS LLP
1401 Walnut Street
Philadelphia, PA 19102-3163
<PAGE>
6. The Corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
alter or repeal the By-Laws of the Corporation. Elections of Directors need not
be written ballot unless the By-Laws of the Corporation shall so provide.
8. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
9. A Director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director except for liability (i) for any breach of the
Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the Director derived any
improper personal benefit.
10. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of ss.291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of ss.279 of Title 8 of the Delaware Code,
order a meeting of the creditors or class of creditors and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three fourths in value of the creditors or class of creditors,
and/or of
-2-
<PAGE>
the stockholders or class of stockholders of this Corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of this
Corporation as consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore
named, for the purpose of forming a corporation pursuant to the General
Corporation Law of the State of Delaware, do make this certificate, hereby
declaring and certifying that this is my act and deed and the facts herein
stated are true, and accordingly have hereunto set my hand this 27th day of
January, 1998.
/s/ Steven C. Bravato
--------------------------------------
Steven C. Bravato, Sole Incorporator
-3-
<PAGE>
Exhibit 3.1(b)
STATE OF COLORADO
ARTICLES OF MERGER OR SHARE EXCHANGE
These articles are made in accordance with Title 7, Article 111 of the
Colorado Revised Statutes.
1. The name of the surviving corporation is:
EYEQ NETWORKING, INC. (a Delaware corporation)
2. The address of the surviving corporation is:
c/o American Maple Leaf Financial Corporation
Two Penn Center Plaza, Suite 605, Philadelphia, PA 19102
3. The merger plan is as follows:
Each issued and outstanding share of EYEQ Networking, Inc.'s (a Colorado
corporation), the Parent corporation, capital stock will constitute and will
be exchangeable for one equivalent share of the Subsidiary corporation's
capital stock. Upon the effective date of the merger, the Parent shall cease
to exist and the Subsidiary shall be the surviving corporation, assuming all
obligations and obtaining all rights of the Parent. The Subsidiary shall have
the same amount of capital stock issued and outstanding as the Parent had at
the effective date of the merger (other than 100 shares of Common Stock
issued to the Parent which will transfer to the name of the Subsidiary), the
same officers and directors as the Parent and the same general corporate
purpose as the Parent.
4. The number of shareholder votes required to approve the merger plan were cast
by the shareholders of each corporation involved in this merger.
5. Immediately before the merger, the parent corporation owned at least 90% of
the outstanding stock shares of each class of the subsidiary.
6. The effective date of the merger is February 9, 1998.
7. The Company's registered agent and office are:
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, Pennsylvania 19102-3163
Attention: Michael C. Forman, Esq.
Dated: February __________, 1998 /s/ Andrew Panzo
---------------------------
Signature
Andrew Panzo, President
Name & Title
EYEQ NETWORKING, INC.
a Delaware Corporation, the surviving
subsidiary
*If this is a parent-subsidiary merger, only the surviving corporation need
execute these articles.
Note: If a surviving or acquiring foreign corporation is not qualified in
Colorado, a registered agent and office must be typed in as number 8.
<PAGE>
Exhibit 3.1(c)
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
EYEQ NETWORKING, INC.
(a Colorado Corporation)
INTO
EYEQ NETWORKING, INC.
(a Delaware Corporation)
**********
EYEQ NETWORKING, INC., a corporation organized and existing under the laws of
the State of Colorado,
DOES HEREBY CERTIFY:
FIRST: That this corporation was incorporated on the 19th day of May, 1988,
pursuant to the Colorado Corporation Code, the provisions of which permit the
merger of a corporation of another state and a corporation organized and
existing under the laws of the State of Colorado.
SECOND: That this corporation owns greater than ninety percent of the
outstanding shares (of each class) of the capital stock of EYEQ NETWORKING,
INC., a corporation incorporated on the 27th day of January, 1998, pursuant to
the General Corporation Laws of the State of Delaware.
THIRD: That the directors of EYEQ NETWORKING, INC. (a Colorado corporation), by
the following resolutions of its Board of Directors, duly adopted by unanimous
written consent on
the 27th day of January, 1998, determined to merge itself into said EYEQ
NETWORKING, INC.
(a Delaware corporation).
<PAGE>
RESOLVED, that EYEQ NETWORKING, INC. (a Colorado corporation) merge, and it
hereby does merge itself into said EYEQ NETWORKING, INC. (a Delaware
corporation) which assumes all of the obligations of EYEQ NETWORKING, INC. (a
Colorado Corporation).
FURTHER RESOLVED, that the merger shall be effective upon filing with the
Secretary of State of Delaware.
FURTHER RESOLVED, that the terms and conditions of the merger are as follows:
EYEQ Networking, Inc. (a Delaware corporation), the subsidiary corporation,
shall issue one share of its common stock in exchange for each share of EYEQ
Networking, Inc. (a Colorado corporation), the parent corporation, currently
issued and outstanding. The common stock of EYEQ Networking, Inc. (a Colorado
corporation), the parent corporation, shall be canceled and EYEQ Networking,
Inc. (a Colorado corporation), the parent corporation shall cease to exist.
FOURTH: That the proposed merger has been adopted, approved, certified, executed
and acknowledged by EYEQ NETWORKING, INC. in accordance with the laws of the
State of Colorado, under which the corporation was organized.
IN WITNESS WHEREOF, said EYEQ NETWORKING, INC. (a Colorado corporation) has
caused this Certificate to be signed by Andrew Panzo, its President, this 9th
day of February, 1998.
/s/ Andrew Panzo
------------------------
Andrew Panzo, President
2
<PAGE>
Exhibit 3.1(d)
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
EYEQ NETWORKING, INC.
The undersigned, being the President of EYEQ NETWORKING, INC., a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware,
DO HEREBY CERTIFY:
FIRST: By Written Consent dated the th day of August, 1998, the Board
of Directors of the Corporation and a majority of the shareholders of the
Corporation duly adopted resolutions approving the following amendment to the
Corporation's Certificate of Incorporation:
That Article 1 of the Corporation's Certificate of
Incorporation be amended to read in its entirety as follows:
1. The Name of the Corporation is:
AVIATION HOLDINGS GROUP, INC.
SECOND: That the aforementioned amendment was duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, I have signed this Certificate of Amendment
this ___ day of August, 1998.
------------------------------
Joseph Nelson, President
<PAGE>
Exhibit 3.2
BY LAWS
OF
EYEQ NETWORKING, INC.
ARTICLE I
OFFICES
Section 1.1 The registered office of the corporation in the
State of Delaware shall be Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The registered agent in charge thereof
shall be The Corporation Trust Company.
Section 1.2 The corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1 All meetings of the stockholders shall be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meeting or in a duly executed waiver of notice thereof.
Section 2.2 A meeting of stockholders shall be held in each
year for the election of directors at such time and place as the board of
directors shall determine. Any other proper business, notice of which was given
in the notice of the meeting or in a duly executed waiver of notice thereof, may
be transacted at the annual meeting. Elections of directors shall be by written
ballot, unless otherwise provided in the certificate of incorporation.
Section 2.3 Unless otherwise provided by law, written notice
of the annual meeting shall be given to each stockholder entitled to vote
thereat not less than ten nor more than sixty days before the date of the
meeting.
-1-
<PAGE>
Section 2.4 The officer who has charge of the stock ledger of
the corporation shall prepare and make, at least ten days before every election
of directors, a complete list of the stockholders entitled to vote at said
election, arranged in alphabetical order, showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder during ordinary
business hours, for a period of at least ten days prior to the election, either
at a place within the city, town or village where the election is to be held and
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where said meeting is to be held, and the list shall be
produced and kept at the time and place of election during the whole time
thereof, and subject to the inspection of any stockholder who may be present.
Section 2.5 Special meetings of the stockholders, for any
purpose or purposes, unless otherwise prescribed by statute or by the
certificate of incorporation, may be called by the president and shall be called
by the president or secretary at the request in writing of stockholders owning a
majority in amount of the entire capital stock of the corporation issued and
outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 2.6 Unless otherwise provided by law, written notice
of a special meeting of stockholders, stating the time, place and purpose or
purposes thereof, shall be given to each stockholder entitled to vote thereat,
not less than ten nor more than sixty days before the date fixed for the
meeting.
Section 2.7 Business transacted at any special meeting of
stockholders shall be limited to the purposes stated in the notice.
Section 2.8 The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings
-2-
<PAGE>
of the stockholders for the transaction of business except as otherwise provided
by statute or by the certificate of incorporation. If, however, such quorum
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
Section 2.9 When a quorum is present at any meeting, the vote
of the holders of a majority of the stock having voting power present in person
or represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which by express provision of the statutes or of
the certificate of incorporation, a different vote is required in which case
such express provision shall govern and control the decision of such question.
Section 2.10 Each stockholder shall at every meeting of the
stockholders be entitled to one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy shall
be voted on after three years from its date, unless the proxy provides for a
longer period, and, except where the transfer books of the corporation have been
closed or a date has been fixed as a record date for the determination of its
stockholders entitled to vote, no share of stock shall be voted on at any
election for directors which has been transferred on the books of the
corporation within twenty days next preceding such election of directors.
Section 2.11 Any action required to be taken at any annual or
special meeting of stockholders, or any action which may be taken at any annual
or special meeting of such stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a
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meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III
DIRECTORS
Section 3.1 The number of directors which shall constitute the
whole board shall be such number as the board of directors may determine. Except
as hereinafter provided in Section 3.2 of this Article, the directors, other
than those constituting the first board of directors, shall be elected by the
stockholders, and each director shall hold office until his successor is elected
and qualified or until his earlier resignation or removal. Directors need not be
stockholders.
Section 3.2 Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director.
Section 3.3 The business and affairs of the corporation shall
be managed by or under the direction of its board of directors which may
exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the certificate of incorporation or by these
by-laws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 3.4 The board of directors of the corporation may hold
meetings, both regular and special, either within or without the State of
Delaware.
Section 3.5 The first meeting of each newly elected board of
directors shall be held immediately after and at the same place as the meeting
of the stockholders at which it was elected and no notice of such meeting shall
be necessary to the newly elected directors in order legally to constitute the
meeting, provided a quorum shall be present.
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Section 3.6 Regular meetings of the board of directors may be
held without notice at such time and at such place as shall from time to time be
determined by the board.
Section 3.7 Special meetings of the board may be called by the
president on two days notice to each director, either personally or by mail or
by telegram; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two directors.
Section 3.8 At all meetings of the board a majority of
directors shall constitute a quorum for the transaction of business and the act
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the board of directors, except as may be otherwise
specifically provided by statute or by the certificate of incorporation. If a
quorum shall not be present at any meeting of the board of directors, the
directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum shall be present.
Section 3.9 Unless otherwise restricted by the certificate of
incorporation or these by-laws, any action required or permitted to be taken at
any meeting of the board of directors or of any committee thereof may be taken
without a meeting, if all members of the board or of such committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the board or committee.
COMMITTEES OF DIRECTORS
Section 3.10 The board of directors may, by resolution passed
by a majority of the whole board, designate one or more committees, each
committee to consist of one or more of the directors of the corporation. In the
absence or disqualification of a member of a committee, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee,
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to the extent provided in the resolution of the board of directors, shall have
and may exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
stockholders a dissolution of the corporation or a revocation of a dissolution
or amending the by-laws of the corporation; and, unless the resolution expressly
so provides, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock or to adopt a certificate of
ownership and merger.
Section 3.11 Each committee shall keep regular minutes of its
meetings and report the same to the board of directors when required.
COMPENSATION OF DIRECTORS
Section 3.12 The board of directors shall have the authority
to fix the compensation of directors.
PARTICIPATION IN MEETING BY TELEPHONE
Section 3.13 Members of the board of directors or any
committee designated by such board may participate in a meeting of the board or
of a committee of the board by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
subsection shall constitute presence in person at such meeting.
ARTICLE IV
NOTICES
Section 4.1 Notices to directors and stockholders shall be in
writing and delivered personally or mailed to the directors or stockholders at
their addresses appearing on the books of the corporation. Notice by mail shall
be deemed to be given at the time when the same shall be mailed.
Notice to directors may also be given by telegram.
Section 4.2 Whenever any notice is required to be given under
the provisions of the statutes or of the certificate of incorporation or by
these by-laws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular, or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
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ARTICLE V
OFFICERS
Section 5.1 The officers of the corporation shall be chosen by
the board of directors and shall be a president, a vice-president, a secretary
and a treasurer. The board of directors may also choose additional
vice-presidents, and one or more assistant secretaries and assistant treasurers.
Any number of offices may be held by the same person, unless the certificate of
incorporation otherwise provides.
Section 5.2 The board of directors at its first meeting after
each annual meeting of stockholders shall choose a president, one or more
vice-presidents, a secretary and a treasurer.
Section 5.3 The board of directors may appoint such other
officers and agents as it shall deem necessary who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the board.
Section 5.4 The salaries of all officers and agents of the
corporation shall be fixed by the board of directors.
Section 5.5 The officers of the corporation shall hold office
until their successors are chosen and qualified. Any officer elected or
appointed by the board of directors may be removed at any time by the
affirmative vote of a majority of the board of directors. Any vacancy occurring
in any office of the corporation shall be filled by the board of directors.
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THE PRESIDENT
Section 5.6 The president shall be the chief executive officer
of the corporation, shall preside at all meetings of the stockholders and the
board of directors, shall have general and active management of the business of
the corporation and shall see that all orders and resolutions of the board of
directors are carried into effect.
Section 5.7 He shall execute bonds, mortgages and other
contracts requiring a seal, under the seal of the corporation, except where
required or permitted by law to be otherwise signed and executed and except
where the signing and execution thereof shall be expressly delegated by the
board of directors to some other officer or agent of the corporation.
THE VICE-PRESIDENTS
Section 5.8 The vice-president, or if there shall be more than
one, the vice-presidents in the order determined by the board of directors,
shall, in the absence or disability of the president, perform the duties and
exercise the powers of the president and shall perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
THE SECRETARY AND ASSISTANT SECRETARIES
Section 5.9 The secretary shall attend all meetings of the
board of directors and all meetings of the stockholders and record all the
proceedings of the meetings of the corporation and of the board of directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or president, under whose supervision he shall be. He shall have
custody of the corporate seal of the corporation and he, or an assistant
secretary, shall have authority to affix the same to any instrument requiring it
and when so affixed, it may be attested by his signature or by the signature of
such assistant secretary. The board of directors may give general authority to
any other officer to affix the seal of the corporation and to attest the
affixing by his signature.
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Section 5.10 The assistant secretary, or if there be more than
one, the assistant secretaries in the order determined by the board of
directors, shall, in the absence or disability of the secretary, perform the
duties and exercise the powers of the secretary and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
THE TREASURER AND ASSISTANT TREASURERS
Section 5.11 The treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the board of
directors.
Section 5.12 He shall disburse the funds of the corporation as
may be ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the president and the board of directors at
its regular meetings or when the board of directors so requires, an account of
all his transactions as treasurer and of the financial condition of the
corporation.
Section 5.13 If required by the board of directors, he shall
give the corporation a bond (which shall be renewed every six years) in such sum
and with such surety or sureties as shall be satisfactory to the board of
directors for the faithful performance of the duties of his office and for the
restoration to the corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
Section 5.14 The assistant treasurer, or if there shall be
more than one, the assistant treasurers in the order determined by the board of
directors, shall, in the absence or disability of the treasurer, perform the
duties and exercise the powers of the treasurer and shall perform such other
duties and have such other powers as the board of directors may from time to
time prescribe.
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ARTICLE VI
CERTIFICATES OF STOCK
Section 6.1 Every holder of stock in the corporation shall be
entitled to have a certificate signed by, or in the name of the corporation by,
the chairman or vice-chairman of the board of directors, or president or a
vice-president and the treasurer or an assistant treasurer, or the secretary or
an assistant secretary of the corporation, certifying the number of shares owned
by him in the corporation.
Section 6.2 Where a certificate is signed (l) by a transfer
agent or an assistant transfer agent or (2) by a transfer clerk acting on behalf
of the corporation and a registrar, the signature of any such chairman or
vice-chairman of the board of directors, president, vice-president, treasurer,
assistant treasurer, secretary or assistant secretary may be facsimile. In case
any officer or officers who have signed, or whose facsimile signature or
signatures have been used on, any such certificate or certificates shall cease
to be such officer or officers of the corporation, whether because of death,
resignation or otherwise, before such certificate or certificates have been
delivered by the corporation, such certificate or certificates may nevertheless
be adopted by the corporation and be issued and delivered as though the person
or persons who signed such certificate or certificates or whose facsimile
signature or signatures have been used thereon had not ceased to be such officer
or officers of the corporation.
LOST CERTIFICATES
Section 6.3 The board of directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the board of
directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to give the corporation a bond in
such sum as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen or destroyed upon the issuance of such new certificate.
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TRANSFERS OF STOCK
Section 6.4 Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transactions upon its books, unless the corporation has a duty to inquire as to
adverse claims with respect to such transfer which has not been discharged. The
corporation shall have no duty to inquire into adverse claims with respect to
such transfer unless (a) the corporation has received a written notification of
an adverse claim at a time and in a manner which affords the corporation a
reasonable opportunity to act on it prior to the issuance of a new, reissued or
re-registered share certificate and the notification identifies the claimant,
the registered owner and the issue of which the share or shares is a part and
provides an address for communications directed to the claimant; or (b) the
corporation has required and obtained, with respect to a fiduciary, a copy of a
will, trust, indenture, articles of co-partnership, by-laws or other controlling
instruments, for a purpose other than to obtain appropriate evidence of the
appointment or incumbency of the fiduciary, and such documents indicate, upon
reasonable inspection, the existence of an adverse claim.
Section 6.5 The corporation may discharge any duty of inquiry
by any reasonable means, including notifying an adverse claimant by registered
or certified mail at the address furnished by him or, if there be no such
address, at his residence or regular place of business that the security has
been presented for registration of transfer by a named person, and that the
transfer will be registered unless within thirty days from the date of mailing
the notification, either (a) an appropriate restraining order, injunction or
other process issues from a court of competent jurisdiction; or (b) an indemnity
bond, sufficient in the corporation's judgment to protect the corporation and
any transfer agent, registrar or other agent of the corporation involved from
any loss which it or they may suffer by complying with the adverse claim, is
filed with the corporation.
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FIXING RECORD DATE
Section 6.6 (a) In order that the corporation may determine
the stockholders entitled to notice or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record is
adopted by the board of directors, and which record date shall not be more than
sixty nor less than ten days before the date of such meeting, nor more than ten
days after the date upon which the resolution fixing the record date of action
with a meeting is adopted by the board of directors, nor more than sixty days
prior to any other action.
(b) If no record date is fixed:
(1) The record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(2) The record date for determining
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the board of directors is necessary, shall be
the first date on which a signed written consent is delivered to the
corporation.
(3) The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the board of directors adopts the resolution relating thereto.
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(c) A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting.
REGISTERED STOCKHOLDERS
Section 6.7 Prior to due presentment for transfer of any share
or shares, the corporation shall treat the registered owner thereof as the
person exclusively entitled to vote, to receive notifications and to all other
benefits of ownership with respect to such share or shares, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 7.1 Dividends upon the capital stock of the
corporation, subject to the provisions of the certificate of incorporation, if
any, may be declared by the board of directors at any regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the capital stock, subject to the provisions of the certificate of
incorporation.
Section 7.2 Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the directors from time to time, in their absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the directors shall think conducive to the interest of
the corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
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ANNUAL STATEMENT
Section 7.3 The board of directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
CHECKS
Section 7.4 All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other persons as
the board of directors may from time to time designate.
FISCAL YEAR
Section 7.5 The fiscal year of the corporation shall be as
determined by the board of directors.
SEAL
Section 7.6 The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware". The seal may be used by causing it or a facsimile
thereof to be impressed or affixed or in any manner reproduced.
ARTICLE VIII
AMENDMENTS
Section 8.1 These by-laws may be altered or repealed at any
regular meeting of the stockholders or of the board of directors or at any
special meeting of the stockholders or of the board of directors if notice of
such alteration or repeal be contained in the notice of such special meeting.
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ARTICLE IX
INDEMNIFICATION
Section 9.1 The corporation shall indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 9.2 The corporation shall indemnify any person who was
or is a party, or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
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Section 9.3 To the extent that a director, officer, employee
or agent of the corporation has been successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in sections 9.1 or 9.2 of
this Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
Section 9.4 Any indemnification under sections 9.1 or 9.2 of
this Article (unless ordered by a court) shall be made by the corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in such section. Such
determination shall be made:
l. By the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or
2. If such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or
3. By the stockholders.
Section 9.5 Expenses (including attorneys' fees) incurred by
an officer or director in defending any civil, criminal, administrative or
investigative action, suit or proceeding may be paid by the corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
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Section 9.6 The indemnification and advancement of expenses
provided by, or granted pursuant to the other sections of this Article shall not
be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
Section 9.7 The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of this Article.
Section 9.8 For purposes of this Article, references to "the
corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Article with respect to the
resulting or surviving corporation as he would have with respect to such
constituent corporation of its separate existence had continued.
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Section 9.9 For purposes of this Article, references
to "other enterprises" shall include employee benefit plans; references to
"fines" shall include any excise taxes assessed on a person with respect to any
employee benefit plan; and references to "serving at the request of the
corporation" shall include any service as a director, officer, employee or agent
of the corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article.
Section 9.10 The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
Section 9.11 No director or officer of the corporation shall
be personally liable to the corporation or to any stockholder of the corporation
for monetary damages for breach of fiduciary duty as a director or officer,
provided that this provision shall not limit the liability of a director or
officer (i) for any breach of the director's or the officer's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the General Corporation Law of Delaware, or (iv) for
any transaction from which the director or officer derived an improper personal
benefit.
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Exhibit 4.1
AVIATION HOLDINGS GROUP, INC.
Incorporated Under the Laws of the State of Delaware
CUSIP: ___________
COMMON STOCK
This certifies that
is the owner of
fully paid and non-assessable shares of Common Stock of $.0001 par value of
Aviation Holdings Group, Inc. transferable on the books of the Corporation by
the holder hereof in person of by a duly authorized attorney upon surrender of
this certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent. This certificate and the shares represented
hereby are issued and shall be held subject to all of the provisions of the
Certificate of Incorporation and Bylaws of the Corporation, and all amendments
thereto, copies of which are on file with the Transfer Agent, to all of which
the holder of this certificate, by acceptance hereof, assents.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be signed by
the facsimile signatures of its duly authorized officers and to be sealed with
the facsimile seal of the Corporation.
Dated:
President:
Secretary:
<PAGE>
Exhibit 5.1
[Letterhead of Klehr, Harrison, Harley, Branzburg & Ellers, L.L.P]
Aviation Holdings Group, Inc.
15675 N.W. 15th Avenue
Miami, FL 33169
Gentlemen:
We are counsel to Aviation Holdings Group, Inc., a Delaware corporation
(the "Company"), and in that capacity we have assisted in the preparation of the
Company's Registration Statement on Form SB-2 (File No. 33-_________) (the
Registration Statement as amended at the time it became effective being referred
to as the "Registration Statement") filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities Act"),
covering ___________ shares of the Company's common stock, par value $.001 per
share (the "Common Stock"), comprised of (i) ___________ shares of Common Stock
to be sold by the Company (the "Shares") to __________ (the "Underwriter") and
(ii) up to _______ shares of Common Stock (the "Optional Shares") which the
Underwriter will have a right to purchase from the Company to cover
over-allotments, if any.
In connection therewith, we have examined the originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Company's
Certificate of Incorporation and Bylaws, as amended through the date hereof;
(ii) minutes and resolutions of the Company's Board of Directors and
stockholders; (iii) certificates issued by public officials; and (iv) such other
documents and corporate records relating to the Company and the issuance and
sale of the Shares and Optional Shares as we have deemed necessary as a basis
for the opinion hereinafter set forth.
In our examination of the foregoing documents, we have assumed the
legal capacity of all natural persons, the genuineness of all signatures on
originals and certified copies of documents, the authenticity of all documents
submitted to us as originals as well as the conformity to the originals of all
documents submitted to us as photostatic copies. As to any facts material to our
opinion expressed herein that were not independently established or verified, we
have relied upon oral or written statements and representations of officers and
other representatives of the Company.
Based upon and subject to the foregoing, we are of the opinion that the
Shares and the Optional Shares, when issued and sold in the manner described in
the plan of distribution set forth in the Registration Statement, will be duly
authorized, validly issued, fully paid and nonassessable.
Members of the our Firm are admitted to the bar in the Commonwealth of
Pennsylvania and the State of Delaware and we do not express any opinion as to
the laws of any other jurisdiction. We hereby consent to the reference to our
Firm in the Registration Statement under the prospectus caption "Legal Matters"
and to the inclusion of this opinion as an exhibit to the Registration
Statement. In giving such consent, we do not admit hereby that we come within
the category of persons whose consent is required under Section 7 of the
Securities Act, or the rules and regulations promulgated thereunder.
Very truly yours,
<PAGE>
Exhibit 10.1
STOCK OPTION PLAN
AVIATION HOLDINGS GROUP, INC.
Aviation Holdings Group, Inc., a Delaware corporation (the "Company")
sets forth herein the terms of this Stock Option Plan, which is an amendment and
restatement of the Stock Option Plan of Jet Aviation Trading, Inc. (now known as
Aviation Holdings, International).
WHEREAS, Jet Aviation Trading, Inc., the predecessor to Aviation
Holdings, International adopted a stock option plan for its officers, other key
employees and outside directors; and
WHEREAS, Jet Aviation Trading, Inc. and Aviation Holdings,
International completed a transaction pursuant to which Aviation Holdings,
International was the surviving entity and became employer of the officers and
other key employees covered by the Plan; and
WHEREAS, Aviation Holdings Group, Inc. owns 92% of the capital
interests in Aviation Holdings, International and, as such, it has been agreed
that Aviation Holdings Group, Inc.'s shall sponsor and maintain this Stock
Option Plan; and
WHEREAS, it was determined that the Jet Aviation Trading, Inc. Stock
Option Plan be amended and restated for these purposes with regard to future
grants and with regard to substituting stock of Aviation Holdings Group, Inc.
for that of Jet Aviation Trading, Inc. pursuant to Section 18 of the Plan for
option grants prior to the date hereof.
NOW, THEREFORE, the Aviation Holding Group, Inc. Stock Option Plan (the
"Plan") reads as follows:
1. PURPOSE
The Plan is intended to advance the interests of the Company and its
Affiliates by providing eligible individuals (as designated pursuant to Section
4 below) with an opportunity to acquire or increase a proprietary interest in
the Company, which will thereby create a stronger incentive to expend maximum
effort for the growth and success of the Company and its Affiliates, and will
encourage such eligible individuals to remain in the employ or service of the
Company or that of one or more of its Affiliates. Affiliates shall mean each
entity that, along with the Company, is a controlled group or under common
control, determined under Section 414 of the Code and specifically includes
Aviation Holdings, International. Each stock option granted under the Plan (an
"Option") is intended to be an "incentive stock option" ("Incentive Stock
Option") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), or the corresponding provision of any
subsequently-enacted tax statute, except (i) to the extent that any such Option
would exceed the limitations set forth in Section 7 below; (ii) for Options
specifically designated at the time of grant as not being "incentive stock
options", or as being "non-qualified stock options"; and (iii) for Options
granted to consultants or to members of the board of directors of the Company
who are not also officers or other employees of the Company, an Affiliate, or
any "subsidiary corporation" (a "Subsidiary") thereof within the meaning of
Section 424(f) of the Code or to directors of any Subsidiary who are not
officers or other salaried employees of the company (a "Subsidiary Director").
If any Options granted hereunder shall, for any reason, fail to qualify as an
Incentive Stock Option, they shall nevertheless be deemed options issued by the
Company pursuant to the Plan and for tax purposes shall be deemed "non-qualified
stock options."
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2. ADMINISTRATION
a. Board. The plan shall be administered by the Board of
Directors of the Company (the "Board"), which shall have the full power and
authority to take all actions, and to make all determinations required or
provided for under the Plan or any Option or Option Agreement (as defined in
Section 8 below) entered into hereunder and all such other actions and
determinations not inconsistent with the specific terms and provisions of the
Plan deemed by the Board to be necessary or appropriate to the administration of
the Plan or any Option granted or Option Agreement entered into hereunder. All
such actions and determinations shall be by the affirmative vote of a majority
of the members of the Board present at a meeting at which any issue relating to
the Plan is properly raised for consideration or without a meeting by written
consent of the Board executed in accordance with the Company's Articles of
Incorporation and By-Laws, and with applicable law. The interpretation and
construction by the Board of any provision of the Plan or of any Option granted
or Option Agreement entered into hereunder shall be final and conclusive.
b. Committee. The Board may appoint a Stock Option Committee
(the "Committee"), which may be the compensation committee, consisting of not
less than two members of the Board, none of whom shall be an officer or other
salaried employee of the Company or any of its Affiliates, and each of whom
shall qualify in all respects as a "non-employee director" as defined in Rule
16b-3 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as an "outside director" under Section 162(m)(4)(C)(i) of
the Code. The Committee shall be solely responsible for those actions and
responsibilities which are required to be taken by outside directors to qualify
for the exceptions under Code ss.162(m) and the regulations thereunder for
performance-based compensation. The Board, in its sole discretion, may provide
that the role of the committee shall be otherwise limited to making
recommendations to the Board concerning any determinations to be made and
actions to be taken by the Board pursuant to or with respect to the Plan, or the
Board may delegate to the Committee such powers and authorities related to the
administration of the Plan, as set forth in Section 2(a) above, as the Board
shall determine, consistent with the Articles of Incorporation of the Company,
By-Laws of the Company and with applicable law. The Board may remove members,
add members, and fill vacancies on the Committee from time to time, all in
accordance with the Company's Articles of Incorporation, ByLaws, and with
applicable law. The majority vote of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee.
c. No Liability. No member of the Board or the Committee shall
be liable for any action or determination made in good faith with respect to the
Plan or any Option granted or Option Agreement entered into hereunder, and the
Company shall indemnify and hold harmless any member of the Board or Committee
from any and all damages, losses or claims, including reasonable attorneys fees,
arising from their actions (or inactions) in connection with this Plan or its
administration.
d. Delegation to the Committee. In the event that the Plan or
any Option granted or Option Agreement entered into hereunder provides for any
action to be taken by or determination to be made by the Board, such action may
be taken by or such determination may be made by the Committee if the power and
authority to do so has been delegated to the Committee by the Board as provided
for in Section 2(b) above. Unless otherwise expressly determined by the Board,
any such action or determination by the Committee shall be final and conclusive.
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e. Action by the Board. The Board may act under the Plan with
respect to any Option granted to or Option Agreement entered into with an
officer, director or stockholder of the Company who is subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") other than
by, or in accordance with the recommendations of, the Committee, constituted as
set forth in Section 2(b) above, only if the Plan is otherwise administered in
accordance with the provisions of Rule 16b-3 and if the provision of Code
ss.162(m) are not applicable to such recommendations.
3. STOCK
The stock that may be issued pursuant to Options granted under the Plan
shall be shares of common stock, par value $.001 per share, of the Company (the
"Stock"), which shares may be treasury shares or authorized but unissued shares.
Shares of stock of Jet Aviation Trading, Inc. underlying options granted under
the Plan prior to its amendment and restatement shall be substituted with shares
of stock of the Company, determined on a one for one conversion basis. The
number of shares of Stock that may be issued pursuant to Options and Stock
Appreciation Rights granted under the Plan shall not exceed in the aggregate
750,000 shares. The foregoing numbers of shares are subject to adjustment as
provided in Section 18 below. If any Option expires, terminates, or is
terminated or canceled for any reason prior to exercise in full, the shares of
Stock that were subject to the unexercised portion of such Option shall be
available for future Options granted under the Plan and such number of shares
shall be restored to the number of shares available for issuance under Options
granted.
4. ELIGIBILITY
a. Employees and Subsidiary Directors. Options may be granted
under the Plan to any employee or consultant of the Company or any Subsidiary
(including any such employee who is an officer or director of the Company or any
Subsidiary), any Affiliate or to any Subsidiary Director as the Board or
Committee shall determine and designate from time to time prior to the
expiration or termination of the Plan.
b. Outside Directors. On the day of each annual meeting of the
Stockholders of the Company, each director who is not then an employee of the
Company or any of its Affiliates (an "Outside Director"), shall be granted an
Option to purchase 5000 shares of Stock, in each case at the prime and upon the
other terms and conditions specified in the Plan. In addition, subject to the
availability of shares of Stock under the Plan, each person first elected to the
Board as an Outside Director after the effective date of the Plan, shall be
granted, as of the date such individual takes office, an Option to purchase
10,000 shares of Stock at the price and upon the terms and conditions specified
in the Plan. Each Option granted to an Outside Director shall be granted at an
Option Price equal to 100 percent of the fair market value of a share of Stock
an the date of grant (determined under Section 9 below) and upon the other terms
and conditions specified in the Plan. Except as provided in this Section 4(b),
no Outside Director shall be eligible to be granted Options under this Plan.
c. Multiple Grants. An individual may hold more than one
Option subject to such restrictions as are provided herein.
5. EFFECTIVE DATE AND TERMS OF THE PLAN
a. Effective Date. The Plan, as amended and restated, shall be
effective and considered adopted as of March 1, 1999, subject to approval of the
Plan within one year of such effective date by a majority of the votes present
and entitled to vote at a duly held meeting of the stockholders of the Company
at which a quorum representing a majority of all outstanding voting stock is
present, either in person or by proxy; provided, however, that upon approval of
the Plan by stockholders of the Company as set forth above, all Options granted
under the Plan on or after the effective date shall be fully effective as if the
stockholders of the Company had approved the Plan on the effective date. If the
stockholders fail to approve the Plan within one year of such effective date,
any Options granted hereunder shall be null and void and of no effect.
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b. Term. The Plan shall terminate on August 31, 2007.
6. GRANT OF OPTIONS
Subject to the terms and conditions of the Plan, the Board or
Committee may, at any time and from time to time, prior to the date of
termination of the Plan, grant to such eligible individuals as the Board or
Committee may determine ("Optionees"), Options to purchase such number of shares
of the Stock on such terms and conditions as the Board or Committee may
determine, including any terms or conditions which may be necessary to qualify
such Option as an "incentive stock option" under Section 422 of the Code. The
date on which the Board or Committee approves the grant of an Option (or such
later date as is specified by the Board or Committee) shall be considered the
date on which such Option is granted.
7. LIMITATION ON INCENTIVE STOCK OPTIONS
An Option (other than an Option described in exception (ii) or
(iii) of Section 1) shall constitute an Incentive Stock Option to the extent
that the aggregate fair market value of Stock (determined at the time the Option
is granted) with respect to which Incentive Stock Options are exercisable for
the first time by any Optionee during any calendar year (under the Plan and all
other plans of the Optionee's employer corporation and its parent and subsidiary
corporations within the meaning of Section 422(d) of the Code) does not exceed
$100,000. This limitation shall be applied by taking Options into account in the
order in which they were granted.
8. OPTION AGREEMENTS
All Options granted pursuant to the Plan shall be evidenced by
written agreements ("Option Agreements"), to be executed by the Company and by
the Optionee, in such form or forms and containing such provisions as the Board
or Committee shall from time to time determine. Option Agreements covering
Options granted from time to time or at the same time need not contain similar
provisions; provided, however, that all such Option Agreements shall comply with
all terms of the Plan.
9. OPTION PRICE
The purchase price of each share of the Stock subject to an
Option (the "Option Price") shall be fixed by the Board or Committee and stated
in each Option Agreement, and shall be not less than 100 percent (or, in the
case of an Option which does not or is not intended to qualify as an incentive
stock option, not less than 50 percent) of the fair market value of a share of
Stock on the date the Option is granted (as determined in good faith by the
Board or Committee); provided, however, that in the event the Optionee would
otherwise be ineligible to receive an Incentive Stock Option by
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reason of the provisions of Sections 422(b)(6) and 424(d) of the Code (relating
to stock ownership of more than ten percent), the Option Price of an Option that
is intended to be an Incentive Stock Option shall be not less than 110 percent
of the fair market value of a share of Stock determined as of the time such
Option is granted. In the event that the Stock is listed on an established
national or regional stock exchange, is admitted to quotation on the Nasdaq
National Market System, or is publicly traded on an established securities
market, in determining the fair market value of the Stock, the Board or
Committee shall use the closing price of the Stock on such exchange or System or
in such market (the highest such closing price if there is more than one such
exchange or market) on the trading date the Option is granted (or, if there is
no such closing price, then the Board or Committee shall use the mean between
the high and low prices on such date or if unavailable the mean between the high
and low bid prices on such date), or, if no sale (or bid) of the Stock had been
made on such day, on the next preceding day on which any such sale (or bid)
shall have been made.
10. TERM AND EXERCISE OF OPTION
a. Term. Each Option granted under the Plan shall terminate
and all rights to purchase shares thereunder shall cease upon the expiration of
ten years from the date such Option is granted, or, with respect to Options
granted to persons other than Outside Directors, on such date prior thereto as
may be fixed by the Board or Committee and stated in the Option Agreement
relating to such Option; provided, however, that in the event the Optionee would
otherwise be ineligible to receive an Incentive Stock Option by reason of the
provisions of Sections 422(b)(6) and 424(d) of the Code (relating to stock
ownership of more than ten percent), an Option granted to such Optionee that is
intended to be an Incentive Stock Option, shall in no event be exercisable after
the expiration of five years from the date it is granted.
b. Option Period and Limitations on Exercise. Each Option
granted to persons other than Outside Directors under the Plan shall be
exercisable in whole or in part, at any time and from time to time, over a
period commencing on or after the date of grant and ending upon the expiration
or termination of the Option, as the Board or Committee shall determine and as
set forth in the Option Agreement relating to such Option. Without limiting the
foregoing, the Board or Committee, subject to the terms and conditions of the
Plan, may in its sole discretion provide that an Option may not be exercised in
whole or in part for any period or periods of time during which such Option is
outstanding; provided, however, that any such limitation on the exercise of an
Option contained in any Option Agreement may be rescinded, modified or waived by
the Board or Committee, in its sole discretion, at any time and from time to
time after the date of such Option, so as to accelerate that time at which the
Option may be exercised. Subject to Section 10(a), each Option granted to
Outside Directors shall be exercisable, in whole or in part, at any time and
from time to time, over a period commencing on the date of grant and ending upon
the expiration of the Option as set forth in the Option Agreement.
Notwithstanding any other provision of the Plan, no Option granted to an
Optionee under the Plan shall be exercisable in whole or in part prior to the
date the amended and restated Plan is approved by the stockholders of the
Company, as provided in Section 5 above.
c. Method of Exercise. An Option that is exercisable hereunder
may be exercised by delivery to the Company on any business day, at its
principal office, addressed to the attention of the Committee (or Board if no
Committee is authorized), of written notice of exercise, which notice shall
specify the number of shares with respect to which the Option is being
exercised. The minimum number of shares of Stock with respect to which an Option
may be exercised, in
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whole or in part, at any time, shall be the lesser of 100 shares or the maximum
number of shares available for purchase under the vested Option at the time of
exercise. Except as provided in the next following sentence, payment in full of
the Option Price of the shares for which the Option is being exercised shall
accompany the written notice of exercise of the Option and shall be made either
(i) in cash or in cash equivalents; (ii) through the tender to the Company of
shares of Stock, including the shares of Stock subject to the Option being
exercised, which shares shall be valued, for purposes of determining the extent
to which the option price has been paid thereby, at their fair market value
(determined in the manner described in Section 9 above) on the date of exercise;
or (iii) by a combination of the methods described in (i) and (ii); provided,
however, that the Board or Committee may in its discretion impose and set forth
in the Option Agreement pertaining to an Option granted to persons other than
Outside Directors such limitations or prohibitions on the use of shares of Stock
to exercise Options as it deems appropriate. Unless the Board or Committee shall
provide otherwise, in the case of an Option Agreement relating to an Option
granted to someone other than an Outside Director, payment in full of the Option
Price need not accompany the written notice of exercise provided the notice of
exercise directs that the Stock certificate or certificates for the shares for
which the Option is exercised be delivered to a licensed broker acceptable to
the Company as the agent for the individual exercising the Option and, at the
time such Stock certificate or certificates are delivered, the broker tenders to
the Company cash (or cash equivalents acceptable to the Company) equal to the
Option Price for the shares of Stock purchased pursuant to the exercise of the
Option plus the amount (if any) of federal and other taxes which the Company
may, in its judgment, be required to withheld with respect to the exercise of
the Option. An attempt to exercise any Option granted hereunder other than as
set forth above shall be invalid and of no force and effect. Promptly after the
exercise of an Option and the payment in full of the Option Price of the shares
of Stock covered thereby, the individual exercising the Option shall be entitled
to the issuance of a Stock certificate or certificates evidencing his ownership
of such shares. A separate Stock certificate or certificates shall be issued for
any shares purchased pursuant to the exercise of an Option which is an Incentive
Stork Option which certificate or certificates shall not include any shares
which were purchased pursuant to the exercise of an Option which is not an
Incentive Stock Option. An individual holding or exercising an Option shall have
none of the rights of a stockholder until the shares of Stock covered thereby
are fully paid and issued to him and, except as provided in Section 18 below, no
adjustments shall be made for dividends or other rights for which the record,
date is prior to the date of such issuance.
11. TRANSFERABILITY OF OPTIONS
Unless set forth in the Option Agreement or Stock Appreciation
Right Agreement at the time of grant, or at any time thereafter, no Option or
Stock Appreciation Right shall be assignable or transferable by the Optionee to
whom it is granted, other than by will or the laws of descent and distribution
and during the lifetime of an Optionee to whom an Option is granted, only such
Optionee (or, in the event of legal incompetency, the Optionee's guardian or
legal representative) may exercise the Option.
12. STOCK APPRECIATION RIGHTS
The Board may, upon recommendation of the Committee, grant
Stock Appreciation Rights to Optionees at the same time as such Optionees are
awarded Options under the Plan. Such Stock Appreciation Rights shall be
evidenced by agreements in such form as the Board shall from time to time
approve. Such agreements shall comply with, and be subject to, the following
terms and conditions:
a. Employment Agreement. The Board may, in its discretion,
include in any Stock Appreciation Rights granted under the Plan a condition that
the Optionee shall agree to remain in the employ of, and to render services to,
the Company or any of its Affiliates for a period of time (specified in the
agreement) from the date the Stock Appreciation Rights are granted. No such
agreement shall impose upon the Company or any of its Affiliates, however, any
obligation to employ the Optionee for any period of time.
b. Grant. Each Stock Appreciation Right shall relate to a
specific Option under the Plan, and shall be awarded to an Optionee concurrently
with the grant of such Option. The number of Stock Appreciation Rights granted
to an Optionee shall be equal to the number of shares that the Optionee is
entitled to receive pursuant to the related Option. The number of Stock
Appreciation Rights held by an Optionee shall be reduced by:
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i. the number of Stock Appreciation Rights exercised for Stock
or cash under the Stock Appreciation Rights agreement, and
ii. the number of shares of Stock purchased by such Optionee
pursuant to the related Option.
c. Manner of Exercise. An Optionee shall exercise Stock Appreciation
Rights by giving written notice of such exercise to the Company. The date upon
which such written notice is received by the Company shall be the exercise date
for the Stock Appreciation Rights. The Stock Appreciation Rights may only be
exercised when the fair market value of the Stock subject to an Option exceeds
the exercise price of the Option.
d. Appreciation Available. Each Stock Appreciation Right shall
entitle an Optionee to the following amount of appreciation and no more - the
excess of the fair market value of a share of Stock on the exercise date over
the option price of the related Option. The total appreciation available to an
Optionee from any exercise of Stock Appreciation Rights shall be equal to the
number of Stock Appreciation Rights being exercised, multiplied by the amount of
appreciation per Stock Appreciation Right determined under the preceding
sentence.
e. Payment of Appreciation. In the discretion of the Optionee, the
total appreciation available to an Optionee from an exercise of Stock
Appreciation Rights may be paid to the Optionee either in Stock or in cash. If
paid in cash, the amount thereof shall be the amount of appreciation determined
under Paragraph (d), above. If paid in Stock, the number of shares of Stock that
shall be issued pursuant to the exercise of Stock Appreciation Rights shall be
determined by dividing the amount of appreciation determined under Paragraph
(d), above, by the fair market value of a share of Stock on the exercise date of
the Stock Appreciation Rights.
f. Limitations Upon Exercise of Stock Appreciation Rights. An
Optionee may exercise a Stock Appreciation Right for cash only in conjunction
with the exercise of the Option to which the Stock Appreciation Right relates.
Stock Appreciation Rights may be exercised only at such times and by such
persons as may exercise Options under the Plan, Stock Appreciation Rights shall
expire when the Option to which the Stock Appreciation Rights expires.
Adjustment to the number of shares in the Plan and the price per share pursuant
to Section 18 below shall also be made to any Stock Appreciation Rights held by
each Optionee. Any termination, amendments or revision of the Plan pursuant to
Section 17 below shall be deemed a termination, amendment or revision of Stock
Appreciation Rights to the same extent. A Stock Appreciation Right is
transferable only when the underlying Option is transferable, and under the same
conditions.
13. TERMINATION OF SERVICE OR EMPLOYMENT
a. Employees and Subsidiary Directors. Upon the termination of the
employment or service of an Optionee (other than an Outside Director) with the
Company or an Affiliate, other than by reason of the death or "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) of such
Optionee, any Option and Stock Appreciation Rights granted to an Optionee
pursuant to the Plan shall terminate three months after the date of such
termination of employment, unless earlier terminated pursuant to Section 10(a);
provided, however, that the Board or Committee may provide, by inclusion of
appropriate language in any Option Agreement, (which is not an Incentive Stock
Option) or Stock Appreciation Rights Agreement that the Optionee may (subject to
the general limitations on exercise set forth in Section 10(b) above), in the
event of termination of service or employment of the Optionee with the Company
or an Affiliate, exercise an, Option or Stock Appreciation Right, in whole or in
part, at any time subsequent to such termination of service or employment and
prior to termination of the Option or Stock Appreciation Right pursuant to
Section 10(a) above, either, subject to or without regard to any installment
limitation on exercise imposed pursuant to Section 10(b) above. Whether a leave
of absence or leave on military or government service shall constitute a
termination of service or employment for purposes of the Plan shall be
determined by the Board or Committee, which determination shall be final and
conclusive. For purposes of the Plan, a termination of employment with the
Company or an Affiliate shall not be deemed to occur if the Optionee is
immediately thereafter employed with or in the service of the Company or any
Affiliate.
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b. Outside Directors. Except as provided in Section 13(c), any
Option and Stock Appreciation Right granted to an Outside Director shall
terminate upon the expiration of three months after the termination of the
Outside Director's service with the Company other than because of death or
"permanent and total disability" as defined above, or, if earlier, upon the
expiration of ten years after grant of the Option.
14. RIGHTS IN THE EVENT OF DEATH OR DISABILITY
a. Death of an Employee or Subsidiary Director, If an Optionee
(other than an Outside Director) dies while in the employ or service of the
Company or an Affiliate or within the period following the termination of
employment or service during which the Option and Stock Appreciation Right is
exercisable under Section 13 above or 14(b) below, the executors,
administrators, legatees or distributees, as the case may be, of such Optionee's
estate shall have the right (subject to the general limitations on exercise set
forth in Section 10(b) above), at any time within one year after the date of
such Optionee's death and prior to termination of the Option and Stock
Appreciation Right pursuant to Section 10(a) above, to exercise any Option or
Stock Appreciation Right held by such Optionee at the date of such Optionee's
death, whether or not such Option or Stock Appreciation Right was exercisable
immediately prior to such Optionee's death; provided, however, that the Board or
Committee may provide by inclusion of appropriate language in any Option
Agreement or Stock Appreciation Rights Agreement that, in the event of the death
of the Optionee, the executor, administrator, legatees or distributees, as the
case may be, of such Optionee's estate may exercise an Option or Stock
Appreciation Right (subject to the general limitations on exercise set forth in
Section I 0(b) above), in whole or in part, at any time subsequent to such
Optionee's death and prior to termination of the Option or Stock Appreciation
Right pursuant to Section 10(a) above, either subject to or without regard to
any installment limitation on exercise imposed pursuant to Section 10(b) above.
b. Disability of an Employee or Subsidiary Director. If an Optionee
(other than an Outside Director) terminates employment or service with the
Company or an Affiliate by reason of the "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) of such Optionee, then such
Optionee shall have the right (subject to the general limitations on exercise
set forth in Section 10(b) above), at any time within one year after such
termination of service or employment and prior to termination of the Option and
Stock Appreciation Right pursuant to Section 10(a) above, to exercise, in whole
or in part, any Option and Stock Appreciation Rights held by such Optionee at
the date of such termination of service or employment, whether or not such
Option was exercisable immediately prior to such termination of service or
employment; provided, however, that the Board or Committee may provide, by
inclusion of appropriate language in any Option Agreement, and Stock
Appreciation Rights Agreement that the Optionee may, in the event of the
termination of service or employment of the Optionee with the Company or an
Affiliate by reason of the "permanent and total disability" (within the meaning
of Section 22(e)(3) of the Code) of such Optionee, exercise an Option, and Stock
Appreciation Right in whole or in part, at any time subsequent to such
termination of service or employment and prior to termination of the Option and
Stock Appreciation Right pursuant to Section 10(a) above, either subject to or
without regard to any installment limitation on exercise imposed pursuant to
Section 10(b) above. Whether a termination of service or employment is to be
considered by reason of "permanent and total disability" for purposes of this
Plan shall be determined by the Board or Committee, which determination shall be
final and conclusive.
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c. Death or Disability of an Outside Director. Any Option and Stock
Appreciation Right granted to an Outside Director shall remain exercisable for
its remaining term in the event the Outside Director's termination of service is
by reason of death or "permanent and total disability," as defined above, or, in
the event of the Outside Director's death during the three-month period
following the Outside Director's termination of service by reason other than
death or permanent and total disability during which the Option was exercisable
pursuant to Section 13(b) above.
15. USE OF PROCEEDS
The proceeds received by the Company from the sale of Stock pursuant
to Options and Stock Appreciation Rights granted under the Plan shall constitute
general funds of the Company.
16. REQUIREMENTS OF LAW
a. Violations of Law. The Company shall not be required to sell or
issue any shares of Stock under any Option or Stock Appreciation Right if the
sale or issuance of such any shares of Stock would constitute a violation by the
individual exercising the Option or Stock Appreciation Right or the Company of
any provisions of any law or regulation of any governmental authority, including
without limitation any federal or state securities laws or regulations.
Specifically in connection with the Securities Act of 1933 (as now in effect or
as hereafter amended) (the "Act"), upon exercise of any Option or Stock
Appreciation Right unless a registration statement under such Act is in effect
with respect to the shares of Stock covered by such Option or Stock Appreciation
Right, the Company shall not be required to sell or issue such shares unless the
Board or Committee has received evidence satisfactory to it that the holder of
such Option or Stock Appreciation Right may acquire such shares pursuant to an
exemption from registration under such Act. Any determination in this connection
by the Board or Committee shall be final, binding, and conclusive. The Company
may, but shall in no event be obligated to, register any securities covered
hereby pursuant to the Act. The Company shall not be obligated to take any
affirmative action in order to cause the exercise of an Option or Stock
Appreciation Right or the issuance of shares pursuant thereto to comply with any
law or regulation of any governmental authority. As to any jurisdiction that
expressly imposes the requirement that an Option shall not be exercisable unless
and until the shares of Stock covered by such Option or Stock Appreciation Right
are registered or are subject to an available exemption from registration, the
exercise of such Option or Stock Appreciation Right (under circumstances in
which the laws of such jurisdiction apply) shall be deemed conditioned upon the
effectiveness of such registration or the availability of such an exemption.
b. Compliance with Rule 16b-3. The intent of this Plan is to
qualify for the exemption provided by Rule 16b-3 promulgated under the Exchange
Act. To the extent any provision of the Plan does not comply with the
requirements of Rule 16b-3, it shall be deemed inoperative to the extent
permitted by law and deemed advisable by the Board or Committee and shall not
affect the validity of the Plan. In the event Rule 16b-3 is revised or replaced,
the Board, or the Committee acting on behalf of the Board, may exercise
discretion to modify this Plan in any respect necessary to satisfy the
requirements of the revised exemption or its replacement.
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17. AMENDMENT AND TERMINATION OF THE PLAN
The Board or Committee may, at any time and from time to time, amend,
suspend or terminate the Plan as to any shares of Stock as to which Options or
Stock Appreciation Rights have not been granted; provided, however, that no
amendment by the Board or Committee shall, without approval by a majority of the
votes present and entitled to vote at a duly held meeting of the stockholders of
the Company at which a quorum representing a majority of all outstanding voting
stock is, either in person or by proxy, present and voting an the amendment, or
by written consent, in accordance with applicable state law and the Certificate
of Incorporation and By-Laws of the Company, materially increase the benefits
accruing to participants under the Plan, change the requirements as to
eligibility to receive Options and Stock Appreciation Rights or increase the
maximum number of shares of Stock in the aggregate that may be sold pursuant to
Options or Stock Appreciation Rights granted under the Plan (except as permitted
under Section 18 hereof). Except as permitted under this Section 16, no
amendment, suspension or termination of the Plan shall, without the consent of
the holder of the Option or Stock Appreciation Rights, alter or impair rights or
obligations under any Option or Stock Appreciation Rights theretofore granted
under the Plan.
18. EFFECT OF CHANGES IN CAPITALIZATION
a. Changes in Stock. If the outstanding shares of Stock are
increased or decreased or changed into or exchanged for a different number or
kind of shares or other securities of the Company by reason of any
recapitalization, reclassification, stock split, reverse split, combination of
shares, exchange of shares, stock dividend or other distribution payable in
capital stock, or other increases or decreases in such shares effected without
receipt of consideration by the Company, occurring after the effective date of
the Plan, the number and kinds of shares of Stock for the purchase of which
Options and Stock Appreciation Rights may be granted under the Plan shall be
adjusted proportionately and accordingly by the Company. In addition, the number
and kind of shares of Stock for which Options and Stock Appreciation Rights are
outstanding shall be adjusted proportionately and accordingly so that the
proportionate interest of the holder of the Option and Stock Appreciation Rights
immediately following such event shall, to the extent practicable, remain the
same as immediately prior to such event. Any such adjustment in outstanding
Options and Stock Appreciation Rights shall not change the aggregate Option
Price payable with respect to shares of Stock subject to the unexercised portion
of the Option outstanding but shall include a corresponding proportionate
adjustment in the Option Price per share.
b. Reorganization in Which the Company Is the Surviving
Corporation. Subject to Subsection (c) hereof, if the Company shall be the
surviving corporation in any reorganization, merger, or consolidation of the
Company with one or more other corporations, any Option and Stock Appreciation
Right theretofore granted pursuant to the Plan shall pertain to and apply to the
securities to which a holder of the number of shares of Stock subject to such
Option or Stock Appreciation Right would have been entitled immediately
following such reorganization, merger, or consolidation, with a corresponding
proportionate adjustment of the Option Price per share so that the aggregate
Option Price thereafter shall be the same as the aggregate Option Price of the
shares remaining subject to the Option immediately prior to such reorganization,
merger, or consolidation.
c. Reorganization in Which the Company Is Not the Surviving
Corporation or Sale of Assets of Stock. Upon the dissolution or liquidation of
the Company, or upon a merger, consolidation, reorganization or other business
combination of the Company with one or more other entities in which the Company
is not the surviving entity, or upon a sale of all or substantially all of the
assets of the Company to another entity, or upon any transaction (including,
without limitation, a merger or reorganization in which the Company is the
surviving corporation) approved by the Board which results in any person or
entity (or persons or entities acting as a group or otherwise in concert) owning
80 percent or more of the combined voting power of all classes of stock of the
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Company, the Plan and all Options and Stock Appreciation Rights outstanding
hereunder shall terminate, except to the extent provision is made in writing in
connection with such transaction for the continuation of the Plan and/or the
assumption of the Options and Stock Appreciation Rights theretofore granted, or
for the substitution for such Options and Stock Appreciation Rights of new
options covering the stock of a successor entity, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kinds of shares and
exercise prices, in which event the Plan and Options and Stock Appreciation
Rights theretofore granted shall continue in the manner and under the terms so
provided. In the event of any such termination of the Plan, each individual
holding an Option and/or Stock Appreciation Right shall have the right
immediately prior to the occurrence of such termination and during such period
occurring prior to such termination as the Board or Committee in its sole
discretion shall determine and designate, to exercise such Option or Stock
Appreciation Right in whole or in part, whether or not such Option or Stock
Appreciation Right was otherwise exercisable at the time such termination occurs
and without regard to any installment limitation on exercise imposed pursuant to
Section 10(b) above. The Board or Committee shall send written notice of an
event that will result in such a termination to all individuals who hold Options
or Stock Appreciation Rights not later than the time at which the Company gives
notice thereof to its stockholders.
d. Adjustments. Adjustments under this Section 18 related to
Stock or securities of the Company shall be made by the Board or Committee,
whose determination in that respect shall be final, binding, and conclusive. No
fractional shares of Stock or units of other securities shall be issued pursuant
to any such adjustment, and any fractions resulting from any such adjustment
shall be eliminated in each case by rounding downward to the nearest whole share
or unit.
e. No Limitations on Company. The grant of an Option or Stock
Appreciation Rights pursuant to the Plan shall not affect or limit in any way
the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge,
consolidate, dissolve or liquidate or to sell or transfer all or any part of its
business or assets.
19. DISCLAIMER OF RIGHTS
No provision in the Plan or in any Option or Stock Appreciation Rights
granted or Option Agreement or Stock Appreciation Rights Agreement entered into
pursuant to the Plan shall be construed to confer upon any individual the right
to remain in the employ or service of the Company or any Affiliate, or to
interfere in any way with the right and authority of the Company or any
Affiliate either to increase or decrease the compensation of any individual at
any time, or to terminate any employment or other relationship between any
individual and the Company or any Affiliate.
20. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan nor the submission of the Plan to the
stockholders of the Company for approval shall be construed as creating any
limitations upon the right and authority of the Board to adopt such other
incentive compensation arrangements (which arrangements may be applicable either
generally to a class or classes or individuals or specifically to a particular
individual or individuals) as the Board in its discretion determines desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan.
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is made and entered into as of the 31st day
of May, 1998, by and between JOSEPH NELSON, whose address is 5565 Lectner Drive
East, Coral Springs, Florida, ("Employee"), and EYEQ NETWORKING, INC., a
Delaware corporation, whose address is The GSB Building, One Belmont Avenue,
Suite 417, Bala Cynwyd, PA 19004 (hereinafter called "EyeQ, Employer or
Company").
WITNESSETH:
WHEREAS, EyeQ is in the business of buying and selling aircraft,
engines and parts and related products and materials (the "Business of
Employer"); and
WHEREAS, Employee will be employed as President, Chief Executive
Officer and Director of EyeQ and whose duties include responsibility for and
oversight of all day to day activities of EyeQ and other functions; and
WHEREAS, EyeQ does business, purchases inventory and has customers
throughout the world; and
WHEREAS, this Agreement sets forth in writing the understanding of the
parties agreed to between themselves to provide for the employment of Employee
upon the terms and conditions herein set forth;
NOW, THEREFORE, in consideration of the above and foregoing premises
and the employment of the Employee during the term hereof, the parties agree as
follows:
1. Recitals. The above-mentioned recitals are true and correct and are
incorporated herein and by reference made a part of this Agreement.
2. Revocation of Prior Agreements. The parties do hereby cancel and
revoke all prior agreements and understandings whether oral or written, relating
to the subject matter of this Agreement. Without limiting the generality of the
preceding sentence, Employee and EyeQ hereby acknowledge that this Agreement
replaces and supersedes that certain Employment Agreement dated October 31, 1996
by and between Employee and JET Aviation Trading, Inc. ("JET") (the "Old
Agreement"), a Florida corporation and a majority-owned subsidiary of EyeQ;
provided, however, that any unpaid principal and/or accrued interest under that
certain promissory note referenced in Section 11(c) of the Old Agreement shall
continue to be an obligation of Employee payable to JET. Any reference herein to
obligations payable by, or to be performed by, Jet shall be interpreted to mean
that the Company shall cause Jet to satisfy such obligation.
<PAGE>
3. Term of Employment. Subject to the provisions hereof, the Employer
hereby employs Employee for the period commencing as of the date hereof and
continuing until May 31, 2001, (the "Term") or unless sooner terminated as
provided herein. Each 12 month period of employment hereunder, commencing as of
the date hereof shall be called an "Employment Year." In the event the Employee
is still employed at the end of the Term, then this Agreement shall
automatically extend from month-to-month thereafter on all of these terms and
conditions except that paragraph 11(b) and 12(b)(ii) shall not apply.
4. Employment Duties. Employee shall serve the Employer as and in the
specific capacity of President, Chief Executive Officer and as a Director of the
Employer. Employee shall be in charge of and oversight of all operating
activities of the Employer and shall be responsible for general oversight and
management of day to day operations of the Employer and such other duties as may
reasonably be required by the elected Board of Directors of EyeQ (the "Board").
Employee covenants and agrees to devote his full time and energies, and his best
efforts and business judgments exclusively to the business of the Employer and
to perform such duties to the best of his ability and to observe all reasonable
policies, rules and regulations as determined and imposed by the Employer for
operation of the Employer's business. The Employee shall report to the Board,
who shall direct, control and supervise the duties to be performed.
5. Vacation. Employee shall be entitled to three (3) weeks of vacation
time during each year of his employment, one and one half weeks of which shall
accrue every six (6) months. Such vacation shall be with full pay and other
benefits provided hereunder. Vacation may be taken prior to accrual, but salary
paid for any such vacation not accrued will be returned by Employee at
termination. The time of vacation shall be selected in such manner as not to
conflict with the Employer's operations, and Employee's employment duties;
however, Employer shall not unreasonably constrain Employee's time of vacation.
Employee shall give Employer reasonable notice of his intended vacations. Up to
two weeks of vacation may be rolled-over to the following year if allotted
vacation time was not used in the previous year. In no event may Employee take
more than two weeks of vacation in a row. If allotted or rolled-over vacation is
not fully used prior to termination, Employee shall be compensated for each
unused vacation.
6. Sick Leave. As determined by the Employer, the Employee shall be
entitled to a reasonable number of days of sick leave with full pay during each
calendar year.
7. Confidential Information. All records of the Employer which include,
but are not limited to, advertising, sales, other materials or articles of
information, including without limitation, data processing reports, computer
software and/or media containing Employer's confidential information, customer
lists, supplier lists, purchasing information, customer sales analysis and
patterns, invoices, price lists or information, samples, or any other materials
or data of any kind furnished to Employee by the Employer, acquired by Employee
while employed by the Employer, or developed by Employee on behalf of the
Employer or at the Employer's direction or for the Employer's use or otherwise
in connection with Employee's employment hereunder, are and shall remain the
sole and confidential property of the Employer. Employee acknowledges that such
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information is proprietary trade secrets of Employer. All or any such materials
and records shall hereinafter be known as "Confidential Information." If the
Employer requests the return of such Confidential Information at any time
during, at, or after the termination of Employee's employment hereunder,
Employee shall immediately deliver the same and all copies or excerpts thereof
to Employer.
8. Covenants During Employment. While employed by the Employer,
Employee agrees that he will not, without the written consent of the Board:
(a) Unless authorized to do so by the Board, make, draw, accept or
endorse any contract, lease, promissory note, or otherwise instrument requiring
the payment of money by the Employer nor shall he use any money belonging to the
Employer or pledge is credit except in the usual and regular course of business
and exclusively on account, or for the benefit of the Employer;
(b) Release or discharge any debtor of the Employer without
receiving the full amount thereof;
(c) Make any statement or perform any act intended to advance an
interest of any existing or prospective competitor of the Employer in any way
that will or may reasonably be thought to injure an interest of the Employer in
its relationships and dealings with existing or potential customers or solicit
or encourage any other employee of the Employer to do any act that is intended
to be disloyal to the Employer or inconsistent with the Employer's best interest
or in violation of any provision of this Agreement;
(d) Compete in any manner, directly or indirectly with the business
of the Company or in any field connected with aviation, aircraft, aircraft
parts, or the like.
9. Nondisclosure. The Employee shall not, at any time during the term
of this Employment Agreement or at any time thereafter, except as may be
authorized by EyeQ in writing disclose or make use of, directly or indirectly,
EyeQ's customer list or supplier list or any other Confidential Information for
his own benefit, for the benefit of others engaged in the same business as EyeQ
or for others who Employee believes or should reasonable believe might or could
enter into EyeQ's business. Employee acknowledges the material adverse impact to
Employer due to any breach by Employee of these provisions, no matter how small,
and that any such breach shall cause him to forfeit any unpaid amounts set forth
in Paragraph 11(b)(ii) below.
10. Non-Compete. a) In the event of termination of Employee's
employment with EyeQ without cause or if Employee voluntarily leaves employment
and Employer elects to pay Employee Severance Pay under paragraph (12)(b)(iii),
hereof, it is agreed that Employee will not, for a period of one year
thereafter, (the "Non-Compete Period") directly or indirectly, either as a
individual, employee, agent, partner, shareholder, owner or otherwise (a) call
on solicit or accept the Customers of EyeQ or JET, as the case may be (as
defined below) for the purpose of selling or the sale of those types of products
or services which EyeQ or JET, as the case may be, sold during the two year
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<PAGE>
period preceding Employee's termination, either for himself or for any other
person or competing business; or (b) call on, solicit or seek to purchase
supplies, materials or inventory for resale or use of the type purchased by EyeQ
or JET, as the case may be, from the Vendors of EyeQ or JET, as the case may be,
(as defined below) or (c) be employed, consult for, or in any way render
services to any business engaged in the sale and or distribution of the type of
products or services which EyeQ or JET, as the case may be, does or has sold or
distributed within the previous twelve month period and in any geographic area
where EyeQ or JET, as the case may be, regularly does business at the time of
Employee's termination from employment. "Customers of EyeQ or JET" shall mean
those persons or entities, including their affiliates, parents, subsidiaries
franchisers or franchisees, wherever located in the world who purchased any
products or services of EyeQ or JET, as the case may be, within the twelve month
period preceding Employee's termination, upon whom Employee called, with whom
Employee because acquainted, or whose name Employee learned during his
employment with EyeQ or JET, as the case may be. "Vendors of EyeQ or JET" shall
mean those persons or entities including their affiliates, parents,
subsidiaries, franchisers or franchisees, who sold raw or finished goods or
supplies to EyeQ or JET within the twelve month period preceding Employee's
termination upon whom Employee called, with whom Employee became acquainted, or
whose name Employee learned during his employment with EyeQ or JET, as the case
may be.
11. Compensation.
(a) Basic Compensation in each year of Employee's Term of
Employment. Employee shall receive as basic compensation ("Basic Compensation")
for all services rendered by the Employee hereunder, an annual salary during
each Employment Year, or prorated for a partial Employment Year of $175,000,
payable in accordance with the customary payroll practices of Employer, but in
no event less frequently than semi-monthly. The Basic Compensation shall be paid
by Jet.
At the end of each Employment Year, Employee and Employer shall
negotiate in good faith any increase in Basic Compensation as may be appropriate
for the next Employment Year.
(b) Bonuses. In addition to the amounts paid to Employee pursuant
to (a) above, if Employee is still employed by Employer on the first anniversary
of the date hereof, and at the end of year fiscal year thereafter, Employee
shall be entitled to a cash bonus based upon the Company's and Jet's results of
operations for the fiscal year ending on the first anniversary of the date
hereof, and each fiscal year thereafter that Employee is still employed
hereunder, on the following terms and conditions:
Employee shall be entitled to a bonus of 3% of the Pre-Tax Net
Income of the Company for such fiscal year, provided, however,
that the Pre-Tax Net Income of the Company attributable to Jet
shall be excluded from such Pre- Tax Net Income of the Company
for purposes of the calculation of such bonus. Such bonus shall
be paid by the Company. The Employee shall also be entitled to
a bonus of 3% of the Pre-Tax Net Income of Jet for such fiscal
year. Such bonus shall be paid by Jet.
"Pre-Tax Net Income" shall be defined as net income of the
Company or Jet, as applicable, determined under generally
accepted accounting principles.
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(c) Health Insurance and Benefits. During the Term, the Company
shall pay for Employee's life, dental and health insurance coverage under the
Company's group health insurance plan in effect for the employees of the Company
and such other benefits as are commensurate with executives in Employee's
position.
(d) Employee shall be granted options to purchase 200,000 shares of
Common Stock of the Company at $2.50 under the stock option plan of the Company
duly adopted by the Company's Board of Directors. Such options shall expire five
(5) years from the date hereof. All such options shall vest upon execution of
this Agreement.
(e) Deductions from Compensation. Any amounts payable to Employee
hereunder shall be subject to reduction and withholding for Social Security,
withholding taxes and any other such taxes or deductions as may from time to
time be required to be withheld by Employer pursuant to applicable governmental
authority.
12. Termination.
(a) General.
This Agreement shall terminate upon the Employee's termination of
employment, but the terms of the paragraphs herein which contemplate acts, the
restraint of acts, or payments after the termination or expiration hereof, and
the representations and warranties made herein, shall survive the termination of
this Employment Agreement for any reason. Employee's employment hereunder shall
be terminated upon the happening of any of the following events:
1) the death of the Employee;
2) the permanent disability of the Employee, as more fully
discussed in Article 13 hereof;
3) upon the expiration of the Term of this Employment Agreement
according to its terms;
4) for cause; for these purposes, "cause" shall include:
(i) the conviction of Employee of a crime involving moral
turpitude;
(ii) an act of dishonesty either involving Employee's
employment or harmful to Employer or other employees,
including fraud, misappropriation, embezzlement or the
like;
(iii) the misfeasance, malfeasance or non-feasance of
Employee in carrying out the duties of Employee's
employment with Employer, not cured within thirty (30)
days prior notice.
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(b) Payment Upon Termination.
i. Death or Disability. Upon termination of Employee's
employment hereunder at the end of the Term or because of the death or permanent
disability of Employee, Employee or in the event of his death or his mental
incapacity his personal representative, shall be paid his Basic Compensation
hereunder for the greater of (a) twenty-four (24) months or (b) the remainder of
the Term. In addition, if termination of this Agreement is due to the death of
the Employee, his estate shall be entitled to the payment of the Employee's
Basic Compensation for twenty-four (24) months after the date of Employee's
death.
ii. Termination For Cause or Voluntary Leaving. Upon termination
of Employee's employment hereunder for cause or voluntary leaving as
compensation for services rendered during the term of this Agreement to the date
of termination, Employee shall be paid his Basic Compensation hereunder prorated
through the date of termination, and no other amounts hereunder. Any amounts
which have been prepaid will be returned by Employee or his personal
representative.
iii. Dismissal. Upon termination of Employee's employment
hereunder, for reasons not for cause, death, permanent disability, his voluntary
leaving (except as provided herein) or the expiration of the Term hereof, such
reasons to include, without limitation, the dismissal of the Employee by
Employer for reasons not for cause, or the dissolution of the Employer, Employee
shall be entitled to receive lump sum compensation equal to three (3) times his
Basic Compensation, or in the event of a change in control, status or authority
of the Company or following termination of Employee's employment under this
Employment Agreement immediately above ("Severance") and such amounts as he may
be entitled to as are set forth in paragraph 11 prorated, annualized and
calculated through the date of termination; provided, however, that Employee
shall receive no such Severance in the event his employment is terminated as a
result of a merger with, or an acquisition of or by, another entity approved by
the Board of Directors of the Company. If Employee voluntarily leaves, at
Employer's election it may pay Employee Severance Pay for so long as Employee
does not compete with Employer under the terms of Paragraph 10 hereof. These
payments shall cease however should Employee breach the provisions of paragraph
7, 9 or 10 hereof, in addition to the other remedies therefor of Employer
hereunder. Notwithstanding the foregoing, if the Employee's duties or
responsibilities are substantially diminished by the Board of Directors of the
Company, the Employee may terminate his Employment hereunder, and the Employee
shall be entitled to the Severance set forth above.
13. Disability.
(a) In the event that Employee incurs a disability of either a
physical or mental character which, in the opinion of a physician selected by
the Employer, which physician shall be approved by Employee (which approval
shall not be unreasonably withheld), renders him disabled from performing the
usual and customary duties to be rendered hereunder or heretofore rendered by
Employee, he shall receive his full Basic Compensation for the first thirty-six
(36) months or any part thereof of continuous disability.
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<PAGE>
(b) No disability shall be deemed to exist until after Employee
shall be unable to perform his duties for thirty (30) days; but after such
disability continues for thirty (30) consecutive days, then the same shall be
deemed to have existed from the first day of such disability.
(c) If the Employee does not recover and resume his duties within
ninety (90) days from the date he is deemed to have become disabled, Employee
may, unless the physician selected in paragraph 11(a) above certifies that
Employee is again capable of performing his usual and customary duties with or
without reasonable accommodation, at the election of the Board of Directors, be
deemed to have become permanently disabled at the beginning of such disability.
(d) (i) If Employee shall have been disabled and shall have
returned to work after the end of such disability, any recurrence of the same
disability commencing within one hundred eighty (180) days of the termination of
the prior period of disability shall be deemed to be a continuation of the prior
disability, and the periods of such disabilities shall be added together to
determine the rights of the parties hereunder.
(ii) If Employee shall have been disabled and shall have
returned to work after the end of such disability, any new and unrelated
disability occurring thereafter shall be treated as if the previous and
unrelated disability had not occurred.
(e) Services During Disability. During the period that Employee
shall be entitled to receive payments under this Article and to the extent that
he is physically and mentally able to do so, he shall furnish information and
assistance to the Employer and comply with the provisions hereof; and, in
addition, upon reasonable request in writing on behalf of the Employer, he shall
make himself available to the Employer to undertake reasonable assignments
consistent with the dignity, importance and scope of his prior position and his
physical and mental health.
14. Reformation. If elements of the agreements set forth in the above
paragraphs would otherwise be determined to be invalid or unenforceable by a
court of competent jurisdiction, the parties intend and agree that such court
shall exercise its discretion in reforming the elements of this Agreement to the
end the Employer and Employee shall be subject to an employment agreement, a
nondisclosure covenant and related covenants as close as possible to the terms
in the paragraphs above and which are enforceable by Employer or Employee.
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<PAGE>
15. Essence. Employee agrees that the covenants and agreements
contained herein are the essence of this Agreement and that such covenants and
agreements are reasonable and necessary to protect and preserve the interests
and properties of Employer and Employee; that irreparable loss and damage will
be suffered by Employer should Employee breach any of such covenants and
agreements; that each of such covenants and agreements is separate, distinct and
severable, not only from the other of such covenants and agreements but also
from the other and remaining provisions of this agreement; that the
enforceability of any such covenant or agreement shall not affect the validity
or enforceability of any other such covenants or agreements or provisions of
this Agreement and that the covenants and agreements shall be fully enforceable
irrespective of how long Employee has been in the employment of Employer.
16. Remedies.
(a) Employee agrees and understands that Employer has acted in
reliance on the provisions of this Agreement in employing Employee and would not
continue to employ Employee if Employee did not execute this Agreement.
(b) In the event that Employee shall breach any or all of the
covenants and agreements set forth in paragraph 9 or 10 subsequent to the
termination of his employment, Employee agrees that the running of the period of
restrictions set forth in paragraphs 9 or 10 shall be tolled during the
continuation(s) of any such breach or breaches by the Employee and the running
of the period of such restrictions shall commence or commence again only upon
compliance by the Employee with the terms of the applicable paragraphs breached.
(c) Employee agrees that in the event he shall breach any of the
above covenants and agreements, damage to Employer shall be presumed in any
legal action by Employer against Employee for damages. Employer shall be
entitled to collect actual damages caused by Employee's breach of any of the
covenants and agreements. In addition to the above remedy and other remedies
available to it, Employer shall be entitled to both permanent and temporary
injunctions, without the posting of a bond and without the need to prove
irreparable harm, to prevent a breach or contemplated breach by Employee of any
of the above covenants or agreements.
17. Miscellaneous.
(a) Binding Agreement. All the terms, covenants, representations,
warranties and conditions of this Agreement shall be binding upon and inure to
the benefit of, and be enforceable by, the parties hereto and their respective
successors, heirs at law, legatees, distributees, executors, administrators and
other legal representatives.
(b) Waiver. No term or condition of this Agreement shall be deemed
to have been waived nor shall there be any estoppel against the enforcement of
any provision of this Agreement, except by written instrument of the party
charged with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition for the future or as to any
act other than that specifically waived.
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(c) Severability. If, for any reason, any provision of this
Agreement is held invalid, such invalidity shall not affect any other provision
of this Agreement not held to be invalid, and each such other provision shall to
the full extent consistent with law continue in full force and effect.
(d) Notices. All notices, requests, demands and other
communications required or permitted to be given hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally, given by
prepaid telegraph or mailed first class, postage prepaid, registered or
certified mail, return receipt requested, to Employer or Employee at their
respective addresses set forth in this Agreement or to any other address of
which notice of the change is given to the parties hereto.
(e) Governing Law. The construction, interpretation, validity and
performance of this Employment Agreement shall be governed by the laws of the
State of Florida. The parties agree that venue for any action shall be in Dade
County, Florida.
(f) Entire Agreement. This instrument contains the entire agreement
between the parties hereto with respect to the subject matter hereof and no
prior or collateral promises or conditions in connection with or with respect to
the subject matter hereof no incorporated herein shall be binding upon the
parties hereto.
(g) Modification. No modification, extension, renewal, recision,
termination or waiver of any of the provisions contained herein or any future
representation, promise or condition in connection with the subject matter
hereof, shall be binding upon any of the parties unless made in writing and duly
executed by the parties or their authorized representative.
(h) Headings. The section and paragraph headings contained in this
Employment Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this document.
(i) Attorney's Fees and Expenses. Employer and Employee agree that,
if either party has to employ an attorney to enforce this Agreement, the
non-prevailing party shall pay reasonable costs, expenses, attorney's fees and
paralegal fees through and including any appeals, settlement or negotiations
required to enforce this Employment Agreement incurred by the prevailing party.
(j) Material Inducement. Employer and Employee agree and understand
that both parties hereto have acted in reliance on this Employment Agreement in
executing this Agreement and the covenants contained herein are a material
inducement for both parties hereto to do so.
(k) Survival. The terms of the paragraphs herein which contemplate
acts, the restraint of acts, or payments after the termination or expiration
hereof and the representations and warranties made herein shall survive the
termination of this Agreement or Employee's employment hereunder for any reason.
9
<PAGE>
IN WITNESS WHEREOF, the Employer has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers hereunto duly
authorized and Employee has signed this Agreement all as of the day and year
first above-written.
EMPLOYER
Attest: EYEQ NETWORKING, INC.
BY:________________________________ BY: /s/ Steven Rosner
Its Secretary ---------------------------------
Title: President
------------------------------
(Corporate Seal)
EMPLOYEE
/s/ Joseph Nelson
-------------------------------------
Joseph Nelson
Witnesses:
- ----------------------------------- -------------------------------------
- ----------------------------------- -------------------------------------
10
<PAGE>
Exhibit 10.4
BUSINESS LEASE
THIS AGREEMENT, entered into this 1st day of January, 1997 between West
Tropical Investment Corp. hereinafter called the lessor or landlord, party of
the first part, and Jet Aviation Trading Inc. of the County of Dade and State of
Florida hereinafter called the lessee or tenant, party of the second part:
WITNESSETH, that the said lessor or landlord does this day lease unto
said lessee, and said lessee does hereby hire and take as tenant ____ under said
lessor the following described premises: (Describe type of property, address,
etc.)
WAREHOUSE and offices consisting of Approximately 13560 Sq.
Feet. 15675 NW 15 Ave., Miami Fl. 33169 situate in Dade county
State of Florida, to be used and occupied by the lessee as
Warehouse and offices, and for no other purposes or uses
whatsoever, for the term of four years, subject and
conditioned on the provisions of clause ten of this lease
beginning the 1st day of January 1997, and ending the 31st day
of December 2000, at and for the agreed total rental of Fifty
Eight Thousand Nine Hundred Seven and 88/100 Dollars.
Payable annually as follows:
Office: 2550 Square Feet at $5.50/sq.ft. -- $168.75 Per month
plus applicable sales tax. Warehouse: 11010 Square Feet at
$3.75/sq.ft. -- $3,440.63 Per month plus applicable sales tax.
Total monthly payment is $4,908.99 (Including sales tax of
6.5%) all payments to be made to the lessor on the first day
of each and every month in advance without demand at the
office of West Tropical Investments Corp. in the City of
Hollywood, Florida or at such other place and to such other
person, as the lessor may from time to time designate in
writing.
The following express stipulations and conditions are made a part of
this lease and are hereby assented to by the lessee:
FIRST: The lessee shall not assign this lease, nor sub-let the
premises, or any part thereof nor use the same, or any part thereof, not permit
he same, or any part thereof, to be used for any other purpose than as above
stipulated, nor make any alterations therein, and all additions thereto, without
the written consent of the lessor, and all additions, fixtures or improvements
which may be made by lessee, except movable office furniture, shall become the
property of the lessor and remain upon the premises as a part thereof, and be
surrendered with the premises at the termination of this lease.
<PAGE>
SECOND: All personal property placed or moved in the premises above
described shall be at the risk of the lessee or owner thereof, and lessor shall
not be liable for any damage to said personal property, or to the lessee arising
from the bursting or leaking of water pipes, or from any net of negligence of
any co-tenant or occupants of the building or of any other person whensoever.
THIRD: That the tenant shall promptly execute and comply with all
statutes, ordinances, rules, orders, regulations and requirements of the
Federal, State and City Government and of any and all their Departments and
Bureaus applicable to said premises, for the correction, prevention, and
abatement of nuisances or other grievances, in, upon, or connected with said
premises during said term; and shall also promptly comply with and execute all
rules, orders and regulations of the applicable fire prevention codes for the
prevention of fires, at Tenant's own cost and expense. Tenant's liability shall
be limited from the commencement of this lease.
FOURTH: In the event the premises shall be destroyed or so damaged or
injured by fire or other casualty during the Life of this agreement, whereby the
same shall be rendered untenantable, then the lessor shall have the right to
render said premises tenantable by repairs within ninety days therefrom. If said
premises are not rendered tenantable within said time, it shall be optional with
either party hereto to cancel this lease, and in the event of such cancellation
the rent shall be paid only to the date of such fire or casualty. The
cancellation herein mentioned shall be evidenced in writing.
FIFTH: The prompt payment of the rent for said premises upon the dates
named, and the faithful observance of the rules and regulations printed upon
this lease, and which are hereby made a part of this covenant, and of such other
and further rules or regulations as may be hereafter made by the lessor, are the
conditions upon which the lease is made and accepted and any failure on the part
of the leasee to comply with the terms of said lease, or any of said rules and
regulations now in existence, or which may be hereafter prescribed by the
lessor, shall at the option of the lessor, work a forfeiture of this contract,
and all of the rights of the lessee hereunder.
SIXTH: If the lessee shall abandon or vacate said premises before the
end of the term of this lease, or shall suffer the rent to be in arrears, the
lessor may, at his option, forthwith cancel this lease or he may enter said
premises as the agent of the lessee, without being liable in any way therefor,
and relet the premises with or without any furniture that may be, therein, as
the agent of the lessor, at such price and upon such terms and for such duration
of time as the lessor may determine, and receive the rent therefor, applying the
same to the payment of the rent due by these presents, and if the full rental
herein provided shall not be realized by lessor over and above the expenses to
lessor in such re-letting, the said lessee shall pay any deficiency, and if more
than the full rental is realized lessor will pay over to said lessee the excess
of demand.
SEVENTH: Lessee agrees to pay the cost of collection and ten per cent
attorney's fees on any part of said rental that may be collected by suit or by
attorney, after the same is past due.
EIGHTH: The lessee agrees that he will pay all charges for rent, gas,
electricity or other
<PAGE>
illumination, and for all water used on said premises, and should said charges
for rent, light or water herein provided for at any time remain due and unpaid
for the space of five days after the same shall have become due, the lessor may
at his option consider the said lessee tenant at sufferance and the entire rent
for the rental period then next ensuing shall at once be due and payable and may
forthwith be collected by distress or otherwise.
NINTH: The said lessee hereby pledges and assigns to the lessor all the
furniture, fixtures, goods and chattels of said lessee, which shall or may be
brought or put on said premises as security for the payment of the rent herein
reserved, and the lessee agrees that the said lien may be enforced by distress
foreclosure or otherwise at the election of the said lessor, and does hereby
agree to pay attorney's fees of ten percent of the amount so collected or found
to be due, together with all costs and charges therefore incurred or paid by the
lessor.
ELEVENTH: The lessor, or any of his agents, shall have the right to
enter said premises during all reasonable hours, to examine the same to make
such repairs, additions or alterations as may be deemed necessary for the
safety, comfort, or preservation thereof, or of said building, or to exhibit
said premises, and to put or keep upon the doors or windows thereof a notice
"FOR RENT" at any time within thirty (30) days before the expiration of this
lease. The right of entry shall likewise exist for the purpose of removing
placards, signs, fixtures, alterations, or additions, which do not conform to
this agreement, or to the rules and regulations of the building.
TWELFTH: Lessee hereby accepts the premises in the condition they are
in at the beginning of this lease and agrees to maintain said premises in the
same condition, order and repair as they are at the commencement of said term,
excepting only reasonable wear and tear arising from the use thereof under this
agreement, and to make good to said lessor immediately upon demand, any damage
to water apparatus, or electric lights or any fixture, appliances or
appurtenances of said premises, or of the building, caused by any act or neglect
of lessee, or of any person or persons in the employ or under the control of the
lessee.
THIRTEENTH: It is expressly agreed and understood by and between the
parties to this agreement, that the landlord shall not be liable for any damage
or injury by water, which may be sustained by the said tenant or other person or
for any other damage or injury resulting from the carelessness, negligence, or
improper conduct on the part of any other tenant or agents, or employees, or by
reason of the breakage, leakage, or obstruction of the water, sewer or soil
pipes, or other leakage in or about the said building.
FOURTEENTH: If the lessee shall become insolvent or if bankruptcy
proceedings shall be begun by or against the lessee, before the end of said term
the lessor is hereby irrevocably authorized at its option, to forthwith cancel
this lease, as for a default. Lessor may elect to accept rent from such receive,
trustee, or other judicial officer during the term of their occupancy in their
fiduciary capacity without affecting lessor's rights as contained in this
contract, but no receiver, trustee, or other judicial officer shall ever have
any right, title or interest in or to the above described property by virtue of
this contract.
FIFTEENTH; Lessee hereby waives and renounces for himself and family
any and all
<PAGE>
homestead and exemption rights he may have now, or hereafter, under or by virtue
of the constitution and laws of this State, or of any other State, or of the
United States, as against the payment of said rental or any portion hereof, or
any other
SIXTEENTH: This contract shall bind the lessor and its assigns or
successors, and the heirs, assigns, personal representatives, or successors as
the case may be, of the lessee.
SEVENTEENTH: It is understood and agreed between the parties hereto
that time is of the essence of this contract and this applies to all terms and
conditions contained herein.
EIGHTEENTH: It is understood and agreed between the parties hereto that
written notice mailed or delivered to the premises leased hereunder shall
constitute sufficient notice to the lessee and written notice mailed or
delivered to the offices of the lessor shall constitute sufficient notice to the
lessor, to comply with the terms of this contract.
NINETEENTH: The rights of this lessor under the foregoing shall be
cumulative, and failure on the part of the lessor to exercise promptly any
rights given hereunder shall not operate to forfeit any of the said rights.
TWENTIETH: It is further understood and agreed between the parties
hereto that any charges against the lessee by the lessor for services or for
work done on the premises by order of the lessor or otherwise .... under this
contract shall be considered as rent due and shall be included in any lien for
rent due and unpaid.
TWENTY-FIRST: It is hereby understood and agreed that any signs of
advertising to be used, including awnings, in connection with the premises
leased hereunder shall be first submitted to the lessor for approval before
installation of same.
TWENTY-SECOND: RADON GAS NOTIFICATION (the following notification may
be required in some ....: Radon is a naturally occurring radioactive gas that,
when it has accumulated in a building in sufficient quantities, may present
health risks to persons who are exposed to it over time. Levels of radon that
exceed federal and state guidelines have been found in buildings. Additional
information regarding radon and radon testing may be obtained from your county
public health unit.
See Attached Addendum:
<PAGE>
In Witness Whereof, the parties hereto have executed this instrument
for the purposes herein expressed, the day and year above written.
Signed, sealed and delivered in the presence of:
By: /s/
- ------------------------------------ ---------------------
Witness Signature (as to Lessee) Witness Signature
- ------------------------------------ ------------------------
Printed Name Printed Name
XXXXX By: /s/
- ------------------------------------ ---------------------
Witness Signature (as to Lessee) Witness Signature
- ------------------------------------ ------------------------
Printed Name Printed Name
By: /s/
- ------------------------------------ -------------------------------
Witness Signature (as to Lessee) Witness Signature
- ------------------------------------ -------------------------------
Printed Name Printed Name
By: /s/
- ------------------------------------ -------------------------------
Witness Signature (as to Lessee) Witness Address
3100 N. 29th Court
Hollywood, FL 33020
By: /s/
- ------------------------------------ -------------------------------
Printed Name Witness Signature
Jet Aviation Trading, Inc.
- ------------------------------------ -------------------------------
Witness Signature (as to Lessee) Printed Name
<PAGE>
By: /s/ Joseph Nelson
- ------------------------------------ --------------------------------
Printed Name Witness Address
15675 NW 15 Ave.
Miami, FL 33169
- ------------------------------------
Witness Signature (as to Lessee)
- ------------------------------------
Printed Name
STATE OF FLORIDA )
COUNTY OF ) I hereby Certify that on this day
before me, an officer duly
authorized to administer oaths and take acknowledgement, personally appointed
Joseph J. Nelson known to me to be the person ----- described in and whos -----
the foregoing ----- who ---- before me that he .... the same and on oath was
not taken, said person(s) is/... personally known to me ... provided the
following type of identification Drivers License
Notary Public Stamp Witness my hand and official seal in
the County and State said aforesaid
this 4th day of November, 1997
/s/ Marion N. Koliniatis
---------------------------------------
Notary Signature
Marion N. Koliniatis
---------------------------------------
Printed Name
<PAGE>
4
ADDENDUM
ARTICLE TWENTY THIRD: INSTALLATIONS
Tenant shall not make any additions, alterations or improvements in or to
the Demised Premises without Landlord's written consent. Landlord shall not
unreasonably withhold consent. For any improvement, addition or alteration made
by the Tenant the Landlord agrees not to charge Tenant for disassembly or
removal of such alteration.
ARTICLE TWENTY FOURTH: UTILITIES
Landlord shall provide necessary mains, ducts and conduit in order to bring
electric service to the demised Premises, however, Tenant shall pay for all
electric usage directly to the utility company. Landlord shall not be liable for
any failure or interruptions of such services and may interrupt same in order to
repair or alter any portion of the warehouse building. Tenant shall pay the
water usage bill for the entire building comprising of the Demised portion of
the building not leased by Tenant. Nothing contained herein shall be construed
as an obligation of Landlord to continue to supply water and sewer service.
ARTICLE TWENTY SIXTH: LIABILITY INSURANCE
Tenant shall, at its own expense, during the term hereof, maintain and
deliver to Landlord public liability and property damage and insurance policies
with respect to the Demised Premises, in which both Landlord and Tenant shall be
named as parties covered thereby, within the limits of $500,000.00 for injury or
death to any one person and $1,000,000.00 for any one accident and $300,000.00
with respect to damage to property. Such policy or policies shall be in such
form and with such insurance companies as shall be to Landlord of cancellation;
and, at least 15 days before the expiration of any such policy, Tenant shall
supply Landlord with a substitute therefore, with evidence of payment of the
premium thereof.
<PAGE>
5
ARTICLE TWENTY SEVENTH: OPTION TO RENEW
Tenant shall have the option, to be exercised by written notice to Landlord
at least six months prior to the expiration of the original term of this lease,
to renew this lease for two additional one year options upon all of the terms
and conditions provided in the original lease. For the purposes of Cost of
Living Adjustment Article, there shall be three (3) "adjustment months" during
the renewal period, which shall be the month during each year of the renewal
period which corresponds with the month in which the term of this lease first
commenced, so that there shall be a cost of living adjustment as provided herein
during each option year of the renewal period, including the first year thereof.
For purposes of application of the cost of living increase during the
option period the basic monthly rental shall be the original monthly rental
under the lease and not the basic monthly rental payable during the initial
option period.
Tenant shall have the right to exercise two option periods as long as
Tenant is not in default of this agreement.
ARTICLE TWENTY EIGHTH: LANDLORD'S WORK
Landlord reserves the right from time to time to make changes, additions
and elimination in and to the buildings and common areas in and around the
warehouse building, provided same do not unreasonably interfere with Tenant's
use of the Demised Premises.
ARTICLE TWENTY NINTH: TAX INCREASE
If the real estate taxes payable on the land and building comprising the
warehouse building properly shall be increased for any tax year over the amount
of such taxes payable for the tax year immediately following the year in which
this Lease is executed (such tax year being hereinafter called "base year" and
the taxes payable in the base year being hereinafter called basic taxes"),
Tenant shall pay to Landlord as additional rent, within 10 days after Landlord
shall notify Tenant of such increase, an amount equal to Tenants' proportionate
share of the tax increase in the ratio that Tenant's floor area bears to the
floor area of all rented and rentable space in the warehouse building. Landlord
shall take the benefit of the provisions of any statute or any ordinance
permitting any such assessment to be paid over a period of time, and Tenant
shall be obligated to pay only the said portion of the installments of any such
assessments which shall become due and payable during the term of this Lease.
Base year is 1997.
<PAGE>
6
ARTICLE THIRTY: ASSESSMENTS
Tenant shall also pay to Landlord as additional rent, within 10 days after
Landlord shall give Tenant notice of the existence thereof, Tenant's
proportionate share of any assessments of installments thereof for public
betterments or improvements which may be levied on the land or buildings
comprising the warehouse building and which are not deductible from any
condemnation award. Tenant's proportionate share shall be in the ratio that
Tenants' floor area bears to the floor area of all rented and rentable space in
the warehouse building. Landlord shall take the benefit of the provisions of any
statute or ordinance permitting any such assessment to be paid over a period of
time, and Tenant shall be obligated to pay only the said portion of the
installments of any such assessments which shall become due and payable during
the term of this lease. Base year is 1997.
ARTICLE THIRTY FIRST: INSURANCE INCREASES
If the insurance premiums payable by Landlord on the fire, windstorm and
extended coverage insurance policy carried by Landlord, covering the warehouse
building in which the Demised Premises are located, shall be increased for any
year over the amount of such insurance premiums for the year immediately
following the year in which this Lease is executed (such year being hereinafter
called "Base Year" and the insurance premium payable in the Base Year being
hereinafter called the "Basic Premium"), Tenant shall pay to Landlord as
additional rent within 10 days after Landlord shall notify Tenant of such
increase, an amount equal to the proportion of the insurance premium increase in
the ratio that Tenant's floor area bears to the floor area of all rented and
rentable space in the warehouse building. Base year in 1997.
ARTICLE THIRTY FIRST: SUNSHINE STATE INDUSTRIAL PARK
Tenant agrees that, during the term hereof, it will pay as additional rent
its proportionate share of any assessments imposed by Sunshine State Industrial
Park Association, Inc. in furtherance of its purposes as set forth in said
Declaration dated December 28, 1958. If Landlord shall so require, the Tenant
shall pay the Association directly.
ARTICLE THIRTY SECOND: COST OF LIVING ADJUSTMENT
Commencing with each of the "adjustment months" described below Tenant
shall pay as additional rent, an amount computed in accordance with the
following provisions:
<PAGE>
7
(A) Landlord shall compute the percentage increase, if any, of the cost
of living for each year based upon the "Consumer Price Index Cities"
(1967-100)(hereinafter called the "Index"), published by the Bureau of Labor
Statistics of the United States Department of Labor. The index number indicated
in the column for U.S. city Average entitled "All Items" for said month shall be
the "current index number", and the corresponding index number for the month
immediately preceding the month in which the term of this Lease commences shall
be the "base index number". The excess of the current index number over the base
index number, expressed in a percentage, shall be multiplied by the minimum rent
payable hereunder, and the resulting amount shall be the increase required to be
determined hereunder. The minimum rent as so adjusted shall be due and payable
to Landlord in equal monthly installments commencing with the month after the
month with respect to which such computation shall have been made.
(B) If publication of the Index shall be discontinued, the parties shall
accept comparable statistics on the cost of living as shall then be computed and
published by an agency of the United States, or, if none, by a respected
financial periodical selected by the parties, or, if they cannot
agree, by arbitration.
(C) There shall be four (4) adjustment months, each of which shall be
the month which is the annual anniversary of the month when the term of this
lease commenced, so that there shall be a cost of living adjustment for each
year during the term of this lease as well as any option periods, if any,
commencing with the first month of the second year of the lease term.
(D) Provided, however, during the initial term and any exercised option
period of this lease the annual rent shall never be increased in any single year
by more than 5% of the minimum rental due in the preceding year. The minimum
increase shall be 2%. Therefore, the annual base rent shall be increased
annually by at least 2%, but not more than 5%.
ARTICLE THIRTY THIRD: SECURITY
The Tenant has this day deposited with the Landlord the first and last month's
rent in the sum of $9,817.98, as security for the full, and faithful performance
by Tenant of all of the terms, covenants and conditions of this lease upon
Tenant's part to be performed, which said sum shall be returned to Tenant 10
days after the time fixed as the expiration of the term hereof, provided that
Tenant has fully and faithfully carried out all of said terms, covenants and
conditions on Tenant's part to be performed. Landlord shall have the right, but
not obligation to apply any part of said deposit to cure any default of Tenant;
<PAGE>
8
and, if Landlord does so, Tenant shall, upon demand, deposit with Landlord the
amount so applied, so that Landlord shall have the full deposit on hand at all
times during the term of this lease. In the event of a sale of the building or
lease of the land on which it stands, subject to this lease, Landlord shall have
the right to transfer the security to the vendee or lessee, and, Landlord shall
be considered released by Tenant from all liability for the return of such
security and Tenant shall look to the new Landlord solely for the return of said
security, and it is agreed that this shall apply to every transfer or assignment
made of the security to a new Landlord. The security deposited under this lease
shall not be mortgaged, assigned or encumbered by Tenant without the written
consent of Landlord, an any attempt to do so shall be void.
One half of the security deposit will be considered last months rent.
This will be used as the last months rent only if tenant is in good standing,
and not in default of the lease agreement. The tenant will be responsible for
the deficit of the rental amount due to cost of living adjustments. If Tenant
shall lease from Landlord additional space in the building, Tenant shall pay
additional security deposit to landlord in the amount of first and last month's
rent for the additional space.
ARTICLE THIRTY FOURTH: BROKERAGE
Tenant represents and warrants that it has not had any dealings with any
broker in connection with the bringing about of this lease or in connection with
Tenant's having been introduced to Landlord. Without limiting the effect of the
foregoing, Tenant agrees to indemnify and hold Landlord harmless against any
claim or demand made by any real estate broker or agent claiming to have dealt
with or consulted with Tenant or any of Tenant's representatives, employees or
agents contrary to the foregoing representation and warranty.
ARTICLE THIRTY FIFTH: ELECTRIC
Tenant recognized Landlord will supply electric to all areas of tenants
leased premises. Landlord will install an electric meter in the leased premises
at Landlord's cost and expense. Tenant shall pay for the usage of all utilities
directly to the utility companies.
<PAGE>
9
ARTICLE THIRTY SIXTH: QUIET ENJOYMENT
Landlord agrees that Tenant, upon paying the rent and performing all the
covenants and conditions on Tenant's part to be observed and performed, shall
and may peaceably and quietly have, hold and enjoy the Demised Premises for the
term aforesaid, subject to the mortgages hereinbefore mentioned.
ARTICLE THIRTY SEVENTH: SUBORDINATION
This lease shall be subject and subordinate to all mortgages, ground or
unerlying leases which may now or hereafter affect the premises of which the
Demised Premises form a part, whether such mortgages cover only the Demised
Premises or be a blanket mortgage covering other premises in addition to the
Demised Premises, and to any renewals, modifications, consolidations,
replacements or extensions thereof. Although this provision of this lease shall
constitute the subordination itself, Tenant shall, if so requested by Landlord,
execute promptly any certificate or subordination agreement that Landlord may
request in confirmation of such subordination.
DATED: JANUARY 1, 1997
WEST TROPICAL INVESTMENT
CORP.
LANDLORD
/s/ STEVER ADELSTEIN
-----------------------------
BY: STEVE ADELSTEIN, PRESIDENT
JET AVIATION TRADING, INC.
TENANT
/s/ JOSEPH NELSON
-----------------------------
BY: JOSEPH NELSON, PRESIDENT
<PAGE>
10
SECOND ADDENDUM TO LEASE BETWEEN WEST TROPICAL INVESTMENTS CORP.,
AS LANDLORD,
AND JET AVIATION TRADING, INC., AS TENANT, FOR THE PREMISES KNOWN AS
15675 N.W.
15TH AVENUE, MIAMI, FLORIDA 33169.
1. ADDITIONAL SPACE:
Tenant has agreed to lease additional space in the building which it
currently occupies. The following additional space will be added to the existing
premises under lease dated January 1, 1997.
a. Office - 2,440 square feet at $5.50/sq.ft. amounting to $1,118.33 per
month plus applicable sales tax.
b. Warehouse - 1,606 square feet at $3.75/sq.ft. amounting to $501.88 per
month plus applicable sales tax.
2. SECURITY DEPOSIT:
Tenant shall deposit additional security deposit for the additional space
amounting to the first and last month's rent in the total amount of $3,240.42.
3. COMMENCEMENT:
This amendment shall take effect and occupancy of the additional space shall
commence November 1, 1997.
DATED:
-------------------------
WITNESSES WEST TROPICAL INVESTMENT CORP.
LANDLORD
/s/ Steve Adelstein, President
- -------------------------------- ----------------------------------
By: Steve Adelstein, President
/s/ Joseph Nelson
- -------------------------------- ----------------------------------
By: Joseph Nelson, President
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between The D.A.R. Group located at 30 Broad Street, 43rd Floor New York, NY
10004 ("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every two and one-half (2.5) JET Shares transferred hereunder
(the "EYEQ Shares"). The acquisition price will be equitably adjusted for any
stock splits, reverse stock splits, stock combinations or recapitalizations of
Buyer which occur after April 22, 1998 and prior to closing as set forth in
Section 3 hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
<PAGE>
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
<PAGE>
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the Securities and Exchange
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
<PAGE>
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act,
<PAGE>
and each of the partners, officers, directors, employees and agents of the
foregoing in their respective capacities as such (the "INDEMNITEES"), to the
full extent lawful, from and against all actions, suits, claims, proceedings,
costs, damages, judgments, amounts paid in settlement and expenses (including,
without limitation, reasonable attorneys' fees and disbursements), whether joint
or several (collectively, a "LOSS"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("BLUE SKY FILING"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
<PAGE>
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8 Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
<PAGE>
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
<PAGE>
With a copy to: Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
The D.A.R. Group EYEQ NETWORKING, INC.
/s/ Michael Cirillo By: /s/ Steven B. Rosner
- --------------------------- ---------------------------
Name: Steven B. Rosner
Address: Title: President
30 Broad Street, 43rd Floor
New York, NY 10004
75,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between The Eastwind Group located at 100 Four Falls Corporate Center West
Conshohocken, PA 19428 ("Seller"), and EYEQ Networking, Inc., a Delaware
corporation (hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from
Seller, and Seller is willing to transfer to Buyer, upon the terms and
conditions of this Agreement, that aggregate number of shares of common stock
set forth under Seller's name on the signature page hereof, that Seller owns
(the "JET Shares") in Jet Aviation Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every two and one-half (2.5) JET Shares transferred hereunder
(the "EYEQ Shares"). The acquisition price will be equitably adjusted for any
stock splits, reverse stock splits, stock combinations or recapitalizations of
Buyer which occur after April 22, 1998 and prior to closing as set forth in
Section 3 hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
<PAGE>
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
<PAGE>
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the Securities and Exchange
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
<PAGE>
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
<PAGE>
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
7.4. Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
<PAGE>
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
<PAGE>
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
<PAGE>
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
<PAGE>
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
The Eastwind Group EYEQ NETWORKING, INC.
/s/ William B. Miller By: /s/ Steven B. Rosner
- --------------------------- Name: Steven B. Rosner
Title: President
Address:
100 Four Fall Corporate Center
West Conshohocken, PA 19428
125,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between KAB Investments, Inc. located at 24224 Kanis Road Little Rock, AR 72211
("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges,
1
<PAGE>
claims and encumbrances. Upon delivery of certificates representing the JET
Shares as contemplated by this Agreement, Buyer will acquire good title to the
JET Shares, free and clear of any liability, security interest, lien, pledge,
claim or encumbrance of any nature whatsoever other than any restrictions on the
transfer of the JET Shares required by the Securities Act of 1933, as amended
(the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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<PAGE>
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
3
<PAGE>
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the
4
<PAGE>
Securities and Exchange Commission under the Securities Act applies, whether or
not for sale for its own account, Buyer shall give written notice thereof to the
Sellers and upon written request of any Seller, given within 15 days after the
receipt of any such written notice, Buyer will include in such registration
statement any or all of the EYEQ Shares acquired pursuant to this Agreement then
owned by such Seller; provided, however, that (i) the maximum number of shares
to be sold shall not exceed the number which the managing underwriter, if any,
considers, in good faith, to be appropriate based on market conditions and other
relevant factors (including pricing); and (ii) if the total number of shares
desired to be sold exceeds such amount, Buyer shall be entitled to include in
such registration statement the full amount of shares that it desires to
include, and the Sellers, together with any other shareholders who elect to
participate in the offering, shall be entitled to sell up to any remaining
amount of shares pro rata in proportion to the number of shares requested to be
included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
5
<PAGE>
7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
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expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
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8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
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advice to Seller with respect to same, and that Seller has had the opportunity
to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
KAB Investments, Inc. EYEQ NETWORKING, INC.
/s/ Ernest Bartlett, Jr. By: /s/ Steven B. Rosner
- --------------------------- --------------------------
Name: Steven B. Rosner
Address: Title: President
24224 Kanis Road
Little Rock, AR 72211
70,000
Shares of Jet Aviation Trading, Inc.
Common Stock
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Godwin Finance Ltd. located at Road Town Tortolla, British Virgin
Islands ("Seller"), and EYEQ Networking, Inc., a Delaware corporation
(hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and
Seller is willing to transfer to Buyer, upon the terms and conditions of this
Agreement, that aggregate number of shares of common stock set forth under
Seller's name on the signature page hereof, that Seller owns (the "JET Shares")
in Jet Aviation Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
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delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
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5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
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transaction to which Rule 145 or any similar rule of the Securities and Exchange
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
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7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
7
<PAGE>
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8
<PAGE>
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
9
<PAGE>
to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Godwin Finance Ltd. EYEQ NETWORKING, INC.
/s/ Steven Edwards By: /s/ Steven B. Rosner
- ---------------------------------- ------------------------------
Name: Steven B. Rosner
Address: Title: President
Road Town
Tortolla, British Virgin Islands
100,000
Shares of Jet Aviation Trading, Inc.
Common Stock
10
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Clifton Capital Ltd. located at Tropic Isle Building Road Town, Tortolla
British Virgin Islands ("Seller"), and EYEQ Networking, Inc., a Delaware
corporation (hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from
Seller, and Seller is willing to transfer to Buyer, upon the terms and
conditions of this Agreement, that aggregate number of shares of common stock
set forth under Seller's name on the signature page hereof, that Seller owns
(the "JET Shares") in Jet Aviation Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every two and one-half (2.5) JET Shares transferred hereunder
(the "EYEQ Shares"). The acquisition price will be equitably adjusted for any
stock splits, reverse stock splits, stock combinations or recapitalizations of
Buyer which occur after April 22, 1998 and prior to closing as set forth in
Section 3 hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
<PAGE>
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
<PAGE>
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the Securities and Exchange
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
<PAGE>
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act,
<PAGE>
and each of the partners, officers, directors, employees and agents of the
foregoing in their respective capacities as such (the "Indemnitees"), to the
full extent lawful, from and against all actions, suits, claims, proceedings,
costs, damages, judgments, amounts paid in settlement and expenses (including,
without limitation, reasonable attorneys' fees and disbursements), whether joint
or several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
<PAGE>
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8 Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
<PAGE>
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
<PAGE>
With a copy to: Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Clifton Capital Ltd. EYEQ NETWORKING, INC.
/s/ Patricia A. Riley By: /s/ Steven B. Rosner
- --------------------- -----------------------------
Name: Steven B. Rosner
Title: President
Address:
Tropic Isle Building
Road Town, Tortolla, British Virgin Islands
128,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Elanken Family Trust located at Compass Point 9, Bermudiana Road
Hamilton, Bermuda ("Seller"), and EYEQ Networking, Inc., a Delaware corporation
(hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and
Seller is willing to transfer to Buyer, upon the terms and conditions of this
Agreement, that aggregate number of shares of common stock set forth under
Seller's name on the signature page hereof, that Seller owns (the "JET Shares")
in Jet Aviation Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges,
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claims and encumbrances. Upon delivery of certificates representing the JET
Shares as contemplated by this Agreement, Buyer will acquire good title to the
JET Shares, free and clear of any liability, security interest, lien, pledge,
claim or encumbrance of any nature whatsoever other than any restrictions on the
transfer of the JET Shares required by the Securities Act of 1933, as amended
(the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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<PAGE>
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
3
<PAGE>
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the
4
<PAGE>
Securities and Exchange Commission under the Securities Act applies, whether or
not for sale for its own account, Buyer shall give written notice thereof to the
Sellers and upon written request of any Seller, given within 15 days after the
receipt of any such written notice, Buyer will include in such registration
statement any or all of the EYEQ Shares acquired pursuant to this Agreement then
owned by such Seller; provided, however, that (i) the maximum number of shares
to be sold shall not exceed the number which the managing underwriter, if any,
considers, in good faith, to be appropriate based on market conditions and other
relevant factors (including pricing); and (ii) if the total number of shares
desired to be sold exceeds such amount, Buyer shall be entitled to include in
such registration statement the full amount of shares that it desires to
include, and the Sellers, together with any other shareholders who elect to
participate in the offering, shall be entitled to sell up to any remaining
amount of shares pro rata in proportion to the number of shares requested to be
included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
5
<PAGE>
7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
6
<PAGE>
(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
7
<PAGE>
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8
<PAGE>
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller
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<PAGE>
has had the opportunity to seek advice of counsel with respect to the risks and
merits of the transactions contemplated by this Agreement including, but not
limited to, any federal or state tax consequences associated with the exchange
of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Elanken Family Trust EYEQ NETWORKING, INC.
/s/ Lynne Garner By: /s/ Steven B. Rosner
- ------------------------------- ---------------------------
Name: Steven B. Rosner
For and on behalf of Bermuda Title: President
Trust Company Limited, Trustee
Address:
Compass Point 9, Bermudiana Road
Hamilton, Bermuda
167,680
Shares of Jet Aviation Trading, Inc.
Common Stock
10
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Joseph Laura located at 105 Mountainside View Morgantown, NJ 07751
("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
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delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
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5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
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transaction to which Rule 145 or any similar rule of the Securities and Exchange
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
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7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
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expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
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8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
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to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Joseph Laura EYEQ NETWORKING, INC.
/s/ Joseph Laura By: /s/ Steven B. Rosner
- ----------------------------- ------------------------------
Name: Steven B. Rosner
Address: Title: President
105 Mountainside View
Morgantown, NJ 07751
233,600
Shares of Jet Aviation Trading, Inc.
Common Stock
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Dallas Investments, Ltd. located at c/o Gibraltar Co., Ltd., CIBC Grand
Caymen Island, Grand Caymans ("Seller"), and EYEQ Networking, Inc., a Delaware
corporation (hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from
Seller, and Seller is willing to transfer to Buyer, upon the terms and
conditions of this Agreement, that aggregate number of shares of common stock
set forth under Seller's name on the signature page hereof, that Seller owns
(the "JET Shares") in Jet Aviation Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges,
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claims and encumbrances. Upon delivery of certificates representing the JET
Shares as contemplated by this Agreement, Buyer will acquire good title to the
JET Shares, free and clear of any liability, security interest, lien, pledge,
claim or encumbrance of any nature whatsoever other than any restrictions on the
transfer of the JET Shares required by the Securities Act of 1933, as amended
(the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
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5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the
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Securities and Exchange Commission under the Securities Act applies, whether or
not for sale for its own account, Buyer shall give written notice thereof to the
Sellers and upon written request of any Seller, given within 15 days after the
receipt of any such written notice, Buyer will include in such registration
statement any or all of the EYEQ Shares acquired pursuant to this Agreement then
owned by such Seller; provided, however, that (i) the maximum number of shares
to be sold shall not exceed the number which the managing underwriter, if any,
considers, in good faith, to be appropriate based on market conditions and other
relevant factors (including pricing); and (ii) if the total number of shares
desired to be sold exceeds such amount, Buyer shall be entitled to include in
such registration statement the full amount of shares that it desires to
include, and the Sellers, together with any other shareholders who elect to
participate in the offering, shall be entitled to sell up to any remaining
amount of shares pro rata in proportion to the number of shares requested to be
included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
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7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any
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securities in any registration statement filed pursuant to this Section 7, Buyer
shall have received an undertaking satisfactory to it from the prospective
seller of such securities to indemnify, defend and hold harmless (in the same
manner and to the same extent as set forth in Section 7.5(a) of this Section 7)
Buyer, each director of Buyer, each officer of Buyer and each other person, if
any, who controls Buyer within the meaning of the Securities Act, with respect
to any untrue statement or alleged untrue statement in, or omission or alleged
omission from, such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein or any Blue Sky Filing, or
any amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to Buyer by or on behalf of such seller for use in
the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, in
no event shall the liability of any seller under this paragraph (b) exceed the
net proceeds received by such seller (after the payment of underwriting
discounts and commissions) from the sale of its securities pursuant to such
registration statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Buyer or any such
director, officer or controlling person and shall survive the transfer of such
securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
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expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8.5 Entire Agreement. This Agreement represents the entire
understanding of the
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parties hereto with reference to the transactions contemplated hereby and
supersedes any and all other oral or written agreements and understandings
heretofore made and shall be binding upon and shall inure to the benefit of the
parties hereto and their respective heirs, successors and assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller
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has had the opportunity to seek advice of counsel with respect to the risks and
merits of the transactions contemplated by this Agreement including, but not
limited to, any federal or state tax consequences associated with the exchange
of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Dallas Investments, Ltd. EYEQ NETWORKING, INC.
/s/ Gino Dalbis By: /s/ Steven B. Rosner
- ---------------- ---------------------------
Name: Gino Dalbis Name: Steven B. Rosner
Title: President Title: President
Address:
c/o Gibraltar Co., Ltd., CIBC
Grand Caymen Island, Grand Caymans
75,000
Shares of Jet Aviation Trading, Inc.
Common Stock
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Joseph Nelson located at 5565 Leitner Drive East Coral Springs, FL 33067
("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges,
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claims and encumbrances. Upon delivery of certificates representing the JET
Shares as contemplated by this Agreement, Buyer will acquire good title to the
JET Shares, free and clear of any liability, security interest, lien, pledge,
claim or encumbrance of any nature whatsoever other than any restrictions on the
transfer of the JET Shares required by the Securities Act of 1933, as amended
(the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
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5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the
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Securities and Exchange Commission under the Securities Act applies, whether or
not for sale for its own account, Buyer shall give written notice thereof to the
Sellers and upon written request of any Seller, given within 15 days after the
receipt of any such written notice, Buyer will include in such registration
statement any or all of the EYEQ Shares acquired pursuant to this Agreement then
owned by such Seller; provided, however, that (i) the maximum number of shares
to be sold shall not exceed the number which the managing underwriter, if any,
considers, in good faith, to be appropriate based on market conditions and other
relevant factors (including pricing); and (ii) if the total number of shares
desired to be sold exceeds such amount, Buyer shall be entitled to include in
such registration statement the full amount of shares that it desires to
include, and the Sellers, together with any other shareholders who elect to
participate in the offering, shall be entitled to sell up to any remaining
amount of shares pro rata in proportion to the number of shares requested to be
included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
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7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
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expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
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8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller
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has had the opportunity to seek advice of counsel with respect to the risks and
merits of the transactions contemplated by this Agreement including, but not
limited to, any federal or state tax consequences associated with the exchange
of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Joseph Nelson EYEQ NETWORKING, INC.
/s/ Joseph Nelson By: /s/ Joseph J. Nelson
- ------------------------ -----------------------------
Address: Name: Joseph J. Nelson
5565 Leitner Drive East Title: President & CEO
Coral Springs, FL 33067
212,000
Shares of Jet Aviation Trading, Inc.
Common Stock
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Fersam International Ltd. located at Pa Verkuyllaan 51-55, Acht. 11-71
EB Badhoevedorp, Netherlands ("Seller"), and EYEQ Networking, Inc., a Delaware
corporation (hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from
Seller, and Seller is willing to transfer to Buyer, upon the terms and
conditions of this Agreement, that aggregate number of shares of common stock
set forth under Seller's name on the signature page hereof, that Seller owns
(the "JET Shares") in Jet Aviation Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges,
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claims and encumbrances. Upon delivery of certificates representing the JET
Shares as contemplated by this Agreement, Buyer will acquire good title to the
JET Shares, free and clear of any liability, security interest, lien, pledge,
claim or encumbrance of any nature whatsoever other than any restrictions on the
transfer of the JET Shares required by the Securities Act of 1933, as amended
(the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
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5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the
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Securities and Exchange Commission under the Securities Act applies, whether or
not for sale for its own account, Buyer shall give written notice thereof to the
Sellers and upon written request of any Seller, given within 15 days after the
receipt of any such written notice, Buyer will include in such registration
statement any or all of the EYEQ Shares acquired pursuant to this Agreement then
owned by such Seller; provided, however, that (i) the maximum number of shares
to be sold shall not exceed the number which the managing underwriter, if any,
considers, in good faith, to be appropriate based on market conditions and other
relevant factors (including pricing); and (ii) if the total number of shares
desired to be sold exceeds such amount, Buyer shall be entitled to include in
such registration statement the full amount of shares that it desires to
include, and the Sellers, together with any other shareholders who elect to
participate in the offering, shall be entitled to sell up to any remaining
amount of shares pro rata in proportion to the number of shares requested to be
included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
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7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
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expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
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8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller
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has had the opportunity to seek advice of counsel with respect to the risks and
merits of the transactions contemplated by this Agreement including, but not
limited to, any federal or state tax consequences associated with the exchange
of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Fersam International Ltd. EYEQ NETWORKING, INC.
/s/ Nazie El Masry By: /s/ Steven B. Rosner
- ------------------------- ---------------------------
Address: Name: Steven B. Rosner
Pa Verkuyllaan 51-55, Acht. 11-71 EB Title: President
Badhoevedorp, Netherlands
280,000
Shares of Jet Aviation Trading, Inc.
Common Stock
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between I.P. Services Inc. at 5025 South McCarran Boulevard, #178 Reno, NV 89502
("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges,
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claims and encumbrances. Upon delivery of certificates representing the JET
Shares as contemplated by this Agreement, Buyer will acquire good title to the
JET Shares, free and clear of any liability, security interest, lien, pledge,
claim or encumbrance of any nature whatsoever other than any restrictions on the
transfer of the JET Shares required by the Securities Act of 1933, as amended
(the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
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5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the
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Securities and Exchange Commission under the Securities Act applies, whether or
not for sale for its own account, Buyer shall give written notice thereof to the
Sellers and upon written request of any Seller, given within 15 days after the
receipt of any such written notice, Buyer will include in such registration
statement any or all of the EYEQ Shares acquired pursuant to this Agreement then
owned by such Seller; provided, however, that (i) the maximum number of shares
to be sold shall not exceed the number which the managing underwriter, if any,
considers, in good faith, to be appropriate based on market conditions and other
relevant factors (including pricing); and (ii) if the total number of shares
desired to be sold exceeds such amount, Buyer shall be entitled to include in
such registration statement the full amount of shares that it desires to
include, and the Sellers, together with any other shareholders who elect to
participate in the offering, shall be entitled to sell up to any remaining
amount of shares pro rata in proportion to the number of shares requested to be
included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
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7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
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expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
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8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that KHHBE has
represented and continues to represent EYEQ with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller
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has had the opportunity to seek advice of counsel with respect to the risks and
merits of the transactions contemplated by this Agreement including, but not
limited to, any federal or state tax consequences associated with the exchange
of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
I.P. Services Inc. EYEQ NETWORKING, INC.
/s/ Howard M. Appel By: /s/ Steven B. Rosner
- ------------------- --------------------------------
Name: Steven B. Rosner
Address: Title: President
5025 South McCarran Boulevard, #178
Reno, NV 89502
70,000
Shares of Jet Aviation Trading, Inc.
Common Stock
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Discretionary Investment Trust dtd 7/7/93 located at PO Box 8808
Jupiter, FL 33468 ("Seller"), and EYEQ Networking, Inc., a Delaware corporation
(hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and
Seller is willing to transfer to Buyer, upon the terms and conditions of this
Agreement, that aggregate number of shares of common stock set forth under
Seller's name on the signature page hereof, that Seller owns (the "JET Shares")
in Jet Aviation Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half (2.5) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges,
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claims and encumbrances. Upon delivery of certificates representing the JET
Shares as contemplated by this Agreement, Buyer will acquire good title to the
JET Shares, free and clear of any liability, security interest, lien, pledge,
claim or encumbrance of any nature whatsoever other than any restrictions on the
transfer of the JET Shares required by the Securities Act of 1933, as amended
(the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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<PAGE>
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
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<PAGE>
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the
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<PAGE>
Securities and Exchange Commission under the Securities Act applies, whether or
not for sale for its own account, Buyer shall give written notice thereof to the
Sellers and upon written request of any Seller, given within 15 days after the
receipt of any such written notice, Buyer will include in such registration
statement any or all of the EYEQ Shares acquired pursuant to this Agreement then
owned by such Seller; provided, however, that (i) the maximum number of shares
to be sold shall not exceed the number which the managing underwriter, if any,
considers, in good faith, to be appropriate based on market conditions and other
relevant factors (including pricing); and (ii) if the total number of shares
desired to be sold exceeds such amount, Buyer shall be entitled to include in
such registration statement the full amount of shares that it desires to
include, and the Sellers, together with any other shareholders who elect to
participate in the offering, shall be entitled to sell up to any remaining
amount of shares pro rata in proportion to the number of shares requested to be
included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
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7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
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expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
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8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller
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has had the opportunity to seek advice of counsel with respect to the risks and
merits of the transactions contemplated by this Agreement including, but not
limited to, any federal or state tax consequences associated with the exchange
of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Discretionary Investment Trust dtd 7/7/93 EYEQ NETWORKING, INC.
/s/ Richard Zona By: /s/ Steven B. Rosner
- ---------------- -------------------------
Name: Steven B. Rosner
Title: President
Address:
PO Box 8808
Jupiter, FL 33468
70,000
Shares of Jet Aviation Trading, Inc.
Common Stock
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<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated July 31, 1998,
is between Brian Due located at 7601 West Montrost, Norridge, IL 60634
("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every one and two-thirds JET Shares transferred hereunder (the
"EYEQ Shares"). The acquisition price will be equitably adjusted for any stock
splits, reverse stock splits, stock combinations or recapitalizations of Buyer
which occur after June 22, 1998 and prior to closing as set forth in Section 3
hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
<PAGE>
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
<PAGE>
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the Securities and Exchange
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
<PAGE>
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
<PAGE>
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
<PAGE>
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8 Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
<PAGE>
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
<PAGE>
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Brian Due EYEQ NETWORKING, INC.
/s/ Brian Due By: /s/ Steven B. Rosner
- ------------------------- ------------------------------
Name: Steven B. Rosner
Address: Title: President
7601 West Montrose
Norridge, IL 60634
20,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated June 30, 1998,
is between Bill Seidle located at 2900 N.W. 36th St. Miami, FL 33142 ("Seller"),
and EYEQ Networking, Inc., a Delaware corporation (hereinafter "EYEQ" or
"Buyer"). Buyer desires to acquire from Seller, and Seller is willing to
transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every one and two-thirds JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after June 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to the common
stock of Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
<PAGE>
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Rule 502(c) of Regulation D,
with respect to the EYEQ Shares being offered hereby.
<PAGE>
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Miscellaneous Terms and Conditions.
7.1 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
7.2 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other
<PAGE>
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with the transactions contemplated by
this Agreement. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
7.3 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
7.4 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
7.5 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
7.6 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
7.7 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
<PAGE>
7.8 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
7.9 Participation of KHHBE. The Seller acknowledges that KHHBE
has represented and continues to represent EYEQ with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller has had the opportunity to seek advice of
counsel with respect to the risks and merits of the transactions contemplated by
this Agreement including, but not limited to, any federal or state tax
consequences associated with the exchange of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Bill Seidle EYEQ NETWORKING, INC.
/s/ Bill Seidle By: /s/ Joseph J. Nelson
- ------------------------ ---------------------------
Name: Joseph J. Nelson
Address: Title: President & CEO
2900 N.W. 36th St.
Miami, FL 33142
10,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated June 23, 1998,
is between Leonard Bloom located at 200 South Biscayne Boulevard, Miami, FL
33131 ("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every two and one-half JET Shares transferred hereunder
(the "EYEQ Shares"). The acquisition price will be equitably adjusted for any
stock splits, reverse stock splits, stock combinations or recapitalizations of
Buyer which occur after June 22, 1998 and prior to closing as set forth in
Section 3 hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
1
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to the common
stock of Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
2
<PAGE>
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Rule 502(c) of Regulation D,
with respect to the EYEQ Shares being offered hereby.
3
<PAGE>
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Miscellaneous Terms and Conditions.
7.1 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
7.2 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other
4
<PAGE>
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with the transactions contemplated by
this Agreement. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
7.3 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
7.4 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
7.5 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
7.6 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
7.7 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
5
<PAGE>
7.8 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
7.9 Participation of KHHBE. The Seller acknowledges that KHHBE
has represented and continues to represent EYEQ with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller has had the opportunity to seek advice of
counsel with respect to the risks and merits of the transactions contemplated by
this Agreement including, but not limited to, any federal or state tax
consequences associated with the exchange of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Leonard Bloom EYEQ NETWORKING, INC.
/s/ Leonard Bloom By: /s/ Steven B. Rosner
- ----------------------- ----------------------------
Name: Steven B. Rosner
Address: Title: President
200 South Biscayne Boulevard
Miami FL 33131
10,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Sheng Kuang Chiang located at 600 Northeast 10th Avenue Pompano Beach,
FL 33060 ("Seller"), and EYEQ Networking, Inc., a Delaware corporation
(hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and
Seller is willing to transfer to Buyer, upon the terms and conditions of this
Agreement, that aggregate number of shares of common stock set forth under
Seller's name on the signature page hereof, that Seller owns (the "JET Shares")
in Jet Aviation Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every one and eight-tenths (1.8) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
<PAGE>
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
<PAGE>
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the Securities and Exchange
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
<PAGE>
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act,
<PAGE>
and each of the partners, officers, directors, employees and agents of the
foregoing in their respective capacities as such (the "Indemnitees"), to the
full extent lawful, from and against all actions, suits, claims, proceedings,
costs, damages, judgments, amounts paid in settlement and expenses (including,
without limitation, reasonable attorneys' fees and disbursements), whether joint
or several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
<PAGE>
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8 Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
<PAGE>
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Norman B. Getson, Esq.
Norman B. Getson, P.A.
2450 Hollywood Blvd., #501
Hollywood, FL 33020
<PAGE>
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Sheng Kuang Chiang EYEQ NETWORKING, INC.
/s/ Sheng Kuang Chiang By: /s/ Steven B. Rosner
- ---------------------- --------------------------
Address: Name: Steven B. Rosner
600 Northeast 10th Avenue Title: President
Pompano Beach, FL 33060
210,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated May 31, 1998, is
between Bing Ju Chiang located at 600 Northeast 10th Avenue Pompano Beach, FL
33070 ("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every one and eight-tenths (1.8) JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after April 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on May 4, 1998 (the "Closing Date") or as soon as practicable after
the satisfaction of the condition set forth in Section 8.1 hereof, provided
that, if the Closing has not been completed by May 31, 1998, this Agreement will
terminate and neither party will have any further obligations to the other
except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
1
<PAGE>
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
2
<PAGE>
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
3
<PAGE>
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the Securities and Exchange
4
<PAGE>
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
5
<PAGE>
7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
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expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
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8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Norman B. Getson, Esq.
Norman B. Getson, P.A.
2450 Hollywood Blvd., #501
Hollywood, FL 33020
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
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to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Bing Ju Chiang EYEQ NETWORKING, INC.
/s/ Bing Ju Chiang By: /s/ Steven B. Rosner
- ------------------------------ ---------------------------
Name:Steven B. Rosner
Address: Title: President
600 Northeast 10th Avenue
Pompano Beach, FL 33070
100,000
Shares of Jet Aviation Trading, Inc.
Common Stock
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SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated July 31, 1998,
is between Impact Investment Company, Ltd. located at Courthouse Plaza, Suite
500, 28 West Flager Street, Miami FL 33130-1891 ("Seller"), and EYEQ Networking,
Inc., a Delaware corporation (hereinafter "EYEQ" or "Buyer"). Buyer desires to
acquire from Seller, and Seller is willing to transfer to Buyer, upon the terms
and conditions of this Agreement, that aggregate number of shares of common
stock set forth under Seller's name on the signature page hereof, that Seller
owns (the "JET Shares") in Jet Aviation Trading, Inc. a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every one and two-thirds JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after June 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3. Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated
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by this Agreement, Buyer will acquire good title to the JET Shares, free and
clear of any liability, security interest, lien, pledge, claim or encumbrance of
any nature whatsoever other than any restrictions on the transfer of the JET
Shares required by the Securities Act of 1933, as amended (the "Securities
Act").
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
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(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
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5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the
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Securities and Exchange Commission under the Securities Act applies, whether or
not for sale for its own account, Buyer shall give written notice thereof to the
Sellers and upon written request of any Seller, given within 15 days after the
receipt of any such written notice, Buyer will include in such registration
statement any or all of the EYEQ Shares acquired pursuant to this Agreement then
owned by such Seller; provided, however, that (i) the maximum number of shares
to be sold shall not exceed the number which the managing underwriter, if any,
considers, in good faith, to be appropriate based on market conditions and other
relevant factors (including pricing); and (ii) if the total number of shares
desired to be sold exceeds such amount, Buyer shall be entitled to include in
such registration statement the full amount of shares that it desires to
include, and the Sellers, together with any other shareholders who elect to
participate in the offering, shall be entitled to sell up to any remaining
amount of shares pro rata in proportion to the number of shares requested to be
included therein.
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
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7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act, and each of the
partners, officers, directors, employees and agents of the foregoing in their
respective capacities as such (the "Indemnitees"), to the full extent lawful,
from and against all actions, suits, claims, proceedings, costs, damages,
judgments, amounts paid in settlement and expenses (including, without
limitation, reasonable attorneys' fees and disbursements), whether joint or
several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
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(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
7
<PAGE>
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8
<PAGE>
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller
9
<PAGE>
has had the opportunity to seek advice of counsel with respect to the risks and
merits of the transactions contemplated by this Agreement including, but not
limited to, any federal or state tax consequences associated with the exchange
of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Impact Investment Company, Ltd. EYEQ NETWORKING, INC.
/s/ Harvey Rogers By: /s/ Steven B. Rosner
- ----------------- ---------------------------
Address: Name: Steven B. Rosner
Courthouse Plaza, Suite 500, Title: President
28 West Flager Street
Miami, FL 33130-1891
20,000
Shares of Jet Aviation Trading, Inc.
Common Stock
10
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated July 31, 1998,
is between Silvertown International Corp. located at Israel Galili No. 6, Tel
Aviv, 69377 Israel ("Seller"), and EYEQ Networking, Inc., a Delaware corporation
(hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and
Seller is willing to transfer to Buyer, upon the terms and conditions of this
Agreement, that aggregate number of shares of common stock set forth under
Seller's name on the signature page hereof, that Seller owns (the "JET Shares")
in Jet Aviation Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every one and two-thirds JET Shares transferred hereunder (the
"EYEQ Shares"). The acquisition price will be equitably adjusted for any stock
splits, reverse stock splits, stock combinations or recapitalizations of Buyer
which occur after June 22, 1998 and prior to closing as set forth in Section 3
hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to the common
stock of Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
<PAGE>
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Rule 502(c) of Regulation D,
with respect to the EYEQ Shares being offered hereby.
<PAGE>
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Miscellaneous Terms and Conditions.
7.1 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
7.2 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other
<PAGE>
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with the transactions contemplated by
this Agreement. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
7.3 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
7.4 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
7.5 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
7.6 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to: Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
7.7 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
<PAGE>
7.8 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
7.9 Participation of KHHBE. The Seller acknowledges that KHHBE
has represented and continues to represent EYEQ with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller has had the opportunity to seek advice of
counsel with respect to the risks and merits of the transactions contemplated by
this Agreement including, but not limited to, any federal or state tax
consequences associated with the exchange of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Silvertown International Corp. EYEQ NETWORKING, INC.
/s/ Zvi Moshe By: /s/ Steven B. Rosner
- ---------------------- ------------------------
Name: Steven B. Rosner
Title: President
Address:
Israel Galili No. 6
Tel Aviv, 69377 Israel
279,800
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated July 31, 1998,
is between Janet and Robert Weinstein located at 8240 S.W. 103rd Street, Miami,
FL 33156 ("Seller"), and EYEQ Networking, Inc., a Delaware corporation
(hereinafter "EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and
Seller is willing to transfer to Buyer, upon the terms and conditions of this
Agreement, that aggregate number of shares of common stock set forth under
Seller's name on the signature page hereof, that Seller owns (the "JET Shares")
in Jet Aviation Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET
Shares shall be one share of Common Stock $.001 par value per share, of Buyer,
issued by the Buyer, for every one and two-thirds JET Shares transferred
hereunder (the "EYEQ Shares"). The acquisition price will be equitably adjusted
for any stock splits, reverse stock splits, stock combinations or
recapitalizations of Buyer which occur after June 22, 1998 and prior to closing
as set forth in Section 3 hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
1
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act. Seller understands that Buyer has no present
intention of registering the resale of the EYEQ Shares other than as
contemplated by Section 7 hereof.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
2
<PAGE>
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
3
<PAGE>
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Regulation D, with respect to
the EYEQ Shares being offered hereby.
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Registration Rights.
7.1 If, at any time after the Closing, Buyer proposes to
register any of its shares of Common Stock under the Securities Act other than
pursuant to a registration effected to implement an employee benefit plan or a
transaction to which Rule 145 or any similar rule of the Securities and Exchange
Commission under the Securities Act applies, whether or not for sale for its own
account, Buyer shall give written notice thereof to the Sellers and upon written
request of any Seller, given within 15 days after the receipt of any such
written notice, Buyer will include in such registration statement any or all of
the EYEQ Shares acquired pursuant to this Agreement then owned by such Seller;
provided, however, that (i) the maximum number of shares to be sold shall not
exceed the number which the managing underwriter, if any, considers, in good
faith, to be appropriate based on market conditions and other relevant factors
(including pricing); and (ii) if the total number of shares desired to be sold
exceeds such amount, Buyer shall be entitled to include in such registration
statement the full amount of shares that it desires to include, and the Sellers,
together with any other shareholders who elect to participate in the offering,
shall be entitled to sell up to any remaining amount of shares pro rata in
proportion to the number of shares requested to be included therein.
4
<PAGE>
7.2 Withdrawal of Shares. If the number of shares to be
included in a registration statement pursuant to this Section 7 is reduced as
provided in Section 7.1, any Seller that previously had elected to participate
in such offering may withdraw its shares from such registration statement by
giving written notice to such effect to Buyer at any time prior to the effective
date thereof. At any time prior to such effective date, Buyer shall have the
right to withdraw such registration statement for any reason whatsoever.
7.3 Information Regarding Sellers; Underwriting Arrangements.
(a) Each Seller participating in a registration
hereunder shall furnish to Buyer such information regarding such Seller and the
distribution of such Seller's securities as Buyer may from time to time request
in order to comply with the Securities Act and the rules and regulations of the
Securities and Exchange Commission thereunder. Each Seller shall notify Buyer as
promptly as practicable of any inaccuracy or change in information previously
furnished by such Seller to Buyer or of the happening of any event as a result
of which any prospectus relating to such registration contains an untrue
statement of a material fact regarding such Seller or the distribution of such
securities or omits to state any material fact regarding such Seller or the
distribution of such securities required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, and shall promptly furnish to Buyer any additional
information required to correct or update any previously furnished information
or required so that such prospectus shall not contain, with respect to such
Seller or the distribution of such securities, an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(b) Each Seller participating in a registration
hereunder shall, if requested by Buyer or the managing underwriter(s) in
connection with such registration, (i) subject to Section 7.4 hereof, agree to
sell its shares on the basis provided in any underwriting arrangements entered
into in connection therewith and (ii) complete and execute all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
customary in similar offerings.
7.4 Restrictions on Sales. Except in connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ for twelve (12) months following the Closing. In connection with any
registration under this Section 7, no Seller shall sell any shares of Common
Stock of EYEQ or securities convertible into or exercisable for Common Stock of
EYEQ, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.5 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless each Seller participating in such registration, each person who
controls such Seller within the meaning of the Securities Act,
5
<PAGE>
and each of the partners, officers, directors, employees and agents of the
foregoing in their respective capacities as such (the "Indemnitees"), to the
full extent lawful, from and against all actions, suits, claims, proceedings,
costs, damages, judgments, amounts paid in settlement and expenses (including,
without limitation, reasonable attorneys' fees and disbursements), whether joint
or several (collectively, a "Loss"), to which any such Indemnitee may become
subject under the Securities Act or any other statute or common law, insofar as
any such Loss may arise out of or be based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such securities were registered, any preliminary, final or summary
prospectus contained therein, or any amendment or supplement thereto, or in any
filing made in connection with the qualification of the offering under blue sky
or other securities laws of jurisdictions in which the Common Stock subject to
registration rights are offered ("Blue Sky Filing"), or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading and Buyer will
reimburse each Indemnitee for any legal or other expenses reasonably incurred in
connection with investigating or defending such Loss; provided, however, that
such indemnification covenant shall not (i) apply to any Loss arising out of, or
based upon, any such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made in reliance
upon and in conformity with written information furnished to Buyer by or on
behalf of such Indemnitee for use in connection with preparation of the
registration statement, any preliminary prospectus or final prospectus contained
in the registration statement, any such amendment or supplement thereto or any
Blue Sky Filing or (ii) inure to the benefit of any Indemnitee to the extent
that any such Loss arises out of such Indemnitee's failure to send or give a
copy of the final prospectus, as the same may be then supplemented or amended,
to the person asserting an untrue statement or alleged untrue statement or
omission or alleged omission at or prior to the written confirmation of the sale
of the securities to such person if such statement or omission was corrected in
such final prospectus. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of any Indemnitee and shall
survive the transfer of such securities by any Indemnitee.
(b) Indemnification by the Sellers. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
prospective seller of such securities to indemnify, defend and hold harmless (in
the same manner and to the same extent as set forth in Section 7.5(a) of this
Section 7) Buyer, each director of Buyer, each officer of Buyer and each other
person, if any, who controls Buyer within the meaning of the Securities Act,
with respect to any untrue statement or alleged untrue statement in, or omission
or alleged omission from, such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein or any Blue
Sky Filing, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
seller for use in the preparation of such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement;
provided, however, in no event shall the liability of any seller under this
paragraph (b) exceed the net proceeds received by such seller (after the payment
of underwriting discounts and commissions) from the sale of its securities
pursuant to such registration statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of Buyer
or any such director, officer or controlling person and shall survive the
transfer of such securities by such seller.
6
<PAGE>
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.5(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice to notify, in writing, such person of its election to
defend, settle or compromise any action, proceeding or claim (or discontinues
its defense at any time after it commences such defense), then the indemnified
party may, at its option, defend, settle or otherwise compromise or pay such
action or claim with the consent of the indemnifying party, which consent shall
not be unreasonably withheld. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any such
action or claim by the indemnifying party and shall furnish to the indemnifying
party all information reasonably available to the indemnified party that relates
to such action or claim. The indemnifying party shall keep the indemnified party
fully apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8 Miscellaneous Terms and Conditions.
8.1 Acquisition of 50% of Jet Aviation Trading, Inc. The
parties agree that Buyer's obligations under this Agreement are conditioned upon
Buyer acquiring not less than 50% of the issued and outstanding shares of the
capital stock of Jet Aviation Trading, Inc.
8.2 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
7
<PAGE>
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
8.3 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
8.4 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8.5 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.6 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.7 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
8
<PAGE>
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
8.8 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.9 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
8.10 Participation of KHHBE. The Seller acknowledges that
KHHBE has represented and continues to represent EYEQ with respect to the
transactions contemplated by this Agreement, that KHHBE has not rendered any
advice to Seller with respect to same, and that Seller has had the opportunity
to seek advice of counsel with respect to the risks and merits of the
transactions contemplated by this Agreement including, but not limited to, any
federal or state tax consequences associated with the exchange of JET Shares for
EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Janet and Robert Weinstein EYEQ NETWORKING, INC.
/s/ Janet Weinstein By: /s/ Steven B. Rosner
- --------------------------- ----------------------------
Name: Steven B. Rosner
/s/ Robert Weinstein Title: President
- ---------------------------
Address:
8240 S.W. 103rd Street
Miami FL 33156
20,000
Shares of Jet Aviation Trading, Inc.
Common Stock
9
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated July 31, 1998,
is between Amoury Borges located at 9300 S.W. 41st Street, Miami FL 33165
("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every one and two-thirds JET Shares transferred hereunder (the
"EYEQ Shares"). The acquisition price will be equitably adjusted for any stock
splits, reverse stock splits, stock combinations or recapitalizations of Buyer
which occur after June 22, 1998 and prior to closing as set forth in Section 3
hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to the common
stock of Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
<PAGE>
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
<PAGE>
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Rule 502(c) of Regulation D,
with respect to the EYEQ Shares being offered hereby.
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Miscellaneous Terms and Conditions.
7.1 Other Transactions. Prior to Closing, Seller shall not, and
shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
<PAGE>
7.2 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
7.3 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
7.4 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
7.5 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
7.6 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
<PAGE>
7.7 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
7.8 Specific Performance. Seller and Buyer acknowledge that, in
view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
7.9 Participation of KHHBE. The Seller acknowledges that KHHBE
has represented and continues to represent EYEQ with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller has had the opportunity to seek advice of
counsel with respect to the risks and merits of the transactions contemplated by
this Agreement including, but not limited to, any federal or state tax
consequences associated with the exchange of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Amoury Borges EYEQ NETWORKING, INC.
/s/ Amoury Borges By: /s/ Joseph J. Nelson
- ----------------- Name: Joseph J. Nelson
Title: President &CEO
Address:
9300 S.W. 41st Street
Miami, FL 33165
20,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated June 25, 1998,
is between SPH Equities, Inc. located at 648 Post Road, Wakefield, RI
("Seller"), and EYEQ Networking, Inc., a Delaware corporation (hereinafter
"EYEQ" or "Buyer"). Buyer desires to acquire from Seller, and Seller is willing
to transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every one and two-thirds JET Shares transferred hereunder (the
"EYEQ Shares"). The acquisition price will be equitably adjusted for any stock
splits, reverse stock splits, stock combinations or recapitalizations of Buyer
which occur after June 22, 1998 and prior to closing as set forth in Section 3
hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or indirectly,
offer, sell, transfer, assign, exchange or otherwise dispose of all or any part
of the EYEQ Shares, except in accordance with the provisions of this Agreement
and the Securities Act.
(c) Seller is acquiring the EYEQ Shares without having
relied upon any offering literature or prospectus. Seller has such knowledge and
experience in financial, business and tax matters that Seller is capable of
evaluating the merits and risks relating to Seller's investment in the EYEQ
Shares and making an investment decision with respect to the common stock of
Buyer.
(d) To the full satisfaction of Seller, Seller has been
given the opportunity to obtain information and documents relating to Buyer and
to ask questions of and receive answers from representatives of Buyer concerning
Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
<PAGE>
(g) Seller is an "accredited investor" as defined in Rule
501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set forth
under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Rule 502(c) of Regulation D,
with respect to the EYEQ Shares being offered hereby.
<PAGE>
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Miscellaneous Terms and Conditions.
7.1 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
7.2 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
<PAGE>
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
7.3 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
7.4 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
7.5 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
7.6 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
7.7 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
<PAGE>
7.8 Specific Performance. Seller and Buyer acknowledge that, in view of the
uIniqueness of the Company's business, Buyer would not have an adequate remedy
at law for money damages in the event that this Agreement were not performed in
accordance with its terms, and therefore agree that Buyer shall be entitled to
specific enforcement of the terms hereof in addition to any other remedy to
which it may be entitled, at law or in equity.
7.9 Participation of KHHBE. The Seller acknowledges that KHHBE
has represented and continues to represent EYEQ with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller has had the opportunity to seek advice of
counsel with respect to the risks and merits of the transactions contemplated by
this Agreement including, but not limited to, any federal or state tax
consequences associated with the exchange of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
SPH Equities, Inc. EYEQ NETWORKING, INC.
/s/ Steven P. Harrington By: /s/ Steven B. Rosner
- ------------------------ ------------------------------------
Name: Steven B. Rosner
Title: President
Address:
648 Post Road
Wakefield, RI
60,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated July 31, 1998,
is between Bella Shrem located at 425 Avenue V, Brooklyn, NY 11223 ("Seller"),
and EYEQ Networking, Inc., a Delaware corporation (hereinafter "EYEQ" or
"Buyer"). Buyer desires to acquire from Seller, and Seller is willing to
transfer to Buyer, upon the terms and conditions of this Agreement, that
aggregate number of shares of common stock set forth under Seller's name on the
signature page hereof, that Seller owns (the "JET Shares") in Jet Aviation
Trading, Inc. a Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every one and two-thirds JET Shares transferred hereunder (the
"EYEQ Shares"). The acquisition price will be equitably adjusted for any stock
splits, reverse stock splits, stock combinations or recapitalizations of Buyer
which occur after June 22, 1998 and prior to closing as set forth in Section 3
hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to the common
stock of Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
<PAGE>
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Rule 502(c) Regulation D,
with respect to the EYEQ Shares being offered hereby.
<PAGE>
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Miscellaneous Terms and Conditions.
7.1 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
7.2 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
<PAGE>
7.3 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
7.4 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
7.5 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
7.6 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
<PAGE>
7.7 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
7.8 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
7.9 Participation of KHHBE. The Seller acknowledges that KHHBE
has represented and continues to represent EYEQ with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller has had the opportunity to seek advice of
counsel with respect to the risks and merits of the transactions contemplated by
this Agreement including, but not limited to, any federal or state tax
consequences associated with the exchange of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Bella Shrem EYEQ NETWORKING, INC.
/s/ Bella Shrem By: /s/ Joseph J. Nelson
- -------------------------------- -----------------------------
Name: Joseph J. Nelson
Title: President & CEO
Address:
425 Avenue V
Brooklyn, NY 11223
12,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated July 6, 1998, is
between Mustang Electronics Inc. Affiliated Defined Benefits Pension Plan
located at 326 East Hallandale Beach Blvd., Hallendale, FL 33009 ("Seller"), and
EYEQ Networking, Inc., a Delaware corporation (hereinafter "EYEQ" or "Buyer").
Buyer desires to acquire from Seller, and Seller is willing to transfer to
Buyer, upon the terms and conditions of this Agreement, that aggregate number of
shares of common stock set forth under Seller's name on the signature page
hereof, that Seller owns (the "JET Shares") in Jet Aviation Trading, Inc. a
Florida corporation.
1 Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the JET Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2 Acquisition Price. The aggregate acquisition price for the JET Shares
shall be one share of Common Stock $.001 par value per share, of Buyer, issued
by the Buyer, for every one and two-thirds JET Shares transferred hereunder (the
"EYEQ Shares"). The acquisition price will be equitably adjusted for any stock
splits, reverse stock splits, stock combinations or recapitalizations of Buyer
which occur after June 22, 1998 and prior to closing as set forth in Section 3
hereof.
3 Closing.
3.1 Time and Place. The closing for the exchange (the
"Closing") will be held at the offices of Klehr, Harrison, Harvey, Branzburg &
Ellers LLP ("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania
19102-3163, on July 31, 1998 (the "Closing Date") or as soon as practicable
after the satisfaction of the condition set forth in Section 8.1 hereof,
provided that, if the Closing has not been completed by August 31, 1998, this
Agreement will terminate and neither party will have any further obligations to
the other except for any breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to
Buyer certificates representing the JET Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to
Seller a certificate representing the EYEQ Shares.
4 Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful
owner, of record and beneficially, of the JET Shares free and clear of all
liabilities, security interests, liens, pledges, claims and encumbrances. Upon
delivery of certificates representing the JET Shares as contemplated by this
Agreement, Buyer will acquire good title to the JET Shares, free and clear of
any liability, security interest, lien, pledge, claim or encumbrance of any
nature whatsoever other than any restrictions on the transfer of the JET Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the JET
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
4.4 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.5 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the EYEQ Shares for its own
account for investment purposes only and not with a view to the resale or
distribution thereof.
(b) Seller has not and will not, directly or
indirectly, offer, sell, transfer, assign, exchange or otherwise dispose of all
or any part of the EYEQ Shares, except in accordance with the provisions of this
Agreement and the Securities Act.
(c) Seller is acquiring the EYEQ Shares without
having relied upon any offering literature or prospectus. Seller has such
knowledge and experience in financial, business and tax matters that Seller is
capable of evaluating the merits and risks relating to Seller's investment in
the EYEQ Shares and making an investment decision with respect to the common
stock of Buyer.
(d) To the full satisfaction of Seller, Seller has
been given the opportunity to obtain information and documents relating to Buyer
and to ask questions of and receive answers from representatives of Buyer
concerning Buyer and the investment in the EYEQ Shares.
(e) Seller has adequately analyzed the risks of an
investment in the EYEQ Shares and has determined that the EYEQ Shares are a
suitable investment for Seller and that Seller is able at this time, and in the
foreseeable future, to bear the economic risk of a total loss of its investment
in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the EYEQ Shares.
<PAGE>
(g) Seller is an "accredited investor" as defined in
Rule 501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the EYEQ Shares for its own account and the Seller, if
an entity, has not been formed for the specific purpose of acquiring the EYEQ
Shares.
(h) Seller understands that no United States federal
or state agency or any other government or governmental agency has passed upon
or made any recommendation or endorsement of the EYEQ Shares.
(i) Seller understands that the EYEQ Shares are being
offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire such EYEQ Shares.
(j) Seller is a resident of the jurisdiction set
forth under Seller's name on the signature page hereof.
5 Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the EYEQ
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Rule 502(c) of Regulation D,
with respect to the EYEQ Shares being offered "Securities Act").
<PAGE>
6 Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7 Miscellaneous Terms and Conditions.
7.1 Other Transactions. Prior to Closing, Seller shall not,
and shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving Jet Aviation Trading, Inc. or the Seller.
7.2 Confidentiality. Seller and Buyer shall hold, and shall
cause their respective consultants and advisors to hold, in strict confidence,
unless compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other
<PAGE>
person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors in connection with the transactions contemplated by
this Agreement. Each party shall be deemed to have satisfied its obligation to
hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
7.3 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
7.4 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
7.5 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
7.6 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: EYEQ Networking, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
If to Seller: The address set forth on
the signature page hereto.
With a copy to:
Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
7.7 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the JET Shares and
the EYEQ Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
<PAGE>
7.8 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
7.9 Participation of KHHBE. The Seller acknowledges that KHHBE
has represented and continues to represent EYEQ with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller has had the opportunity to seek advice of
counsel with respect to the risks and merits of the transactions contemplated by
this Agreement including, but not limited to, any federal or state tax
consequences associated with the exchange of JET Shares for EYEQ Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
Mustang Electronics Inc. Affiliated EYEQ NETWORKING, INC.
Defined Benefits Pension Plan
/s/ Michael Mustang By: /s/ Joseph J. Nelson
- ------------------- --------------------------
Name: Joseph J. Nelson
Address: Title: President & CEO
326 East Hallandale Beach Blvd.
Hallandale, FL 33009
20,000
Shares of Jet Aviation Trading, Inc.
Common Stock
<PAGE>
Exhibit 10.6(a)
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (the "Agreement"), dated March 4, 1999,
is between Argaman, Inc., an Isle of St. Kitts, Nevis corporation ("Seller"),
and Aviation Holdings Group, Inc., a Delaware corporation (hereinafter "AHG" or
"Buyer"). Buyer desires to acquire from Seller, and Seller is willing to
transfer to Buyer, upon the terms and conditions of this Agreement, an aggregate
of 600,000 shares of common stock that Seller owns (the "AHI Shares") in
Aviation Holdings International, Inc., a Florida corporation.
1. Transfer by Seller. In exchange for the consideration set forth
below, at Closing (as defined in paragraph 3), Seller will transfer and convey
the AHI Shares to Buyer, free and clear of all liabilities, security interests,
liens, pledges, claims and encumbrances.
2. Consideration. The aggregate consideration for the AHI Shares shall
be (i) a warrant to purchase 100,000 shares of common stock, $.001 par value per
share (the "Warrant"), of Buyer at an exercise price of $3.75 per share in
substantially the form attached hereto as Exhibit "A," and (ii) 500,000 shares
of common stock, $.0001 par value per share, of Buyer (the "AHG Shares").
3. Closing.
3.1 Time and Place. The closing for the purchase (the "Closing")
will be held at the offices of Klehr, Harrison, Harvey, Branzburg & Ellers LLP
("KHHBE"), located at 1401 Walnut Street, Philadelphia, Pennsylvania 19102-3163,
on _____________, 1999 (the "Closing Date") provided that, if the Closing has
not been completed by ________________, 1999, this Agreement will terminate and
neither party will have any further obligations to the other except for any
breach of its obligations hereunder.
3.2 Delivery by Seller. At the Closing, Seller will deliver to Buyer
certificates representing the AHI Shares, duly endorsed for transfer.
3.3 Delivery by Buyer. At the Closing, Buyer shall deliver to Seller
the Warrant and certificates representing the AHG Shares.
4. Representations and Warranties by Seller. Seller represents and
warrants to Buyer as follows:
4.1 Ownership and Power to Transfer. Seller is the lawful owner, of
record and beneficially, of the AHI Shares free and clear of all liabilities,
security interests, liens, pledges, claims and encumbrances. Upon delivery of
certificates representing the AHI Shares as contemplated by this Agreement,
Buyer will acquire good title to the AHI Shares, free and clear of any
liability, security interest, lien, pledge, claim or encumbrance of any nature
whatsoever other than any restrictions on the transfer of the AHI Shares
required by the Securities Act of 1933, as amended (the "Securities Act").
<PAGE>
4.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Seller enforceable against Seller in
accordance with its terms.
4.3 No Violation. Neither the execution or delivery of this
Agreement by Seller, nor the performance by Seller of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Seller is a party or may be bound.
4.4 Additional Representations and Warranties. The Seller
represents and warrants as follows, which representations and warranties shall
be true and correct as of the date when made and as of the Closing Date as
though made at that time:
(a) Seller is acquiring the Warrant and the AHG Shares for
its own account for investment purposes only and not with a view to the resale
or distribution thereof.
(b) Seller has not and will not, directly or indirectly,
offer, sell, transfer, assign, exchange or otherwise dispose of all or any part
of the Warrant or the AHG Shares, except in accordance with the provisions of
this Agreement and the Securities Act.
(c) Seller is acquiring the Warrant and the AHG Shares
without having relied upon any offering literature or prospectus. Seller has
such knowledge and experience in financial, business and tax matters that Seller
is capable of evaluating the merits and risks relating to Seller's investment in
the Warrant and the AHG Shares and making an investment decision with respect to
the Warrant and the AHG Shares.
(d) To the full satisfaction of Seller, Seller has been
given the opportunity to obtain information and documents relating to Buyer and
to ask questions of and receive answers from representatives of Buyer concerning
Buyer and the investment in the Warrant and the AHG Shares.
(e) Seller has adequately analyzed the risks of an
investment in the Warrant and the AHG Shares and has determined that the Warrant
and the AHG Shares are a suitable investment for Seller and that Seller is able
at this time, and in the foreseeable future, to bear the economic risk of a
total loss of its investment in Buyer.
(f) Seller is aware that there are substantial risks
attendant to an investment in the Warrant and the AHG Shares.
(g) Seller is an "accredited investor" as defined in Rule
501 of Regulation D of the Securities Act ("Regulation D") as presently in
effect and is purchasing the Warrant and the AHG Shares for its own account and
the Seller, if an entity, has not been formed for the specific purpose of
acquiring the Warrant and the AHG Shares.
2
<PAGE>
(h) Seller understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Warrant and the AHG Shares.
(i) Seller understands that the Warrant and the AHG Shares
are being offered and sold to it in reliance upon specific exemptions from the
registration requirements of United States federal and state securities laws and
that Buyer is relying upon the truth and accuracy of, and Seller's compliance
with, the representations, warranties, and agreements, of Seller set forth
herein in order to determine the availability of such exemptions and the
eligibility of Seller to acquire the Warrant and the AHG Shares.
(j) Seller is a resident of the jurisdiction set forth
under Seller's name on the signature page hereof.
5. Representations and Warranties of Buyer. Buyer represents and
warrants to Seller as follows, which representations and warranties shall be
true and correct as of the date when made and as of the Closing Date as though
made at that time:
5.1 Fees or Commissions. Buyer has not made any agreement or
taken any action which might cause anyone to become entitled to a broker's fee
or commission as a result of the transactions contemplated hereunder.
5.2 Validity of the Agreement. This Agreement constitutes the
legal, valid and binding agreement of Buyer enforceable against Buyer in
accordance with its terms.
5.3 Absence of Litigation. There is no litigation, proceeding,
claim or investigation pending or threatened, against or affecting the AHG
Shares, whether or not fully covered by insurance, nor is there any valid basis
for any such litigation, proceeding, claim or investigation.
5.4 No Violation. Neither the execution or delivery of this
Agreement by Buyer, nor the performance by Buyer of any of the transactions
contemplated hereby (i) conflicts with, or constitutes a breach or default under
(a) any applicable judgment, order, writ, injunction or decree of any court or
(b) any applicable law or any applicable rule or regulation of any
administrative agency or governmental or regulatory authority or (ii) violates,
conflicts with, or constitutes a default (or an event or condition that, with
notice or lapse of time or both, would constitute a default) under, any
contract, commitment, understanding, arrangement, agreement or restriction of
any kind or character to which Buyer is a party or may be bound.
5.5 No General Solicitation. Buyer has not conducted any
"general solicitations" as such term is defined in Rule 502(c) of Regulation D,
with respect to the AHG Shares being offered hereby.
3
<PAGE>
6. Indemnity.
6.1 Seller shall indemnify Buyer, and hold Buyer harmless from
and against, any loss, liability, claim, obligation, damage or deficiency,
including interest, penalties and reasonable attorneys fees and expenses
(collectively "Damages") arising from any misrepresentation or breach of
warranty made by Seller in this Agreement or any nonfulfillment by Seller of any
obligation on the part of Seller set forth in this Agreement.
6.2 Buyer shall indemnify Seller and hold Seller harmless from
and against any Damages arising from any misrepresentation or breach of warranty
made by Buyer in this Agreement or any nonfulfillment by Buyer of any obligation
on the part of Buyer set forth in this Agreement.
6.3 Any party which may be entitled to indemnification under
this Agreement shall give prompt notice to the indemnifying party. The
indemnifying party shall have the right, at its expense, to assume and direct
the investigation and defense of any claim, action or proceeding, including the
selection of counsel, provided any counsel selected by the indemnifying party is
reasonably satisfactory to the indemnified party. No settlement for monetary
payment which is the subject of indemnity under this Agreement shall be made
without the consent of the indemnifying party and the indemnifying party shall
have the right to direct proceedings with respect to such settlement. All
amounts to which an indemnified party may be entitled hereunder shall be
advanced by the indemnifying party as such amounts are incurred.
6.4 Remedies Cumulative. Except as expressly provided in this
Agreement, the remedies provided herein shall be cumulative and shall not
preclude assertion by any party hereto of any other rights or the seeking of any
other remedies against any other party hereto.
7. Registration Rights.
7.1 Buyer shall use its best efforts to file, as soon as
practicable after the registration statement filed by the Buyer with the U.S.
Securities and Exchange Commission in connection with the proposed public
offering of the Buyer's securities is declared effective, a registration
statement (the "Registration Statement") to register for resale under the
Securities Act, among other securities of Buyer, 100,000 of the AHG Shares and
the 100,000 shares of Buyer's common stock underlying the exercise of the
Warrant (the "Warrant Shares"). Seller shall have the right to sell up to a
maximum of 25,000 AHG Shares during each successive 90-day period subsequent to
the date the Registration Statement is declared effective by the U.S. Securities
and Exchange Commission.
7.2 Information Regarding Sellers; Underwriting Arrangements.
(a) Seller shall furnish to Buyer such information
regarding Seller and the distribution of Seller's AHG Shares and the Warrant
Shares as Buyer may from time to time request in order to comply with the
Securities Act and the rules and regulations of the Securities and Exchange
Commission thereunder. Seller shall notify Buyer as promptly as practicable of
any inaccuracy or change in information previously furnished by Seller to Buyer
or of the happening of
4
<PAGE>
any event as a result of which any prospectus relating to the Registration
Statement contains an untrue statement of a material fact regarding Seller or
the distribution of Seller's AHG Shares and the Warrant Shares or omits to state
any material fact regarding Seller or the distribution of Seller's AHG Shares
and the Warrant Shares required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and shall promptly furnish to Buyer any additional information
required to correct or update any previously furnished information or required
so that such prospectus shall not contain, with respect to Seller or the
distribution of securities, an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(b) Seller shall, if requested by Buyer or the managing
underwriter(s) in connection with the Registration Statement, (i) subject to
Section 7.3 hereof, agree to sell its eligible AHG Shares and the Warrant Shares
on the basis provided in any underwriting arrangements entered into in
connection therewith and (ii) complete and execute all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents customary in
similar offerings.
7.3 Restrictions on Sales. Except in connection with any
registration under this Section 7, Seller shall not sell any shares of Common
Stock of AHG or securities convertible into or exercisable for Common Stock of
AHG for twelve (12) months following the Closing. In connection with any
registration under this Section 7, Seller shall not sell any shares of Common
Stock of AHG or securities convertible into or exercisable for Common Stock of
AHG, except pursuant to such registration, for the period following the
effective date of the applicable registration statement that the managing
underwriter of the offering determines is necessary to effect the offering,
which period shall not exceed 360 days.
7.4 Registration Rights Indemnification.
(a) Indemnification by Buyer. In connection with any
registration pursuant to this Section 7, Buyer shall indemnify, defend and hold
harmless Seller, each person who controls such Seller within the meaning of the
Securities Act, and each of the partners, officers, directors, employees and
agents of the foregoing in their respective capacities as such (the
"Indemnitees"), to the full extent lawful, from and against all actions, suits,
claims, proceedings, costs, damages, judgments, amounts paid in settlement and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements), whether joint or several (collectively, a "Loss"), to which any
such Indemnitee may become subject under the Securities Act or any other statute
or common law, insofar as any such Loss may arise out of or be based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, or in any filing made in connection with the qualification
of the offering under blue sky or other securities laws of jurisdictions in
which the Common Stock subject to registration rights are offered ("Blue Sky
Filing"), or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the statements
therein not misleading and Buyer will reimburse each Indemnitee for any legal or
other expenses reasonably incurred in connection with investigating or defending
such Loss; provided, however, that such indemnification covenant shall not (i)
apply to any Loss arising out of, or based upon, any such untrue statement or
alleged untrue statement, or any such omission or alleged
5
<PAGE>
omission, if such statement or omission was made in reliance upon and in
conformity with written information furnished to Buyer by or on behalf of such
Indemnitee for use in connection with preparation of the registration statement,
any preliminary prospectus or final prospectus contained in the registration
statement, any such amendment or supplement thereto or any Blue Sky Filing or
(ii) inure to the benefit of any Indemnitee to the extent that any such Loss
arises out of such Indemnitee's failure to send or give a copy of the final
prospectus, as the same may be then supplemented or amended, to the person
asserting an untrue statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale of the securities
to such person if such statement or omission was corrected in such final
prospectus. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of any Indemnitee and shall survive the
transfer of such securities by any Indemnitee.
(b) Indemnification by the Seller. As a condition to
including any securities in any registration statement filed pursuant to this
Section 7, Buyer shall have received an undertaking satisfactory to it from the
Seller to indemnify, defend and hold harmless (in the same manner and to the
same extent as set forth in Section 7.4(a) of this Section 7) Buyer, each
director of Buyer, each officer of Buyer and each other person, if any, who
controls Buyer within the meaning of the Securities Act, with respect to any
untrue statement or alleged untrue statement in, or omission or alleged omission
from, such registration statement, any preliminary prospectus, final prospectus
or summary prospectus contained therein or any Blue Sky Filing, or any amendment
or supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to Buyer by or on behalf of Seller for use in the
preparation of the Registration Statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement; provided, however, in
no event shall the liability of Seller under this paragraph (b) exceed the net
proceeds received by Seller (after the payment of underwriting discounts and
commissions) from the sale of its AHG Shares or Warrant Shares pursuant to the
Registration Statement. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of Buyer or any such
director, officer or controlling person and shall survive the transfer of such
securities by Seller.
(c) Notices of Claims. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim hereunder, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party, give written notice to the
latter of the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under this Section 7.4(c) unless the
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, the indemnifying
party shall be entitled to participate in and, unless a conflict of interest
between such indemnified and indemnifying parties exists in respect of such
claim, to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that the indemnifying party may wish, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof. In the event that the
indemnifying party advises an indemnified party that it will contest a claim for
indemnification hereunder, or fails, within 30 days of receipt of any
indemnification notice
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<PAGE>
to notify, in writing, such person of its election to defend, settle or
compromise any action, proceeding or claim (or discontinues its defense at any
time after it commences such defense), then the indemnified party may, at its
option, defend, settle or otherwise compromise or pay such action or claim with
the consent of the indemnifying party, which consent shall not be unreasonably
withheld. The indemnified party shall cooperate fully with the indemnifying
party in connection with any negotiation or defense of any such action or claim
by the indemnifying party and shall furnish to the indemnifying party all
information reasonably available to the indemnified party that relates to such
action or claim. The indemnifying party shall keep the indemnified party fully
apprised at all times as to the status of the defense or any settlement
negotiations with respect thereto. If the indemnifying party elects to defend
any such action or claim, then the indemnified party shall be entitled to
participate in such defense with counsel of its choice at its sole cost and
expense. If the indemnifying party does not assume such defense, the indemnified
party shall keep the indemnifying party apprised at all times as is reasonably
practicable as to the status of the defense. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its written consent; provided, however, that the indemnifying party shall not
unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the consent of the indemnified party (not to be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation.
8. Miscellaneous Terms and Conditions.
8.1 Other Transactions. Prior to Closing, Seller shall not, and
shall not permit any party on Seller's behalf to, directly or indirectly,
encourage, solicit, initiate or participate in discussions or negotiations with,
or provide any information or assistance to, any corporation, partnership,
person or other entity or group (other than Buyer and Buyer's representatives)
concerning any merger, sale of securities, sale of substantial assets or similar
transactions involving AHI, Jet Aviation Trading, Inc. or the Seller.
8.2 Confidentiality. Seller and Buyer shall hold, and shall cause
their respective consultants and advisors to hold, in strict confidence, unless
compelled to disclose by judicial or administrative process or by other
requirements of law, all documents and information concerning the other parties
furnished to it by any other party or its representatives in connection with the
transactions contemplated by this Agreement (except to the extent that such
information shall be shown to have been (a) previously known by the party to
which it was furnished, (b) in the public domain through no fault of such party
or (c) later lawfully acquired from other sources by the party to which it was
furnished), and each party shall not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with the transactions contemplated
by this Agreement. Each party shall be deemed to have satisfied its obligation
to hold confidential information concerning or supplied by the other party if it
exercises the same care as it takes to preserve confidentiality for its own
similar information.
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8.3 Execution of Counterparts. This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties hereto and delivered to each of the other parties
hereto.
8.4 Entire Agreement. This Agreement represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and supersedes any and all other oral or written agreements
and understandings heretofore made and shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns.
8.5 Governing Law. This Agreement will be governed by the laws
of the State of Delaware in the United States.
8.6 Notices. All notices and other communications between the
parties shall be in writing and shall be deemed to have been given if mailed
first-class, postage prepaid to the address set forth below or such other
address as Seller or Buyer may give the other for such purpose:
If to Buyer: Aviation Holdings Group, Inc.
15675 Northwest 15th Avenue
Miami, FL 33169
with a copy to: Michael C. Forman, Esquire
Klehr, Harrison, Harvey,
Branzburg & Ellers LLP
1401 Walnut Street
Philadelphia, PA 19102
If to Seller: Argaman, Inc.
c/o MSA Trust Company Ltd.
Daniel Fresch Street
Tel Aviv, Israel 54731
8.7 Further Assurances. Prior to and following the Closing, at
the request of either party, the other party or parties shall deliver any
further instruments of transfer and take all reasonable actions as may be
necessary or appropriate to (i) effectuate the conveyance of the AHI Shares and
the AHG Shares as contemplated hereby and (ii) effectuate any of the other
transactions contemplated by this Agreement.
8.8 Specific Performance. Seller and Buyer acknowledge that,
in view of the uniqueness of the Company's business, Buyer would not have an
adequate remedy at law for money damages in the event that this Agreement were
not performed in accordance with its terms, and therefore agree that Buyer shall
be entitled to specific enforcement of the terms hereof in addition to any other
remedy to which it may be entitled, at law or in equity.
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8.9 Participation of KHHBE. The Seller acknowledges that KHHBE
has represented and continues to represent AHG with respect to the transactions
contemplated by this Agreement, that KHHBE has not rendered any advice to Seller
with respect to same, and that Seller has had the opportunity to seek advice of
counsel with respect to the risks and merits of the transactions contemplated by
this Agreement including, but not limited to, any federal or state tax
consequences associated with the exchange of AHI Shares for the AHG Shares.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have executed this Agreement as of the date first written above.
SELLER: BUYER:
ARGAMAN, INC. AVIATION HOLDINGS GROUP, INC.
By: /s/ Michael Shaham By: /s/ Joseph J. Nelson
--------------------------- -----------------------------
Name: Name: Joseph J. Nelson
Title: Title: President
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Exhibit 10.6(b)
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM. THIS WARRANT AND SUCH SECURITIES
MAY BE TRANSFERRED ONLY IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS
WARRANT.
March 4, 1999
AVIATION HOLDINGS GROUP, INC.
STOCK PURCHASE WARRANT
AVIATION HOLDINGS GROUP, INC., a Delaware corporation (the "Company"),
for value received, hereby certifies that Argaman, Inc., an Isle of St. Kitts,
Nevis Corporation, or its registered assigns, is entitled to purchase from the
Company, at any time or from time to time during the period specified in Section
2 hereof, 100,000 fully paid and nonassessable shares of Common Stock, par value
$.0001, of the Company (the "Common Stock"), at an exercise price equal to $3.75
per share (the "Exercise Price"), subject to the terms, conditions and
adjustments set forth herein. As used herein, the term "Warrant Shares" means
the shares of Common Stock issuable upon exercise of this Warrant.
1. Manner of Exercise; Issuance of Certificates; Payment for Shares.
Subject to the provisions hereof, this Warrant may be exercised by the holder
hereof, in whole or in part, by the surrender of this Warrant, together with a
completed exercise agreement in the form attached hereto (the "Exercise
Agreement"), to the Company during normal business hours on any business day at
the Company's principal executive offices (or such other office or agency of the
Company as it may designate by notice to the holder hereof), and upon payment to
the Company in cash, by certified or offi cial bank check or by wire transfer to
an account specified by the Company of the Exercise Price for the Warrant Shares
specified in the Exercise Agreement. The Warrant Shares so purchased shall be
deemed to be issued to the holder hereof or such holder's designee, as the
record owner of such shares, as of the close of business on the date on which
this Warrant shall have been surrendered, the completed Exercise Agreement shall
have been delivered, and payment shall have been made for such shares as set
forth above. Certificates for the Warrant Shares so purchased, representing the
aggregate number of shares specified in the Exercise Agreement, shall be
delivered to the holder hereof within a reasonable time, not exceeding three
business days, after this Warrant shall have been so exercised. The certificates
so delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or such other name as
such holder may designate and upon payment by such holder of any applicable
transfer taxes. In the event this Warrant is exercised in part, the Company
shall also deliver a new warrant to the holder hereof, which warrant shall be
identical to this Warrant, except that the number of Warrant Shares shall be
decreased by the number of Warrant Shares so purchased.
2. Period of Exercise. This Warrant is exercisable at any time or from
time to time before 5:00 p.m., eastern time on the third anniversary of the date
hereof (the "Exercise Period").
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3. Certain Agreements of the Company. The Company covenants as follows:
(a) Shares to be Fully Paid. All Warrant Shares shall, upon issuance
in accordance with the terms of this Warrant, be validly issued, fully paid, and
nonassessable and free from all taxes, liens, and charges with respect to the
issue thereof.
(b) Reservation of Shares. During the Exercise Period, the Company
shall at all times have authorized, and reserved for the purpose of issuance
upon exercise of this Warrant, a suf ficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Certain Actions Prohibited. The Company shall not, by amendment
of its certificate of incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities, or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by it hereunder, but shall at all
times in good faith assist in the carrying out of all the provisions of this
Warrant and in the taking of all such action as may reasonably be requested by
the holder of this Warrant in order to protect the exercise privilege of the
holder of this Warrant against impairment, consistent with the tenor and purpose
of this Warrant. Without limiting the generality of the foregoing, the Company
shall take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.
(d) Successors and Assigns. This Warrant shall be binding upon any
entity succeeding to the Company by merger, consolidation, or acquisition of all
or substantially all the Company's assets.
4. Antidilution Provisions. During the Exercise Period, the Exercise
Price and the number of Warrant Shares shall be subject to adjustment from time
to time as provided in this Section 4.
(a) Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the Common Stock into a greater
number of shares, then, after the record date for effecting such subdivision,
the Exercise Price in effect immediately prior to such subdivision shall be
proportionately reduced and the number of Warrant Shares shall be
proportionately increased. If the Company at any time combines (by reverse stock
split, recapitalization, reorganization, reclassification or otherwise) the
Common Stock into a smaller number of shares, then, after the record date for
effecting such combination, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased and the number of Warrant
Shares shall be proportionately decreased.
(b) Consolidation, Merger or Sale. In case the Company after the
date hereof (a) shall consolidate with or merge into any other entity and shall
not be the continuing or surviving corporation of such consolidation or merger,
(b) shall permit any other entity to consolidate with or merge into the Company
and the Company shall be the continuing or surviving entity but, in connection
with such consolidation or merger, the Common Stock shall be changed into or
exchanged for stock or other securities of any other entity or cash or any other
property, (c) shall transfer all or substantially all of its properties or
assets to any other person or entity, or (d) shall effect a capital
reorganization or reclassification of the Common Stock (other than a capital
reorganization or reclassification for which adjustment in the Exercise Price is
provided in Section 4(a)), then, and in the case of each such transaction,
proper provision shall be made so that, upon the basis and the terms and in the
manner provided in this Warrant, the holder of this Warrant, upon the exercise
hereof at any time after the consummation of such transaction, shall be entitled
to receive (at the aggregate Exercise Price in effect
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at the time of such consummation for all Common Stock issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock
issuable upon such exercise immediately prior to such consummation, the highest
amount of securities, cash or other property to which such holder would have
been entitled as a shareholder upon such consummation if such holder had
exercised this Warrant immediately prior thereto, subject to adjustments
(subsequent to such consummation) as nearly equivalent as possible to the
adjustments provided for in this Section 4. The Company shall not effect any
such consolidation, merger, or sale of assets, or capital reorganization or
reclassification unless prior to the consummation thereof, the continuing or
surviving corporation (if other than the Company) assumes by written instrument
the obligations under this Section 4 and the obligations to deliver to the
holder of this Warrant such securities, cash or other property as, in accordance
with the foregoing provisions, the holder may be entitled to acquire.
(c) Distribution of Assets. In case the Company shall declare or
make any distribution of its assets to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise, other than a
dividend payable in shares of Common Stock or in cash out of earnings of the
Company, the holder of this Warrant shall be entitled upon exercise of this
Warrant to receive the amount of cash, securities or other property that would
have been payable to the holder had such holder been the holder of such shares
of Common Stock on the record date for the determination of stockholders
entitled to such distribution.
(d) Notice of Adjustment. Upon the occurrence of any event that
requires any adjustment of the Exercise Price, the Company shall give notice
thereof to the holder of this Warrant, which notice shall state the Exercise
Price resulting from such adjustment and the increase or decrease, if any, in
the number of Warrant Shares, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(e) Adjustment of Exercise Price. No adjustment of the Exercise
Price shall be made in an amount less than 1% of the Exercise Price in effect at
the time such adjustment is otherwise required to be made, but any such lesser
adjustment shall be carried forward and shall be made at the time and together
with the next subsequent adjustment which, together with any adjustments so
carried forward, shall amount to not less than 1% of such Exercise Price. In the
event that any adjustment of the Exercise Price as required herein results in a
fraction of a cent, such Exercise Price shall be rounded up to the nearest cent.
(f) No Fractional Shares. No fractional shares of Common Stock shall
be issued upon the exercise of this Warrant, but the Company shall pay a cash
adjustment in respect of any fractional share that would otherwise be issuable
in an amount equal to the same fraction of the Market Price of a share of Common
Stock on the date of such exercise.
(g) Other Notices. In case at any time:
(i) the Company shall declare any dividend upon the Common
Stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings)
to the holders of the Common Stock;
(ii) the Company shall offer for subscription pro rata to the
holders of the Common Stock any additional shares of stock of any class or other
rights;
(iii) there shall be any capital reorganization of the Company,
or reclassification of the Common Stock, or consolidation or merger of the
Company with or into, or sale of all or substantially all its assets to, another
entity; or
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(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in each such case, the Company shall give to the holder of this Warrant
notice of (a) the date on which the books of the Company shall close or a record
shall be taken for determining the holders of Common Stock entitled to receive
any such dividend, distribution or subscription rights, or for determining the
holders of Common Stock entitled to vote in respect of any such transaction, and
(b) the date (or, if not then known, a reasonable approximation thereof by the
Company) when such transaction shall occur. Such notice shall also specify the
date on which the holders of Common Stock shall be entitled to receive such
dividend, distribution or subscription rights or to exchange their Common Stock
for stock or other securities or property deliverable upon consummation of such
transaction. Such notice shall be given at least 30 days prior to the record
date or the date on which the Company's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not affect the
validity of any action referred to in clauses (i), (ii), (iii) and (iv) above.
(h) Certain Events. In case any event shall occur as to which
paragraphs (a), (b) or (c) of this Section 4 are not strictly applicable but the
failure to make any adjustment would not fairly protect the rights represented
by this Warrant in accordance with the essential intent of such provisions, the
Company shall give notice of such event as provided in Section 4(d) and shall
make an appropriate adjustment in the Exercise Price and the number of Warrant
Shares to preserve, without dilution, the rights represented by this Warrant.
5. Issue Tax. The issuance of certificates for Warrant Shares upon the
exercise of this Warrant shall be made without charge to the holder of this
Warrant or such shares for any issuance tax or other costs in respect thereof;
provided that the holder shall pay all transfer taxes owed upon the issuance of
such shares in the name of any person or entity designed by the holder.
6. No Rights as a Stockholder. Prior to the exercise of this Warrant,
the holder hereof, as such, shall not be entitled to any rights of a stockholder
of the Company, including, without limitation, the right to vote, to consent, to
exercise any preemptive right, to receive any notice of meetings of stockholders
for the election of directors of the Company or any other matter or to receive
any notice of any proceedings of the Company, except as may be specifically
provided for herein.
7. Transfer, Exchange, and Replacement of Warrant.
(a) Restriction on Transfer. Neither this Warrant (including any
replacement Warrant) nor any Warrant Shares may be sold, transferred or
otherwise disposed of prior to the first anniversary of the initial date of
issuance of this Warrant, without the prior written consent of the Company,
except for (i) the exercise of this Warrant in accordance with its terms, (ii)
pledges to bona fide financial institutions to secure the repayment of
indebtedness and (iii) in case of natural persons, transfers to immediate family
members or a trust or trusts for the benefit of such family members for estate
planning purposes. The holder of this Warrant and each such permitted transferee
shall (i) be bound by the transfer restrictions contained herein and (ii)
execute, prior to any transfer, such documents as the Company may reasonably
request to evidence and affirm their obligations hereunder. The Warrant Shares
shall be issued with a restrictive legend setting forth the above restrictions
on transfer.
(b) Replacement of Warrant. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction, or mutilation of
this Warrant and, in the case of any such loss, theft, or destruction, upon
delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company, or, in the case of any such mutilation, upon surrender and
cancellation of this Warrant, the Company, at its expense, shall execute and
deliver, in lieu thereof, a new Warrant of like tenor.
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(c) Cancellation; Payment of Expenses. Upon the surrender of this
Warrant in connection with any transfer or replacement as provided in this
Section 7, this Warrant shall be promptly canceled by the Company. The Company
shall pay all taxes and all other expenses (other than legal expenses, if any,
incurred by the holder or transferees) and charges payable in connection with
the preparation, execution, and delivery of Warrants pursuant to this Section 7.
(d) Register. The Company shall maintain, at its principal executive
offices (or such other office or agency of the Company as it may designate by
notice to the holder hereof), a register for this Warrant, in which the Company
shall record the name and address of the person in whose name this Warrant has
been issued, as well as the name and address of each transferee and each prior
owner of this Warrant.
(e) Exercise or Transfer Without Registration. If, at the time of
the surrender of this Warrant in connection with any exercise or transfer of
this Warrant, this Warrant (or, in the case of any exercise, the Warrant
Shares), shall not be registered under the Securities Act and under applicable
state securities or blue sky laws, the Company may require, as a condition of
allowing such exercise or transfer, that the holder or transferee of this
Warrant, as the case may be, furnish to the Company a written opinion of
counsel, which opinion and counsel are acceptable to the Company, to the effect
that such exercise or transfer may be made without registration under the
Securities Act and applicable state securities or blue sky laws.
8. Notices. All notices, requests, and other communications required or
permitted to be given or delivered hereunder to the holder of this Warrant shall
be in writing, and shall be personally delivered, or shall be sent by certified
or registered mail or by recognized overnight mail courier, postage prepaid and
addressed, to such holder at the address shown for such holder on the books of
the Company, or at such other address as such holder shall have furnished to the
Company. All notices, requests and other communications required or permitted to
be given or delivered hereunder to the Company shall be in writing, and shall be
per sonally delivered, or shall be sent by certified or registered mail or by
recognized overnight mail courier, postage prepaid and addressed, to Aviation
Holdings Group, Inc., 15675 Northwest 15th Avenue, Miami, Florida 33169, or to
such other address as the Company shall have furnished to the holder of this
Warrant. Any such notice, request or other communication may be sent by
facsimile, but shall in such case be subsequently confirmed by a writing
personally delivered or sent by certified or registered mail or by recognized
overnight mail courier as provided above. All notices, requests and other
communications shall be deemed to have been given either at the time of the
receipt thereof at the address specified in this Section 8 or, if mailed by
registered or certified mail or with a recognized overnight mail courier, upon
deposit with the United States Post Office or such overnight mail courier,
postage prepaid and properly addressed.
9. Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO ITS OR ANY OTHER JURISDICTION'S CONFLICTS OF LAW.
10. Miscellaneous.
(1) Amendments. This Warrant may only be amended by an instrument in
writing signed by the Company and the holder hereof.
(2) Headings. The headings of the sections and paragraphs of this
Warrant are for reference purposes only, and shall not affect the meaning or
construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
AVIATION HOLDINGS GROUP, INC.
By: /s/Joseph J. Nelson
-------------------
Joseph J. Nelson, President
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FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
To:_____________________________
The undersigned, pursuant to the provisions set forth in the within
Warrant, hereby agrees to purchase ________ shares of Common Stock covered by
such Warrant, and makes payment herewith in full therefor at the price per share
provided by such Warrant in cash or by certified or official bank check in the
amount of $_________. Please issue a certificate or certificates for such shares
of Common Stock in the name of and pay any cash for any fractional share to:
Name:___________________________________
Signature:______________________________
Address:________________________________
________________________________
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
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FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth below
to:
Name of Assignee Address No of Shares
, and hereby irrevocably constitutes and appoints ______________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.
Dated: _____________________, ____,
Name: ____________________________
Signature: _______________________
Title of Signing Officer or Agent (if any):
________________________
Address: ___________________________
___________________________
Note: The above signature should correspond
exactly with the name on the face of the
within Warrant.
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THIS NOTE AND THE COMMON STOCK ISSUABLE PURSUANT TO THE TERMS OF PARAGRAPH 7 OF
THIS NOTE ("THE SECURITIES") HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY. THESE SECURITIES ARE BEING OFFERED PURSUANT TO EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAW AND CANNOT BE
RESOLD UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER SUCH LAWS OR UNLESS
EXEMPTIONS FROM REGISTRATION ARE AVAILABLE. NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY OTHER GOVERNMENTAL AGENCY HAS PASSED ON, RECOMMENDED, OR
ENDORSED THE MERITS OF THE SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
PROMISSORY NOTE
---------------
$200,000.00 October 15, 1998
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND HEREBY,
Aviation Holdings Group, Inc., a Delaware corporation having its principal
executive office at 15675 Northwest 15th Avenue, Miami, Florida 33169
("Borrower"), promises to pay to the order of Nancy Plotkin, an individual
having a mailing address at c/o Plotkin, Jacobs & Orlofsky, Ltd., 116 South
Michigan Avenue, Suite 1300, Chicago, Illinois 60603 ("Lender"), the principal
sum of Two Hundred Thousand ($200,000.00) Dollars, together with interest as set
forth below, until the date on which the principal amount is paid in full,
payable in lawful money of the United States of America in accordance with the
terms of this Promissory Note (the "Note").
1. Maturity Date. The Note shall have a "Maturity Date" of March 15,
1999, subject to Borrower's right to extend ("Borrower's Right to Extend") the
Maturity Date up to two times, each for a one month period. In order to exercise
Borrower's Right to Extend, Borrower shall provide Lender with written notice of
such intention at least ten days prior to any Maturity Date.
2. Interest.
(a) During the period beginning on the date hereof and ending on the
Maturity Date, interest shall accrue daily on the outstanding principal amount
hereunder at a simple rate of ten (10%) percent per annum.
(b) Interest shall be calculated hereunder for the actual number of
days that the principal is outstanding, based on a three hundred sixty (360) day
year. Interest shall continue to accrue on the principal balance hereof at the
then-applicable simple rate of interest specified in this Note, notwithstanding
any demand for payment, acceleration and/or the entry of any judgment
against Borrower, until all principal owing hereunder is paid in full.
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<PAGE>
3. Payment. No principal payments shall be due on the Note until the
Maturity Date. All interest that accrues hereunder shall be due and payable on
the Maturity Date. All payments of principal and interest shall be made by cash
or check to Lender at the address designated in writing by Lender.
4. Prepayments. The Borrower reserves the right to prepay principal and
any or all accrued and unpaid interest due on the Note at any time prior to the
Maturity Date.
5. Ranking. Lender's right to repayment will be senior to all other
unsecured debt of Borrower.
6. Security. Payment of the Note will be guaranteed by Aviation
Holdings International, Inc. pursuant to the terms of the Collateral Pledge
Agreement attached hereto as Exhibit A.
7. Grant of Common Stock.
(a) Issuance of Common Stock. In consideration of the funding of
this Note by Lender, Borrower shall issue to Lender 20,000 shares of Borrower's
Common Stock;
(b) Restrictions on Shares. The shares of Common Stock issuable
pursuant to Paragraph 7(a) (the "Securities") may not be sold or transferred
unless (i) they first shall have been registered under the Securities Act of
1933, as amended (the "Act") and applicable state securities laws, or (ii)
Borrower shall have been furnished with an opinion of legal counsel (in form,
substance and scope acceptable to Borrower) to the effect that such sale or
transfer is exempt from the registration requirements of the Act. Each
certificate for Securities issuable pursuant to this Paragraph 7 that have not
been so registered and that have not been sold pursuant to an exemption that
permits removal of the legend, shall bear a legend substantially in the
following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") OR ANY OTHER STATE
SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT OR A
VALID EXEMPTION THEREFROM. ANY SUCH SALE, ASSIGNMENT OR
TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE SECURITIES
LAWS.
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<PAGE>
(c) Registration Rights.
(i) Demand Registration. In connection with the contemplated
public offering of the Company's Common Stock, Lender shall be entitled to
include all shares of Common Stock issuable to Borrower pursuant to this
Paragraph 7 in such registration statement. In connection therewith, Borrower
will use its best efforts to cause such Common Stock to be registered under the
Act in such contemplated public offering. Borrower shall not be required to
affect more than one registration pursuant to this Paragraph 7(c)(i).
(ii) Piggyback Registrations. If at any time subsequent to the
consummation of the contemplated public offering of the Company's Common Stock,
Borrower shall file with the Securities and Exchange Commission a registration
statement relating to an offering for its own account or the account of others
under the Act of any of its equity securities, and Lender's registration rights
have not been discharged in accordance with Paragraph 7(c)(i) hereof, Borrower
shall send to Lender written notice of such determination and, if within fifteen
(15) days from the date of such notice, Lender shall so request in writing,
Borrower shall include in such registration statement all or any part of the
Common Stock that Lender requests to be registered, except that if, in
connection with any underwritten public offering, the managing underwriter(s)
shall impose a limitation on the number of shares of Common Stock which may be
included in the registration statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate the distribution, then Borrower shall be obligated to include in such
registration statement only such limited portion of the Common Stock with
respect to which Lender has requested inclusion hereunder as the underwriter
shall permit.
8. Lender's Rights Upon Default.
Each of the following events shall constitute an "Event of Default"
and, upon the occurrence thereof, Lender shall have the option, without the
necessity of giving any prior written notice to Borrower, (1) to accelerate the
maturity of this Note and all amounts payable hereunder and demand immediate
payment thereof and (2) to exercise all of Lender's rights and remedies under
this Note or otherwise available at law or in equity:
(a) Borrower shall fail to pay the principal amount of the Note or
accrued interest thereon on the Maturity Date; provided, however, that in the
event Borrower shall be in default on March 15, 1999 pursuant to this paragraph
8(a) and has not provided Lender with the Notice of Borrower's Right to Extend
in accordance with paragraph 1 hereof, then Borrower's Right to Extend shall be
deemed exercised on March 15, 1999 and, if Borrower shall fail to pay the
principal amount of the Note or accrued interest thereon prior to such date,
then Borrower's Right to Extend shall be deemed exercised on April 15, 1999.
Lender shall be entitled to receive the Extension Shares, as defined in the
Securities Transfer Agreement executed by Borrower and Lender on October 15,
1998, upon each deemed exercise of Borrower's Right to Extend;
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<PAGE>
(b) Borrower shall admit an inability to pay its debts as they
mature, or shall make a general assignment for the benefit of any of its or
their creditors;
(c) Proceedings in bankruptcy, or for reorganization of Borrower for
the readjustment of any of its or their debts, under the United States
Bankruptcy Code, as amended, or any part thereof, or under any other laws,
whether state or federal, for the relief of debtors, now or hereafter existing,
shall be commenced by Borrower or shall be commenced against Borrower and shall
not be dismissed within sixty (60) days of their commencement; and
(d) A receiver or trustee shall be appointed for Borrower or for any
substantial part of its assets, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of Borrower, and if such
appointment or proceedings are involuntary, such receiver or trustee shall not
be discharged within sixty (60) days of appointment, or such proceedings shall
not be discharged within sixty (60) days of their commencement, or Borrower
shall discontinue its business(es) or materially change the nature of its
business(es).
9. Application of Funds. All sums realized by Lender on account of this
Note, from whatever source received, shall be applied first to any fees, costs
and expenses (including attorney's fees) incurred by Lender, second to accrued
and unpaid interest, and then to principal.
10. Attorney's Fees and Costs. In the event that Lender engages an
attorney to represent it in connection with (a) any default by Borrower under
this Note, (b) any bankruptcy or other insolvency proceedings commenced by or
against Borrower and/or (c) any actual litigation arising out of or related to
any of the foregoing, then Borrower shall be liable to and shall reimburse
Lender on demand for all reasonable attorneys' fees, costs and expenses incurred
by Lender in connection with any of the foregoing.
11. Governing Law. This Note is made and delivered in the State of
Delaware and shall be construed and enforced in accordance with and governed by
the internal laws of the State of Delaware without regard to conflicts of laws
principles.
12. Miscellaneous.
(a) This Note is made and delivered in accordance with and subject
to the terms of the Subscription Agreement entered into by Lender and Borrower
on October 15, 1998.
(b) Borrower hereby waives protest, notice of protest, presentment,
dishonor, notice of dishonor and demand. To the extent permitted by law,
Borrower hereby waives and releases all errors, defects and imperfections in any
proceedings instituted by Lender under the terms of this Note.
(c) The rights and privileges of Lender under this Note shall inure
to the benefit of its successors and assigns. All representations, warranties
and agreements of Borrower made in connection with this Note shall bind
Borrower's successors and assigns.
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<PAGE>
(d) If any provision of this Note shall for any reason be held to
be invalid or unen forceable, such invalidity or unenforceability shall not
affect any other provision hereof, but this Note shall be construed as if such
invalid or unenforceable provision had never been contained herein.
(e) The waiver of any Event of Default or the failure of Lender to
exercise any right or remedy to which it may be entitled shall not be deemed to
be a waiver of any subsequent Event of Default or of Lender's right to exercise
that or any other right or remedy to which Lender is entitled.
(f) The rights and remedies of Lender under this Note shall be in
addition to any other rights and remedies available to Lender at law or in
equity, all of which may be exercised singly or concurrently.
IN WITNESS WHEREOF, Borrower has duly executed this Promissory Note the
day and year first above written and has hereunto set hand and seal.
AVIATION HOLDINGS GROUP, INC.
By: /s/ Joseph J. Nelson
----------------------------
Joseph J. Nelson, President
5
<PAGE>
COLLATERAL PLEDGE AGREEMENT
(Aviation Holdings International, Inc. Common Stock)
This Collateral Pledge Agreement (the "Agreement") is made this 15th
day of October, 1998 by and between Aviation Holdings Group, Inc., a Delaware
Corporation with its principal executive office at 15675 Northwest 15th Avenue,
Miami, Florida 33169 ("Pledgor"), and Nancy Plotkin, an individual and the John
G. Jacobs Trust, John G. Jacobs Trustee, both having a mailing address at c/o
Plotkin, Jacobs & Orlofsky, Ltd., 116 South Michigan Avenue, Suite 1300,
Chicago, IL 60603 (collectively, "Pledgee").
BACKGROUND
Pursuant to a certain Promissory Note dated October 15, 1998 executed
by Pledgor and in favor of Pledgee (the "Note"), Pledgee has loaned an aggregate
of $250,000 to Pledgor. Pledgor's obligations to Pledgee, as evidenced by the
Note are hereinafter referred to as the "Obligations".
As collateral security for the Obligations, Pledgor is required to
pledge to Pledgee all of Pledgor's right, title and interest in and to the
Pledged Securities (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, and for good, valuable and sufficient consideration, the
receipt of which is hereby acknowledged, Pledgor agrees as follows:
1. Certain Definitions.
(a) The term "Pledged Securities" shall mean 51% of the issued and
outstanding shares of Common Stock of Aviation Holdings International, Inc.
("AHI"), a Florida corporation, provided that, if AHI issues new shares of
Common Stock prior to satisfaction of the Obligations, then the number of shares
of Common Stock that are Pledged Securities shall be increased so that the
Pledged Securities equal 51% of the issued and outstanding shares of AHI Common
Stock.
(b) The term "Event of Default" shall mean a default or an event of
default under this Agreement or the Note.
2. Pledge.
(a) As security for the prompt satisfaction of the Obligations,
Pledgor hereby pledges, hypothecates, agrees to deliver and set over to Pledgee
within twenty (20) days of the date hereof, the Pledged Securities and grants to
Pledgee a lien on and security interest in and to the Pledged Securities.
<PAGE>
(b) Prior to the occurrence of an Event of Default, Pledgor shall be
entitled to all voting rights with respect to the Pledged Securities and, for
that purpose, Pledgee shall execute and deliver to Pledgor all necessary
proxies. Immediately and without further notice, upon the occurrence of an Event
of Default, whether or not the Pledged Securities shall have been registered in
the name of Pledgee or its nominee, Pledgee or its nominee shall have the right
to exercise all voting rights as to all of the Pledged Securities and all other
corporate rights and all conversion, exchange, subscription or other rights,
privileges or options pertaining thereto as if Pledgee or its nominee were the
absolute owner thereof including, without limitation, the right to exchange any
or all of the Pledged Securities upon the merger, consolidation, reorganization,
recapitalization or other readjustment of Pledgee thereof, or upon the exercise
by Pledgee of any right, privilege, or option pertaining to any of the Pledged
Securities and, in connection therewith, to deliver any of the Pledged
Securities to any committee, depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may determine, all
without liability except to account for property actually received by Pledgee;
but Pledgee shall have no duty to exercise any of the aforesaid rights or
privileges, or may delay in so doing.
(c) Prior to the occurrence of an Event of Default, Pledgor shall be
entitled to any and all regular cash dividends declared by the Pledgee to be
paid on account of the Pledged Securities; provided, however, that immediately
and without further notice, upon the occurrence of an Event of Default, whether
or not the Pledged Securities shall have been registered in the name of Pledgee
or its nominees, Pledgee or its nominee shall have the right to any and all
regular cash dividends paid on account of the Pledged Securities which shall be
delivered to Pledgee and may, at Pledgee's option, be applied on account of the
Obligations in such order and manner as Pledgee may elect.
(d) At any time following execution of this Agreement, if Pledgor
shall become entitled to receive or shall receive, in connection with any of the
Pledged Securities, any: (i) stock certificate, including, without limitation,
any certificate representing a stock dividend or in connection with any increase
or reduction of capital, reclassification, merger, consolidation, sale of
assets, combination of shares, stock split, spin-off or split-off; (ii) option,
warrant or right, whether as an addition to or in substitution or in exchange
for any of the Pledged Securities, or otherwise; or (iii) dividends or
distributions payable in property, including securities issued by an issuer
other than Pledgee; then, Pledgor shall accept the same as Pledgee's agent, in
express trust for Pledgee, and shall deliver the same forthwith to the Pledgee
in the exact form received with, as applicable, Pledgor's endorsement, or
appropriate stock powers duly executed in blank, (with signatures "bank
guaranteed") which the Pledgor hereby unconditionally agrees to make and/or
furnish, to be held by Pledgee, subject to the terms hereof, as part of the
Pledged Securities.
3. Remedies Upon an Event of Default.
Upon the occurrence of an Event of Default, Pledgee may without demand
of performance or other demand, advertisement, or notice of any kind (except the
notice specified below of time and place of public or private sale or other
disposition) to or upon the Pledgor or any other person (all of which are, to
the extent permitted by law, hereby expressly waived), forthwith realize upon
the Pledged Securities or any part thereof, and may forthwith, or agree to take
possession and title to the Pledged Securities, subject to Pledgor's right or
equity of redemption, which right or equity is hereby expressly waived and
released. Pledgee agrees to give at least ten (10) days written notice prior to
taking possession and title to the Pledged Securities pursuant to this Section
3, which notice Pledgor hereby deems commercially reasonable. If Pledgee takes
possession of the Pledged Securities pursuant to this Section e, then the
Obligations shall be deemed to be satisfied.
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<PAGE>
4. Pledgor's Representations and Warranties. Pledgor represents and
warrants that:
(a) Pledgor has all requisite power to enter into this Pledge, to
pledge the Pledged Securities for the purposes described in Paragraph 2(a)
above, and to carry out the transactions contemplated by this Pledge;
(b) Pledgor is the legal and beneficial owner of the Pledged
Securities;
(c) The execution and delivery of this Pledge, and the performance
of its terms, will not violate or constitute a default under the terms of any
agreement, indenture or other instrument, license, judgment, decree, order or
regulation, applicable to Pledgor or any of its property; and
(d) Upon the execution of this Pledge and the delivery to Pledgee of
the shares of Pledged Securities now held of record by Pledgor, this Pledge
shall create a valid first lien upon and perfected security interest in the
Pledged Securities and the cash and noncash proceeds thereof, subject to no
prior lien or subordinate lien, or agreement purporting to grant to any third
party a security interest in the property or assets of Pledgor which would
include the Pledged Securities.
5. Pledgor's Covenants. Pledgor hereby covenants that, until all of the
Obligations have been satisfied in full:
(a) Pledgor will not sell, convey, or otherwise dispose of any of
the Pledged Securities or any interest therein, or create, incur, or permit to
exist any pledge, mortgage, lien, charge, encumbrance or any security interest
whatsoever in or with respect to any of the Pledged Securities or the proceeds
thereof, other than that created hereby; and
(b) Pledgor will, at Pledgor's own expense, defend (engaging counsel
acceptable to Pledgee) Pledgee's right, title, special property and security
interest in and to the Pledged Securities against the claims of any person,
firm, corporation or other entity.
6. Further Assurances. Pledgor shall at any time, and from time to
time, upon written request of Pledgee, execute and deliver such further
documents and do such further acts and things as Pledgee may reasonably request
to effect the purposes of this Pledge including, without limitation, delivering
to Pledgee, upon the occurrence of an Event of Default, irrevocable proxies with
respect to the Pledged Securities in form satisfactory to Pledgee. Until receipt
thereof, this Pledge shall constitute Pledgor's proxy to Pledgee or his nominee
to vote all shares of Pledged Securities then registered in Pledgor's name.
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<PAGE>
7. Termination of Pledge. Upon the satisfaction in full of all
Obligations and the satisfaction of all additional costs and expenses of Pledgee
as provided herein, this Pledge shall terminate and Pledgee shall deliver to
Pledgor, the Pledged Securities or so much thereof as shall not have been sold
or otherwise applied pursuant to this Pledge. Furthermore, in the event that AHI
is permitted to enter into a Guaranty Agreement, Pledgor shall be entitled to
substitute a Guaranty Agreement for the obligations set forth in this Agreement.
8. Miscellaneous.
(a) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Securities while held hereunder, Pledgee shall have no
duty or liability to preserve rights pertaining thereto and shall be relieved of
all responsibility for the Pledged Securities upon surrendering the Pledged
Securities or tendering surrender of it to Pledgor.
(b) The rights and remedies provided herein and in the Note and any
related instruments, agreements and documents are cumulative and are in addition
to and not exclusive of any rights or remedies provided by law, including,
without limitation, the rights and remedies of a secured party under the UCC.
(c) The provisions of this Pledge are severable, and if any clause
or provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction and shall not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision in this Pledge in any
jurisdiction.
9. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been validly given, as of the date
delivered, if delivered personally, three days after being sent by registered or
certified mail (postage prepaid, return receipt requested), one day after
dispatch by recognized overnight courier (provided delivery is confirmed by the
courier) and upon transmission by telecopy, confirmed received, to the parties
at the following addresses (or at such other address for a party as shall be
specified by like change of address):
(a) If to Pledgee:
Nancy Plotkin
c/o Plotkin, Jacobs & Orlofsky, Ltd.
116 South Michigan Avenue
Suite 1300
Chicago, IL 60603
John G. Jacobs, Trustee of the John G. Jacobs Trust
c/o Plotkin, Jacobs & Orlofsky, Ltd.
116 South Michigan Avenue
Suite 1300
Chicago, IL 60603
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<PAGE>
(a) If to Pledgor:
Aviation Holdings Group, Inc.
15675 Northwest 15th Avenue
Miami, Florida 33169
Attention: Joseph J. Nelson, President
10. Governing Law. This Pledge shall be construed in accordance with
the substantive laws of the State of Delaware without regard to principles of
conflicts of laws and is intended to take effect as an instrument under seal.
11. Jurisdiction. The parties agree to the exclusive jurisdiction of
the Federal and State courts located in the State of Delaware in connection with
any matter arising hereunder, including the collection and enforcement hereof.
IN WITNESS WHEREOF, Pledgor has executed this Collateral Pledge
Agreement as of the day and year first above written.
PLEDGOR: AVIATION HOLDINGS GROUP, INC.
/s/ Joseph J. Nelson
--------------------------------------
Joseph J. Nelson, President
PLEDGEE:
/s/ Nancy Plotkin
--------------------------------------
Nancy Plotkin
PLEDGEE:
/s/ John G. Jacobs
--------------------------------------
John G. Jacobs, Trustee of the
John G. Jacobs Trust
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<PAGE>
Exhibit 10.7(c)
SECURITIES TRANSFER AGREEMENT
SECURITIES TRANSFER AGREEMENT (this "Agreement"), dated as of October
15, 1998 by and between APP INVESTMENTS, INC., a Pennsylvania corporation
("APP"), Nancy Plotkin, an individual having a mailing address at c/o Plotkin,
Jacobs & Orlofsky, Ltd., 116 South Michigan Avenue, Suite 1300, Chicago, IL
60603 ("Lender"), and, solely with respect to Paragraphs 3 and 5.i., Aviation
Holdings Group, Inc., a Delaware corporation ("Borrower").
WHEREAS, to induce Lender to provide Borrower with a loan in the
principal amount of Two Hundred Thousand ($200,000) Dollars, as evidenced by
that promissory note executed by Borrower on October 15, 1998 (the "Note"), APP
and Borrower (solely with respect to Paragraphs 3 and 5.i. hereof) hereby agree
as follows:
1. TRANSFER OF SHARES OF COMMON STOCK.
a. If Borrower (i) has not repaid all principal and accrued
interest due under the Note by March 15, 1999 (the "Maturity Date") or (ii)
experiences or commits any "Event of Default" (as that term is defined in
Paragraph 8 of the Note), then within five days thereafter, APP shall transfer
20,000 shares of Borrower's common stock owned by APP to Lender (the "Default
Shares").
b. If Borrower exercises its Right to Extend the Maturity Date
(as defined in Paragraph 1 of the Note) or if Borrower's Right to Extend is
deemed exercised (as described in Paragraph 8(a) of the Note), then within five
days thereafter, APP shall transfer 8,000 shares of Borrower's common stock
owned by APP to Lender for each month that the Maturity Date is extended (the
"Extension Shares," collectively with the Default Shares, the "Transferred
Shares"), provided that, the Extension Shares shall be transferred by APP to
Lender in addition to the Default Shares.
2. RESTRICTIONS ON TRANSFERRED SHARES.
a. The Transferred Shares may not be sold or transferred
unless (i) they first shall have been registered under the Securities Act of
1933, as amended (the "Securities Act") and applicable state securities laws, or
(ii) Borrower shall have been furnished with an opinion of legal counsel (in
form, substance and scope acceptable to Borrower) to the effect that such sale
or transfer is exempt from the registration requirements of the Securities Act.
Each certificate for Transferred Shares that have not been so registered and
that have not been sold pursuant to an exemption that permits removal of the
legend, shall bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES") HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY OTHER STATE SECURITIES LAWS. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED
FOR SALE,
<PAGE>
SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR A
VALID EXEMPTION THEREFROM. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST
ALSO COMPLY WITH APPLICABLE STATE SECURITIES LAWS.
b. Pursuant to the Stock Pledge Agreement between Lender and
APP dated October 15, 1999, APP has pledged and will deliver certificates (the
"Certificates") in APP's name representing the Default Shares, the Extension
Shares and the shares of Borrower's common stock to be sold to Lender upon
exercise of the Stock Purchase Warrant dated October 15, 1998 (the "Warrant
Shares") to Plotkin within twenty (20) days of the date hereof. Each of the
Certificates shall contain the following legend:
THE SECURITIES HAVE BEEN PLEDGED AS COLLATERAL PURSUANT TO A STOCK
PLEDGE AGREEMENT (THE "PLEDGE AGREEMENT") BETWEEN APP INVESTMENTS, INC.
AND NANCY PLOTKIN DATED OCTOBER 15, 1998 AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED UNLESS THE PLEDGE HAS BEEN RELEASED
OR TERMINATED PURSUANT TO THE TERMS OF THE PLEDGE AGREEMENT.
Lender hereby agrees that if the Pledge is either released or terminated
pursuant to the terms of the Pledge Agreement, then Lender shall take all
appropriate actions to instruct Borrower's transfer agent to remove this legend
from each of the Certificates. APP hereby agrees that if Lender becomes entitled
to own the Default Shares, the Extension Shares or the Warrant Shares (or any
portion thereof), then APP shall take all appropriate actions to instruct
Borrower's transfer agent to remove this legend from each of the Certificates.
3. REGISTRATION RIGHTS.
a. Demand Registration. In connection with the contemplated
public offering of Borrower's common stock, Lender shall be entitled to require
Borrower to register for resale all of the Transferred Shares and the Warrant
Shares pursuant to the Securities Act. In connection therewith, Borrower will
use its best efforts to cause the Transferred Shares and the Warrant Shares to
be registered under the Securities Act in such contemplated public offering.
Borrower shall not be required to affect more than one registration pursuant to
this Paragraph 3.a.
b. Piggyback Registrations. If at any time subsequent to the
consummation of the contemplated public offering of Borrower's common stock,
Borrower shall file with the Securities and Exchange Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities and Lender's
registration rights have not been discharged in accordance with Paragraph 3(a)
hereof, Borrower shall send to Lender written notice of such determination and,
if within fifteen (15) days from the date of such notice, Lender shall so
request in writing, Borrower shall include in such registration statement all or
any part of the Transferred Shares and Warrant Shares that Lender requests to be
registered, except that if, in connection with any underwritten public offering,
the managing underwriter(s) shall impose a limitation on the number of shares of
common stock which may be included in the registration statement because, in
such underwriter(s)' judgment, marketing or other
2
<PAGE>
factors dictate such limitation is necessary to facilitate the distribution,
then Borrower shall be obligated to include in such registration statement only
such limited portion of the Transferred Shares and Warrant Shares with respect
to which Lender has requested inclusion hereunder as the underwriter shall
permit.
4. ANTIDILUTION PROVISIONS. At any time prior to their transfer to
Lender, the number of Extension Shares and Default Shares shall be subject to
adjustment from time to time as provided in this Section 4. APP shall be
responsible for all rights and obligations provided in this Section 4.
a. Subdivision or Combination of Common Stock. If Borrower at
any time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the Common Stock into a greater
number of shares, then, after the record date for effecting such subdivision,
the number of Extension Shares and Default Shares shall be proportionately
increased. If Borrower at any time combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its common
stock into a smaller number of shares, then, after the record date for effecting
such combination, the number of Extension Shares and Default Shares shall be
proportionately decreased.
b. Consolidation, Merger or Sale. In case Borrower after the
date hereof (a) shall consolidate with or merge into any other entity and shall
not be the continuing or surviving corporation of such consolidation or merger,
(b) shall permit any other entity to consolidate with or merge into Borrower and
Borrower shall be the continuing or surviving entity but, in connection with
such consolidation or merger, Borrower's common stock shall be changed into or
exchanged for stock or other securities of any other entity or cash or any other
property, (c) shall transfer all or substantially all of its properties or
assets to any other person or entity, or (d) shall effect a capital
reorganization or reclassification of its common stock, then, and in the case of
each such transaction, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Agreement, Lender, at any time
after the consummation of such transaction, shall be entitled to receive, in
lieu of the common stock transferable immediately prior to such consummation,
the highest amount of securities, cash or other property to which Lender would
have been entitled as a shareholder upon such consummation if Lender had
received the Extension Shares or the Default Shares immediately prior thereto,
subject to adjustments (subsequent to such consummation) as nearly equivalent as
possible to the adjustments provided for in this Section 4. Borrower shall not
effect any such consolidation, merger, or sale of assets, or capital
reorganization or reclassification unless prior to the consummation thereof, APP
assumes by written instrument the obligations under this Section 4 and the
obligations to deliver to Lender such securities, cash or other property as, in
accordance with the foregoing provisions, Lender may be entitled to acquire.
c. Distribution of Assets. In case Borrower shall declare or
make any distribution of its assets to holders of its common stock as a partial
liquidating dividend, by way of return of capital or otherwise, other than a
dividend payable in shares of its common stock or in cash out of earnings of
Borrower, Lender shall be entitled to receive the amount of cash, securities or
other property that would have been payable to Lender had Lender been the holder
of such shares of Borrower's common stock on the record date for the
determination of stockholders entitled to such distribution.
3
<PAGE>
d. Notice of Adjustment. Upon the occurrence of any event that
requires any adjustment of the number of Extension Shares or Default Shares,
Borrower shall give notice thereof to APP who shall give notice thereof to
Lender, which notice shall state the increase or decrease, if any, in the number
of Extension Shares and Default Shares, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
e. No Fractional Shares. No fractional shares of Borrower's
common stock shall be transferred to Lender, but upon any transfer of the
Extension Shares or the Default Shares, APP shall pay a cash adjustment in
respect of any fractional share that would otherwise be transferable in an
amount equal to the fractional share multiplied by the market price of a share
of Borrower's common stock on the date of such transfer.
f. Other Notices. In case at any time:
i. Borrower shall declare any dividend upon its common
stock payable in shares of stock of any class or make any other distribution
(other than dividends or distributions payable in cash out of retained earnings)
to the holders of its common stock;
ii. Borrower shall offer for subscription pro rata to the
holders of its common stock any additional shares of stock of any class or other
rights;
iii. There shall be any capital reorganization of Borrower,
or reclassification of its common stock, or consolidation or merger of Borrower
with or into, or sale of all or substantially all its assets to, another entity;
or
iv. There shall be a voluntary or involuntary dissolution,
liquidation or winding-up of Borrower;
then, in each such case, Borrower shall give notice to Lender of (a) the date on
which the books of Borrower shall close or a record shall be taken for
determining the holders of its common stock entitled to receive any such
dividend, distribution or subscription rights, or for determining the holders of
its common stock entitled to vote in respect of any such transaction, and (b)
the date (or, if not then known, a reasonable approximation thereof by Borrower)
when such transaction shall occur. Such notice shall also specify the date on
which the holders of Borrower's common stock shall be entitled to receive such
dividend, distribution or subscription rights or to exchange their common stock
for stock or other securities or property deliverable upon consummation of such
transaction. Such notice shall be given at least 30 days prior to the record
date or the date on which Borrower's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not affect the
validity of any action referred to in clauses (i), (ii), (iii) and (iv) above.
g. Certain Events. In case any event shall occur as to which
paragraphs (a), (b) or (c) of this Section 4 are not strictly applicable but the
failure to make any adjustment would not fairly protect the rights represented
by this Warrant in accordance with the essential intent of such
4
<PAGE>
provisions, the Company shall give APP notice of such event, who shall in turn
give notice thereof to Lender as provided in Section 4(d) and shall make an
appropriate adjustment in the number of Extension Shares and Default Shares to
preserve, without dilution, the rights represented by this Agreement.
5. MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.
c. Headings. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
d. Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the Note
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
f. Notices. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier and shall be
effective three days after being placed in the mail, if mailed, or upon receipt
or refusal of receipt, if delivered personally or by courier, in each case
addressed to a party. The addresses for such communications shall be:
If to Borrower:
Aviation Holdings Group, Inc.
15675 Northwest 15th Avenue
Miami, FL 33169
Attn: Joseph J. Nelson
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If to Lender:
Nancy Plotkin
c/o Plotkin, Jacobs & Orlofsky, Ltd.
116 South Michigan Avenue, Suite 1300
Chicago, IL 60603
If to APP:
APP Investments, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
Attn: Andrew P. Panzo
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither party shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other.
h. Third Party Beneficiaries. This Agreement is intended for
the benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Further Assurances. Borrower hereby agrees to take all
appropriate actions reasonably requested by Lender or APP and necessary to
complete the transactions contemplated by the Pledge Agreement and this
Agreement, including but not limited to, issuing the appropriate instructions to
Borrower's transfer agent.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreements to be duly
executed as of the date first above written.
APP INVESTMENTS, INC.
/s/ Andrew P. Panzo
-------------------------------------
Andrew P. Panzo, President
Solely With Respect to Paragraphs 3
and 5.i. hereof:
AVIATION HOLDINGS GROUP, INC.
/s/ Joseph J. Nelson
--------------------------------------
Joseph J. Nelson, President
AGREED TO AND ACCEPTED:
/s/ Nancy Plotkin
- ----------------------------
Nancy Plotkin
7
<PAGE>
STOCK PLEDGE AGREEMENT
(Aviation Holdings Group, Inc. Common Stock)
This Stock Pledge Agreement (the "Agreement") is made this 15th day of
October, 1998, by APP Investments, Inc., a Pennsylvania corporation having
offices at Two Penn Center Plaza, Suite 605, Philadelphia, Pennsylvania 19102
("Pledgor"), in favor of Nancy Plotkin, an individual having a mailing address
at c/o Plotkin, Jacobs & Orlofsky, Ltd., 116 South Michigan Avenue, Suite 1300,
Chicago, Illinois 60603 ("Pledgee").
B A C K G R O U N D
Pledgee has agreed to provide or has provided Aviation Holdings Group,
Inc., a Delaware corporation ("Borrower"), loans and/or advances of credit in an
aggregate amount of up to Two Hundred Thousand ($200,000.00) Dollars
(collectively, the "Loan") as evidenced by a promissory note of even date
herewith executed by Borrower in favor of Pledgee (the "Note"). As an inducement
to Pledgee to make the loan to Borrower, Pledgor granted Pledgee a Stock
Purchase Warrant (the "Warrant") on October 15, 1998, pursuant to which Pledgor
agreed to sell sixty thousand (60,000) shares of Borrower's common stock owned
by Pledgor to Pledgee at an exercise price of $4.00 per share, and Pledgor,
pursuant to a Securities Transfer Agreement between Borrower, Pledgor and
Plotkin of even date herewith (the "Transfer Agreement"), agreed to transfer up
to thirty-six thousand (36,000) shares of Borrower's common stock to Pledgee
upon the occurrence of certain events set forth in the Transfer Agreement.
Pledgor's undertakings set forth in the Transfer Agreement are hereinafter
collectively referred to as the "Obligations."
As collateral security for the Obligations, Pledgor is required to
pledge to Pledgee all of Pledgor's right, title and interest in and to the
Pledged Securities (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, and for good, valuable and sufficient consideration, the
receipt of which is hereby acknowledged, Pledgor agrees as follows:
1. Certain Definitions.
(a) The term "Pledged Securities" shall mean shares of common stock
of Borrower, owned legally or beneficially by Pledgor, which are evidenced by
stock certificates in the name of Pledgor in the amounts of 28,000, 8,000 and
60,000 shares of Borrower's common stock.
(b) The term "Event of Default" shall mean a default or an event of
default under this Agreement, the Transfer Agreement, or any other instrument,
document or agreement, which evidences or secures the Obligations.
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<PAGE>
2. Pledge.
(a) As security for the prompt satisfaction of the Obligations,
Pledgor hereby agrees to pledge, hypothecate, deliver and set over to Pledgee
within twenty (20) days of the date hereof, the Pledged Securities and grants to
Pledgee a lien on and security interest in and to the Pledged Securities.
(b) Prior to the occurrence of an Event of Default, Pledgor shall be
entitled to all voting rights with respect to the Pledged Securities and, for
that purpose, Pledgee shall execute and deliver to Pledgor all necessary
proxies. Immediately and without further notice, upon the occurrence of an Event
of Default, whether or not the Pledged Securities shall have been registered in
the name of Pledgee or its nominee, Pledgee or its nominee shall have the right
to exercise all voting rights as to all of the Pledged Securities and all other
corporate rights and all conversion, exchange, subscription or other rights,
privileges or options pertaining thereto as if Pledgee or its nominee were the
absolute owner thereof including, without limitation, the right to exchange any
or all of the Pledged Securities upon the merger, consolidation, reorganization,
recapitalization or other readjustment of Pledgee thereof, or upon the exercise
by Pledgee of any right, privilege, or option pertaining to any of the Pledged
Securities and, in connection therewith, to deliver any of the Pledged
Securities to any committee, depository, transfer agent, registrar or other
designated agency upon such terms and conditions as it may determine, all
without liability except to account for property actually received by Pledgee;
but Pledgee shall have no duty to exercise any of the aforesaid rights or
privileges, or may delay in so doing.
(c) Prior to the occurrence of an Event of Default, Pledgor shall be
entitled to any and all regular cash dividends declared by the Pledgee to be
paid on account of the Pledged Securities; provided, however, that immediately
and without further notice, upon the occurrence of an Event of Default, whether
or not the Pledged Securities shall have been registered in the name of Pledgee
or its nominees, Pledgee or its nominee shall have the right to any and all
regular cash dividends paid on account of the Pledged Securities which shall be
delivered to Pledgee and may, at Pledgee's option, be applied on account of the
Obligations in such order and manner as Pledgee may elect.
(d) At any time following execution of this Agreement, if Pledgor
shall become entitled to receive or shall receive, in connection with any of the
Pledged Securities, any: (i) stock certificate, including, without limitation,
any certificate representing a stock dividend or in connection with any increase
or reduction of capital, reclassification, merger, consolidation, sale of
assets, combina tion of shares, stock split, spin-off or split-off; (ii) option,
warrant or right, whether as an addition to or in substitution or in exchange
for any of the Pledged Securities, or otherwise; or (iii) dividends or
distributions payable in property, including securities issued by an issuer
other than Pledgee; then, Pledgor shall accept the same as Pledgee's agent, in
express trust for Pledgee, and shall deliver the same forthwith to the Pledgee
in the exact form received with, as applicable, Pledgor's endorsement, or
appropriate stock powers duly executed in blank, (with signatures "bank
guaranteed") which the Pledgor hereby unconditionally agrees to make and/or
furnish, to be held by Pledgee, subject to the terms hereof, as part of the
Pledged Securities.
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<PAGE>
3. Remedies Upon an Event of Default.
Upon the occurrence of an Event of Default, Pledgee may without
demand of performance or other demand, advertisement, or notice of any kind to
or upon the Pledgor or any other person (all of which are, to the extent
permitted by law, hereby expressly waived), forthwith realize upon the Pledged
Securities or any part thereof which Pledgee is entitled to receive pursuant to
the terms of the Transfer Agreement or the Warrant Agreement and APP hereby
agrees to take all actions necessary to transfer the certificates representing
the Pledged Securities to the name of Pledgee.
4. Pledgor's Representations and Warranties. Pledgor represents and
warrants that:
(a) Pledgor has all requisite capacity and power to enter into this
Pledge, to pledge the Pledged Securities for the purposes described in Paragraph
2(a) above, and to carry out the transactions contemplated by this Pledge;
(b) Pledgor is the legal and beneficial owner of the Pledged
Securities;
(c) The execution and delivery of this Pledge, and the performance
of its terms, will not violate or constitute a default under the terms of any
agreement, indenture or other instrument, license, judgment, decree, order or
regulation, applicable to Pledgor or any of its property; and
(d) Upon the execution of this Pledge and the delivery to Pledgee of
the shares of Pledged Securities now held of record by Pledgor, this Pledge
shall create a valid first lien upon and perfected security interest in the
Pledged Securities and the cash and noncash proceeds thereof, subject to no
prior lien or subordinate lien, or agreement purporting to grant to any third
party a security interest in the property or assets of Pledgor which would
include the Pledged Securities.
5. Pledgor's Covenants. Pledgor hereby covenants that, until all of the
Obligations have been satisfied in full:
(a) Pledgor will not sell, convey, or otherwise dispose of any of
the Pledged Securities or any interest therein, or create, incur, or permit to
exist any pledge, mortgage, lien, charge, encumbrance or any security interest
whatsoever in or with respect to any of the Pledged Securities or the proceeds
thereof, other than that created hereby; and
(b) Pledgor will, at Pledgor's own expense, defend (engaging counsel
acceptable to Pledgee) Pledgee's right, title, special property and security
interest in and to the Pledged Securities against the claims of any person,
firm, corporation or other entity.
6. Release of Pledged Securities to Pledgor. Pledgee agrees to release
this Pledge and to deliver the Pledged Securities to Pledgor in the following
manner:
(a) If Borrower has satisfied the terms of the Note, including the
payment of all principal and accrued interest thereunder, on or before March 15,
1999, then Pledgee shall release 36,000 shares of the Pledged Securities to
Pledgor within five days of Borrower's satisfaction of the Note.
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<PAGE>
(b) If Borrower has satisfied the terms of the Note, including the
payment of all principal and interest thereunder, subsequent to March 15, 1999
but on or before April 15, 1999, then Pledgee shall release 8,000 shares of the
Pledged Securities to Pledgor within five days of Borrower's satisfaction of the
Note.
(c) If Pledgee does not exercise (and pay the exercise price of) any
portion of the Warrant granted on or before October 15, 2003, then Pledgee shall
release the remaining Pledged Securities to Pledgor by October 20, 2003.
7. Further Assurances. Pledgor shall at any time, and from time to
time, upon written request of Pledgee, execute and deliver such further
documents and do such further acts and things as Pledgee may reasonably request
to effect the purposes of this Pledge including, without limitation, delivering
to Pledgee, upon the occurrence of an Event of Default, irrevocable proxies with
respect to the Pledged Securities in form satisfactory to Pledgee. Until receipt
thereof, this Pledge shall constitute Pledgor's proxy to Pledgee or his nominee
to vote all shares of Pledged Securities then registered in Pledgor's name.
8. Termination of Pledge. Upon the satisfaction in full of all
Obligations and the satisfaction of all additional costs and expenses of Pledgee
as provided herein, this Pledge shall terminate and Pledgee shall deliver to
Pledgor, the Pledged Securities or so much thereof as shall not have been sold
or otherwise applied pursuant to this Pledge.
9. Miscellaneous.
(a) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Securities while held hereunder, Pledgee shall have no
duty or liability to preserve rights pertaining thereto and shall be relieved of
all responsibility for the Pledged Securities upon surrendering the Pledged
Securities or tendering surrender of it to Pledgor.
(b) The rights and remedies provided herein and in the Transfer
Agreement and any related instruments, agreements and documents are cumulative
and are in addition to and not exclusive of any rights or remedies provided by
law, including, without limitation, the rights and remedies of a secured party
under the Uniform Commercial Code, as enacted in any jurisdiction where the
Pledged Securities are deemed held.
(c) The provisions of this Pledge are severable, and if any clause
or provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction and shall not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision in this Pledge in any
jurisdiction.
10. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been validly given, as of the date
delivered, if delivered personally, three days
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<PAGE>
after being sent by registered or certified mail (postage prepaid, return
receipt requested) and one day after dispatch by recognized overnight courier
(provided delivery is confirmed by the courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
change of address):
(a) If to Pledgee:
Ms. Nancy Plotkin
c/o Plotkin, Jacobs & Orlofsky, Ltd.
116 South Michigan Avenue
Suite 1300
Chicago, IL 60603
(b) If to Pledgor:
APP Investments, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
11. Governing Law. This Pledge shall be construed in accordance with
the substantive laws of the State of Delaware without regard to principles of
conflicts of laws and is intended to take effect as an instrument under seal.
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<PAGE>
12. Jurisdiction. The parties agree to the exclusive jurisdiction of
the Federal and State courts located in the Commonwealth of Pennsylvania in
connection with any matter arising hereunder, including the collection and
enforcement hereof.
IN WITNESS WHEREOF, Pledgor has executed this Stock Pledge Agreement as
of the day and year first above written.
APP INVESTMENTS, INC.
By: /s/ Andrew P. Panzo
----------------------------
Andrew P. Panzo, President
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<PAGE>
THIS NOTE AND THE COMMON STOCK ISSUABLE PURSUANT TO THE TERMS OF PARAGRAPH 7 OF
THIS NOTE ("THE SECURITIES") HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND
EXCHANGE COMMISSION, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY
AUTHORITY. THESE SECURITIES ARE BEING OFFERED PURSUANT TO EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF FEDERAL AND STATE SECURITIES LAW AND CANNOT BE
RESOLD UNLESS THEY ARE SUBSEQUENTLY REGISTERED UNDER SUCH LAWS OR UNLESS
EXEMPTIONS FROM REGISTRATION ARE AVAILABLE. NEITHER THE SECURITIES AND EXCHANGE
COMMISSION NOR ANY OTHER GOVERNMENTAL AGENCY HAS PASSED ON, RECOMMENDED, OR
ENDORSED THE MERITS OF THE SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
PROMISSORY NOTE
$50,000.00 October 15, 1998
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND HEREBY,
Aviation Holdings Group, Inc., a Delaware corporation having its principal
executive office at 15675 Northwest 15th Avenue, Miami, Florida 33169
("Borrower"), promises to pay to the order of the John G. Jacobs Trust, a trust
having a mailing address at c/o Plotkin, Jacobs & Orlofsky, Ltd., 116 South
Michigan Avenue, Suite 1300, Chicago, Illinois 60603 ("Lender"), the principal
sum of Fifty Thousand ($50,000.00) Dollars, together with interest as set forth
below, until the date on which the principal amount is paid in full, payable in
lawful money of the United States of America in accordance with the terms of
this Promissory Note (the "Note").
1. Maturity Date. The Note shall have a "Maturity Date" of March 15,
1999, subject to Borrower's right to extend ("Borrower's Right to Extend") the
Maturity Date up to two times, each for a one month period. In order to exercise
Borrower's Right to Extend, Borrower shall provide Lender with written notice of
such intention at least ten days prior to any Maturity Date.
2. Interest.
(a) During the period beginning on the date hereof and ending on the
Maturity Date, interest shall accrue daily on the outstanding principal amount
hereunder at a simple rate of ten (10%) percent per annum.
(b) Interest shall be calculated hereunder for the actual number of
days that the principal is outstanding, based on a three hundred sixty (360) day
year. Interest shall continue to accrue on the principal balance hereof at the
then-applicable simple rate of interest specified in this Note, notwithstanding
any demand for payment, acceleration and/or the entry of any judgment against
Borrower, until all principal owing hereunder is paid in full.
<PAGE>
3. Payment. No principal payments shall be due on the Note until the
Maturity Date. All interest that accrues hereunder shall be due and payable on
the Maturity Date. All payments of principal and interest shall be made by cash
or check to Lender at the address designated in writing by Lender.
4. Prepayments. The Borrower reserves the right to prepay principal and
any or all accrued and unpaid interest due on the Note at any time prior to the
Maturity Date.
5. Ranking. Lender's right to repayment will be senior to all other
unsecured debt of Borrower.
6. Security. Payment of the Note will be guaranteed by Aviation
Holdings International, Inc. pursuant to the terms of the Collateral Pledge
Agreement attached hereto as Exhibit A.
7. Grant of Common Stock.
(a) Issuance of Common Stock. In consideration of the funding of
this Note by Lender, Borrower shall issue to Lender 5,000 shares of Borrower's
Common Stock;
(b) Restrictions on Shares. The shares of Common Stock issuable
pursuant to Paragraph 7(a) (the "Securities") may not be sold or transferred
unless (i) they first shall have been registered under the Securities Act of
1933, as amended (the "Act") and applicable state securities laws, or (ii)
Borrower shall have been furnished with an opinion of legal counsel (in form,
substance and scope acceptable to Borrower) to the effect that such sale or
transfer is exempt from the registration requirements of the Act. Each
certificate for Securities issuable pursuant to this Paragraph 7 that have not
been so registered and that have not been sold pursuant to an exemption that
permits removal of the legend, shall bear a legend substantially in the
following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE "SECURITIES")
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT") OR ANY OTHER STATE SECURITIES LAWS. THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY
NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES
UNDER THE ACT OR A VALID EXEMPTION THEREFROM. ANY SUCH SALE,
ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH APPLICABLE STATE
SECURITIES LAWS.
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<PAGE>
(c) Registration Rights.
(i) Demand Registration. In connection with the contemplated
public offering of the Company's Common Stock, Lender shall be entitled to
include all shares of Common Stock issuable to Borrower pursuant to this
Paragraph 7 in such registration statement. In connection therewith, Borrower
will use its best efforts to cause such Common Stock to be registered under the
Act in such contemplated public offering. Borrower shall not be required to
affect more than one registration pursuant to this Paragraph 7(c)(i).
(ii) Piggyback Registrations. If at any time subsequent to the
consummation of the contemplated public offering of the Company's Common Stock,
Borrower shall file with the Securities and Exchange Commission a registration
statement relating to an offering for its own account or the account of others
under the Act of any of its equity securities, and Lender's registration rights
have not been discharged in accordance with Paragraph 7(c)(i) hereof, Borrower
shall send to Lender written notice of such determination and, if within fifteen
(15) days from the date of such notice, Lender shall so request in writing,
Borrower shall include in such registration statement all or any part of the
Common Stock that Lender requests to be registered, except that if, in
connection with any underwritten public offering, the managing underwriter(s)
shall impose a limitation on the number of shares of Common Stock which may be
included in the registration statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate the distribution, then Borrower shall be obligated to include in such
registration statement only such limited portion of the Common Stock with
respect to which Lender has requested inclusion hereunder as the underwriter
shall permit.
8. Lender's Rights Upon Default.
Each of the following events shall constitute an "Event of Default"
and, upon the occurrence thereof, Lender shall have the option, without the
necessity of giving any prior written notice to Borrower, (1) to accelerate the
maturity of this Note and all amounts payable hereunder and demand immediate
payment thereof and (2) to exercise all of Lender's rights and remedies under
this Note or otherwise available at law or in equity:
(a) Borrower shall fail to pay the principal amount of the Note or
accrued interest thereon on the Maturity Date; provided, however, that in the
event Borrower shall be in default on March 15, 1999 pursuant to this paragraph
8(a) and has not provided Lender with the Notice of Borrower's Right to Extend
in accordance with paragraph 1 hereof, then Borrower's Right to Extend shall be
deemed exercised on March 15, 1999 and, if Borrower shall fail to pay the
principal amount of the Note or accrued interest thereon prior to such date,
then Borrower's Right to Extend shall be deemed exercised on April 15, 1999.
Lender shall be entitled to receive the Extension Shares, as defined in the
Securities Transfer Agreement executed by Borrower and Lender on October 15,
1998, upon each deemed exercise of Borrower's Right to Extend;
(b) Borrower shall admit an inability to pay its debts as they
mature, or shall make a general assignment for the benefit of any of its or
their creditors;
3
<PAGE>
(c) Proceedings in bankruptcy, or for reorganization of Borrower for
the readjustment of any of its or their debts, under the United States
Bankruptcy Code, as amended, or any part thereof, or under any other laws,
whether state or federal, for the relief of debtors, now or hereafter existing,
shall be commenced by Borrower or shall be commenced against Borrower and shall
not be dismissed within sixty (60) days of their commencement; and
(d) A receiver or trustee shall be appointed for Borrower or for any
substantial part of its assets, or any proceedings shall be instituted for the
dissolution or the full or partial liquidation of Borrower, and if such
appointment or proceedings are involuntary, such receiver or trustee shall not
be discharged within sixty (60) days of appointment, or such proceedings shall
not be discharged within sixty (60) days of their commencement, or Borrower
shall discontinue its business(es) or materially change the nature of its
business(es).
9. Application of Funds. All sums realized by Lender on account of this
Note, from whatever source received, shall be applied first to any fees, costs
and expenses (including attorney's fees) incurred by Lender, second to accrued
and unpaid interest, and then to principal.
10. Attorney's Fees and Costs. In the event that Lender engages an
attorney to represent it in connection with (a) any default by Borrower under
this Note, (b) any bankruptcy or other insolvency proceedings commenced by or
against Borrower and/or (c) any actual litigation arising out of or related to
any of the foregoing, then Borrower shall be liable to and shall reimburse
Lender on demand for all reasonable attorneys' fees, costs and expenses incurred
by Lender in connection with any of the foregoing.
11. Governing Law. This Note is made and delivered in the State of
Delaware and shall be construed and enforced in accordance with and governed by
the internal laws of the State of Delaware without regard to conflicts of laws
principles.
12. Miscellaneous.
(a) This Note is made and delivered in accordance with and subject
to the terms of the Subscription Agreement entered into by Lender and Borrower
on October 15, 1998.
(b) Borrower hereby waives protest, notice of protest, presentment,
dishonor, notice of dishonor and demand. To the extent permitted by law,
Borrower hereby waives and releases all errors, defects and imperfections in any
proceedings instituted by Lender under the terms of this Note.
(c) The rights and privileges of Lender under this Note shall inure
to the benefit of its successors and assigns. All representations, warranties
and agreements of Borrower made in connection with this Note shall bind
Borrower's successors and assigns.
4
<PAGE>
(d) If any provision of this Note shall for any reason be held to be
invalid or unen forceable, such invalidity or unenforceability shall not affect
any other provision hereof, but this Note shall be construed as if such invalid
or unenforceable provision had never been contained herein.
(e) The waiver of any Event of Default or the failure of Lender to
exercise any right or remedy to which it may be entitled shall not be deemed to
be a waiver of any subsequent Event of Default or of Lender's right to exercise
that or any other right or remedy to which Lender is entitled.
(f) The rights and remedies of Lender under this Note shall be in
addition to any other rights and remedies available to Lender at law or in
equity, all of which may be exercised singly or concurrently.
IN WITNESS WHEREOF, Borrower has duly executed this Promissory Note the
day and year first above written and has hereunto set hand and seal.
AVIATION HOLDINGS GROUP, INC.
By: /s/ Joseph J. Nelson
--------------------------
Joseph J. Nelson, President
<PAGE>
Exhibit 10.8(b)
SECURITIES TRANSFER AGREEMENT
SECURITIES TRANSFER AGREEMENT (this "Agreement"), dated as of October
15, 1998 by and between APP INVESTMENTS, INC., a Pennsylvania corporation
("APP"), the John G. Jacobs Trust, John G. Jacobs Trustee, a trust having a
mailing address at c/o Plotkin, Jacobs & Orlofsky, Ltd., 116 South Michigan
Avenue, Suite 1300, Chicago, IL 60603 ("Lender"), and, solely with respect to
Paragraphs 3 and 5.i., Aviation Holdings Group, Inc., a Delaware corporation
("Borrower").
WHEREAS, to induce Lender to provide Borrower with a loan in the
principal amount of Fifty Thousand ($50,000) Dollars, as evidenced by that
promissory note executed by Borrower on October 15, 1998 (the "Note"), APP and
Borrower (solely with respect to Paragraphs 3 and 5.i. hereof) hereby agree as
follows:
1. TRANSFER OF SHARES OF COMMON STOCK.
a. If Borrower (i) has not repaid all principal and accrued interest
due under the Note by March 15, 1999 (the "Maturity Date") or (ii) experiences
or commits any "Event of Default" (as that term is defined in Paragraph 8 of the
Note), then within five days thereafter, APP shall transfer 5,000 shares of
Borrower's common stock owned by APP to Lender (the "Default Shares").
b. If Borrower exercises its Right to Extend the Maturity Date (as
defined in Paragraph 1 of the Note) or if Borrower's Right to Extend is deemed
exercised (as described in Paragraph 8(a) of the Note), then within five days
thereafter, APP shall transfer 2,000 shares of Borrower's common stock owned by
APP to Lender for each month that the Maturity Date is extended (the "Extension
Shares," collectively with the Default Shares, the "Transferred Shares"),
provided that, the Extension Shares shall be transferred by APP to Lender in
addition to the Default Shares.
2. RESTRICTIONS ON TRANSFERRED SHARES.
a. The Transferred Shares may not be sold or transferred unless (i)
they first shall have been registered under the Securities Act of 1933, as
amended (the "Securities Act") and applicable state securities laws, or (ii)
Borrower shall have been furnished with an opinion of legal counsel (in form,
substance and scope acceptable to Borrower) to the effect that such sale or
transfer is exempt from the registration requirements of the Securities Act.
Each certificate for Transferred Shares that have not been so registered and
that have not been sold pursuant to an exemption that permits removal of the
legend, shall bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE (THE
"SECURITIES") HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR ANY OTHER
STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
1
<PAGE>
INVESTMENT PURPOSES ONLY AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER
THE SECURITIES ACT OR A VALID EXEMPTION THEREFROM. ANY SUCH
SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH
APPLICABLE STATE SECURITIES LAWS.
b. Pursuant to the Stock Pledge Agreement between Lender and APP
dated October 15, 1999, APP has pledged and will deliver certificates (the
"Certificates") in APP's name representing the Default Shares, the Extension
Shares and the shares of Borrower's common stock to be sold to Lender upon
exercise of the Stock Purchase Warrant dated October 15, 1998 (the "Warrant
Shares") to Plotkin within twenty (20) days of the date hereof. Each of the
Certificates shall contain the following legend:
THE SECURITIES HAVE BEEN PLEDGED AS COLLATERAL PURSUANT TO A STOCK
PLEDGE AGREEMENT (THE "PLEDGE AGREEMENT") BETWEEN APP INVESTMENTS, INC.
AND NANCY PLOTKIN DATED OCTOBER 15, 1998 AND MAY NOT BE OFFERED FOR
SALE, SOLD, TRANSFERRED OR ASSIGNED UNLESS THE PLEDGE HAS BEEN RELEASED
OR TERMINATED PURSUANT TO THE TERMS OF THE PLEDGE AGREEMENT.
Lender hereby agrees that if the Pledge is either released or terminated
pursuant to the terms of the Pledge Agreement, then Lender shall take all
appropriate actions to instruct Borrower's transfer agent to remove this legend
from each of the Certificates. APP hereby agrees that if Lender becomes entitled
to own the Default Shares, the Extension Shares or the Warrant Shares (or any
portion thereof), then APP shall take all appropriate actions to instruct
Borrower's transfer agent to remove this legend from each of the Certificates.
3. REGISTRATION RIGHTS.
a. Demand Registration. In connection with the contemplated public
offering of Borrower's common stock, Lender shall be entitled to require
Borrower to register for resale all of the Transferred Shares and the Warrant
Shares pursuant to the Securities Act. In connection therewith, Borrower will
use its best efforts to cause the Transferred Shares and the Warrant Shares to
be registered under the Securities Act in such contemplated public offering.
Borrower shall not be required to affect more than one registration pursuant to
this Paragraph 3.a.
b. Piggyback Registrations. If at any time subsequent to the
consummation of the contemplated public offering of Borrower's common stock,
Borrower shall file with the Securities and Exchange Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities and Lender's
registration rights have not been discharged in accordance with Paragraph 3(a)
hereof, Borrower shall send to Lender written notice of such determination and,
if within fifteen (15) days from the date of such notice, Lender shall so
request in writing, Borrower shall include in such registration statement all or
any part of the Transferred Shares and Warrant Shares that Lender requests to be
registered, except that if, in connection with any underwritten public offering,
the managing underwriter(s) shall impose a limitation on the number of shares of
common stock which may be
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<PAGE>
included in the registration statement because, in such underwriter(s)'
judgment, marketing or other factors dictate such limitation is necessary to
facilitate the distribution, then Borrower shall be obligated to include in such
registration statement only such limited portion of the Transferred Shares and
Warrant Shares with respect to which Lender has requested inclusion hereunder as
the underwriter shall permit.
4. ANTIDILUTION PROVISIONS. At any time prior to their transfer to
Lender, the number of Extension Shares and Default Shares shall be subject to
adjustment from time to time as provided in this Section 4. APP shall be
responsible for all rights and obligations provided in this Section 4.
a. Subdivision or Combination of Common Stock. If Borrower at any
time subdivides (by any stock split, stock dividend, recapitalization,
reorganization, reclassification or otherwise) the Common Stock into a greater
number of shares, then, after the record date for effecting such subdivision,
the number of Extension Shares and Default Shares shall be proportionately
increased. If Borrower at any time combines (by reverse stock split,
recapitalization, reorganization, reclassification or otherwise) its common
stock into a smaller number of shares, then, after the record date for effecting
such combination, the number of Extension Shares and Default Shares shall be
proportionately decreased.
b. Consolidation, Merger or Sale. In case Borrower after the date
hereof (a) shall consolidate with or merge into any other entity and shall not
be the continuing or surviving corporation of such consolidation or merger, (b)
shall permit any other entity to consolidate with or merge into Borrower and
Borrower shall be the continuing or surviving entity but, in connection with
such consolidation or merger, Borrower's common stock shall be changed into or
exchanged for stock or other securities of any other entity or cash or any other
property, (c) shall transfer all or substantially all of its properties or
assets to any other person or entity, or (d) shall effect a capital
reorganization or reclassification of its common stock, then, and in the case of
each such transaction, proper provision shall be made so that, upon the basis
and the terms and in the manner provided in this Agreement, Lender, at any time
after the consummation of such transaction, shall be entitled to receive, in
lieu of the common stock transferable immediately prior to such consummation,
the highest amount of securities, cash or other property to which Lender would
have been entitled as a shareholder upon such consummation if Lender had
received the Extension Shares or the Default Shares immediately prior thereto,
subject to adjustments (subsequent to such consummation) as nearly equivalent as
possible to the adjustments provided for in this Section 4. Borrower shall not
effect any such consolidation, merger, or sale of assets, or capital
reorganization or reclassification unless prior to the consummation thereof, APP
assumes by written instrument the obligations under this Section 4 and the
obligations to deliver to Lender such securities, cash or other property as, in
accordance with the foregoing provisions, Lender may be entitled to acquire.
c. Distribution of Assets. In case Borrower shall declare or make
any distribution of its assets to holders of its common stock as a partial
liquidating dividend, by way of return of capital or otherwise, other than a
dividend payable in shares of its common stock or in cash
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<PAGE>
out of earnings of Borrower, Lender shall be entitled to receive the amount of
cash, securities or other property that would have been payable to Lender had
Lender been the holder of such shares of Borrower's common stock on the record
date for the determination of stockholders entitled to such distribution.
d. Notice of Adjustment. Upon the occurrence of any event that
requires any adjustment of the number of Extension Shares or Default Shares,
Borrower shall give notice thereof to APP who shall give notice thereof to
Lender, which notice shall state the increase or decrease, if any, in the number
of Extension Shares and Default Shares, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
e. No Fractional Shares. No fractional shares of Borrower's common
stock shall be transferred to Lender, but upon any transfer of the Extension
Shares or the Default Shares, APP shall pay a cash adjustment in respect of any
fractional share that would otherwise be transferable in an amount equal to the
fractional share multiplied by the market price of a share of Borrower's common
stock on the date of such transfer.
f. Other Notices. In case at any time:
i. Borrower shall declare any dividend upon its common stock
payable in shares of stock of any class or make any other distribution (other
than dividends or distributions payable in cash out of retained earnings) to the
holders of its common stock;
ii. Borrower shall offer for subscription pro rata to the holders
of its common stock any additional shares of stock of any class or other rights;
iii. There shall be any capital reorganization of Borrower, or
reclassification of its common stock, or consolidation or merger of Borrower
with or into, or sale of all or substantially all its assets to, another entity;
or
iv. There shall be a voluntary or involuntary dissolution,
liquidation or winding-up of Borrower;
then, in each such case, Borrower shall give notice to Lender of (a) the date on
which the books of Borrower shall close or a record shall be taken for
determining the holders of its common stock entitled to receive any such
dividend, distribution or subscription rights, or for determining the holders of
its common stock entitled to vote in respect of any such transaction, and (b)
the date (or, if not then known, a reasonable approximation thereof by Borrower)
when such transaction shall occur. Such notice shall also specify the date on
which the holders of Borrower's common stock shall be entitled to receive such
dividend, distribution or subscription rights or to exchange their common stock
for stock or other securities or property deliverable upon consummation of such
transaction. Such notice shall be given at least 30 days prior to the record
date or the date on which Borrower's books are closed in respect thereto.
Failure to give any such notice or any defect therein shall not affect the
validity of any action referred to in clauses (i), (ii), (iii) and (iv) above.
4
<PAGE>
g. Certain Events. In case any event shall occur as to which paragraphs
(a), (b) or (c) of this Section 4 are not strictly applicable but the failure to
make any adjustment would not fairly protect the rights represented by this
Warrant in accordance with the essential intent of such provisions, the Company
shall give APP notice of such event, who shall in turn give notice thereof to
Lender as provided in Section 4(d) and shall make an appropriate adjustment in
the number of Extension Shares and Default Shares to preserve, without dilution,
the rights represented by this Agreement.
5. MISCELLANEOUS.
a. Governing Law. This Agreement shall be governed by and
interpreted in accordance with the laws of the State of Delaware without regard
to the principles of conflict of laws.
b. Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party.
c. Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
d. Severability. If any provision of this Agreement shall be invalid
or unenforceable in any jurisdiction, such invalidity or unenforceability shall
not affect the validity or enforceability of the remainder of this Agreement or
the validity or enforceability of this Agreement in any other jurisdiction.
e. Entire Agreement; Amendments. This Agreement and the Note
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein. No provision of this Agreement may be
waived or amended other than by an instrument in writing signed by the party to
be charged with enforcement.
f. Notices. Any notices required or permitted to be given under the
terms of this Agreement shall be sent by certified or registered mail (return
receipt requested) or delivered personally or by courier and shall be effective
three days after being placed in the mail, if mailed, or upon receipt or refusal
of receipt, if delivered personally or by courier, in each case addressed to a
party. The addresses for such communications shall be:
If to Borrower:
Aviation Holdings Group, Inc.
15675 Northwest 15th Avenue
Miami, FL 33169
Attn: Joseph J. Nelson
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<PAGE>
If to Lender:
John G. Jacobs, Trustee of the John G. Jacobs Trust
c/o Plotkin, Jacobs & Orlofsky, Ltd.
116 South Michigan Avenue, Suite 1300
Chicago, IL 60603
If to APP:
APP Investments, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
Attn: Andrew P. Panzo
Each party shall provide notice to the other party of any change in
address.
g. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
party shall assign this Agreement or any rights or obligations hereunder without
the prior written consent of the other.
h. Third Party Beneficiaries. This Agreement is intended for the
benefit of the parties hereto and their respective permitted successors and
assigns, and is not for the benefit of, nor may any provision hereof be enforced
by, any other person.
i. Further Assurances. Borrower hereby agrees to take all
appropriate actions reasonably requested by Lender or APP and necessary to
complete the transactions contemplated by the Pledge Agreement and this
Agreement, including but not limited to, issuing the appropriate instructions to
Borrower's transfer agent.
6
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreements to be duly
executed as of the date first above written.
APP INVESTMENTS, INC.
_____________________________________
Andrew P. Panzo, President
Solely With Respect to Paragraphs 3
and 5.i. hereof:
AVIATION HOLDINGS GROUP, INC.
_____________________________________
Joseph J. Nelson, President
AGREED TO AND ACCEPTED:
________________________________
John G. Jacobs, Trustee of the
John G. Jacobs Trust
7
<PAGE>
STOCK PLEDGE AGREEMENT
(Aviation Holdings Group, Inc. Common Stock)
This Stock Pledge Agreement (the "Agreement") is made this 15th day of
October, 1998, by APP Investments, Inc., a Pennsylvania corporation having
offices at Two Penn Center Plaza, Suite 605, Philadelphia, Pennsylvania 19102
("Pledgor"), in favor of the John G. Jacobs Trust, John G. Jacobs Trustee, a
trust having a mailing address at c/o Plotkin, Jacobs & Orlofsky, Ltd., 116
South Michigan Avenue, Suite 1300, Chicago, Illinois 60603 ("Pledgee").
B A C K G R O U N D
Pledgee has agreed to provide or has provided Aviation Holdings Group,
Inc., a Delaware corporation ("Borrower"), loans and/or advances of credit in an
aggregate amount of up to Fifty Thousand ($50,000.00) Dollars (collectively, the
"Loan") as evidenced by a promissory note of even date herewith executed by
Borrower in favor of Pledgee (the "Note"). As an inducement to Pledgee to make
the loan to Borrower, Pledgor granted Pledgee a Stock Purchase Warrant (the
"Warrant") on October 15, 1998, pursuant to which Pledgor agreed to sell fifteen
thousand (15,000) shares of Borrower's common stock owned by Pledgor to Pledgee
at an exercise price of $4.00 per share, and Pledgor, pursuant to a Securities
Transfer Agreement between Borrower, Pledgor and Plotkin of even date herewith
(the "Transfer Agreement"), agreed to transfer up to nine thousand (9,000)
shares of Borrower's common stock to Pledgee upon the occurrence of certain
events set forth in the Transfer Agreement. Pledgor's undertakings set forth in
the Transfer Agreement are hereinafter collectively referred to as the
"Obligations."
As collateral security for the Obligations, Pledgor is required to
pledge to Pledgee all of Pledgor's right, title and interest in and to the
Pledged Securities (as hereinafter defined).
NOW, THEREFORE, in consideration of the foregoing, and intending to be
legally bound hereby, and for good, valuable and sufficient consideration, the
receipt of which is hereby acknowledged, Pledgor agrees as follows:
1. Certain Definitions.
(a) The term "Pledged Securities" shall mean shares of common
stock of Borrower, owned legally or beneficially by Pledgor, which are evidenced
by stock certificates in the name of Pledgor in the amounts of 7,000, 2,000 and
15,000 shares of Borrower's common stock.
(b) The term "Event of Default" shall mean a default or an
event of default under this Agreement, the Transfer Agreement, or any other
instrument, document or agreement, which evidences or secures the Obligations.
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<PAGE>
2. Pledge.
(a) As security for the prompt satisfaction of the
Obligations, Pledgor hereby agrees to pledge, hypothecate, deliver and set over
to Pledgee within twenty (20) days of the date hereof, the Pledged Securities
and grants to Pledgee a lien on and security interest in and to the Pledged
Securities.
(b) Prior to the occurrence of an Event of Default, Pledgor
shall be entitled to all voting rights with respect to the Pledged Securities
and, for that purpose, Pledgee shall execute and deliver to Pledgor all
necessary proxies. Immediately and without further notice, upon the occurrence
of an Event of Default, whether or not the Pledged Securities shall have been
registered in the name of Pledgee or its nominee, Pledgee or its nominee shall
have the right to exercise all voting rights as to all of the Pledged Securities
and all other corporate rights and all conversion, exchange, subscription or
other rights, privileges or options pertaining thereto as if Pledgee or its
nominee were the absolute owner thereof including, without limitation, the right
to exchange any or all of the Pledged Securities upon the merger, consolidation,
reorganization, recapitalization or other readjustment of Pledgee thereof, or
upon the exercise by Pledgee of any right, privilege, or option pertaining to
any of the Pledged Securities and, in connection therewith, to deliver any of
the Pledged Securities to any committee, depository, transfer agent, registrar
or other designated agency upon such terms and conditions as it may determine,
all without liability except to account for property actually received by
Pledgee; but Pledgee shall have no duty to exercise any of the aforesaid rights
or privileges, or may delay in so doing.
(c) Prior to the occurrence of an Event of Default, Pledgor
shall be entitled to any and all regular cash dividends declared by the Pledgee
to be paid on account of the Pledged Securities; provided, however, that
immediately and without further notice, upon the occurrence of an Event of
Default, whether or not the Pledged Securities shall have been registered in the
name of Pledgee or its nominees, Pledgee or its nominee shall have the right to
any and all regular cash dividends paid on account of the Pledged Securities
which shall be delivered to Pledgee and may, at Pledgee's option, be applied on
account of the Obligations in such order and manner as Pledgee may elect.
(d) At any time following execution of this Agreement, if
Pledgor shall become entitled to receive or shall receive, in connection with
any of the Pledged Securities, any: (i) stock certificate, including, without
limitation, any certificate representing a stock dividend or in connection with
any increase or reduction of capital, reclassification, merger, consolidation,
sale of assets, combina tion of shares, stock split, spin-off or split-off; (ii)
option, warrant or right, whether as an addition to or in substitution or in
exchange for any of the Pledged Securities, or otherwise; or (iii) dividends or
distributions payable in property, including securities issued by an issuer
other than Pledgee; then, Pledgor shall accept the same as Pledgee's agent, in
express trust for Pledgee, and shall deliver the same forthwith to the Pledgee
in the exact form received with, as applicable, Pledgor's endorsement, or
appropriate stock powers duly executed in blank, (with signatures "bank
guaranteed") which the Pledgor hereby unconditionally agrees to make and/or
furnish, to be held by Pledgee, subject to the terms hereof, as part of the
Pledged Securities.
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<PAGE>
3. Remedies Upon an Event of Default.
Upon the occurrence of an Event of Default, Pledgee may
without demand of performance or other demand, advertisement, or notice of any
kind to or upon the Pledgor or any other person (all of which are, to the extent
permitted by law, hereby expressly waived), forthwith realize upon the Pledged
Securities or any part thereof which Pledgee is entitled to receive pursuant to
the terms of the Transfer Agreement or the Warrant Agreement and APP hereby
agrees to take all actions necessary to transfer the certificates representing
the Pledged Securities to the name of Pledgee.
4. Pledgor's Representations and Warranties. Pledgor represents
and warrants that:
(a) Pledgor has all requisite capacity and power to enter into
this Pledge, to pledge the Pledged Securities for the purposes described in
Paragraph 2(a) above, and to carry out the transactions contemplated by this
Pledge;
(b) Pledgor is the legal and beneficial owner of the Pledged
Securities;
(c) The execution and delivery of this Pledge, and the
performance of its terms, will not violate or constitute a default under the
terms of any agreement, indenture or other instrument, license, judgment,
decree, order or regulation, applicable to Pledgor or any of its property; and
(d) Upon the execution of this Pledge and the delivery to
Pledgee of the shares of Pledged Securities now held of record by Pledgor, this
Pledge shall create a valid first lien upon and perfected security interest in
the Pledged Securities and the cash and noncash proceeds thereof, subject to no
prior lien or subordinate lien, or agreement purporting to grant to any third
party a security interest in the property or assets of Pledgor which would
include the Pledged Securities.
5. Pledgor's Covenants. Pledgor hereby covenants that, until all
of the Obligations have been satisfied in full:
(a) Pledgor will not sell, convey, or otherwise dispose of any
of the Pledged Securities or any interest therein, or create, incur, or permit
to exist any pledge, mortgage, lien, charge, encumbrance or any security
interest whatsoever in or with respect to any of the Pledged Securities or the
proceeds thereof, other than that created hereby; and
(b) Pledgor will, at Pledgor's own expense, defend (engaging
counsel acceptable to Pledgee) Pledgee's right, title, special property and
security interest in and to the Pledged Securities against the claims of any
person, firm, corporation or other entity.
6. Release of Pledged Securities to Pledgor. Pledgee agrees to
release this Pledge and to deliver the Pledged Securities to Pledgor in the
following manner:
(a) If Borrower has satisfied the terms of the Note, including
the payment of all principal and accrued interest thereunder, on or before March
15, 1999, then Pledgee shall release 9,000 shares of the Pledged Securities to
Pledgor within five days of Borrower's satisfaction of the Note.
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<PAGE>
(b) If Borrower has satisfied the terms of the Note, including
the payment of all principal and interest thereunder, subsequent to March 15,
1999 but on or before April 15, 1999, then Pledgee shall release 2,000 shares of
the Pledged Securities to Pledgor within five days of Borrower's satisfaction of
the Note.
(c) If Pledgee does not exercise (and pay the exercise price
of) any portion of the Warrant granted on or before October 15, 2003, then
Pledgee shall release the remaining Pledged Securities to Pledgor by October 20,
2003.
7. Further Assurances. Pledgor shall at any time, and from time
to time, upon written request of Pledgee, execute and deliver such further
documents and do such further acts and things as Pledgee may reasonably request
to effect the purposes of this Pledge including, without limitation, delivering
to Pledgee, upon the occurrence of an Event of Default, irrevocable proxies with
respect to the Pledged Securities in form satisfactory to Pledgee. Until receipt
thereof, this Pledge shall constitute Pledgor's proxy to Pledgee or his nominee
to vote all shares of Pledged Securities then registered in Pledgor's name.
8. Termination of Pledge. Upon the satisfaction in full of all
Obligations and the satisfaction of all additional costs and expenses of Pledgee
as provided herein, this Pledge shall terminate and Pledgee shall deliver to
Pledgor, the Pledged Securities or so much thereof as shall not have been sold
or otherwise applied pursuant to this Pledge.
9. Miscellaneous.
(a) Beyond the exercise of reasonable care to assure the safe
custody of the Pledged Securities while held hereunder, Pledgee shall have no
duty or liability to preserve rights pertaining thereto and shall be relieved of
all responsibility for the Pledged Securities upon surrendering the Pledged
Securities or tendering surrender of it to Pledgor.
(b) The rights and remedies provided herein and in the
Transfer Agreement and any related instruments, agreements and documents are
cumulative and are in addition to and not exclusive of any rights or remedies
provided by law, including, without limitation, the rights and remedies of a
secured party under the Uniform Commercial Code, as enacted in any jurisdiction
where the Pledged Securities are deemed held.
(c) The provisions of this Pledge are severable, and if any
clause or provision shall be held invalid or unenforceable in whole or in part
in any jurisdiction and shall not in any manner affect such clause or provision
in any other jurisdiction or any other clause or provision in this Pledge in any
jurisdiction.
10. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been validly given, as of the date
delivered, if delivered personally, three days after being sent by registered or
certified mail (postage prepaid, return receipt requested) and one day
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<PAGE>
after dispatch by recognized overnight courier (provided delivery is confirmed
by the courier) to the parties at the following addresses (or at such other
address for a party as shall be specified by like change of address):
(a) If to Pledgee:
John G. Jacobs, Trustee of the John G. Jacobs Trust
c/o Plotkin, Jacobs & Orlofsky, Ltd.
116 South Michigan Avenue
Suite 1300
Chicago, IL 60603
(b) If to Pledgor:
APP Investments, Inc.
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
11. Governing Law. This Pledge shall be construed in accordance
with the substantive laws of the State of Delaware without regard to principles
of conflicts of laws and is intended to take effect as an instrument under seal.
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<PAGE>
12. Jurisdiction. The parties agree to the exclusive jurisdiction
of the Federal and State courts located in the Commonwealth of Pennsylvania in
connection with any matter arising hereunder, including the collection and
enforcement hereof.
IN WITNESS WHEREOF, Pledgor has executed this Stock Pledge Agreement as
of the day and year first above written.
APP INVESTMENTS, INC.
By: /s/ Andrew P. Panzo
-----------------------------
Andrew P. Panzo, President
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<PAGE>
Exhibit 10.10(a)
CONSIGNMENT AGREEMENT
BY AND BETWEEN
JET AVIATION TRADING, INC.
("CONSIGNEE")
AND
JET AVIONICS SYSTEMS, INC.
("OWNER")
<PAGE>
INDEX
PREAMBLE
ARTICLE 1 DEFINITIONS
ARTICLE 2 SUBJECT MATTER
ARTICLE 3 TERM OF AGREEMENT
ARTICLE 4 DELIVERY
ARTICLE 5 ACCEPTANCE AND STORAGE
ARTICLE 6 TITLE AND RISK
ARTICLE 7 INSURANCE/INDEMNIFICATION
ARTICLE 8 SELLING PRICE
ARTICLE 9 CONDITIONS OF SALE
-Standard Conditions of Sale
-CONSIGNEE to Comply with Laws
ARTICLE 10 REMUNERATION
ARTICLE 11 PARTS IMPROVED OPTION
ARTICLE 12 TAXES
ARTICLE 13 WARRANTY OF TITLE
ARTICLE 14 MATERIAL CERTIFICATION
ARTICLE 15 OWNER'S RIGHT OF ACCESS
ARTICLE 16 TERMINATION FOR INSOLVENCY
<PAGE>
ARTICLE 17 INCOMPLETE SALES AT TERMINATION
ARTICLE 18 REGISTRATION OF OWNER'S INTEREST
ARTICLE 19 FORCE MAJEURE
ARTICLE 20 CONFIDENTIALITY
ARTICLE 21 APPLICABLE LAW
ARTICLE 22 BROKERS AND FINDERS
ARTICLE 23 ASSIGNMENT
ARTICLE 24 NOTICES
ARTICLE 25 ALTERATIONS
ARTICLE 26 EXHIBITS
ARTICLE 27 SEVERABILITY
ARTICLE 28 HEADINGS
ARTICLE 29 NON-EXCLUSIVITY
ARTICLE 30 COUNTERPARTS
EXHIBIT A INVENTORY
<PAGE>
CONSIGNMENT AGREEMENT
THIS AGREEMENT is made this lst day of October, 1996, and effective as
of October 3, 1996, between JET AVIATION TRADING, INC., having its principal
place of business at 1170 N.W. 163rd Drive, Miami, FL 33169, (hereinafter
referred to as the "CONSIGNEE") and JET AVIONICS SYSTEMS, INC., having its
principal place of business at 1170 N.W. 163rd Drive, Miami, FL 33169
(hereinafter referred to as the "OWNER").
PREAMBLE
WHEREAS:
(a) The OWNER owns various spare commercial aircraft parts (hereinafter the
"Inventory") which it desires to sell; and,
2
<PAGE>
(b) The CONSIGNEE is in the business of selling spare commercial aircraft parts
and aircraft engine parts; and,
(c) The OWNER is desirous of appointing the CONSIGNEE as the exclusive consignee
of the Inventory for the purpose of the repair and sale thereof, and,
(d) The CONSIGNEE has represented to the OWNER that it has the staff, facilities
and financial security to carry out its proposed obligations as set out
below.
NOW, THEREFORE, in consideration of the premises and material covenants
herein contained, the parties hereto agree as follows:
OWNER: S.T.
------------------------
CONSIGNEE: /s/
-----------------------
3
<PAGE>
ARTICLE I - DEFINITIONS
(a) AGREEMENT - shall mean this Agreement and any exhibits and/or amendments
attached hereto.
(b) CURRENT LIST PRICE - shall mean the manufacturers current list price as
published from time to time by the manufacturer of the Inventory.
(c) INVENTORY - shall mean the spare commercial aircraft parts consigned to
CONSIGNEE for sales as listed in attached Exhibit "A" as amended from time
to time.
ARTICLE 2 - SUBJECT MATTER
OWNER may, at its sole discretion from time to time, upon prior written
notice, deliver to CONSIGNEE Inventory being the property of OWNER on
consignment for sale by CONSIGNEE. Each item of Inventory delivered to CONSIGNEE
hereunder shall be added to Exhibit "A" attached hereto, and such Exhibit "A"
<PAGE>
shall automatically be amended to constitute the Inventory for the purposes of
this Agreement. The failure of the parties, as a result of mistake, neglect or
inadvertence, to amend Exhibit "A" hereto shall not affect the validity of this
Agreement which shall cover all Inventory delivered by OWNER to CONSIGNEE during
the term of this Agreement even absent an appropriate amendment to Exhibit "A"
to reflect such delivery.
ARTICLE 3 - TERM OF AGREEMENT
This Agreement shall remain in force for a period of one (1) year,
commencing upon the execution of this Agreement, unless terminated prior to the
expiration date of the Agreement by either party giving a minimum of thirty (30)
days prior written notice to the other or by termination due to the breach of
any of the terms and conditions of this Agreement by either party hereto
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
4
<PAGE> 5
(hereinafter referred to as the "Term"). This Agreement may be extended for an
additional year by CONSIGNEE if it is not then in default hereunder.
Upon termination, the Inventory held by the CONSIGNEE shall be returned
to OWNER or to a facility at OWNER's direction. The expenses of such return,
shall be borne by, (a) the party providing the notice of termination, unless the
termination results from breach of this Agreement by the other party (in which
case, all return expenses shall be borne by the party in breach of this
Agreement); or, (b) the party in breach of this Agreement; or, (c) the CONSIGNEE
upon the expiration of this Agreement.
ARTICLE 4 - DELIVERY
OWNER shall deliver to CONSIGNEE at CONSIGNEE's facility at a mutually
agreed upon schedule, the Inventory specified in Article 2 hereof and shall be
responsible for payment of all costs incurred incident to such delivery.
ARTICLE 5 - ACCEPTANCE AND STORAGE
CONSIGNEE shall accept the Inventory and shall provide free of charge to
OWNER secure and proper storage at CONSIGNEE's warehouse in Miami or at such
other place as may be mutually agreed in writing between OWNER and CONSIGNEE.
CONSIGNEE will segregate the Inventory from all other goods held in the custody
of CONSIGNEE, and shall maintain a correct and up-to-date listing thereof.
CONSIGNEE shall maintain a suitably clean and neat place of business for
the storage and sale of the Inventory.
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
5
<PAGE>
ARTICLE 6 - TITLE AND RISK
(a) Title to any item of Inventory shall pass from OWNER to CONSIGNEE
immediately upon the delivery of any such item of Inventory by CONSIGNEE to
CONSIGNEE's customer, F.O.B. CONSIGNEE's premises, after an offer by such
customer to purchase any such item of Inventory, has been accepted by
CONSIGNEE.
(b) Risk of loss or damage to any item of Inventory shall pass from OWNER to
CONSIGNEE immediately upon delivery of such item to CONSIGNEE's facility.
ARTICLE 7 - INSURANCE/INDEMNIFICATION
CONSIGNEE shall be required to insure OWNER's interest in any Inventory
held by CONSIGNEE and OWNER shall not be required to reimburse CONSIGNEE for the
amount of any premium paid in respect of any insurance effected by CONSIGNEE.
ARTICLE 8 - SELLING PRICE
The prices at which the respective items of Inventory may be offered by
CONSIGNEE for sale shall be their fair market value as determined by CONSIGNEE
in good faith by comparison to Current List Price and according to prevailing
market conditions at the time of sale(s).
ARTICLE 9 - CONDITIONS OF SALE
STANDARD CONDITIONS OF SALE
Any loss sustained or any expenditure incurred by CONSIGNEE arising out
of the operation or enforcement of the sale of an item or items of Inventory
shall be for CONSIGNEE's account and shall not be recoverable from OWNER nor
made deductible from any money payable to OWNER under the terms and conditions
of this Agreement.
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
6
<PAGE>
Notwithstanding the above, in the event that an item of Inventory sold
by CONSIGNEE is rejected by CONSIGNEE's customer within a reasonable period of
time, CONSIGNEE may, at its option, accept return of such item for customer
credit. The returned item of Inventory shall be returned to stock and any
remuneration previously paid to OWNER in accordance with Article 10 hereof shall
be debited from OWNER's proceeds at the next reporting period following such
return.
CONSIGNEE TO COMPLY WITH LAWS
In relation to each sale of an item of Inventory, CONSIGNEE's customer
shall be responsible for obtaining any required authorization such as an Export
License, Import License, or any other required Government authorization,
including without limitation of the foregoing, any present or future rules,
regulations, provisions or requirements of the United States Government, or any
other government instrumentality or authority which prohibits or restricts the
sale or export of goods, services, data or know-how to certain countries.
CONSIGNEE's customer shall issue or make application for (as the case
may be) any requisite license, authority or permit in its own name and shall not
directly, or by implication, use the name of OWNER in any such issue or
application, except as where required by law, without OWNER's prior written
consent.
ARTICLE 10 - REMUNERATION
CONSIGNEE shall be entitled to retain by way of remuneration for the
services rendered by it to OWNER, an amount equivalent to a percentage of the
Net Sales Price of each item of Inventory sold by the CONSIGNEE pursuant to this
Agreement as follows:
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
7
<PAGE>
(a) Seventy-Five (75%) percent of the Net Sales Price to OWNER and Twenty-Five
(25%) percent of the Net Sales Price to CONSIGNEE. The Net Sales Price is
the Gross Sales Price less any costs involved if any item of Inventory is
required to be overhauled, certified or modified in order to be sold, as
outlined in Article 11 herein. All payments to OWNER by CONSIGNEE will be
made as set forth in subparagraph 10(d) hereof via company check in good
bank funds to the following:
(b) CONSIGNEE shall be responsible for any bad debts, (except where OWNER has
given prior written approval to terms of sale for promotional purposes) and
all administration and selling expenses incurred by CONSIGNEE including, but
not being limited to, warehousing, advertising, sales promotion, inspection,
preparation for shipment, sales analysis, performance reports and
accountancy.
(c) "Gross Sales Price" shall mean the actual sales price less any rebates,
discounts or allowances, including the cost of freight out, charged to the
customer of CONSIGNEE.
(d) CONSIGNEE shall prepare, at its cost and provide to OWNER a monthly report
which shall be delivered to OWNER no later than the tenth day of the next
succeeding month and which shall reflect each sale of the OWNER's Inventory
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
8
<PAGE> 9
held by CONSIGNEE, the gross amount of the sale, and the name of the
purchaser which may be identified with a vendor number for the convenience
of the parties. Payment for such sales shall be due five days after
submittal of the report but, in any event, no later than the fifteenth
(15th) day of the month next succeeding the month which the report covers.
(e) No later than the first anniversary of the execution date hereof, CONSIGNEE
shall pay to OWNER the amount of $225,000 less the amount of payments
previously made to OWNER hereunder for sales of Inventory under this
Article.
(f) Upon the execution hereof, the CONSIGNEE shall honor OWNER's subscription
for 600,000 shares of the CONSIGNEE's Common Stock. Such shares will be
issued upon delivery of OWNER's promissory note in the principal amount of
$175,000 payable together with accrued interest at the Applicable Federal
Rate for demand obligation in effect at the date this Consignment Agreement
is executed, as determined by the Internal Revenue Service, per annum, upon
demand. After the OWNER has received $500,000 in payments from CONSIGNEE
hereunder, CONSIGNEE may apply the next monies due OWNER hereunder to the
unpaid principal and interest due on said promissory note. (g) If CONSIGNEE
shall have made an initial public offering of equity securities during the
term hereof and shall have raised at such offering net proceeds to CONSIGNEE
of $5,000,000 or more, then CONSIGNEE shall pay to OWNER in exchange for all
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
9
<PAGE>
remaining Inventory the sum of $675,000 less all payments previously made to
OWNER hereunder.
ARTICLE 11 - PARTS IMPROVED OPTION
CONSIGNEE agrees to repair and/or overhaul the Inventory as may be
required in its opinion to put the Inventory in such a condition as to render it
saleable. Costs incurred in repairing and/or overhauling the Inventory shall be
deducted by CONSIGNEE in accordance with Article 10 hereof.
ARTICLE 12 - TAXES
Taxes imposed by any Federal, State or Local taxing authority within
the United States and payable as a result of any sale, use, delivery, storage,
or transfer of goods shall be borne by CONSIGNEE. All taxes imposed upon or
measured by the net income or gross revenues of OWNER shall be the
responsibility of OWNER.
ARTICLE 13 - WARRANTY OF TITLE
OWNER warrants that all Inventory consigned to CONSIGNEE under this
Agreement shall have marketable title, free and clear of all liens, claims and
encumbrances whatsoever. Further, OWNER warrants that it shall defend such title
forever to CONSIGNEE and CONSIGNEE's third party customer(s).
ARTICLE 14 - MATERIAL CERTIFICATION
OWNER certifies the following to CONSIGNEE:
(a) Each item of Inventory covered by this Agreement was produced by a
manufacturer holding an FAA Approved Production Inspection System issued
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
10
<PAGE>
under FAR 21, Sub Part F, or by a manufacturer holding an FAA Production
Certificate issued under FAR 21, Sub. Part G. Each item of Inventory was
manufactured by the prime manufacturer or its approved
manufacturing/supplier source holding one of the following
agreements/approvals; (i) a Fixed Quantity Licensee/Consignment Agreement,
or; (ii) an FAA/PMA Licensee Agreement, or; (iii) written approval for
Direct Ship Authority from the prime manufacturer. None of the items of
Inventory have been subjected to severe stress or heat (as in major
aircraft, engine failure, accident or fire); and,
(b) The Inventory shall be sold by CONSIGNEE in an "as is" condition and OWNER
makes no warranties, guarantees or representations of any kind, either
express or implied, statutory or otherwise, except as set forth herein, with
respect to the Inventory or any other equipment or parts delivered by OWNER
to CONSIGNEE hereunder including any items of Inventory overhauled/repaired
or recertified in accordance with Article 11 hereof, and
(c) OWNER shall certify and supply all applicable records, data and
certification identifying back-to-birth records for life limited and/or time
controlled items of Inventory, where applicable; and,
(d) All serialized and non-serialized items of Inventory (rotable, repairable
and/or engine) will be accompanied with traceability to a commercial
aviation regulated source,
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
11
<PAGE> 12
(e) In accordance with ATA Specification 106 and Federal Aviation Regulation
ss.21.321 Sub. Part L, all Airworthy items of Inventory which are Class II
products will be accompanied by FAA or airworthiness releases.
(f) Each rotable, repairable and/or engine items of Inventory that is certified
airworthy will be accompanied by its teardown/work report; and,
(g) Airworthiness release certificates, where applicable, will identify the FAA
repair station number and the signature of the approving inspector, as well
as all other pertinent information.
ARTICLE 15 - OWNER'S RIGHTS OF ACCESS
CONSIGNEE shall allow any duly authorized representative of OWNER the
right of free and unrestricted access during normal business hours to all
Inventory held by CONSIGNEE and shall provide all reasonable facilities for
inspection and audit of the said Inventory and of CONSIGNEE's records relative
to the receipt, storage and sale thereof. In the event that such audit discloses
a deficiency in the quantity of the Inventory, then CONSIGNEE shall have the
right of substitution of a part that is of equal or greater value or shall be
liable to pay compensation to OWNER at the minimal sales price for such item(s)
as previously agreed upon between the parties and in accordance with Article 8
herein.
ARTICLE 16 - TERMINATION FOR INSOLVENCY
CONSIGNEE hereby waives its right to assume or reject this Agreement in
the event that it is adjudicated a bankrupt unless it assumes this Agreement
within thirty (30) days of such adjudication which shall be determined by the
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
12
<PAGE>
entry of an order for relief in any bankruptcy, whether voluntary or
involuntary. CONSIGNEE further expressly consents to OWNER being granted relief
from the automatic stay provision under the Bankruptcy Code, 11 U.S.C. ss.362,
thirty (30) days after the aforesaid entry of an order for relief, unless within
such time an order has been entered by the bankruptcy court permitting CONSIGNEE
to assume this Agreement and, in connection with such assumption, curing any
defaults of CONSIGNEE pursuant to the terms of this Agreement.
ARTICLE 17 - INCOMPLETE SALES AT TERMINATION
OWNER will allow CONSIGNEE ninety (90) days from the date of receipt of
notice of termination to complete the deliveries of items(s) which were sold
prior to the receipt of notice of termination pursuant to Article 16 hereof.
ARTICLE 18 - REGISTRATION OF OWNER'S INTEREST
CONSIGNEE shall do all acts and things necessary, give all consents and
sign all documents required to be given or signed at OWNER's reasonable request
so as to ensure that OWNER's right to and interest in the Inventory is protected
as against the present or potential claims of any third party, including but not
limited to those of CONSIGNEE's creditors, mortgagees, financiers, security
holders and CONSIGNEE's related/associated companies, businesses or individuals,
AND FURTHER the said acts and things shall include, but not be limited to any
consents, statements or duly completed documents or forms required to register
OWNER's interest in the Inventory in any State or Federal registry of interest
in corporate, business or individual property, assets, stock in trade, shares or
any other interest in property of any kind howsoever held. This obligation shall
continue throughout the Term hereof and any holding over.
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
13
<PAGE>
ARTICLE 19 - FORCE MAIEURE
Neither OWNER nor CONSIGNEE shall be liable for damages for any delay or
failure to perform their respective obligations under this Agreement which are
due to causes beyond their control, including but not restricted to, acts of
God, acts of public enemies, acts of the Government, whether legal or illegal,
fires, floods, epidemics, quarantine restrictions, industrial disputes,
lockouts, strikes, work slow-downs, freight embargoes, or unusually severe
weather, provided however, that the party seeking to rely on such causes shall,
within seven (7) days, notify the other party in writing of the cause of any
such delay and such party shall make all reasonable efforts to reduce the effect
of such delay on the operation of this Agreement.
ARTICLE 20 - CONFIDENTIALITY
Each party agrees (except with the prior written consent of the other
party):
(a) not to disclose details of this Agreement to any third parties other than
its financial and legal advisers; and,
(b) to maintain confidentiality of all information exchanged between the
parties, including pricing information and other proprietary knowledge, held
as confidential between OWNER and OWNER's suppliers and CONSIGNEE and
CONSIGNEE's customers, and not to use such for the benefit of any third
party.
Such confidentiality shall survive the Term of this Agreement.
ARTICLE 21 - APPLICABLE LAW
The provisions of this Agreement and all rights and obligations
hereunder shall be governed by and construed in accordance with the laws of the
State of Florida.
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
14
<PAGE>
Both parties hereby agree that this Agreement shall be deemed to have
been made in the County of Dade, Florida, and that any suit, action or
proceeding arising out of or relating to this Agreement may be instituted in any
State or Federal court having its situs within the County of Dade, Florida and
each party hereby waives the personal service of any and all process and consent
that all such service of process may be made by certified mail, return receipt
requested, directed to the address set forth herein for each party. Any such
notice shall be effective and shall be deemed to have been given when received
at, or after refusal to receive, at the addresses set forth herein or at such
other substitute addresses provided in accordance with this Article.
ARTICLE 22 - BROKERS AND FINDERS
CONSIGNEE and OWNER each agree that there are no third parties involved
as brokers and finders in this transaction. OWNER indemnifies CONSIGNEE from
liability for any fees, commissions or other claims made, including all legal
costs, due to such claims caused by the indemnifying party.
ARTICLE 23 - ASSIGNMENT
This Agreement shall not be assigned in whole or in part by either
party hereto without the prior written consent of the other party.
ARTICLE 24 - NOTICES
All notices or requests under this Agreement shall be in writing and
shall be deemed to have been adequately given when received by the party to whom
such notice or request is given. Notices may be delivered personally, by first
class mail, postage prepaid, by reputable courier or by facsimile transmission
and shall be addressed as follows:
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
15
<PAGE>
If to CONSIGNEE: Jet Aviation Trading, Inc.
1170 N.W. 163rd Drive
Miami, FL 33169
If to OWNER: Jet Avionics Systems, Inc.
1170 N.W. 163rd Drive
Miami, FL 33169
or to such other address as either party may designate, from time to time, by
written notice to the other party.
ARTICLE 25 - ALTERATIONS
This Agreement shall be effective only when duly signed by both parties
hereto. It contains the entire understanding between the parties and may not be
changed, modified or altered, nor any of its provisions waived, except by an
agreement in writing signed by the parties hereto. All prior agreements or
understandings between the parties in connection with the subject matter of this
Agreement are superseded hereby and the waiver of any term of condition herein
by either party shall not be deemed a waiver of any subsequent term or condition
hereof.
ARTICLE 26 - EXHIBITS
Any Exhibits to this Agreement or side letters or referring to this
Agreement and duly agreed to by both parties in writing shall automatically
become a part of this Agreement and unless specifically stated otherwise, the
provisions of this Agreement shall prevail in the event of any inconsistency.
ARTICLE 27 - SEVERABILITY
In the event that any provision of this Agreement is rendered void,
invalid, or unenforceable in a certain jurisdiction, then such provision (or
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
16
<PAGE>
part thereof) may be severed from this Agreement without affecting the remaining
provisions hereof, as long as such severance does not have a material adverse
affect on the performance of this Agreement.
ARTICLE 28 - HEADINGS
The headings to the clauses of this Agreement are for the purpose of
reference only and in no way define, limit or describe the scope of intent of
this Agreement.
ARTICLE 29 - NON-EXCLUSIVITY
The relationship of OWNER and CONSIGNEE under this Agreement is
non-exclusive. Both parties reserve the right to enter into agreements with
other parties for the provision of similar or identical services at any time
during the Term of this Agreement. Further, nothing herein shall authorize
either party to hold itself out as acting for or on behalf of the other party.
ARTICLE 30 - COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall constitute an original but all of which taken
together shall constitute one and the same instrument. A facsimile signature on
any counterpart hereto shall be deemed an original for all purposes.
IN WITNESS WHEREOF, the parties hereto by their duly authorized
officers have executed this Agreement as of the day and year first above
written.
FOR: JET AVIATION TRADING, INC.
BY: /s/ Joseph J. Nelson
----------------------------
NAME: Joseph J. Nelson
- --------------------------------
TITLE: President & C.E.O.
- --------------------------------
DATE: October 1, 1996
- --------------------------------
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
17
<PAGE>
FOR: JET AVIONICS SYSTEMS, INC.
BY: /s/ Sharon Taoz
------------------------------
NAME: Sharon Taoz
- ----------------------------------
TITLE: President
- ----------------------------------
DATE: October 1, 1996
OWNER: S.T.
------------------------
CONSIGNEE: /s/
---------------------
18
<PAGE>
EXHIBIT "A"
INVENTORY
SEE DOCUMENTS ATTACHED HERETO AND MADE A PART HEREOF
19
<PAGE>
Exhibit 10.10(b)
CONSIGNMENT, CANCELLATION AND PURCHASE AGREEMENT
This agreement is made this 29th day of August, 1997 between Jet
Aviation Trading, Inc. having its principal place of business at 15675 N.W. 15th
Avenue, Miami, FL 33167, (hereinafter referred to as "CONSIGNEE") and Jet
Avionics Systems, Inc., having its principal place of business at 18181 N.E.
31st Court, Suite 1907, North Miami Beach, FL 33160 (hereinafter referred to as
the "OWNER").
RECITALS:
WHEREAS, OWNER and CONSIGNEE entered into a Consignment Agreement dated
October 1, 1996, (the "Consignment Agreement") whereby OWNER consigned to
CONSIGNEE that certain Inventory defined in the Consignment Agreement for sale
by Consignee for the benefit of OWNER and CONSIGNEE; and
WHEREAS, OWNER and CONSIGNEE have determined that CONSIGNEE shall
purchase the remaining unsold Inventory from Owner, as set forth on Exhibit "A",
attached hereto under the terms and conditions set forth herein;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Purchase: CONSIGNEE shall purchase all remaining unsold
Inventory originally consigned to CONSIGNEE under the
Consignment Agreement held by it on the 31st day of August,
1997 (the "Closing Date").
2. Purchase Price: The purchase price ("Purchase Price") for the
payment of such purchased Inventory shall be $675,000.
3. Payment: Payment of the Purchase Price shall be as follows:
a. $340,000 of the Purchase Price has already been paid
to OWNER in cash and equity in CONSIGNEE.
b. CONSIGNEE shall apply the outstanding balance of
principal and accumulated interest of OWNER's
promissory note to CONSIGNEE in the original
principal amount of $175,000 dated October 1,1 996,
originally given for its subscription of shares of
stock of CONSIGNEE to the Purchase Price; and
-1-
<PAGE>
c. The remainder of the Purchase Price shall be paid by
issuing shares of CONSIGNEE's common stock at the
rate of $2.00 of the Purchase Price for each share
of common stock of Consignee. Owner acknowledges
that such shares of common stock have not been
registered for sale under the laws of the United
States or any state. Owner agrees to execute a
Subscription Agreement in the form attached hereto
as Exhibit "B".
4. Title: At closing, OWNER will execute a Warranty Bill of Sale
transferring marketable title to all of the remaining
Inventory to CONSIGNEE free and clear of all liens, claims and
encumbrances whatsoever. Further, OWNER warrants that it shall
defend such title forever to CONSIGNEE and CONSIGNEE's third
party customers.
5. Taxes: Taxes imposed by any federal, state or local taxing
authority within the United States and payable as a result of
the sale of the Inventory shall be borne by OWNER.
6. Material Certification: OWNER certifies the following to
CONSIGNEE:
(a) Each item of Inventory covered by this Agreement was
produced by a manufacturer holding an FAA Approved
Production Inspection System issued under FAR 21,
Sub Part F, or by a manufacturer holding an FAA
Production Certificate issued under FAR 21, Sub.
Part G. Each item of Inventory was manufactured by
the prime manufacturer or its approved
manufacturing/supplier source holding one of the
following agreements/approvals; (i) a Fixed Quantity
Licensee/Consignment Agreement, or; (ii) an FAA/PMA
Licensee Agreement, or; (iii) written approval for
Direct Ship Authority from the prime manufacturer.
None of the items of Inventory have been subjected
to severe stress or heat (as in major aircraft,
engine failure, accident or fire). Any part found
not to comply with the standards of this paragraph 6
may, at Consignee's option, either be returned to
Owner or disposed of in accordance with the
appropriate regulatory standards; and,
(b) The Inventory shall be sold by OWNER in an "as is"
condition and OWNER makes no warranties, guarantees
or representations of any kind, either express or
implied, statutory or otherwise, except as set forth
herein, with respect to the Inventory or any other
equipment or parts delivered by OWNER to CONSIGNEE
hereunder including any items of Inventory
overhauled/repaired or recertified; and
-2-
<PAGE>
(c) All serialized and non-serialized items of Inventory
(rotable, repairable and/or engine) will be
accompanied with traceability to a commercial
aviation regulated source.
(d) Airworthiness release certificates, where applicable,
will identify the FAA repair station number and the
signature of the approving inspector, as well as all
other pertinent information.
7. Confidentiality: Each party agrees (except with the prior
written consent of the other party):
(a) not to disclose details of this Agreement to any
third parties other than its financial and legal
advisers; and,
(b) to maintain confidentiality of all information
exchanged between the parties, including pricing
information and other proprietary knowledge, held as
confidential between OWNER and OWNER's suppliers and
CONSIGNEE and CONSIGNEE's customers, and not to use
such for the benefit of any third party.
Such confidentiality shall survive the Term of this
Agreement.
8. Applicable Law: The provisions of this Agreement and all
rights and obligations hereunder shall be governed by and
construed in accordance with the laws of the State of
Florida. Both parties hereby agree that this Agreement shall
be deemed to have been made in the County of Dade, Florida,
and that any suit, action or proceeding arising out of or
relating to this Agreement may be instituted in any State or
Federal court having its situs within the County of Dade,
Florida and each party hereby waives the personal service of
any and all process and consent that all such service of
process may be made by certified mail, return receipt
requested, directed to the address set forth herein for each
party. Any such notice shall be effective and shall be deemed
to have been given when received at, or after refusal to
receive, at the addresses set forth herein or at such other
substitute addresses provided in accordance with this
Article.
9. Brokers and Finders: CONSIGNEE and OWNER each agree that there
are no third parties involved as brokers and finders in this
transaction. OWNER indemnifies CONSIGNEE from liability for
any fees, commissions or other claims made, including all
legal costs, due to such claims caused by the indemnifying
party.
10. Assignment: This Agreement shall not be assigned in whole or
in part by either party hereto without the prior written
consent of the other party.
-3-
<PAGE>
11. Notices: All notices or requests under this Agreement shall be
in writing and shall be deemed to have been adequately given
when received by the party to whom such notice or request is
given. Notices may be delivered personally, by first class
mail, postage prepaid, by reputable courier or by facsimile
transmission and shall be addressed as follows:
If to CONSIGNEE: Jet Aviation Trading, Inc.
15675 N.W. 15th Avenue
Miami, FL 33169
Fax (305) 624-2944
If to OWNER: Jet Avionics Systems, Inc.
18181 N.E. 31st Court, Suite 1907
North Miami, FL 33160
Fax (305) 933-1635
or to such other address as either party may designate, from time to
time, by written notice to the other party.
12. Alterations: This Agreement shall be effective only when duly
signed by both parties hereto. It contains the entire
understanding between the parties and may not be changed,
modified or altered, nor any of its provisions waived, except
by an agreement in writing signed by the parties hereto. All
prior agreements or understandings between the parties in
connection with the subject matter of this Agreement are
superseded hereby and the waiver of any term of condition
herein by either party shall not be deemed a waiver of any
subsequent term or condition hereof.
13. Exhibits: Any Exhibits to this Agreement or side letters or
referring to this Agreement and duly agreed to by both parties
in writing shall automatically become a part of this Agreement
and unless specifically stated otherwise, the provisions of
this Agreement shall prevail in the event of any
inconsistency.
14. Severability: In the event that any provision of this
Agreement is rendered void, invalid, or unenforceable in a
certain jurisdiction, then such provision (or part thereof)
may be severed from this Agreement without affecting the
remaining provisions hereof, as long as such severance does
not have a material adverse affect on the performance of this
Agreement.
15. Headings: The headings to the clauses of this Agreement are
for the purpose of reference only and in no way define, limit
or describe the scope of intent of this Agreement.
-4-
<PAGE>
16. Non-Exclusivility: The relationship of OWNER and CONSIGNEE
under this Agreement is non-exclusive. Both parties reserve
the right to enter into agreements with other parties for the
provision of similar or identical services at any time before
or after the Closing Date. Further, nothing herein shall
authorize either party to hold itself out as acting for or on
behalf of the other party.
17. Counterparts: This Agreement may be executed simultaneously in
two or more counterparts, each of which shall constitute an
original but all of which taken together shall constitute one
and the same instrument. A facsimile signature on any
counterpart hereto shall be deemed an original for all
purposes.
IN WITNESS WHEREOF, the parties hereto by their duly authorized
officers have executed this Agreement as of the day and year first above
written.
JET AVIATION TRADING, INC.
BY:/s/ Joseph J. Nelson
--------------------------------
JET AVIONICS SYSTEMS, INC.
BY:/s/ Sharon Taoz
--------------------------------
-5-
<PAGE>
BILL OF SALE
FOR VALUABLE CONSIDERATION, receipt of which is here acknowledged, Jet
Avionics Systems, Inc. ("Seller") does hereby grant, bargain, sell, assign,
transfer and deliver to Jet Aviation Trading, Inc. ("Purchaser") all of Seller's
right, title, and interest in and to the goods and chattels which are listed on
Exhibit "A" attached to this bill of sale.
TO HAVE AND TO HOLD unto the Purchaser, its successors and assigns
forever.
And the Seller does, for itself, its successors, and assigns, covenant
to and with the Purchaser, its successors and assigns that the Seller is the
lawful owner of the said goods and chattels; that they are free from all
encumbrances; that the Seller has good right to sell the same aforesaid, and
that Seller will warrant and defend the transfer of the goods and chattels
hereby made, unto the Purchaser, its successors and assigns against the lawful
claims and demands of all persons whomsoever.
IN WITNESS WHEREOF, the Seller has caused this document to be executed
in its name and its corporate seal affixed by its proper officers thereto duly
authorized this 29th day of August, 1997.
Signed, sealed and delivered JET AVIONICS SYSTEMS, INC.
in the presence of: Seller:
/s/ Zvi Mosite /s/ Sharon Taoz
- ------------------------------ -------------------------------------
Witness (Sign Name) Sharon Taoz, President
Zvi Mosite
- ------------------------------
(Print Name of Witness)
<PAGE>
Exhibit 10.11
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into as of ________________, 1999,
by and between AVIATION HOLDINGS GROUP, INC., a Delaware corporation (the
"Company"), and _______________________ (the "Indemnitee").
PRELIMINARY STATEMENTS
WHEREAS, the Company desires to retain the services of the Indemnitee
as a director, officer, employee and/or agent of the Company;
WHEREAS, Section 607.0850 of the Florida Business Corporation Act (the
"Act") provides a non-exclusive statutory basis for the indemnification of
directors, officers, employees and agents of a Florida corporation and
authorizes agreements between the Company and its directors, officers, employees
and agents with respect to indemnification of such individuals.
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons so that they will
serve or continue to serve the Company free from undue concern that they will
not be so indemnified, and the Indemnitee is wiling to serve, continue to serve
and to take on additional service for or on behalf of the Company on the
condition that he be so indemnified; and
WHEREAS, in order to induce the Indemnitee to serve or to continue to
serve as a director, officer, employee and/or agent of the Company and/or a
subsidiary of the Company, the Company has determined and agreed to enter into
this agreement with the Indemnitee, and the Company and the Indemnitee agree as
follows:
1. Indemnification of Indemnitee. The Company hereby agrees to hold
harmless and indemnify the Indemnitee to the fullest extent authorized or
permitted by the provisions of the Florida Statute, or by any amendment thereof
or other statutory provision authorizing or permitting such indemnification
adopted after the date hereof that has the effect of broadening (but not
narrowing) the scope of indemnification provided under the Florida Statute as it
exists as of the date hereof.
2. Additional Indemnification. In addition to any other indemnification
to which the Indemnitee may be entitled pursuant to the Florida Statute, the
Company's Articles of Incorporation (the "Articles") or Bylaws (the "Bylaws"),
or otherwise, and subject only to the limitation set forth in Section 3 hereof,
the Company hereby further agrees to hold harmless and
indemnify the Indemnitee against any and all costs and expenses (including
trial, appellate and other attorneys' fees), judgments, fines, penalties and
amounts paid in settlement, actually and reasonably incurred by the Indemnitee
in connection with any threatened, pending or completed claim, action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
an action by or in the right of the
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Company or a corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise or by or in the right of any other person) to which the
Indemnitee is, was or at any time becomes a party, or is threatened to be made a
party, by reason of the fact that the Indemnitee is, was or at any time becomes
a director, officer, employee or agent of the Company, or is or was serving or
at any time serves at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise. Notwithstanding any other provision
of this Agreement, the Company shall pay and reimburse all expenses incurred by
Indemnitee in connection with his appearance as a witness or other participation
in a proceeding at a time when he is not a named defendant or respondent in the
proceeding.
3. Limitations on Additional Indemnification. No indemnification
pursuant to Section 2 hereof shall be paid by the Company if a judgment (after
exhaustion of all appeals) or other final adjudication determines that the
Indemnitee's actions, or omissions to act, were material to the cause of action
so adjudicated and constitute:
a. a violation of criminal law, unless the Indemnitee had
reasonable cause to believe his conduct was lawful; or had no reasonable cause
to believe his conduct was unlawful;
b. a transaction from which the Indemnitee received an
improper personal benefit within the meaning of Section 607.0850(7)(b) of the
Florida Statute;
c. in the case of a director, a circumstance under which the
liability provisions of Section 607.0834 of the Florida Business Corporation Act
are applicable; or
d. willful misconduct or a conscious disregard for the best
interests of the Company in a proceeding by or in the right of the Company to
procure a judgment in its favor or in a proceeding by or in the right of a
shareholder of the Company.
4. Disbursement/Repayment of Expenses. In addition to the prompt
payment of any indemnification to which the Indemnitee may be entitled, upon the
demand of the Indemnitee, the Company shall promptly (and in any event within
five (5) business days after written demand therefor) advance to or reimburse
the Indemnitee for all reasonable expenses (including, without limitation,
trial, appellate and other attorneys' fees, court costs, judgments, fines,
penalties, amounts paid in settlement and other payments) that the Indemnitee
may incur in responding to, investigating, defending, settling or appealing any
claim, action, suit or proceeding for which it reasonably appears that the
indemnitee may be entitled to indemnification from the Company, either pursuant
to this Agreement, the Florida Statute, the Articles, the Bylaws or otherwise.
The Indemnitee agrees to reimburse the Company for all such expenses in the
event, and only to the extent, that it shall be ultimately determined that the
Indemnitee is not entitled to be indemnified by the Company for such expenses
under the provisions of Section 3 of this Agreement. Such undertaking to
reimburse the Company for amounts advanced if it is ultimately determined that
the Indemnitee is not entitled to be indemnified by the Company is an unlimited
general, unsecured and interest free obligation of the Indemnitee.
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<PAGE>
5. Indemnification Procedures.
a. Payment/Determination of Indemnification. Upon any request from
the Indemnitee for indemnification from the Company, whether pursuant to this
Agreement, the Florida Statute, the Articles, the Bylaws or otherwise, the
Company shall promptly pay the full amount of such requested indemnification. If
the Company's Board of Directors (the "Board") reasonably believes that all or
any portion of such indemnification pursuant to this Agreement is prohibited by
Section 3 hereof, the Company shall in any event promptly pay the amount of such
indemnification if any, that may reasonably then be paid and shall promptly make
or cause to be made a determination (the "Determination") of whether the payment
of the balance is limited by Section 3 hereof. Such Determination shall be made
in the following order or preference:
(i) by the Board of Directors by majority vote or consent of a
quorum consisting of directors who are not, at the time of the Determination,
named parties to such action, suit or proceeding ("Disinterested Directors");
or
(ii) if such a quorum of Disinterested Directors cannot be
obtained by majority vote or consent of a committee duly designated by the Board
(in which designation all directors, whether or not Disinterested Directors, may
participate) consisting solely of two or more Disinterested Directors; or
(iii) if such a committee cannot be established, by the opinion
of independent outside legal counsel employed by the Company; or
(iv) if such legal opinion cannot be obtained, by a majority vote
or consent of a quorum of shareholders who are not parties to such action, suit
or proceedings or, if not such quorum is obtainable, by a majority vote of such
shareholders.
b. Presumptions and Effect of Certain Proceedings. In making a
Determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making the Determination shall presume that
Indemnitee is entitled to indemnification under this Agreement and the Company
shall have the burden of proof to overcome that presumption in connection with
the making by any person, persons or entity of any Determination contrary to
that presumption. The termination of any claim, action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, be determinative of or create a
presumption that the Indemnitee is not entitled to indemnification or
reimbursement of expenses hereunder or otherwise.
c. Reliance as Safe Harbor. For purposes of any Determination
hereunder, the Indemnitee shall be deemed to have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company; or with respect to any criminal action or proceeding, to have had
reasonable cause to believe his conduct was lawful, or no reasonable cause to
believe his conduct was unlawful; if his action is based on information,
opinions, reports, or statements, including financial statements and other
financial data, prepared or presented by one or more officers or employees of
the Company whom the
3
<PAGE>
Director reasonably believes to be reliable and competent in such matters
presented; legal counsel, public accountants, or other persons as to matters the
Director reasonably believes are within the persons' professional or expert
competence; or a committee of the Board of Directors of which he is not a member
if the Director reasonably believes the committee merits confidence. The term
"another enterprise" as used in this Section 5(c) shall mean any other
corporation or any partnership, joint venture, trust, employee benefit plan or
other enterprise of which the Indemnitee is or was serving at the request of the
Company as a director, officer, partner, trustee, employee or agent. The
provisions of this Section 5(c) shall not be deemed to be exclusive or to limit
in any way the other circumstances in which the Indemnitee may be deemed to have
met the applicable standard of conduct set forth herein.
d. Success on Merits or Otherwise. Notwithstanding any other
provision for this Agreement, to the extent that the Indemnitee has been
successful on the merits or otherwise in defense of any action, suit or
proceeding described herein, or in defense of any claim, issue or matter
therein, he shall be indemnified against all costs and expenses (including
trial, appellate and other attorneys' fees) actually and reasonably incurred by
him in connection with the investigation, defense, settlement or appeal thereof.
For purposes of this Section 5(d), the term "successful on the merits or
otherwise" shall include, but not be limited to, (i) any termination,
withdrawal, or dismissal (with or without prejudice) of any claim, action, suit
or proceeding against the Indemnitee without any express finding of liability or
guilt against him, (ii) the expiration of 90 days after the making of any claim
or threat of an action, suit or proceeding without the institution of the same
and without any promise of payment made to induce a settlement, or (iii) the
settlement of any action, suit or proceeding pursuant to which the Indemnitee
pays less than $15,000 in settlement.
e. Partial Indemnification or Reimbursement. If the Indemnitee
is entitled under any provision of this Agreement to indemnification and/or
reimbursement by the Company for some or a portion of the costs and expenses
(including trial, appellate and other attorneys' fees) judgments, fines,
penalties or amounts paid in settlement by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any action specified herein, but
not, however, for the total amount thereof, the Company shall nevertheless
indemnify and/or reimburse the Indemnitee for the portion thereof to which the
Indemnitee is entitled. The party or parties making the Determination shall
determine the portion (if less than all) of such claims, damages, expenses
(including trial, appellate and other attorneys' fees), judgments, fines or
amounts paid in settlement for which the Indemnitee is entitled to
indemnification and/or reimbursement under this Agreement.
f. Costs. All costs of making any Determination required by
this Section 5 shall be borne solely by the Company, including, but not limited
to, the costs of legal counsel, proxy solicitations and judicial determinations.
The Company shall also be solely responsible for paying (i) all reasonable
expenses incurred by the Indemnitee to enforce this Agreement including trial,
appellate and other attorneys' fees and costs; and (ii) all costs of defending
any suits or proceedings challenging payments to the Indemnitee under this
Agreement including trial, appellate and other attorneys' fees and costs.
4
<PAGE>
g. Timing of the Determination. The Company shall use its best
efforts to make the Determination contemplated by this Section 5 promptly, but
in all events within the following time periods:
i. if the Determination is to be made by the Board or a committee
thereof, such Determination shall be made not later than 30 days after a written
request for a Deermination (a "Request") is delivered to the Company by the
Indemnitee;
ii. if the Determination is to be made by the Company's outside
independent legal counsel, such Determination shall be made not later than 30
days after a Request is delivered to the Company by the Indemnitee; and
iii. if the Determination is to be made by the Company's
shareholders, such Determination shall be made not later than 90 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time period shall
constitute a Determination that full indemnification is not limited or
prohibited by Section 3 hereof.
h. Shareholder Vote on Determination. In connection with each
meeting at which a Shareholder Determination will be made, the Company shall
solicit proxies that expressly include a proposal to indemnify or reimburse the
Indemnitee. Subject to the fiduciary duties of its members under applicable law,
the Board will not recommend against Indemnification or reimbursement in any
proxy statement relating to the proposal to indemnify or reimburse the
Indemnitee.
i. Right of Indemnitee to Appeal on Adverse Determination by Board
or Committee. If a Determination is made by the Board or a committee
thereof that all or any portion of a request for indemnification pursuant to
this Agreement is prohibited by Section 3 hereof, then upon the written request
of the Indemnitee, the Company shall cause a new Determination to be made by the
Company's shareholders at the next regular or special meeting of shareholders.
Such Determination by the Company's shareholders shall be binding and conclusive
for all purposes of this Agreement, but shall not preclude the Indemnitee from
seeking court-ordered indemnification or reimbursement pursuant to any provision
of the Florida Statutes or otherwise.
j. Right of Indemnitee to Select Forum for Indemnification. If at
any time subsequent to the date of this Agreement, "Continuing Directors" (as
defined below) do not constitute a majority of the members of the Board, or
there is otherwise a change in control of the Company (as contemplated by Item
403(c) of Securities and Exchange Commission Regulation S-K), then upon the
request of the Indemnitee, the Company shall cause the Determination required by
this Section 5 to be made by special legal counsel designated by the Indemnitee
and approved by the Board (which approval shall not be unreasonably withheld),
which counsel shall be deemed to satisfy the requirements of Section 5(a)(iii)
hereof. If none of the legal counsel selected by the Indemnitee
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<PAGE>
are willing and/or able to make the Determination, then the Company shall cause
the Determination to be made a majority vote or consent of a Board committee
consisting solely of Continuing Directors. For purposes of this Agreement, a
"Continuing Director" means either a member of the Board at the date of this
Agreement or a person nominated to serve as a member of the Board by a majority
of the then Continuing Directors.
k. Access by the Indemnitee to Determination. The Company shall
afford to the Indemnitee and his representative ample opportunity to present
evidence of the facts upon which the Indemnitee relies for indemnification or
reimbursement, together with other information relating to any requested
Determination. The Company shall also afford the Indemnitee the reasonable
opportunity to include such evidence and information in any Company proxy
statement relating to a shareholder Determination.
6. Contribution.
a. If the indemnification provided in Sections 1 and 2 hereof is
unavailable and may not be paid to the Indemnitee for any reason other than
those set forth in Section 3 hereof, then in respect of any threatened, pending
or completed action, suit or proceeding in which the Company is jointly liable
with the Indemnitee (or would be joined in such action, suit or proceeding), the
Company shall contribute to the amount of expenses, judgments, fines and
settlements paid or payable by the Indemnitee in such proportion as is
appropriate to reflect (i) the relative benefits received by the Company on the
one hand and the Indemnitee on the other hand from the transaction from which
such action, suit or proceeding arose, and (ii) the relative fault of the
Company on the one hand and of the Indemnitee on the other in connection with
the events that resulted in such expenses, judgments, fines or settlement
amounts, as well as any other relevant equitable considerations. The relative
fault of the Company on the one hand and of the Indemnitee on the other shall be
determined by reference to, among other things, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent the
circumstances resulting in such expenses, judgments, fines or settlement
amounts. The Company agrees that it would not be just and equitable if
contribution pursuant to this Section 6 were determined by pro rata allocation
or any other method of allocation that does not take in to account the foregoing
equitable considerations.
b. The determination as to the amount of the contribution, if any,
shall be made by:
i. a court of competent jurisdiction upon the application of both
the Indemnitee and the Company (if an action or suit had been brought in, and
final determination had been rendered by such court);
ii. the Board by a majority vote of a quorum consisting of
directors who were not parties to such action, suit or proceeding; or
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iii. outside independent legal counsel of the Company, if a
quorum is not obtainable for purpose of (ii) above, or, even if obtainable, a
quorum of Disinterested Directors so directs.
7. Notification and Defense of Claim. Promptly after receipt of notice
of the commencement of any action, suit or proceeding, the Indemnitee will, if a
claim in respect thereof is to be made against the Company under this Agreement,
notify the Company of the commencement thereof, but the omission to so notify
the Company will not relieve the Company from any liability that it
may have to the Indemnitee otherwise than under this Agreement. With respect to
any such action, suit or proceeding as to which the Indemnitee so notifies the
Company:
a. The Company will be entitled to participate therein at its own
expense.
b. Except as otherwise provided below, the Company may assume the
defense thereof, with counsel satisfactory to the Indemnitee. After notice from
the Company to the Indemnitee of its election to assume the defense, the Company
will not be liable to the Indemnitee under this Agreement for any legal or other
expenses subsequently incurred by the Indemnitee in connection with the defense
thereof, other than reasonable costs of investigation or as otherwise provided
below. The Indemnitee shall have the right to employ his counsel in such action,
suit or proceeding, but the fees and expenses of such counsel incurred after
notice from the Company of its assumption of the defense thereof shall be at the
expense of the Indemnitee unless: (i) the employment of counsel by the
Indemnitee has been authorized by the Company; (ii) the Indemnitee shall have
reasonably concluded that there may be a conflict of interest between the
Company and the Indemnitee in the conduct of the defense of such action; or
(iii) the Company shall not in fact have employed counsel to assume the defense
of such action, in each of which cases the fees and expenses of the Indemnitee's
counsel shall be at the expense of the Company. The Company shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Company or as to which the Indemnitee shall have come to the
conclusion provided for in (ii) above; and
c. The Company shall not be liable to indemnify the Indemnitee under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any action or
claim in any manner that would impose any penalty or limitation on the
Indemnitee without the Indemnitee's written consent. Neither the Company nor the
Indemnitee will unreasonably withhold its or his consent to any proposed
settlement.
8. Liability Insurance. So long as the Indemnitee shall continue to
serve as a director or officer of the Company (or shall continue at the request
of the Company to serve as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise), the Company will use its
best efforts to purchase and maintain in effect for the benefit of the
Indemnitee one or more valid, binding and enforceable policy or policies of D&O
Insurance providing coverage within limits determined by the Board in its sole
discretion. Notwithstanding the foregoing, the Company shall
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not be required to purchase or maintain such insurance policy, if, in the sole
discretion of the Board (i) such insurance is not reasonably available; (ii) the
premium cost for such insurance is disproportionate to the amount of coverage;
or (iii) the coverage provided by such insurance is so limited by exclusions
that there is insufficient benefit from such insurance.
9. Disclosure of Payments. Except as expressly required by law, neither
party shall disclose any payments under this Agreement unless prior approval of
the other party is obtained. Any payments to the Indemnitee that must be
disclosed shall, unless otherwise required by law, be described only in Company
proxy or information statements relating to special and/or annual meetings of
the Company's shareholders, and the Company shall afford the Indemnitee the
reasonable opportunity to review all such disclosures and, if requested, to
explain in such statement any mitigating circumstances regarding the events
reported.
10. Covenant Not to Sue; Limitation of Actions and Release of Claims.
No legal action shall be brought and no cause of action shall be asserted by or
on behalf of the Company (or any of its subsidiaries) against the Indemnitee,
his spouse, heirs, personal representatives, successors or assigns after the
expiration of 2 years from the date the Indemnitee ceases (for any reason) to
serve as either a director, officer, or agent of the Company, and any claim or
cause of action of the Company (or any of its subsidiaries) shall be
extinguished and deemed released unless asserted by the filing of a legal action
within such 2-year period.
11. Continuation of Obligations. All agreements and obligations of the
Company contained herein shall continue during the period the Indemnitee is a
director, officer, employee or agent of the Company (or is serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise), and shall
continue thereafter for so long as the Indemnitee shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal or investigative, by reason of the fact that the
Indemnitee has ceased to serve in any such capacity due to his resignation,
removal by vote of directors or shareholders, termination, death, disability or
otherwise.
12. Enforcement.
a. The Company expressly confirms and agrees that it has entered
into this Agreement and assumed the obligations imposed on it hereby in order
to induce the Indemnitee to serve or to continue to serve as a director,
officer, employee and/or agent of the Company and/or a subsidiary of the
Company, and acknowledges that the Indemnitee is relying upon this Agreement in
agreeing to serve or to continue to serve in such capacity.
b. In the event the Indemnitee is required to bring any action to
enforce his rights and to collect monies due under this Agreement and is
successful in such action, the Company shall reimburse the Indemnitee for all of
the Indemnitee's reasonable fees and expenses in bringing and pursuing such
action, including reasonable attorney's fees (including trial, appellate and
other attorney's fees), court costs and other related expenses.
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13. Miscellaneous.
a. Cooperation and Intent. The Company shall cooperate in good
faith with the Indemnitee and use its best efforts to ensure that the Indemnitee
is indemnified and/or reimbursed for expenses as described herein to the fullest
extent permitted under the provisions of this Agreement.
b. Nonexclusivity; Subrogation; Entire Agreement. The rights of
indemnification and reimbursement provided in this Agreement shall be in
addition to any rights by which the Indemnitee may otherwise be entitled by the
Florida Statutes, the Articles, the Bylaws, a vote of the Company's
shareholders, or otherwise. In the event of any payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of the Indemnitee, who shall execute all papers required and
take all action necessary to secure such rights, including the execution of such
documents as are necessary to enable the Company to bring suit to enforce such
rights. The Company shall not be liable under this Agreement to make any payment
of amounts otherwise indemnifiable hereunder if and to the extent that the
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise. This Agreement constitutes the entire
agreement between the Company and the Indemnitee with respect to the subject
matter hereof and supersedes all prior agreements, understandings, negotiations
and discussions, both written and oral, between the parties hereto with respect
to such subject matter (the "Prior Agreements"); provided, however, that if this
Agreement shall ever be held void or unenforceable for any reason whatsoever,
and is not reformed pursuant to Section 13(d) hereof, then (i) this Agreement
shall not be deemed to have superseded any Prior Agreements; (ii) all
of such Prior Agreements shall be deemed to be in full force and effect
notwithstanding the execution of this Agreement; and (iii) the Indemnitee shall
be entitled to maximum indemnification benefits provided under the Florida
Statute, the Articles, the Bylaws, a vote of Company's shareholders, or any
Prior Agreements.
c. Effective Date. The provisions of this Agreement shall cover
claims, actions, suits, and proceedings whether now pending or hereafter
commenced and shall be retroactive to cover acts or omissions or alleged acts or
omissions that heretofore have taken place.
d. Severability; Reformation. Each of the provisions of this
Agreement is a separate and distinct agreement and independent of the others, so
that if any provision hereof shall be held to be invalid or unenforceable in
whole or in part for any reason, such invalidity or unenforceability shall not
affect the validity or enforceability of the other provisions hereof. In the
event that all or any portion of this Agreement is ever held void or
unenforceable by a court of competent jurisdiction, then the parties hereto
hereby expressly authorize such court to modify any provision(s) held void or
unenforceable to the extent, and only to the extent, necessary to render it
valid and enforceable.
e. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication is directed, or (ii) mailed by certified or registered mail,
postage prepaid, on the third business day after the date on which it is so
mailed:
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If to the Indemnitee: To the address set forth on the signature page hereof.
If to the Company: Aviation Holdings Group, Inc.
15675 N.W. 15 Avenue
Miami, FL 33169
or to such other address as may have been furnished by either party to the
other.
f. Amendments or Modification. This Agreement may not be amended or
modified in any way except by a written instrument executed by all of the
parties.
g. Governing Law. This Agreement shall be governed by, interpreted
and enforced in accordance with the laws of the State of Florida, without giving
effect to the principles of conflicts of law thereof.
h. Successor and Assigns. This Agreement shall be binding, upon the
Indemnitee and the Company, its successors and assigns, and shall inure to the
benefit of the Indemnitee, his heirs, personal representatives, successors and
assigns and to the benefit of the Company, its successors and assigns.
i. Identical Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
j. Headings. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
AVIATION HOLDINGS GROUP, INC.
BY:
-----------------------------------
Joseph Nelson, President
THE INDEMNITEE:
--------------------------------------
Address:
------------------------------
--------------------------------------
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EXHIBIT 10.12
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT made the 3rd day of October 1997, between JET
AVIATION TRADING, INC., a Florida corporation, with offices at 15675 N.W. 15th
Avenue, Miami, FL 33169, (hereinafter referred to as the "Corporation") and
ALLEN BENI, whose address is ________________________ (hereinafter referred to
as "Consultant").
WITNESSETH:
WHEREAS, the Corporation is desirous of engaging the services of the
Consultant in the capacity hereinafter stated, and the Consultant is desirous of
serving the Corporation in such capacity for the period and on the terms and
conditions as set forth herein; and
WHEREAS, the services of the Consultant are unique, extraordinary and
not readily replaceable due to his particular expertise and knowledge;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained, the parties hereto do hereby agree as follows:
1. SERVICES AND DUTIES
(a) The Corporation hereby engages the Consultant to provide
the services set forth below (the "Consulting Services") to the Corporation and
its customers and the Consultant accepts such engagement and agrees to provide
to the Corporation the rendition of the Consulting Services, faithfully and to
the best of his ability. The Consultant shall render advice to the Corporation
regarding purchasing and selling opportunities and techniques and his insight
into customers and their needs and buying habits. Consultant shall further
render such other services as may be requested of him by the President of the
Corporation from time to time.
<PAGE>
2. TERM OF ENGAGEMENT
(1) The term of the Consultant's engagement hereunder shall
become effective on October 3, 1997, and shall end on October 2, 1998. Each
twelve month period of the engagement commencing October 3, 1997, shall be
called an "Engagement Year". The engagement may be renewed upon similar terms by
the mutual agreement of the parties.
3. ConfiDENTIAL INFORMATION. All records of the Corporation which
include, but are not limited to, advertising, sales, other materials or articles
of information, including without limitation, data processing reports, computer
software and/or media containing Corporation's confidential information,
customer lists, supplier lists, purchasing information, customer sales analysis
and patterns, invoices, price lists or information, samples, or any other
materials or data of any kind furnished to Consultant by the Corporation,
acquired by Consultant while engaged by the Corporation, or developed by
Consultant on behalf of the Corporation or at the Corporation's direction or for
the Corporation's use or otherwise in connection with Consultant's engagement
hereunder, are and shall remain the sole and confidential property of the
Corporation. Consultant acknowledges that such information is proprietary trade
secrets of Corporation. All or any such materials and records shall hereinafter
be known as "Confidential Information." If the Corporation requests the return
of such Confidential Information at any time during, at, or after the
termination of Consultant's engagement hereunder, Consultant shall immediately
deliver the same and all copies or excerpts thereof to Corporation.
4. COVENANTS DURING ENGAGEMENT. While engaged by the Corporation,
Consultant agrees that he will not, without the written consent of the Board:
(a) Unless authorized to do so by the Board, make, draw, accept or
endorse any contract, lease, promissory note, or other instrument requiring the
payment of money by the
2
<PAGE>
Corporation nor shall he use any money belonging to the Corporation or pledge
its credit except in the usual and regular course of business and exclusively on
account, or for the benefit of the Corporation;
(b) Release or discharge any debtor of the Corporation without
receiving the full amount thereof;
(c) Make any statement or perform any act intended to advance an
interest of any existing or prospective competitor of the Corporation in any way
that will or may reasonably be thought to injure an interest of the Corporation
in its relationships and dealings with existing or potential customers or
solicit or encourage any other Consultant of the Corporation to do any act that
is intended to be disloyal to the Corporation or inconsistent with the
Corporation's best interest or in violation of any provision of this Agreement;
(d) Compete in any manner directly or indirectly with the business of
the Corporation or in any field connected with aviation, aircraft parts,
avionics or the like.
5. NONDISCLOSURE. The Consultant shall not, at any time during the term
of this Employment Agreement or at any time thereafter, except as may be
authorized by the Corporation in writing disclose or make use of, directly or
indirectly, the Corporation's customer list or supplier list or any other
Confidential Information for his own benefit, for the benefit of others engaged
in the same business as the Corporation or for others who Consultant believes or
should reasonably believe might or could enter into the Corporation's business.
Consultant acknowledges the material adverse impact to Corporation due to any
breach by Consultant of these provisions, no matter how small, and that any such
breach shall cause him to forfeit any unpaid amounts set forth in Paragraph 6
below.
3
<PAGE>
6. COMPENSATION.
(a) Basic Compensation In each year of Consultant's Term of Engagement:
Consultant shall receive as basic compensation ("Basic Compensation") for all
services rendered by the Consultant hereunder, a monthly payment of $4,000.
(b) Commission: In addition to the amounts paid to Consultant pursuant
to (a) above, Consultant shall be paid a commission equal to 15% of the
collected purchase price of sales made as a direct result of Consultant's
efforts and a commission of 15% of the purchase price of purchases of material
for resale made by Corporation located or negotiated by Consultant on
Corporation's behalf. Such commission shall be payable, in the case of sales,
thirty days after the Corporation has collected the purchase price due from its
customers, and in the case of purchased materials, thirty days after closure of
the purchase, delivery and receipt of all required material certification
records.
(c) Deductions from Compensation: Any amounts payable to Consultant
hereunder shall be subject to reduction and withholding for Social Security,
withholding taxes, and any other such taxes or deductions as may from time to
time be required to be withheld by Corporation pursuant to applicable
governmental authority.
7. Termination.
(a) General:
This Agreement shall terminate upon the termination of Consultant's
engagement, but the terms of the paragraphs herein which contemplate acts, the
restraint of acts, or payments after the termination or expiration hereof, and
the representations and warranties made herein, shall survive the termination of
this Consulting Agreement for any reason. Consultant's engagement hereunder
shall be terminated upon the happening of any of the following events:
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<PAGE>
(1) the death of the Consultant;
(2) the permanent disability of the Consultant, as more fully
discussed in Article 8 hereof;
(3) upon the expiration of the Term of this Consulting
Agreement according to its terms;
(4) for "cause"; for these purposes, "cause" shall
include:
(i) the conviction of Consultant a crime
involving moral turpitude;
(ii) an act of dishonesty either involving
Consultant's engagement or harmful to
Corporation or other consultants or
employees of Corporation, including fraud,
misappropriation, embezzlement or the like;
(iii) the misfeasance, malfeasance or non-feasance
of Consultant in carrying out the duties of
Consultant's engagement with Corporation,
not cured within thirty (30) days written
notice.
(b) Payments Upon Termination:
i. Death or Disability. Upon termination of Consultant's
engagement hereunder at the end of the Tenn or because of the death or permanent
disability of Consultant, Consultant or in the event of his death or his mental
incapacity his personal representative, shall be paid his Basic Compensation
hereunder, prorated through the date of termination as well as any earned
commission. In addition if termination of this Agreement is due to the death of
the Consultant, his estate shall be entitled to the payment of the Consultant's
Basic Compensation for sixty (60) days after the date of Consultant's death.
5
<PAGE>
ii. Termination For Cause or Voluntary Leaving. Upon
termination of Consultant's engagement hereunder for cause or voluntary leaving,
as compensation for services rendered during the term of this Agreement to the
date of termination, Consultant shall be paid his Basic Compensation hereunder
prorated through the date of termination and any earned commissions and no other
amounts hereunder. Any amounts which have been prepaid will be returned by
Consultant or his personal representative.
iii. Cancellation of Engagement. Upon termination of
Consultant's engagement hereunder, for reasons not for cause, death, permanent
disability, his voluntary leaving or the expiration of the Term hereof, such
reasons to include, without limitation, the cancellation of consultant
engagement by the Corporation for reasons not for cause, or the dissolution of
the Corporation, Consultant shall be entitled to receive his Basic Compensation
accrued to date and any commission earned.
8. DISABILITY.
(a) In the event that Consultant incurs a disability of either
a physical or mental character which, in the opinion of a physician selected by
the Corporation, which physician shall be approved by Consultant (which approval
shall not be unreasonably withheld), renders him disabled from performing the
usual and customary duties to be rendered hereunder or heretofore rendered by
Consultant, he shall receive his full Basic Compensation for the first ninety
(90) days or any part thereof of continuous disability.
(b) No disability shall be deemed to exist until after
Consultant shall be unable to perform his duties for thirty (30) consecutive
days, but after such disability continues for thirty (30) consecutive days, then
the same shall be deemed to have existed from the first day of such disability.
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<PAGE>
(c) If the Consultant does not recover and resume his duties within
ninety days from the date he is deemed to have become disabled, Consultant may,
unless the physician selected in paragraph 8(a) above certifies that Consultant
is again capable of performing his usual and customary duties with or without
reasonable accommodation, at the election of the Board of Directors, be deemed
to have become permanently disabled at the beginning of such disability.
(d)(i) If Consultant shall have been disabled and shall have returned
to his engagement after the end of such disability, any recurrence of the same
disability commencing within one hundred eighty (180) days of the termination of
the prior period of disability shall be deemed to be a continuation of the prior
disability, and the periods of all such disabilities shall be added together to
determine the rights of the parties hereunder.
(ii) If Consultant shall have been disabled and shall have returned to
his engagement after the end of such disability, any new and unrelated
disability occurring thereafter shall be treated as if the previous and
unrelated disability had not occurred.
(e) Services During Disability: During the period that Consultant shall
be entitled to receive payments under this Article, and to the extent that he is
physically and mentally able to do so, he shall furnish information and
assistance to the Corporation and comply with the provisions hereof; and, in
addition, upon reasonable request in writing on behalf of the President he shall
make himself available to the Corporation to undertake reasonable assignments
consistent with the dignity, importance and scope of his prior engagement and
his physical and mental health.
7
<PAGE>
9. Reformation. If elements of the agreements set forth in the above
paragraphs would otherwise be determined to be invalid or unenforceable by a
court of competent jurisdiction, the parties intend and agree that such court
shall exercise its discretion in reforming the elements of this Agreement to the
end that Corporation and Consultant shall be subject to a consulting agreement,
a covenant not to compete, a nondisclosure covenant and related covenants as
close as possible to the terms in the paragraphs above and which are enforceable
by Corporation or Consultant.
10. Essence. Consultant agrees that the covenant and agreements
contained herein are the essence of this Agreement and that such covenants and
agreements are reasonable and necessary to protect and preserve the interests
and properties of Corporation and Consultant; that irreparable loss and damage
will be suffered by Corporation should Consultant breach any of such covenants
and agreements; that each of such covenants and agreements is separate, distinct
and severable, not only from the other of such covenants and agreements but also
from the other and remaining provisions of this agreement; that the
enforceability of any such covenant or agreement shall not affect the validity
or enforceability of any other such covenants or agreements or provisions of
this Agreement and that the covenants and agreement shall be fully enforceable
irrespective of how long Consultant has been engaged by the Corporation.
11. Remedies.
(a) Consultant agrees and understands that Corporation has acted in
reliance on the provisions of this Agreement in engaging Consultant and would
not continue to engage Consultant if Consultant did not execute this Agreement.
(b) Consultant agrees that in the event he shall breach any of the
above covenants and agreements, damage to Corporation shall be presumed in any
legal action by
8
<PAGE>
Corporation against Consultant for damages. Corporation shall be entitled to
collect actual damages caused by Consultant's breach of any of the covenants and
agreements. In addition to the above remedy and other remedies available to it,
Corporation shall be entitled to both permanent and temporary injunctions,
without the posting of a bond and without the need to prove irreparable harm, to
prevent a breach or contemplated breach by Consultant of any of the above
covenants or agreements. Consultant hereby waives any claims he might make that
any competition by Consultant with Corporation in derogation of this agreement:
1) would be justified in any manner and 2) would not cause irreparable harm to
Corporation or that the restrictions on competition hereunder would be an
improper restraint of trade. Consultant acknowledges that he is fully capable of
earning a living upon termination of his engagement with Corporation, without
competing in any manner with the business of Corporation.
12. Miscellaneous.
(a) Binding A agreement: All the forms, covenants, representations,
warranties and conditions of this Agreement shall be binding upon and inure to
the benefit of, and be enforceable by, the parties hereto and their respective
successors, heirs at law, legatees, distributees, executors, administrators and
other legal representatives.
(b) Waiver: No term or condition of this Agreement shall be deemed to
have been waived nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific tenn or condition for the future or as to any
act other than that specifically waived.
9
<PAGE>
(d) Severability: If, for any reason, any provision of this Agreement
held invalid, such invalidity shall not affect any other provision of this
Agreement not held to be invalid, and each such other provision shall to the
full extent consistent with law continue in full force and effect.
(e) Notices: All notices, requests, demands and other communications
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally, given by prepaid
telegraph or mailed first class, postage prepaid, registered or certified mail,
return receipt requested, to Corporation or Consultant at their respective
addresses set forth in this Agreement or to any other address of which notice of
the change is given to the parties hereto.
(f) Governing Law. The construction, interpretation, validity and
performance of this Engagement Agreement shall be governed by the laws of the
State of Florida. The parties agree that venue for any action shall be in Dade
County, Florida
(g) Entire Agreement. This instrument contains the entire agreement
between the parties hereto with respect to the subject matter hereof and no
prior or collateral promises or conditions in connection with or with respect to
the subject matter hereof not incorporated herein shall be binding upon the
parties hereto.
(h) Modification. No modification, extension, renewal, rescission,
termination or waiver of any of the provisions contained herein or any future
representation, promise or condition in connection with the subject matter
hereof, shall be binding upon any of the parties unless made in writing and duly
executed by the parties or their authorized representative.
10
<PAGE>
(i) Headings. The section and paragraph headings contained in this
Consulting Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this document.
(j) Attorney's Fees and Expenses. Corporation and Consultant agree
that, if either party has to employ an attorney to enforce this Agreement, the
non-prevailing party shall pay reasonable costs, expenses, attorney's fees and
paralegal fees through and including any appeals, settlement or negotiations
required to enforce this Consulting Agreement incurred by the prevailing party.
(k) Material Inducement. Corporation and Consultant agree and
understand that both parties hereto have acted in reliance on this Consulting
Agreement in executing this Agreement and the covenants contained herein are a
material inducement for both parties hereto to do so.
(l) Survival. The terms of the paragraphs herein which contemplate
acts, the restraint of acts, or payments after the termination or expiration
hereof and the representations and warranties made herein shall survive the
termination of this Agreement or Consultant's engagement hereunder for any
reason.
[SIGNATURE BLOCKS ON FOLLOWING PAGE]
11
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
executed and its seal to be affixed hereunto by its officers hereunto duly
authorized, and Consultant has signed this Agreement all as of the day and year
first above written.
Corporation
-----------
Attest: JET AVIATION TRADING, INC.
By:/s/ By: /s/
--------------------------------- ---------------------------------
its Secretary
Title: President & CEO
-----------------------------
(Corporate Seal)
Witnesses:
/s/ Cynthia S. Taylor /s/ Allen Beni
--------------------------------- -----------------------------------
Allen Beni
- ---------------------------------
12
<PAGE>
SIMULATOR PURCHASE AGREEMENT
(JOINT VENTURE)
BY AND BETWEEN
JET AVIATION TRADING, INC.
(BUYER)
AND
FERSAM INTERNATIONAL LTD.
(SELLER)
(VENDOR)
<PAGE>
INDEX
ARTICLE 1. SCOPE OF AGREEMENT
ARTICLE 2. DEFINITION OF PURCHASE
ARTICLE 3. OWNERSHIP
ARTICLE 4. INSURANCE
ARTICLE 5. PURCHASE PRICE
ARTICLE 6. MUTUAL UNDERSTANDING
ARTICLE 7. GUARANTEE
ARTICLE 8. TERM
2
<PAGE>
This agreement ("Agreement") is entered into this 1st day of November 1996
by and between JET AVIATION TRADING, INC. ("BUYER") having its principal place
of business at: 1170 N.W. 163rd. Drive, Miami, Florida 33169, USA and FERSAM
INTERNATIONAL LIMITED ("SELLER") having its principal place of business at:
PA VERKUYLLAAN (ACHTER), 51-55 (FERSAMLAAN, 1171 EB BADHOEVEDORP, THE
NETHERLANDS.
3
<PAGE>
ARTICLE 1. SCOPE OF AGREEMENT
Seller is the owner of one (1) DC10-30 flight simulator manufactured by CAE
Electronics LTD; and which is more fully described in Exhibit "A". Seller wishes
to sell one-half (50%) ownership of this simulator to the buyer.
ARTICLE 2: DEFINITION OF PURCHASED MATERIAL
One (1) DC10-30 six axis flight simulator ("Material") manufactured by CAE
Electronics to include all attaching hardware, computer system, computer
software, visual system, canopy axis mechanism and all equipment required to
operate the simulator.
ARTICLE 3. OWNERSHIP
Seller warrants that Seller currently and forever in the future will
maintain title of the Material free and clear of any liens or encumbrances.
Both Seller and Buyer are restricted from encumbering or restricting free and
4
<PAGE>
clear title. Upon signature of this agreement, Seller will convey one-half (50%)
ownership of the Material to Buyer. Buyer and Seller will equally participate in
all revenues generated from the sale, lease or disassembly of the Material.
Buyer and Seller will equally participate in all expenses incurred relative to
the Material's storage, transport, sale and/or maintenance.
ARTICLE 4. INSURANCE
Seller agrees to maintain adequate casualty, loss and transport insurance
during the term of this agreement.
ARTICLE 5. PURCHASE PRICE
Seller agrees to sell to Buyer one-half (50%) interest in this Material for
the sum of Two Hundred Twenty-Five Thousand dollars ($225,000.00). Seller agrees
to accept payment of this sum from the Buyer in the form of U.S. currency and
equity. It is agreed between the Buyer and Seller that the sum of U.S. currency
and equity to be conveyed to the Seller by the Buyer is defined as follows:
A) U.S. Currency: $125,000.00 payable in increments of $50,000.00 at
contract signing and $75,000.00 payable within 45 days thereafter.
B) Equity: $100,000.00 payable in the form of equity in the Buyers newly
formed company, JET AVIATION TRADING, INC. Such equity will be the
equivalent number of common stock shares as valued at the initial offering
price. The initial offering per share price is estimated at +/- $2.50.
5
<PAGE>
ARTICLE 6. MUTUAL UNDERSTANDING
It is mutually agreed between the Buyer and the Seller that each party will
endeavor to market, promote and sell the material with the sole intent to
achieve the highest possible financial rate of return. Both parties of this
agreement will agree by mutual consent, such issues as sale price, terms and
conditions of each potential revenue producing transaction.
ARTICLE 7. GUARANTEE
Should the Seller at any time after April 30, 1997 desire to "convert" the
equity portion of this transaction as described in ARTICLE 5 to U.S. currency,
the Buyer hereby guarantees to purchase one hundred percent (100%) of the common
stock shares originally issued to the Seller for the named value of $100,000.00.
Such amount will be paid to Seller within thirty (30) days after such notice is
provided to Buyer.
ARTICLE 8. TERM
This agreement will remain in effect until the Material is fully divested
either by sale or other mutually agreed upon events.
6
<PAGE>
The foregoing accurately represents the general terms, condition and synergy
of the herein described transactions.
IN WITNESS WHEREOF, the parties hereto have agreed as of the date first
shown above.
FOR: JET AVIATION TRADING, INC.
--------------------------
BY: /s/ JOSEPH J. NELSON
--------------------------
NAME: JOSEPH J. NELSON
--------------------------
TITLE: PRESIDENT
-------------------------
DATE: NOVEMBER 14, 1996
-------------------------
FOR: FERSAM INTERNATIONAL, LTD.
--------------------------
BY: /s/ NAZIE EL MASRY
--------------------------
NAME: NAZIE EL MASRY
--------------------------
TITLE: PRESIDENT
-------------------------
DATE: NOVEMBER 14, 1996
7
Exhibit 21.1
Subsidiaries of the Company
Name Jurisdiction of Formation
- ---- -------------------------
Aviation Holdings International, Inc. Florida
PASCO International Aviation Corp. Florida
PASCO International Aviation Corp Limited Hong Kong
PASCO Financial Services Limited Hong Kong
Aero-Link Flight Systems Limited Hong Kong
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and the use
of our report dated February 25, 1998 (except for Note 5 as to which the date is
May 21, 1998 and Note 14 as to which the date is August 31, 1998), in the
Registration Statement and related Prospectus of Aviation Holdings Group, Inc.
for the registration of 750,000 units each unit consisting of two shares of
Common Stock.
----------------------------
LJ SOLDINGER ASSOCIATES
Arlington Heights, Illinois
March 25, 1999
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<PERIOD-TYPE> OTHER OTHER
<FISCAL-YEAR-END> DEC-31-1997 SEP-30-1998
<PERIOD-END> DEC-31-1997 SEP-30-1998
<CASH> 2,175 254,994
<SECURITIES> 0 0
<RECEIVABLES> 0 2,787,964
<ALLOWANCES> 0 (151,000)
<INVENTORY> 0 2,718,381
<CURRENT-ASSETS> 11,872 5,825,394
<PP&E> 0 342,873
<DEPRECIATION> 0 (54,282)
<TOTAL-ASSETS> 962,545 7,903,963
<CURRENT-LIABILITIES> 48,000 4,095,490
<BONDS> 0 0
0 0
0 0
<COMMON> 235 345
<OTHER-SE> 914,310 2,712,242
<TOTAL-LIABILITY-AND-EQUITY> 962,545 7,903,963
<SALES> 0 5,094,931
<TOTAL-REVENUES> 0 5,094,931
<CGS> 0 3,898,257
<TOTAL-COSTS> 0 5,358,380
<OTHER-EXPENSES> 64,177 (1,917)
<LOSS-PROVISION> 0 639,410
<INTEREST-EXPENSE> (6,740) (60,729)
<INCOME-PRETAX> (64,177) (902,839)
<INCOME-TAX> 0 11,535
<INCOME-CONTINUING> (57,437) (851,728)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (57,437) (851,728)
<EPS-PRIMARY> (0.06) (0.29)
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