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As filed with the Securities and Exchange Commission on July 13, 1999
Registration No. 333-75169
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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AMENDMENT NO. 1
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)
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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
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(Name, Address and Telephone Number of Agent For Service)
with copy to:
Michael C. Forman, Esq.
Klehr, Harrison, Harvey, Branzburg & Ellers LLP
260 S. Broad 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 [ ]
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CALCULATION OF REGISTRATION FEE
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Amount Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Securities To Be Offering Price Per Aggregate Offering Registration
To Be Registered Registered (1)(2) Unit(3) Price(3) Fee
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Units, each unit consisting
of two shares of
common stock, $.0001 par value
and One Class A Warrant 825,000 $8.50 $7,012,500 $1,950
Common stock, $.0001 par
value 1,650,000 __ __ __
Class A Warrants to purchase
common stock 825,000 __ __ __
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(1) Pursuant to Rule 416 under the Securities Act of 1993 (the "Act"), this
Registration Statement covers such additional indeterminate numbers of
shares of common stock as may be issued by reason of adjustments in the
number of shares of common stock pursuant to anti-dilution provisions
contained in the Class A Warrant Agreement governing the Class A
Warrants. Because such additional shares of common stock will, if
issued, be issued for no additional consideration, no registration fee
is required.
(2) Includes up to 75,000 units, and 150,000 shares of common stock and
75,000 Class A Warrants included in such units, that may be purchased
from the Company at the option of the Underwriter solely to cover
over-allotments, if any.
(3) Estimated solely for purposes of calculating registration fee in
accordance with Rule 457(a) under the Securities Act of 1933, as
amended.
(4) Previously paid
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.
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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 JULY 13, 1999
PROSPECTUS
AVIATION HOLDINGS GROUP, INC.
750,000 Units, each Unit Consisting of Two
Shares of Common Stock and a Class A Warrant to
Purchase One Share of Common Stock
Aviation Holdings Group is offering up to a maximum of 750,000 units at
the purchase price of $___ per unit. Each unit is comprised of two shares of
common stock and one Class A Warrant. Each Class A Warrant is exercisable into
one share of common stock at the purchase price of $___. The Class A Warrants
shall be exercisable for a period of three years upon registration with the
Securities and Exchange Commission and shall be redeemable by us at $.001 per
Class A Warrant if the market value of a share of common stock exceeds $_____.
The shares of common stock and Class A Warrants that make up each unit may not
be separated or sold separately until 45 days after the date of issuance. We
expect that the initial public offering price for the units will be between
$8.00 and $9.00 per unit.
Silver Capital Group, a division of LCP Capital Corp., will serve as
the underwriter for this public offering and will purchase 750,000 units for
resale to the public. We have 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 us 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 filling orders for units in excess
of 750,000 units, if any.
Prior to this public offering, shares of our 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.
We have applied to have the units, common stock and Class A Warrants
quoted on the American Stock Exchange under the trading symbols "_____________,"
"_____________" and "___________," respectively.
Investing in units involves certain risks. See "Risk Factors" on pages
4 to 9.
Offering of Units Per Unit Total
o Public Offering Price $____ $____
o Underwriting Discounts and Commissions $____ $____
o Proceeds to the Company $____ $____
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
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TABLE OF CONTENTS
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PROSPECTUS SUMMARY................................................................................................1
AVIATION HOLDINGS GROUP...........................................................................................1
THE OFFERING......................................................................................................1
SELECTED FINANCIAL INFORMATION....................................................................................3
RISK FACTORS......................................................................................................4
The Underwriter Has Limited Underwriting Experience...............................................................4
We Are in Default Under Our Credit Facility.......................................................................4
We Have A Limited Operating History On Which To Evaluate An Investment In This Offering...........................4
We May Never Realize The Current Valuation Of Our Only Significant Asset
Other Than Our Investment In Aviation Holdings International.............................................4
We May Fail To Obtain Additional Funding If Needed................................................................5
A Downturn In The Airline Industry Would Adversely Affect Our Business............................................5
Consolidation In The Aircraft Parts Industry Could Reduce Our Market
Share....................................................................................................5
Stricter Government Regulations Could Reduce The Value Of Our Inventory
And/Or Require Significant Expenditures..................................................................5
Our Planned Expansion Into The Jet Engine Business Will Subject Us To
Additional Risks.........................................................................................5
Our Operating Results Could Be Adversely Affected by Fluctuations
In Demand................................................................................................6
Our Operations Would Be Adversely Affected By The Loss Of Key Personnel...........................................6
We Have Fewer Financial Resources Than Many Of Our Competitors....................................................6
Our Business May Subject Us to Expensive Product Liability Claims.................................................6
Our Plans For Expansion Are Dependent On Identifying Suitable Acquisition
Targets..................................................................................................6
Certain Stockholders May Be Able To Effectively Control Our Operations............................................7
Our Ownership Of Aviation Holdings International Is Subject To Significant
Possible Dilution........................................................................................7
We Do Not Plan To Pay Any Dividends For The Foreseeable Future....................................................7
Our Business Could Be Adversely Affected If Our Customers Or Suppliers Encounter
Year 2000 Problems.......................................................................................7
We Maintain Bank Account Balances In Excess Of Insured Amounts....................................................7
Possible Volatility Of Stock Prices...............................................................................8
The Units, Common Stock And Class A Warrants May Be Subject To Limitations
On Trading...............................................................................................8
The Warrants May Not Be Exercisable If We Do Not Maintain A Current
Prospectus And Registrations.............................................................................8
We May Be Able To Redeem The Class A Warrants At A Time Adverse To The Interest
Of A Class A Warrant Holder..............................................................................8
WHERE YOU CAN GET MORE INFORMATION................................................................................9
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS.................................................................9
DILUTION ........................................................................................................10
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USE OF PROCEEDS..................................................................................................11
MARKET PRICE OF THE COMMON STOCK.................................................................................11
DIVIDEND POLICY..................................................................................................12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS....................................................................13
BUSINESS ........................................................................................................20
MANAGEMENT.......................................................................................................27
PRINCIPAL STOCKHOLDERS...........................................................................................31
CERTAIN TRANSACTIONS.............................................................................................32
DESCRIPTION OF SECURITIES........................................................................................34
UNDERWRITING.....................................................................................................35
LEGAL MATTERS....................................................................................................36
EXPERTS ........................................................................................................37
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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 we are offering.
You should read the entire prospectus carefully. You should also read our
financial statements and the notes to the financial statements.
Aviation Holdings Group
Aviation Holdings Group is a holding company and currently has no
operations other than the ownership of 96% of the outstanding capital stock of
Aviation Holdings International, Inc.
Our only significant asset, other than our interest in Aviation
Holdings International, is a note receivable in the amount of $900,000 which is
secured by a mortgage on a parcel of real property in Colchester, Connecticut.
We specialize in the sale, lease, exchange and purchase of technical
spare parts 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. We also provide
our customers with inventory management services. We intend to pursue
opportunities involving the purchase, sale and lease of jet turbine engines, jet
turbine aircraft and related aviation industry equipment.
Our operations are in the United States. However, we also conduct
operations in Europe and South America, and in China and other parts of Asia .
Our executive offices are located at 15675 Northwest 15th Avenue,
Miami, Florida 33169. Our telephone number is (305) 624-6700. We also have
offices in Beijing and Hong Kong, China.
The Offering
The following table excludes 201,250 shares of common stock reserved
for issuance upon the exercise of stock options outstanding as of July 1, 1999
under our Stock Option Plan and 548,750 shares of common stock available for the
future grant of stock options and other equity securities under the Stock Option
Plan. This table 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." This table also excludes 325,000
shares issuable upon exercise of outstanding warrants. See "Description of
Securities--Outstanding Warrants."
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Common Stock Currently Outstanding .......................4,208,315 shares of common stock
Securities Offered by the Company.........................750,000 units, each unit consisting of two
shares of common stock and one Class A
Warrant, for an aggregate of 1,500,000
shares of common stock and 750,000 Class A
Warrants.
Common Stock to be Outstanding
after the Offering .......................................5,708,315 shares of common stock
Dividend Policy...........................................We intend to retain all future earnings to
fund the development and growth of our
business. Therefore, we do not currently
anticipate paying cash dividends. See
"Dividend Policy."
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Use of Proceeds by the Company............................To fund our financial commitment to
the SYNOR-A joint venture, to purchase additional
inventory, to retire indebtedness, to purchase jet
turbine engines, to fund acquisitions and for general
corporate purposes. See "Use of Proceeds."
Proposed American Stock Exchange Symbols..................
for the common stock, units and "______," "_______" and "_______"
Class A Warrants, respectively.
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SELECTED FINANCIAL INFORMATION
Set forth below is the historical selected financial information with
respect to Aviation Holdings Group for the fiscal years ended December 31, 1997
and December 31, 1998, and for the three months ended March 31, 1998 and the
three months ended March 31, 1999. Information for the fiscal year ended
December 31, 1998 reflects operations of Aviation Holdings International from
May 1998 through December 31, 1998.
FISCAL YEAR ENDED THREE MONTHS ENDED
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DECEMBER 31, MARCH 31,
INCOME STATEMENT 1997 1998 1998 1999
INFORMATION
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Revenue. $ 0 8,365,197 0 3,147,373
Net Income (Loss)................ (57,437) (705,866) (536,998) (17,744)
Net Income (Loss) per Share...... (0.06) (0.23) (0.23) (0.01)
Weighted Average Shares
Outstanding.................... 1,046,235 3,035,856 2,350,000 3,507,483
BALANCE SHEET
INFORMATION AT END OF
PERIOD...........................
Working Capital.................. $1,612,885 1,680,846
Total Assets..................... 9,605,366 11,418,386
Total Liabilities................ 5,187,685 5,711,869
Minority Interest................ 1,350,050 656,567
Stockholders' Equity............. 3,067,631 5,049,950
Net Tangible Book Value
Per Share...................... 1.14 0.85
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RISK FACTORS
Investing in the units is very risky. Investors should carefully
consider the following factors in addition to the other information in this
prospectus, in evaluating an investment in Aviation Holdings Group, Inc.
The Underwriter Has Limited Underwriting Experience
Silver Capital Group, a division of LCP Capital Corp. has agreed to act
as underwriter in connection with our offering of units. The underwriter, its
affiliates and predecessors have engaged in only limited underwriting activities
and have been the lead or sole underwriter in only a few public offerings during
the past five years. 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, and purchasers of the units or the common stock may suffer a lack of
liquidity in their investment. See "Underwriting."
We Are In Default Under Our Credit Facility
Aviation Holdings International is required to maintain tangible net
worth of $4,250,000 under its Comerica Bank credit facility. As of March 31,
1999, Aviation Holdings International had tangible net worth (as defined by
Comerica Bank) of $3,491,504 and therefore was in default. Comerica Bank has not
declared an event of default and continues to advance funds, and we anticipate
that our receipt of the proceeds from the offering will permit us to cure the
default. However, in the event that we are unable to cure the default or obtain
replacement financing, Comerica Bank could declare an event of default and
exercise its rights as a secured lender to collect the accounts receivable and
sell the assets of Aviation Holdings International in an amount sufficient to
repay the loan. As of June 30, 1999, the outstanding balance due to Comerica
Bank was $2,075,000.
We Have A Limited Operating History On Which To Evaluate An Investment In This
Offering
We have a limited operating history on which you must base your
investment decision and are subject to all of the risks associated with
development stage enterprises. We had no significant operations prior to the
acquisition of a majority of the outstanding shares of capital stock of Aviation
Holdings International, which only commenced operations in October 1996 and has
a correspondingly limited operating history. Accordingly, we are subject to
various risks common to developing businesses, including cash flow difficulties,
competition for customers and employees and delays in implementing business
plans. We intend to expand our operations, which will substantially increase our
expenses and will likely decrease our cash flow and earnings in the near future.
Our ability to operate profitably will depend on increasing sales, maintaining
adequate profit margins and a continuing demand for Aviation Holdings
International's products and services. Our expansion plans may have a negative
impact on our profitability, at least in the short term, as significant expenses
will be incurred prior to the receipt of additional revenues. See "Financial
Statements" and "Business."
We May Never Realize The Current Valuation Of Our Only Significant Asset Other
Than Our Investment In Aviation Holdings International
We own a note receivable from Environmental Waste Solutions, Inc. in
the principal amount of $1,475,100 and accrued interest of $58,310 as of March
31, 1999. The note is secured by a mortgage on real estate in Colchester,
Connecticut. We have established a reserve for nonpayment of the note in the
amount of $633,410 and ceased accruing interest on the note as of July 2, 1998.
The note matured on February 1, 1999. As of the date hereof, the note remains
unpaid and is in default. We may ultimately receive substantially less in
repayment of the note than its current carrying value.
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We May Fail To Obtain Additional Funding If Needed
Our inability to raise additional capital when needed would have an
adverse effect on our plans to expand operations. We anticipate that this
offering will generate net proceeds of approximately $5,165,000. We believe that
revenues from operations will be sufficient to fund our operational requirements
for the foreseeable future and that the net proceeds from the offering will be
sufficient to expand our existing business. However, we may need to raise
additional funds for acquisitions. We do not know if additional funds will be
available on acceptable terms, if at all.
A Downturn In The Airline Industry Would Adversely Affect Our Business
An economic downturn in the airline industry could have a serious
negative impact on our business. 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 an economic 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. Older aircraft into which aircraft spare parts are most often
placed tend to be less fuel efficient and become less viable as the price of
aircraft fuel increases.
Consolidation In The Aircraft Parts Industry Could Reduce Our Market Share
The airline industry is currently experiencing a reduction in the
number of approved parts suppliers and a consolidation of the spare parts
redistribution market. Although we presently are an "approved" supplier of 26
airlines, we cannot be certain that we will be able to maintain or expand this
status. Our revenues will be reduced if we are unable to do so. A number of
major airlines have reduced the number of "approved" suppliers during the last
few years from as many as 50 to as few as five. Airlines choose "approved"
suppliers based on a number of factors including 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 the redistribution market which is likely to continue.
Stricter Government Regulations Could Reduce The Value Of Our Inventory And/Or
Require Significant Expenditures
The aircraft parts which make up our inventory are subject to strict
regulatory standards. If stricter standards are enacted, then some of our
inventory may lose some or all of its value. 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 and/or similar regulatory agencies abroad.
Specific regulations vary 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. See "Business
- - Government Regulation and Traceability."
Our Planned Expansion Into The Jet Engine Business Will Subject Us To Additional
Risks
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. These activities will involve risks not present in our
current business. 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 us to commit substantial capital, which will come from the proceeds of
the offering. Such funds 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.
5
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Our Operating Results Could Be Adversely Affected By Fluctuations In Demand
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 our 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 historical 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."
Our Operations Would Be Adversely Affected By The Loss Of 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 Simon Chiang,
our Vice President, and upon our ability to attract and retain qualified
personnel experienced in the various phases of our business. While we have
entered into employment agreements with Mr. Nelson and Mr. Chiang, the loss of
their services would jeopardize our operations. We will also be dependent upon
other employees as we expand operations. The loss of, or failure to retain and
develop, such persons could negatively effect our business or financial results.
See "Management."
We Have Fewer Financial Resources Than Many Of Our Competitors
The aircraft and engine spare part industries are highly competitive.
Competitive pressures could have a material adverse effect on our business or
financial results. 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 and can afford to reduce their prices and commit more
resources to marketing their products so as to remain extremely competitive. We
may not be able to afford to take such measures to compete successfully .
Our Business May Subject Us To Expensive Product Liability Claims
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, we
cannot be certain that we will not be the subject of lawsuits based on the
failure of parts which we sold in the marketplace. These lawsuits may result in
damage awards against us. We do not carry product liability insurance and
therefore we would be required to pay any judgment levied against us. See
"Business - Product Liability and Legal Proceedings."
Our Plans For Expansion Are Dependent On Identifying Suitable Acquisition
Targets
Our strategy involves growth through increased sales and the
acquisition of additional inventories of aircraft spare parts and turbine
engines, the expansion into new markets 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
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o capital and/or financing on competitive terms
If we cannot identify suitable assets or businesses for acquisition,
our growth will be slowed.
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
Certain Stockholders May Be Able To Effectively Control Our Operations
Certain of our stockholders own significant blocks of our common stock
and have the ability to exert significant influence over the operation of our
business. Following the offering, one of our stockholders will beneficially own
16% of our issued and outstanding common stock, and our directors and
executive officers, as a group, will beneficially own an additional 17.7% 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
our Board of Directors and, therefore, to control our business, policies and
affairs .
Our Ownership Of Aviation Holdings International Is Subject To Significant
Possible Dilution
We have pledged 51% of the outstanding stock of Aviation Holdings
International to secure $250,000 in loans made to us in October 1998 by Nancy
Plotkin and the John G. Jacobs Trust. These loans have a final maturity date of
July 14, 1999. If we are unable to pay these loans at maturity, then the lenders
will have the right to sell these shares of Aviation Holdings International
common stock in an amount sufficient to repay the loans, thus reducing our
ownership of Aviation Holdings International.
We Do Not Plan to Pay Any Dividends for the Foreseeable Future
We have not in the past and do not plan in the foreseeable future to
pay dividends on our common stock. We will be dependent on funds generated by
Aviation Holdings International's operations to finance our own operations for
the foreseeable future. Aviation Holdings International's existing bank lending
agreements prohibit payment of dividends without the bank's consent. Earnings,
if any, are expected to be retained to finance and develop our business. See
"Dividend Policy."
Our Business Could be Adversely Affected if our Customers Encounter Year 2000
Problems
If the computer software programs and operating systems of our vendors,
customers and other third parties with whom we transact business are not "Year
2000" compliant, then our business could experience disruption and other
problems in early 2000. 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. However, we have not fully determined the extent to which our
vendors, customers and other persons with whom we transact business have systems
which are "Year 2000" compliant. In the event that a material portion of our
suppliers or customer's suffer business disruption as the result of "Year 2000"
problems, we could be adversely affected. See "Managements Discussion and
Analysis of Financial Condition and Results of Operations - Year 2000 Issue."
We Maintain Bank Account Balances in Excess of Insured Amounts
We maintain our principal banking relationships with Comerica Bank, our
working capital lender, and Citibank. As a result, our account balances
typically exceed FDIC insurance limits. As of December 31, 1998 and March 31,
1999, these excess balances were $403,377 and $665,321, respectively. In the
event of the failure of a bank in which we have such an excess balance, we could
lose some or all of such excess.
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Possible Volatility of Stock Prices
The market price of our common stock may be subject to significant
volatility until a stable, regular trading market for our common stock develops.
As of July 1, 1999, we had 4,208,315 issued and outstanding shares of common
stock. Following the offering, we will have 5,708,315 issued and outstanding
shares of common stock and there will be Class A Warrants outstanding to
purchase an additional 750,000 shares. Other holders of our warrants could
purchase an additional 325,000 shares of common stock. 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 our common stock.
Furthermore, although we intend to list the common stock, and the units
and the Class A Warrants for trading on the American Stock Exchange, we cannot
be certain 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 our common stock or the units will remain stable. 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.
The Units, Common Stock And Warrants May Be Subject To Certain Limitations Upon
Trading Activities
In the event that the common stock, the units and the Class A Warrants
are not listed on the American Stock Exchange, trading of our securities may be
subject to material limitations as a consequence of certain provisions of the
Securities Exchange Act of 1934 which limit the activities of broker-dealers
effecting transactions in "penny stocks."
"Penny stocks" are 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 Securities and Exchange 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 stock." This may have the result of
depressing the market for our 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.
The Warrants May Not Be Exercisable If We Do Note Maintain A Current Prospectus
And Registrations.
We intend to maintain registration of the common stock underlying the
Class A Warrants so that holders of Class A Warrants may exercise them and sell
the underlying common stock, but we cannot assure you that we will be able to do
so. If we cannot, the Class A Warrants may have limited value.
We May Be Able To Redeem The Class A Warrants At A Time Adverse To The Interest
Of A Class A Warrant Holder.
8
<PAGE>
We have the right to redeem the Class A Warrants at any time for a
price of $.01 per share if the average closing price for the common stock equals
or exceeds $_____ for a specified period of time. This could force holders to
exercise the Class A Warrants, and pay the exercise price, at a time when they
otherwise would not do so. See "Description of Securities--Class A Warrants."
WHERE YOU CAN GET MORE INFORMATION
At your request, we will provide you, without charge, a copy of any
exhibits to our 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 annual
reports containing audited financial statements and other appropriate reports to
our shareholders. 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.
9
<PAGE>
DILUTION
As of March 31, 1999, the net tangible book value of our common stock
was $3,487,093, or $0.85 per share of common stock, based upon 4,092,815 shares
outstanding. "Net tangible book value" per share represents the amount of our
total tangible assets reduced by our total liabilities and minority interest and
divided by the number of shares of common stock outstanding. After giving effect
to the sale of 750,000 units being offered by us in this offering at an assumed
initial public offering price of $8.50 per unit less underwriting discounts and
commissions and estimated offering expenses we owe, our pro forma net tangible
book value at March 31, 1999 would have been $8,652,093, or $1.55 per share of
common stock, based upon 5,592,815 shares outstanding. This does not include the
750,000 shares issuable on exercise of the Class A Warrants. This represents an
immediate increase in net tangible book value of $0.70 per share to existing
stockholders and an immediate dilution per share of $2.70 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 in this
offering and the pro forma net tangible book value per share at March 31, 1999,
as adjusted to give effect to this offering.
Public offering price per share(1).................................... $4.25
Net tangible book value per share before offering.................. $0.85
Increase per share attributable to new investors................... $0.70
Pro forma net tangible book value per share after offering......... $1.55
Dilution per share to new investors................................ $2.70
- -----------
(1) Before deduction of underwriting discounts and commissions and
estimated offering expenses .
The foregoing computations exclude (i) an aggregate of 201,250 shares
of common stock reserved for issuance upon exercise of outstanding stock options
under our stock option plan, as amended, at a weighted average exercise price of
$2.50 per share; and (ii) 525,000 shares of common stock reserved for issuance
upon exercise of other outstanding warrants and options. Any exercise of such
options or warrants may result in further dilution to new investors.
The following table summarizes on a pro forma basis as of March 31,
1999, the number of shares of common stock we issued, the total consideration we
received and the average price per share paid by the existing stockholders and
to be paid by purchasers of our common stock in the offering (before deducting
offering expenses and underwriting discounts and commissions) at an assumed
public offering price of $4.25 per share. Excluded from the amount of
consideration from existing stockholders is $176,015 recorded for the shares
issued to Nancy Plotkin and the John G. Jacobs Trust from APP Investments in
consideration of the Company's extension of payment of their $250,000 notes
payable.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
Average Price
Number Percent Amount Percent Per Share
------------- ------------- ------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Existing Common Stockholders 4,092,815 73.2% 5,972,852 48.4% $ 1.46
New Investors 1,500,000 26.8 6,375,000 51.6 $ 4.25
Total 5,592,815 100.0% 12,347,852 100.0% $ 2.21
</TABLE>
10
<PAGE>
USE OF PROCEEDS
Our net proceeds from the offering will be approximately $5,165,000,
assuming a public offering price of $8.50 per unit and after deducting
underwriting discounts and commissions and estimated offering expenses. If the
underwriter exercises its option in full however, we estimate to receive net
proceed from this offering of $5,720,000.
Over the twelve months following completion of the sale of the units,
we intend to use the net proceeds as follows:
o $300,000 to fund the remaining portion of our commitment to
the SYNOR-A joint venture (see "Business-Asian Operations");
o approximately $0.9 million to fund purchases of additional
inventory;
o approximately $1.8 million to pay off outstanding debt, of
which $250,000 will be applied to repay working capital loans
bearing interest at 10% and maturing July 14, 1999. The
remainder will be used to pay down the principal balance of
our line of credit, which is payable on demand and bears
interest at Comerica Bank's prime rate plus 1%. See "Business
- Operations - Credit Facilities."
o approximately $1.5 million of the net proceeds to fund
purchases of aircraft and/or jet turbine engines; and
o approximately $0.6 of the net proceeds for general corporate
purposes, including possible business acquisitions.
If the underwriter exercises its option in full, $0.2 million of the
additional proceeds would be applied to purchase inventory, $0.2 million would
be used to pay down the line of credit, and $0.3 million would be available for
general corporate purposes.
We have had discussions with a number of acquisition candidates which
primarily are FAA certified aircraft part repair facilities in various parts of
the country. We also have had discussions with aircraft parts manufacturers and
distributors. It is too early to tell which, if any, of these potential business
acquisitions will take place. We anticipate that any business acquisitions will
be accomplished using a combination of cash and shares of our common stock for
the purchase price.
The amounts actually expended for the purposes described above could
vary significantly depending on, among other things, our ability to obtain
capital from other sources, the demand for our services and the availability of
inventory, jet engines and aircraft at attractive prices.
Pending application of the net proceeds we receive from the offering,
we intend to invest the funds in short-term investment-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, our common stock is traded in the
over-the-counter market through the OTC Bulletin Board under the symbol "AHGI."
The market for our common stock on the OTC Bulletin Board is sporadic, and the
quarterly average daily volume of shares traded since formation ranged from a
low of 25,944 shares to a high of 37,957 shares. The following table presents
the range of the high and low bid and average daily volume information for our
common stock for the periods indicated, which information was provided by the
Nasdaq Stock Market, Inc. The quotations reflect inter-dealer prices, without
retail mark-up, markdown or commission, and may not represent actual
transactions.
<TABLE>
<CAPTION>
Average
Daily
High Low Volume (Shares)
---- --- ---------------
<S> <C> <C> <C>
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
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ending December 31, 1999
First Quarter 5.25 3 25,944
Second Quarter (through June 17, 1999) 5.25 4 29,047
</TABLE>
Records of our stock transfer agent indicate that as of July 1, 1999,
there were 71 record holders of our common stock.
DIVIDEND POLICY
We have not paid any cash dividends to date, and do not anticipate or
contemplate paying cash dividends in the foreseeable future. Under the terms of
its credit agreement with Comerica Bank, Aviation Holdings International is
prohibited from declaring or paying cash dividends to Aviation Holdings Group
without the consent of Comerica Bank. We intend to utilize all available funds
for the purposes set forth above under "Use of Proceeds."
12
<PAGE>
MANAGEMENTS 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 and accompanying notes. This prospectus contains certain
forward-looking information, which involves risks and uncertainties. The actual
results could differ from the results we anticipate. See "Special Note Regarding
Forward-Looking Statements."
Overview
Our principal asset is our ownership of a controlling interest in
Aviation Holdings International. Accordingly, our results of operations are
highly dependent upon the results of operations of Aviation Holdings
International.
Aviation Holdings International 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 Aviation Trading, Inc. On July 28, 1997,
Schuylkill Acquisition Corp. acquired 100% of the outstanding common stock of
Jet Aviation Trading, Inc., a Florida corporation, in exchange for 1,776,800
shares of common stock of Schuylkill Acquisition Corp. in a one-for-one stock
exchange. The former Jet Aviation Trading, Inc. 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 name of Schuylkill Acquisition Corp. was changed to
Jet Aviation Trading, Inc. Effective September 15, 1998, the name of Jet
Aviation Trading, Inc. was changed to Aviation Holdings International.
The effect of the transaction between Schuylkill Acquisition Corp. and
the former Jet Aviation Trading, Inc. was a reverse merger. Accordingly, the
historical financial statements presented for Aviation Holdings International
are those of the accounting survivor, Jet Aviation Trading, Inc., and the
stockholders' equity of the merged company was recapitalized to reflect the
capital structure of the surviving legal entity (Schuylkill Acquisition Corp.)
and the retained earnings of Jet Aviation Trading, Inc.
In February 1998, Aviation Holdings International 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, we acquired a majority of the common stock of
Aviation Holdings International. Accordingly, our financial statements and those
of Aviation Holdings International were consolidated as of that date and our
financial statements for the year ended December 31, 1998 include the results of
Aviation Holdings International's operations for the period May 1998 through
December 31, 1998.
Aviation Holdings International currently derives its revenues from
selling, leasing and exchanging spare parts for fixed-wing commercial jet
transport aircraft, selling turbine jet engines and management services.
We have only a limited operating history upon which you may base an
evaluation of our operations and prospects. Although since our inception we
have experienced increased net sales, we may experience significant fluctuations
in our gross margins and operating results in the future, both on an annual and
quarterly basis. Various factors cause these fluctuations, including general
economic conditions, specific economic conditions in the commercial aviation
industry, the availability and price of surplus aviation parts, the size and
timing of customer orders, returns by and allowances to customers and our cost
of capital.
13
<PAGE>
Three Months Ended March 31, 1999 v. Three Months Ended March 31, 1998.
Results of Operations
Effective in May 1998, we acquired a majority of the common stock of
Aviation Holdings International. Accordingly, our financial statements and those
of Aviation Holdings International were consolidated as of that date and our
financial statements for the three months ended March 31, 1999 include the
results of Aviation Holdings International's operations. The financial
statements for the three months ended March 31, 1998 do not include the results
of Aviation Holdings International.
Net sales of aircraft and engine spare parts were $3,147,373 for the
three months ended March 31, 1999 and $0 for the three months ended March 31,
1998. The increase in net sales of aircraft and engine parts was due to our
acquisition of the controlling interest in Aviation Holdings International.
Cost of goods sold was $2,192,272 for the three months ended March 31,
1999 and $0 for the three months ended March 31, 1998. Gross profit increased
from $0 in the three months ended March 31, 1998 to $955,101 in the three months
ended March 31, 1999. Our increase in cost of goods sold and gross profit were
due to our acquisition of the controlling interest in Aviation Holdings
International.
Salary and wage expense was $318,270 in the three months ended March
31, 1999 and $0 in the three months ended March 31, 1998. This increase is a
result of our acquisition of the controlling interest in Aviation Holdings
International.
General and administrative expenses were $417,810 in the three months
ended March 31, 1999 and $463,631 for the three months ended March 31, 1998. Our
general and administrative expenses for the three months ended March 31, 1998
consisted primarily of a valuation allowance on amounts due to the Company from
Environmental Waste Systems (see "Risk Factors - We May Never Realize The
Current Valuation Of Our Significant Asset Other Than Our Investment In Aviation
Holdings International"), a nonrecurring expense. Our general and administrative
expenses for the three months ended March 31, 1999 related primarily to Aviation
Holdings International's operations.
Professional fees were $56,199 in the three months ended March 31, 1999
and $101,130 in the three months ended March 31, 1998. We incurred additional
accounting and legal expenses related to our efforts to acquire businesses in
the first three months of 1998. Activities related to acquisitions in the first
three months of 1999 declined.
Interest expense was $157,109 in the three months ended March 31, 1999
and $0 in the three months ended March 31, 1998. This increase was primarily due
to additional borrowings from Comerica Bank and stockholders and amortization of
the discount on the notes payable to the John G. Jacobs Trust and Nancy Plotkin.
Interest income was $5,376 in the three months ended March 31, 1999 and
$27,763 in the three months ended March 31, 1998. We stopped recording interest
on the Environmental Waste Solutions note receivable after the note was in
default and therefore interest income decreased.
Income from the joint venture was $6,553 in the three months ended
March 31, 1999 and $0 in the three months ended March 31, 1998. This increase is
primarily a result of our investment in the SYNOR-A Joint Venture which we
acquired along with our controlling interest in Aviation Holdings International.
Income tax expense was $9,000 in the three months ended March 31, 1999
and $0 in the three months ended March 31, 1998. This increase is primarily due
to our earnings for the three months ended March 31, 1999. At March 31, 1998,
due to the uncertainty of our ability to generate future earnings, we recorded a
valuation allowance for the income tax benefits that would have been generated
by our loss incurred for the three months ended March 31, 1998.
14
<PAGE>
Minority interest was $26,386 in the three months ended March 31, 1999
and $0 in the three months ended March 31, 1998. This decrease is due to the
acquisition of our controlling interest in Aviation Holdings International.
As a result of the foregoing, our net loss was $17,744 for the three
months ended March 31, 1999, which was a decrease from a net loss of $536,998
for the three months ended March 31, 1998. Basic and diluted loss per common
share decreased from $.23 for the three months ended March 31, 1998 to $.01 for
the three months ended March 31, 1999.
Liquidity and Capital Resources
As of March 31, 1999, our principal source of liquidity included cash
and cash equivalents of $691,074, compared with cash and cash equivalents of $0
as of March 31, 1998. As of March 31, 1999, total outstanding debt was
$2,532,141 compared to $396,500 as of March 31, 1998. Aviation Holdings
International obtained a revolving working capital line of credit from Comerica
Bank in 1998. At March 31, 1999, the amount of principal owed to the bank was
$1,500,000. The credit agreement governing the revolving line of credit provides
for a maximum aggregate borrowing limit of $3,500,000, subject to certain
borrowing restrictions and is secured by substantially all of Aviation Holdings
International's assets. The line of credit bears interest per annum at Comerica
Bank's prime rate plus 1%. As of March 31, 1999, Aviation Holdings International
did not meet the tangible net worth covenant of $4,250,000 in the Comerica Bank
credit agreement, which puts it in technical default under the terms of the
credit agreement. Comerica Bank has, however, continued to make advances under
the credit agreement.
Cash provided by operating activities for the three months ended March
31, 1999 was $355,368, primarily attributable to increases in accounts payable
and accrued expenses amounting to $296,532, which were partially offset by
growth in accounts receivable of $39,206 and inventory of $24,682. Cash provided
by operating activities for the three months ending March 31, 1998 was $26,825.
Cash used in investing activities for the three months ended March 31,
1999 was $216,412 compared with $395,500 of cash used for the three months ended
March 31, 1998. For the three months ended March 31, 1999, cash used was related
primarily to the investment in the SYNOR-A joint venture of $200,000 and the
purchase of property and equipment for $15,852. For the three months ended March
31, 1998, the primary use of cash was funding advances under the Environmental
Waste Solutions credit facility of $395,500.
Cash provided by financing activities for the three months ended March
31, 1999 was $188,428 compared with $366,500 for the three months ended March
31, 1998. Cash provided for the three months ended March 31, 1999 primarily
resulted from the proceeds from the sale of stock of $295,000, partially offset
by repayments of advances from stockholders of $100,000. For the three months
ended March 31, 1998, the primary source of cash was an advance from our
stockholders of $366,500.
We believe that existing cash balances, the credit agreement with
Comerica and the proceeds of this offering will be sufficient to meet our
capital requirements for at least the next eighteen months, including those
expenditures described in "Use of Proceeds" and, in particular, the capital
required for expansion of our turbine engine and aircraft sales. Thereafter, if
our capital requirements increase, we could be required to secure additional
sources of capital. There can be no assurance we will be capable of securing
additional capital or that the terms upon which such capital will be available
to us will be acceptable.
Year ended December 31, 1998 v. Year Ended December 31, 1997
Results of Operations
Effective in May 1998, we acquired a majority of the common stock of
Aviation Holdings International. Accordingly, our financial statements and those
of Aviation Holdings International were consolidated as of that date and our
financial statements for the year ended December 31, 1998 include the results of
Aviation Holdings International's operations for the period May 1998 through
December 31, 1998.
Net sales of aircraft and engine spare parts were $8,365,197 for the
year ended December 31, 1998 as compared to $0 for the year ended December
31,1997. The increase in net sales of aircraft and engine spare parts was due to
our acquisition of the controlling interest in Aviation Holdings International.
15
<PAGE>
Cost of goods sold was $5,839,049 for the year ended December 31, 1998
as compared to $0 for the year ended December 31, 1997. Our increase in cost of
goods sold was due to the sales generated by the acquisition of the controlling
interest in Aviation Holdings International.
Salary and wage expenses increased to $1,300,172 in the year ended
December 31, 1998 from $0 in the year ended December 31, 1997. This increase is
primarily the result of our acquisition of the controlling interest in Aviation
Holdings International and $380,328 of noncash compensation expense for common
stock and options to purchase common stock granted to our President.
General and administrative expenses increased to $1,771,560 in the year
ended December 31, 1998 from $15,950 in the year ended December 31, 1997. This
increase is primarily due to our acquisition of the controlling interest in
Aviation Holdings International, our increased acquisition activities during the
first five months of 1998, and the provision in the amount of $633,410 for a
valuation allowance on the Environmental Waste Solutions note.
Professional fees increased to $617,099 in the year ended December 31,
1998 from $48,227 in the year ended December 31, 1997. This increase is
primarily due to our acquisition of the controlling interest in Aviation
Holdings International and to our increased acquisition activities during the
first five months of 1998.
Interest expense increased to $96,044 in the year ended December 31,
1998 from $0 in the year ended December 31, 1997. The increase is due to
interest incurred on advances from our stockholders, interest on borrowings
under the Comerica credit facility by Aviation Holdings International and
amortization of the discount on the notes payable to the John G. Jacobs Trust
and Nancy Plotkin.
Interest income increased to $72,825 in the year ended December 31,
1998 from $6,740 in the year ended December 31, 1997. The increase is primarily
due to the interest recorded under the Environmental Waste Solutions note
receivable.
Loss from the joint venture increased to $8,313 in the year ended
December 31, 1998 from $0 in the year ended December 31, 1997. The increase is
due to the losses recorded on our investment in the SYNOR-A Joint Venture.
Income tax benefit increased to $532,470 in the year ended December 31,
1998 from $0 in the year ended December 31, 1997. The increase is primarily the
result of recording the current and deferred tax benefits related to income
generated by Aviation Holdings International, Inc that may be offset by losses
incurred by Aviation Holdings Group, Inc.
Minority interest increased to $44,121 in the year ended December
31,1998 from $0 in the year ended December 31, 1997. This increase is primarily
due to our acquisition of less than 100% of Aviation Holdings International in
1998.
As a result of the foregoing, net loss increased to $705,866 for the
year ended December 31, 1998 as compared to $57,437 for the year ended December
31, 1997. Basic and diluted loss per share of common stock increased from $.06
in the year ended December 31, 1997 as compared to $.23 for the year ended
December 31, 1998.
Liquidity and Capital Resources
As of December 31, 1998 our liquidity and capital resources included
cash and cash equivalents of $363,690 and working capital of $1,612,885,
compared with cash and cash equivalents of $2,175 and a working capital deficit
of $36,128 for the year ended December 31, 1997. The increase in working capital
was primarily due to our acquisition of the controlling interest in Aviation
Holdings International.
Cash used in operating activities for the year ended December 31, 1998
was $1,828,124 compared to $41,009 for the year ended December 31, 1997. Cash
used in the year ended December 31, 1998 was primarily to fund increases in
accounts receivable of $1,059,241, inventory of $613,306, interest receivable of
$64,351, and to reduce accounts payable by $180,414 and accrued expenses by
$173,823. Cash provided for the year ended December 31, 1998 was primarily due
to a decrease in prepaid expenses of $27,905 and an increase in income taxes
payable of $188,500. Cash used in the year ended December 31, 1997 was primarily
related to increases in interest receivable of $6,740 and prepaid expenses of
$2,957, and a decrease in the amount due to stockholder of $7,207. Cash provided
for the year ended December 31, 1997 was due to an increase in accrued expenses
of $8,000.
16
<PAGE>
Cash used in investing activities for the year ended December 31, 1998
was $97,007 compared to $950,673 of cash used for investing activities in the
year ended December 31, 1997. Cash used in the year ended December 31, 1998 was
for funds we advanced under the Environmental Waste Systems credit facility of
$535,100, purchases of equipment of $88,198 and additional investment in SYNOR-A
Joint Venture of $300,000. Cash provided for the year ended December 31, 1998
was due to the cash acquired in the acquisition of the controlling interest in
Aviation Holdings International of $830,331. The primary components of cash
used in the year ended December 31, 1997 was from funds we advanced under the
Environmental Waste Solutions credit facility of $940,000.
Cash provided by financing activities for the year ended December 31,
1998 was $2,286,646 compared to $993,857 for the year ended December 31, 1997.
The primary sources of cash provided from the year ended December 31, 1998
related to $1,500,000 borrowed on the bank line of credit, $50,000 borrowed from
the John G. Jacobs Trust, $200,000 borrowed from Nancy Plotkin, and advances
from stockholders, net of repayments, of $550,284. The source of cash provided
from the year ended December 31, 1997 was the proceeds received from the sale of
securities, net of offering costs paid, in the amount of $993,857.
Since our principal sources of funds are those generated by Aviation
Holdings International, the following sets forth certain information relating to
the operations of Aviation Holdings International for the periods indicated.
Aviation Holdings International formerly maintained its accounting records on a
fiscal year basis ending August 31. Beginning January 1, 1999, Aviation Holdings
International has changed its reporting to a calendar year basis.
Year ended August 31, 1998 v. October 3, 1996 (Date of Inception) to August 31,
1997.
Results of Operations
Aviation Holdings International's net sales of aircraft and engine
spare parts for the fiscal year ended August 31, 1998 increased $6,858,043, or
110%, over the period ended August 31, 1997. During this period, domestic sales
increased by 119% from $3,559,585 to $7,788,597, and international sales
increased 99% from $2,655,968 to $5,284,999. The increase in net sales was due
to several factors which include the sale of a single jet engine to Federal
Express for $2,000,000, 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 was $11,066,005 for the fiscal year ended August 31, 1998
and $4,684,864 for the fiscal period ended August 31, 1997, which is an increase
of 136% resulting from the increase in sales. There was a decrease in gross
profit from 25% to 15%. The decrease in gross profit was primarily due to a
lower profit margin on the cost of the jet engine sold to Federal Express and
the establishment of reserves for obsolete and slow-moving inventory of
$515,421.
General and administrative expenses decreased $441,735 in the fiscal
year ended August 31, 1998, or 15% compared to the fiscal period ended August
31, 1997. General and administrative expenses were 19% of operating revenues for
the fiscal year ended August 31, 1998, compared to 46% for the fiscal period
ended August 31, 1997. There was nonrecurring compensation expense recorded in
the period ended August 31, 1997 for the issuance of common stock to Aviation
Holdings International's founders in the amount of $1,399,600. The decrease in
this expense in the year ended August 31, 1998 was offset by increases in salary
expense of $630,807, professional fees of $96,145, and other general and
administrative expenses of $230,913, so that overall general administrative
costs only decreased by $441,735.
As a result of these and other factors, Aviation Holdings International
generated a loss from operations of $295,264 for the fiscal year ended August
31, 1998, compared to a loss of $1,383,641 for the fiscal period ended August
31, 1997.
Liquidity and Capital Resources
Aviation Holdings International's liquidity and capital resources
included cash and cash equivalents of $559,578 and working capital of $2,632,231
as of August 31, 1998 compared with cash and cash equivalents of $341,660 and
working capital of $3,246,086 as of August 31, 1997. The principal reason for
the decrease in working capital was the increase in the reserves for
uncollectible accounts and the establishment of the reserve for obsolete and
slow-moving inventory.
Cash provided by operations was $90,180 for the fiscal year ended
August 31, 1998 compared to cash used in operating activities of $1,516,173 for
the fiscal period ended August 31, 1997. For the fiscal year ended August 31,
1998, cash provided was primarily attributable to increases in accounts payable
and accrued expenses of $1,325,114. Cash used in the fiscal year ended August
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31, 1998 was primarily related to increases in inventory of $922,519, accounts
receivable of $516,035, and prepaid expenses amounting to $57,805. Cash provided
from the period ended August 31, 1997 was $1,179,058 which was primarily from
increases in accounts payable and accrued expenses. For the period ended August
31, 1997, cash was primarily used to fund increases in inventory of $1,006,754,
accounts receivable of $1,857,119, and prepaid expenses of $29,610.
Cash used in investing activities was $412,142 for the fiscal year
ended August 31, 1998 compared to $121,730 for the fiscal period ended August
31, 1997. Fort the year ended August 31, 1998, cash was used for the acquisition
of property and equipment of $212,142 and the funding of the SYNOR-A joint
venture commitment of $200,000. The primary use of cash for the period ended
August 31, 1997 was for the acquisition of property and equipment of $96,7 30.
Cash provided by financing activities was $539,880 for the fiscal year
ended August 31, 1998 compared to $1,979,563 for the fiscal period ended August
31, 1997. Cash from the fiscal year ended August 31, 1998 was from proceeds from
the issuance of stock in the amount of $165,000 and borrowings under the line of
credit of $425,000. Cash provided by the fiscal period ended August 31, 1997 was
from the proceeds received from stockholder loans, net of repayments, in the
amount of $1,070,000, and proceeds from the issuance of securities in the amount
of $923,313.
Inflation
Although we cannot accurately anticipate the effect of inflation on our
operations, we do not believe that inflation has had, or is likely in the
foreseeable future to have, a material effect on our 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.
Year 2000 Issue
The widespread use of computer programs that rely on two-digit dates to
perform computations and decision making functions may cause computer systems to
malfunction prior to or in the year 2000 and lead to significant business delays
and disruptions in the U.S. and Internationally.
We recently upgraded all of our current computer hardware and software
applications as part of our normal business operations, and we believe that all
of our hardware and software applications are year 2000 compliant. As this
upgrade would have occurred in any event, we had no additional costs
attributable to the Year 2000 issue. We have completed an assessment of our
non-information technology systems, and we are not currently aware of any Year
2000 problems relating to these systems which would materially adversely affect
our business operating results or financial condition.
We are currently reviewing the efforts of our vendors and customers to
become Year 2000 compliant. Letters and questionnaires have been or are in the
process of being sent to all critical entities with which we do business to
assess their Year 2000 readiness. To date, we have received minimal responses.
Each of the companies that have responded have assured us that they have already
addressed, or that they will address on a timely basis, all of their known
significant Year 2000 issues. In particular, we have been assured that the
principal electronic database on which we advertise parts, ILS, is Year 2000
compliant. Although this review is continuing, we are not currently aware of any
vendor or customer circumstances that may materially adversely impact us.
We cannot assure you that Year 2000 compliance plans of our vendors and
customers will be completed on a timely manner. With respect to vendors, we
believe that there are sufficient numbers of vendors of parts that any Year 2000
problems encountered by a particular vendor will not adversely impact our
ability to purchase inventory. In the event that any particular customer
encounters Year 2000 difficulties, it may impact our sales to, or collection of
receivables from, that customer until the problems are resolved. We believe that
our sales are sufficiently diversified that this would not result in a material
adverse impact on operating results. In addition, any such disruption is likely
to be temporary and result in a delay, rather than loss, of sales to that
customer. However, if a number of customers experience problems resulting in
significant delays in payment on outstanding accounts receivable, we could
experience material cash flow difficulties until such problems are resolved.
The great majority of aircraft spare parts in our inventory do not
involve computers or embedded chips that might present Year 2000 problems. We
have contacted our vendors of the parts that might have such problems to assess
the Year 2000 compliance of those parts. If any such parts are determined to be
Year 2000 non-compliant, we will seek to return them to the vendor and believe
that we will be successful in doing so. However, we cannot be sure that this
will always be the case, and some parts may be rendered unsaleable as a result.
We do not believe that this will be material in amount.
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Plan of Operation
Following the completion of this offering we intend to use a portion of
the proceeds, as well as trade credit, to expand our inventory of aircraft and
engine spare parts and to acquire turbine jet engines and/or aircraft. We also
anticipate hiring additional employees, particularly in the marketing area.
Aviation Holdings International owns a one-half interest in a DC10-30
flight simulator. See "Certain Transactions." Our 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. We anticipate this liquidation will be
completed by the end of 1999.
We believe that anticipated cash flows from by operations, together
with net proceeds we receive from the offering, will meet our anticipated short
term cash needs for working capital and will enable us to make future inventory
expenditures for the foreseeable future. On August 12, 1998, Aviation Holdings
International entered into a credit agreement with Comerica Bank whereby
Comerica Bank agreed to extend a revolving line of credit to Aviation Holdings
International of up to $3,500,000. The revolving line of credit is intended to
fund working capital needs such as inventory purchases and, subject to
Comerica's approval, strategic acquisitions. The funds advanced to Aviation
Holdings International by Comerica are secured by the assets of Aviation
Holdings International. The outstanding balance may not at any time exceed the
sum of (a) 85% of Aviation Holdings International's eligible accounts receivable
and (b) 35% of Aviation Holdings International's eligible inventory. As of June
30, 1999, the maximum amount available to Aviation Holdings International under
this formula was approximately $2.109 million, and the outstanding balance was
approximately $2.075 million.
We do not anticipate material capital expenditures for the coming
fiscal year other than as described above under "Use of Proceeds."
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BUSINESS
General
Aviation Holdings Group was incorporated in January 1998 as a Delaware
corporation and wholly-owned subsidiary of EyeQ Networking, Inc., a Colorado
corporation formed in May 1988. In February, 1998, EyeQ Networking, Inc. merged
with and into Aviation Holdings Group, with Aviation Holdings Group surviving as
the newly merged entity under the name of EyeQ Networking, Inc. In September
1998, Aviation Holdings Group changed its name from EyeQ Networking, Inc. to
Aviation Holdings Group, Inc.
We acquired approximately 96% of the issued and outstanding capital
stock of Aviation Holdings International through a series of share exchanges in
which holders of Aviation Holdings International common stock exchanged it for
newly-issued shares of Aviation Holdings Group common stock.
Our only significant asset, other than our interest in Aviation
Holdings International, is a note receivable recorded in our financial
statements in the amount of $900,000 which is secured by a mortgage on a 60 acre
parcel of real property in Colchester, Connecticut. The note receivable resulted
from loans made by us during 1997 and 1998 in connection with a proposed
acquisition of another business entity. That acquisition was never consummated,
and we have no further obligations in connection with that proposed acquisition.
The parcel of land includes a 10 to 20 acre former landfill that is not
currently in operation and has been capped. The property is wooded and
unimproved. The property as zoned for limited residential, agricultural,
recreational, utility and public uses. We are aware of sales of five parcels of
unimproved land of 20 acres of more in the Colchester area during the past three
years.
We are in the aircraft and engine spare parts redistribution business
and specialize in the sale, lease, exchange and purchase of technical spare
parts for fixed-wing commercial jet transport aircraft manufactured by Boeing,
McDonnell Douglas, Airbus and Lockheed. As part of this business, we provide
customers with inventory management services including new product distribution,
technical purchasing, maintenance and repair management, consignment marketing
and purchase/leaseback of technical spare parts inventory. We also pursue
opportunities involving the purchase, sale and lease of jet turbine engines, jet
turbine aircraft and related aviation industry equipment.
Industry Overview
The aircraft spare parts redistribution market includes sellers of
parts other than parts manufacturers. This 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. We believe that significant trends
affecting the aircraft spare parts market will increase our 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
Boeing's 1999 Market Outlook estimates that:
o the worldwide fleet of commercial passenger airplanes will
more than double from 12,600 airplanes at the end of 1998 to
28,400 airplanes by 2018; and
o cargo jet aircraft will increase from 1,545 airplanes in 1998
to 3,036 airplanes by 2018.
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 parts
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. We believe that
all of these factors will increase the demand for aircraft spare parts from the
redistribution market.
Increased Outsourcing of Inventory Management Function
Airlines incur substantial expenditures in connection with fuel, labor
and aircraft ownership. During the last decade, airlines have come under
increasing pressure from consumers to reduce air travel costs. Although some
expenditures required to operate an
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airline are beyond the direct control of airline operators (e.g., the price of
fuel and labor costs), we believe that obtaining replacement parts from the
redistribution market and outsourcing inventory management functions are steps
airlines will take to manage these functions with less expense and greater
efficiency.
Increasing Emphasis on Traceability
Due to concerns regarding unapproved aircraft spare parts, regulatory
authorities now require airlines to maintain stricter parts documentation. This
requirement has, in turn, been extended by airlines to the spare parts vendors .
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. On March 25, 1999 our
quality control systems were certified by the Airline Suppliers Association as
meeting its quality system standards and FAA guidelines.
Increased Consignment
Certain of our 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. We believe that major
airlines and other owners of aircraft spare parts are increasingly entering into
long-term consignment agreements with redistributors in order to concentrate on
their core businesses and to more effectively redistribute their excess parts
inventories. By consigning inventories to a redistributor such as us, 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 us to offer for sale significant parts
inventory at minimal capital cost to us.
Increased Leasing
We believe that cost considerations will cause airlines to lease,
rather than purchase, more spare parts and engines. This would benefit us by:
o providing a steady income stream over a period of time from
lease payments;
o upon termination of the lease, we would regain the part or
engine for subsequent sale; and
o provide the opportunity to obtain additional financing.
Operations
Our core business is buying and selling aircraft and engine spare
parts. We purchase spare parts from numerous unaffiliated sources, including
airlines, original equipment manufacturers and other parts distributors. We have
also pursued opportunities to purchase and sell related aviation industry
equipment. For example, Aviation Holdings International acquired a 50% interest
in a DC10 flight simulator and related support package and software. We also
provide value-added inventory management services to our customers. We believe
that inventory management services provide significant opportunities for
expansion of our business in the future. We also intend 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:
o rotable: means 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
reused an indefinite number of times. An important type of
rotable is a "life limited" part, which means it has a
predetermined designated number of allowable flight hours
and/or flights after which it is rendered unusable;
o repairable means a part limited by the number of times it can
be repaired before it must be discarded; and
o expendable means a part which is used and not thereafter
repaired for further use.
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Rotable and repairable aircraft and engine spare parts are further
classified as:
o factory new means parts that have never been installed or used
which are purchased from manufacturers or their authorized
distributors, aircraft manufacturers and engine manufacturers;
o new surplus means parts that have never been installed or used
which are purchased from excess stock of airlines, repair
facilities or other redistributors;
o overhauled means a part that has been completely disassembled,
inspected, repaired, reassembled and tested by a licensed
repair facility;
o serviceable means a part repaired by an approved maintenance
center that is functional and meets any manufacturer or time
and cycle restrictions applicable to it; and
o as removed means a part that requires functional testing,
repair or overhaul by a licensed facility prior to being
returned to service in an aircraft or engine.
A factory new, new surplus, overhauled or serviceable part designation indicates
that the part can be immediately utilized on an aircraft.
Inventory Purchases and Sales
Our daily operations encompass inventory sales, brokering and
exchanging aircraft spare parts. We advertise our available inventories held for
sale or exchange on the Inventory Locator Service ("ILS"), the Airline Inventory
Redistribution System ("AIRS") and BCOM electronic databases. Buyers of aircraft
spare parts can access the ILS, AIRS and BCOM databases and determine the
companies which have the desired inventory available. We estimate that 25% of
ours 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, we maintain 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. We are currently developing an internet web site that will describe in
detail the parts and services we offer.
We typically have over 50,000 line items in stock. We monitor market
availability, pricing and historical data on a continuous basis. We sell new,
overhauled and serviceable replacement parts from our inventory and buy them at
the request of its customers against a specific order. We usually purchase parts
for our own account and sell them to our customers.
For the twelve months ended December 31, 1998 and the three months
ended March 31, 1999, Aviation Holdings International's total revenues were
approximately as follows:
12/31/98 3/31/99
83% from inventory sales; 87% from inventory sales;
16% from engine sales; and 12% from engine sales; and
1% from consignment sales. 1% from consignment sales.
Inventory Management Services
We provide a number of inventory management services to our customers.
These services assist airlines in downsizing their inventory management
operations, thus enabling them to utilize their capital more efficiently and
reduce costs. We believe we can provide an inventory management program geared
to any particular customer's requirements. Such programs would be supported by
our operating agreements with various airlines and independent repair agencies.
We do not charge separately for these services, but consider them to be a
marketing advantage to our inventory sales.
Consignment
By consigning inventories to a redistributor such as us, 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 us to sell a broad range of parts at minimal capital
cost. We anticipate that revenues from consignment will increase as a percentage
of total revenues in the future.
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Purchasing Services
We purchase spare parts on behalf of smaller and start-up airlines.
This service allows our customers to take advantage of our greater purchasing
power, repair management services, information systems technology, quality and
logistics systems and industry expertise. We do not charge separately for these
services, but consider them to be a marketing tool for our inventory sales.
Asian Operations
While the majority of our operations are conducted in the United
States, we also operate in Asia and the Pacific Rim directly and through a joint
venture with a third party and a number of subsidiaries. These Asian operations
currently account for approximately 20% of our gross revenues on a consolidated
basis and we intend to continue to expand them. The Asian operations are
supervised by Simon Chiang, Vice President for Asia and the Pacific Rim. From
our Miami headquarters, business is conducted through a number of entities
controlled by us that share employees and office facilities. There are two
employees in Hong Kong, one in Shenyang and one in Beijing. The bulk of the
Asian operations consist of business similar to our core operations in the
United States and Europe. We intend to expand the Asian operations to include
other lines of business related to aviation.
Pasco International Aviation Corp. Ltd., a Hong Kong corporation
("Pasco-HK") and majority-owned subsidiary of Aviation Holdings International,
accounted for approximately 13% of our gross revenues on a consolidated basis
for the year ended December 31, 1998 and the three months ended March 31, 1999.
The following is a list of some of its major customers : 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. is a
Sino-American joint venture company established in November 1997. The joint
venture mainly deals with inspection, repair and recertification of DC9, MD80
and A300-600 components, line replacement units, instruments and avionics. It
also represents some of the world's leading original equipment manufacturers for
certain items. It is the first Sino-foreign joint venture approved by the Civil
Aviation Administration of China in the avionics and accessories repair field
and which commenced operations in March 1998. Twenty-five percent of the joint
venture is held by PASCO International Aviation Corporation, Inc., a Florida
corporation and a subsidiary of Aviation Holdings International ("Pasco-FLA").
China Northern Airlines, one of the largest airlines in China, holds the
remaining 75%. The joint venture is currently certified by the Chinese aviation
authorities and expects to complete FAA certification by the end of 1999.
Pasco-FLA's total financial commitment to the joint venture is
$1,000,000. As of June 30, 1999, Aviation Holdings International had funded
approximately $700,000 of this total and intends to fund the remaining
approximately $300,000 with proceeds from this offering and from internal
operations. Under the terms of the joint venture, Pasco-FLA is entitled to
certain preferences in any initial distributions of net income. This preference
provides that Pasco-FLA will recoup its investment prior to any regular
distributions being made to China Northern. Pasco-FLA provides technological
advice to the joint venture and promotes, markets and sells its services. The
joint venture serves approximately 14 airlines. In June 1999, Pasco-FLA received
an initial distribution of approximately $14,600 from the joint venture.
Pasco Financial Services Ltd., Corp., a Hong Kong corporation and
majority-owned subsidiary of Aviation Holdings International
("Pasco-Financial"), specializes in providing financing from banks on behalf of
airlines for aircraft and aviation-related purchases. Pasco-Financial was
recently appointed by China Southwest Airlines 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,
Aviation Holdings International 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. Two
majority owned subsidiaries of Aviation Holdings International, Aero-Link Flight
Systems Ltd., a Hong Kong corporation, and Aero-Link Flight System, Inc., a
Florida corporation (collectively, "Aero-Link"), act as China Airlines' global
marketing representative outside of Taiwan. To date, we have recognized $77,162
in revenue from Aero-Link.
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Credit Facilities
On August 12, 1998, Aviation Holdings International entered into a
Credit Agreement with Comerica Bank ("Comerica") whereby Comerica agreed to
extend a revolving line of credit to Aviation Holdings International 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
Aviation Holdings International by Comerica are secured by the assets of
Aviation Holdings International and may not at any time exceed the sum of (a)
85% of Aviation Holdings International's eligible accounts receivable and (b)
35% of Aviation Holdings International's eligible inventory. As of June 30,
1999, Aviation Holdings International had an aggregate availability of
approximately $2.109 million and an outstanding balance due to Comerica under
the revolving line of credit of approximately $2.075 million.
Strategy
We believe that we 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 our business strategy are:
Internal Growth
We seek to increase our operating revenues and operating income through
continued customer penetration in our existing markets and expansion into new
markets. We intend to achieve such growth by continuing to increase the size and
scope of our inventory and by continuing to expand our marketing efforts
worldwide. We will also expand our inventory management, leasing and consignment
services to allow our 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. We will seek to establish and maintain close working relationships
with our 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:
o airlines, in order to reduce capital requirements, sell large
amounts of inventory in a single transaction;
o inventories of aircraft spare parts are sold in conjunction
with asset sales or bankruptcy proceedings, or
o when operators upgrade their fleet.
In these situations, we 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. As
of March 31, 1999, we had successfully completed approximately eight bulk
inventory purchases in excess of $100,000. We believe that due to our
experience, and as a result of additional capital, we will be able to complete
an increased number of larger bulk purchases.
Purchase and Sale of Jet Turbine Engines and Aircraft
We believe that with sufficient financial resources, we would be in a
position to increase our activity in the market for the purchase and sale of jet
turbine engines and aircraft. This market is extremely competitive and capital
intensive. We feel, however, that our management has the expertise and industry
contacts to make prudent purchases, which are the key to profitability in this
market.
Pursue Acquisitions of Complementary Businesses
We will also seek acquisitions of other companies, assets or product
lines that would complement or expand our existing aircraft spare parts
redistribution and inventory management services business. We believe that such
acquisitions will enable us to achieve economies of scale and expand the product
and service lines available to our customers. We are currently evaluating a
number of acquisition opportunities, including several FAA certified aircraft
part repair facilities. 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.
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Diversification
We are interested in contracting with manufacturers of specialty
products that could diversify our product line. New product distribution
agreements would allow us to exploit our 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 us, as we are in a position to reap residual commissions
without any of the associated product costs or liability. On January 23, 1997,
we entered into such an agreement with Mirandy Products Ltd., a leading
manufacturer of lavatory systems cleaner for aircraft. We feel that distribution
sales of Mirandy's latest product, "Mirabowl," will serve to augment ours
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,
decreases aircraft parts and may be used as an interior cleaner for the cabin
area. We intend to begin active marketing of these products in the near future
and have not realized revenues from sales of these products to date. We are
currently negotiating agreements with other manufacturers whose products relate
to aircraft environmental systems and fluid processing systems.
We have 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. This opportunity
should allow us to recognize additional income, receive volume discounts on
products and obtain increased recognition in the commercial aviation community,
which will enhance overall brand awareness. We have entered into contracts with
additional maintenance providers and intend to pursue additional relationships.
We also are seeking to expand our 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
We utilize twelve inside and outside salespersons and a network of
independent representatives in our 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 Aviation Holdings
International's day-to-day sales are accomplished through our inside sales
force.
We provide 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. Our South
Florida location, with easy access to Miami International Airport and Fort
Lauderdale International Airport, assists in the reliable and timely delivery of
purchased products. This location also provides access to exceptional import and
export facilities.
We have 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 twelve month period ended December 31,
1998, Aviation Holdings International's top 10 customers accounted for
approximately 47% of net sales, and one customer, Federal Express Corp.,
accounted for more than 16% of net sales. During the three month period ended
March 31, 1999, the top 10 customers accounted for approximately 53% of net
sales, and one customer, Nielsen Aviation Corp. accounted for 13% of net sales.
Management Information System
We have upgraded our management information systems by acquiring
computer hardware and software. Our data system is being developed to
incorporate state-of-the-art records imaging, archiving, inventory and asset
management analysis, financial record and other support systems. We believe that
upon full implementation, our data management system will be adequate to manage
our requirements in accordance with our forecasted growth.
Competition
The aircraft spare parts redistribution market is highly-fragmented.
Competition is generally based on price, availability of product and quality,
including traceability. Our major competitors include AAR Corp., Aero
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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 our 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.
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 ensure that all aircraft and aviation equipment
are continuously maintained in proper condition for the safe operation of
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, we utilize FAA and/or Joint Aviation Authority
("JAA") certified repair stations to repair and certify parts to ensure
worldwide marketability. Our operations may in the future be subject to new and
more stringent regulatory requirements. In that regard, we closely monitor the
FAA and industry trade groups in an attempt to understand how possible future
regulations might impact us. See "Risk Factors -- Stricter Government
Regulations Could Reduce The Value Of Our Inventory And/or Require Significant
Expenditures."
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. We require all of our suppliers
to provide adequate documentation as required by the industry and the regulatory
agencies. We are designing out data management system to image, capture, manage
and communicate this documentation.
Employees
As of June 30, 1999, Aviation Holdings Group employed one person and
Aviation Holdings International employed 32 persons, including two in Hong Kong,
one in Shenyang and one in Beijing. None of these employees are covered by
collective bargaining agreements. We believe that our relations with our
employees are good.
Properties
Our 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 Aviation Holdings International is
the tenant, dated January 1, 1997 and subsequently amended on November 1, 1997,
which expires on December 31, 2000. Annual rental is $78,348 plus pass-through
of (1) utilities, (2) increases in real estate taxes, (3) assessments, (4)
increases in insurance and (5) a pro rata share of assessments imposed by the
industrial park's association. Rent is subject to a cost of living increase
adjustment. We have two additional one year options to renew. These facilities
are adequate for our present and anticipated needs. Pasco-HK 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
Our business exposes us 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. We have a director of quality
control whose responsibilities include implementation of our quality control
system and supervision of our licensed airframe and powerplant inspectors and
operations personnel. Our 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. We also ensure that all parts received or shipped
are accompanied by proper documentation. The director of quality control also
supervises our document traceability program. We do not carry product liability
insurance. See "Risk Factors -- Our Business May Subject Us To Expensive Product
Liability Claims."
Neither Aviation Holdings Group nor Aviation Holdings International is
currently involved in any litigation.
26
<PAGE>
MANAGEMENT
Directors and Executive Officers
The Directors and executive officers of Aviation Holdings Group and
Aviation Holdings International, their ages and positions are set forth below:
Joseph J. Nelson 49 President, Chief Executive Officer and
Director of Aviation Holdings International
and Aviation Holdings Group
Simon Chiang 44 Vice President-Asia and Pacific Rim
Operations of Aviation Holdings International
and Director of Aviation Holdings
International
Michael J. Cirillo 31 Director of Aviation Holdings International
and Aviation Holdings Group
Theodore H. Gregor 48 Director of Aviation Holdings International
and Aviation Holdings Group
Joseph F. Janusz 47 Vice President-Finance and Chief Financial
Officer of Aviation Holdings International
Joseph J. Nelson has been our President, Chief Executive Officer and a
Director since August 1998 and President, Chief Executive Officer and a Director
of Aviation Holdings International since October 1996. 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 Aviation Holdings International since February 1998 and has
been a Director of ours 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
from 1995 to 1998. 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 Aviation Holdings International since June
1997 and a Director of Aviation Holdings Group since August 1998. Mr. Cirillo
holds a B.S. degree from Farleigh Dickinson University.
Theodore H. Gregor has been a director of Aviation Holdings
International since October 1997 and a director of Aviation Holdings Group 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 Aviation Holdings International 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.
The officers of Aviation Holdings Group and Aviation Holdings
International are elected by the Board of Directors of Aviation Holdings Group
and Aviation Holdings International, respectively, to serve until their
successors are elected and qualified. The Directors are elected at the annual
meeting of the stockholders.
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<PAGE>
Aviation Holdings Group's Certificate of Incorporation and Bylaws and
Aviation Holdings International's Certificate of Incorporation and Bylaws
provide for the indemnification of, and advancement of expenses to, directors
and officers. Aviation Holdings International has also entered into agreements
to provide indemnification for its Directors and executive officers.
Committees
Our Board of Directors has not to date established any committees, but
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 our
financial statements, 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 our internal accounting and
auditing procedures.
Director Compensation
Our Directors have not received any compensation for their services as
Directors in the past. We intend to pay directors who are not employed by us a
fee of $500 for each meeting of the Board of Directors attended and $500 for
each committee meeting attended.
In addition, all Directors will receive stock option grants under the
Stock Option Plan for serving on our 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 Aviation Holdings
International 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 .
Executive Compensation
The following table reflects compensation paid or accrued during the
indicated fiscal years, which end on August 31 of the indicated year with
respect to compensation paid or accrued by Aviation Holdings International and
which end on December 31 of the indicated year with respect to compensation paid
or accrued by Aviation Holdings Group.
28
<PAGE>
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 President, Chief 1998 160,000 29,999 20,128 (2) 0.00
Executive Officer 1997 160,000 11,153 0.00 0.00
and Director
Simon Chiang Vice President and 1998 87,653 21,500 0.00 0.00
Director
Joseph F. Janusz Vice President of 1998 78,000 14,500 62,500 (3) 0.00
Aviation Holdings 1997 29,500 0.00 0.00 0.00
International
</TABLE>
(1) Does not include perquisites 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 common stock granted on August 1, 1998
by the Company's Board of Directors at $5.03 per share. The shares were
issued in consideration of services rendered.
(3) Represents 25,000 shares of Aviation Holdings International's common
stock granted on June 11, 1998 by Aviation Holdings International's
Board of Directors at $2.50 per share. The shares were issued by
Aviation Holdings International in consideration of services rendered.
The following table contains information concerning stock options
granted to officers and directors through July 1, 1999.
<TABLE>
<CAPTION>
Number of % of Options Earliest
Options/Warrants Granted to Employees Exercise or Exercise
Name Granted (1) Base Price Date Expiration Date
---- ---------------- -------------------- ------------ -------- ---------------
<S> <C> <C> <C> <C> <C>
Joseph Nelson 50,000 12.5% 2.50 12/24/97 December 23, 2002
Joseph Nelson 200,000 49.8% 2.50 5/31/98 May 30, 2003
Joseph Nelson 25,000 6.2% 2.50 5/31/98 May 30, 2003
Joseph Janusz 20,000 5.0% 2.50 10/29/98 June 11, 2004
Joseph Janusz 20,000 5.0% 2.50 12/24/97 June 11, 2004
Joseph Janusz 15,000 3.7% 2.50 5/31/98 June 11, 2004
Simon Chiang 15,000 3.7% 2.50 2/12/99(2) February 11, 2003
Simon Chiang 10,000 2.5% 2.50 5/31/98 May 30, 2003
Theodore Gregor 10,000 2.5% 2.50 11/6/97 November 5, 2002
</TABLE>
(1) Excludes from total options those options canceled due to employee
termination and options canceled under the provisions of Joseph
Nelson's employment agreement. The cancellations amounted to 35,000
options shares in 1998 and 14,500 option shares in the three months
ended March 31, 1999.
(2) Options vest as to 5,000 shares on February 12 of each year, commencing
February 12, 1999.
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<PAGE>
The following table sets forth information regarding the number and
value of options held as of July 1, 1999 by the directors and officers, based on
an assumed value of $4.25 per share of common stock. No options have been
exercised to date.
<TABLE>
<CAPTION>
Number of Unexercised Options Value of Unexercised In-the Money Options
Name at July 1, 1999 at July 1, 1999
---- ------------------------------- -----------------------------------------
Exercisable Unexercisable Exercisable Unexerciseable
----------- ------------- ----------- --------------
<S> <C> <C>
Joseph Nelson 275,000 --- 481,250 ---
Joseph Janusz 55,000 --- 96,250 ---
Simon Chiang 15,000 10,000 26,250 17,500
Theodore Gregor 10,000 --- 17,500 ---
</TABLE>
Employment Agreements
Aviation Holdings Group 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 Aviation Holdings Group. 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 Aviation Holdings Group (exclusive of the pre-tax net income of
Aviation Holdings International) and 3% of the pre-tax net income of Aviation
Holdings International, and (iii) certain fringe and other employee benefits
that are made available to the senior executives of Aviation Holdings Group.
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
Aviation Holdings Group other than one approved by its Board of Directors or in
the event that Mr. Nelson's employment is terminated by Aviation Holdings Group
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.
Aviation Holdings International 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 Aviation Holdings International. 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
Aviation Holdings International'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 Aviation Holdings International. Pursuant to the
agreement, Mr. Chiang was granted options, under Aviation Holdings
International's Stock Option Plan, to purchase 15,000 shares of Aviation
Holdings International 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 Aviation Holdings International 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.
Aviation Holdings International 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 Aviation Holdings International. The
agreement has a term of two and one-half years and provides for (i) annual base
compensation of $78,000 (increasing to $89,500 as of October 14, 1999), (ii) an
annual bonus, and (iii) benefits consistent with Aviation Holdings
International's then current policies and reasonable expense reimbursement.
30
<PAGE>
Pursuant to the agreement, Mr. Janusz was granted, under Aviation Holdings
International's Stock Option Plan, options to purchase 20,000 shares of Aviation
Holdings International common stock. In the event that Mr. Janusz's employment
is terminated by Aviation Holdings International for reasons other than his
death or permanent disability or for "cause" (as definition the agreement), 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 Aviation Holdings
International will require any successor to all or substantially all of the
business or assets of Aviation Holdings International to assume Aviation
Holdings International's obligations under the agreement.
Stock Option Plan
On September 1, 1997, the Board of Directors of Aviation Holdings
International adopted a Stock Option Plan which was superseded, effective March
1, 1999, by a Stock Option Plan of Aviation Holdings Group (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 Aviation Holdings Group, or Compensation Committee. The Plan also
sets forth applicable rules and regulations for stock options granted to
non-employee directors. To date, 201,250 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 our 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 June 30, 1999 (i) by each of the Company's
directors and executive officers, (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 common stock. All persons listed have sole voting and investment power
over the indicated shares unless otherwise indicated.
<TABLE>
<CAPTION>
PERCENT
-------------------------------------
NAME SHARES Before Offering After Offering(9)
- ---- ------ --------------- -----------------
<S> <C> <C> <C>
Joseph J. Nelson (1) (2) 475,800 11.3 8.3
Joseph F. Janusz (1) (3) 70,000 1.7 1.2
Simon Chiang (1) (4) 187,123 4.4 3.3
Michael J. Cirillo (1) (5) 268,000 6.4 4.7
Theodore H. Gregor (6) 10,000 0.2 0.2
1495 Southeast Avenue
Hialeach, FL 33010
APP Investments, Inc. (7) 915,000 21.7 16.0
Two Penn Center Plaza
Suite 605
Philadelphia, PA 19102
Argaman, Inc. (8) 600,000 14.3 10.5
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) 1,006,923 24.0 17.7
</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.
31
<PAGE>
(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 64,000 shares of common stock, and warrants to purchase
200,000 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) APP is a personal holding company. The sole shareholder of APP is
AndrewP. Panzo. APP and Mr. Panzo are is not affiliated with any
officer, director, or other principal stockholder.
(8) Includes warrants to purchase 100,000 shares of common stock. Argaman
is an Israeli corporation making investments on behalf of a group of
investors. Argaman is not affiliated with any officer, director or
other principal stockholder.
(9) Does not include exercise of the underwriter's option.
CERTAIN TRANSACTIONS
Effective October 1, 1996, Aviation Holdings International issued
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. Aviation Holdings International also entered into a Consignment
Agreement with Jet Avionics, whereby Aviation Holdings International agreed to
sell certain inventory of technical spares for the benefit of Aviation Holdings
International and Jet Avionics. The Consignment Agreement was for a period of
one year and provided for the delivery of inventory by Jet Avionics to Aviation
Holdings International and the storage by Aviation Holdings International, 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 Aviation
Holdings International and then to the third party. Aviation Holdings
International insured the inventory. The Consignment Agreement provided that
Aviation Holdings International 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, Aviation Holdings International 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, Aviation Holdings International and Jet Avionics
entered into a Consignment Cancellation and Purchase Agreement whereby (i) Jet
Avionics canceled the debt of $303,000 and (ii) Aviation Holdings International
purchased the remaining consignment inventory with a value of approximately
$336,000 from Jet Avionics all in exchange for
32
<PAGE>
230,000 shares of Aviation Holdings International's common stock, $4,000 in
cash, and the cancellation of $175,000 of indebtedness of Jet Avionics to
Aviation Holdings International. The President and sole shareholder of Jet
Avionics is Sharon Taoz. Ms. Taoz was employed by Aviation Holdings
International, as an account executive, from October 3, 1996 through August 31,
1997 and was paid $37,000. Ms. Taoz is married to a current employee of Aviation
Holdings International.
On October 3, 1996, Aviation Holdings International sold 80,000 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 Aviation Holdings International aggregate of $325,000. During
the year, Aviation Holdings International repaid $125,000. The balance
($200,000) was repaid on August 29, 1997 through the issuance of 100,000 shares
of Aviation Holdings International common stock. FAC was also issued 7,500
shares for advisory services rendered. Mr. Appel may be deemed to have been an
organizer of Aviation Holdings International.
On November 1, 1996, Aviation Holdings International sold 192,000
shares of its common stock to its president, Joseph J. Nelson, in consideration
of a promissory note in the principal amount of $80,000 payable on demand. The
outstanding balance as of June 30, 1999 was $80,000. The note bears interest at
the applicable federal rate.
On November 14, 1996, Aviation Holdings International 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,
Aviation Holdings International paid $125,000 in cash and issued 40,000 shares
of Aviation Holdings International common stock valued at $100,000. On March 28,
1997, Aviation Holdings International 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, Aviation Holdings International issued 200,000 shares of Aviation
Holdings International common stock valued at $500,000.
On March 27, 1997, Silvertown International Corp. ("Silvertown") loaned
Aviation Holdings International $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, Aviation
Holdings International issued to Silvertown 4,800 shares of Aviation Holdings
International common stock. This note was extended for an additional three (3)
months. On May 12, 1997, Silvertown loaned Aviation Holdings International
$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, Aviation Holdings International issued to
Silvertown 10,000 shares of Aviation Holdings International common stock. On
August 29, 1997, Aviation Holdings International satisfied the principal amounts
of these promissory notes through the issuance of 185,000 shares of Aviation
Holdings International common stock to Silvertown.
On May 23, 1997, Joseph Laura loaned $500,000 to Aviation Holdings
International. This loan was evidenced by a promissory note payable to Mr.
Laura, due on the earlier of May 31, 1998 or Aviation Holdings International
obtaining equity financing in excess of $1,000,000, together with interest at
12% per annum. Aviation Holdings International 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 Aviation Holdings International, was issued 200,000
shares of Aviation Holdings International common stock, for $200. On June 1,
1997, The D.A.R. Group, Inc., was issued warrants to purchase 950,000 shares of
Aviation Holdings International common stock for a fee in connection with advice
concerning the formation, capitalization and structure of Schuylkill Acquisition
Corp. See "Description of Securities -- Outstanding Warrants."
33
<PAGE>
On February 12, 1998, Aviation Holdings International consummated a
transaction whereby Aviation Holdings International 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 Aviation Holdings International 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, Aviation
Holdings International and Mr. Chiang entered into an employment agreement
pursuant to which Mr. Chiang serves as Aviation Holdings International's Vice
President for Asia and the Pacific Rim Operations. See "Management - Employment
Agreements."
On October 15, 1998, Nancy Plotkin and the John C. 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
15,1 999), bear interest at 10% per annum and are secured by the pledge of 51%
of the outstanding stock of Aviation Holdings International. As additional
consideration for the loans, the Company issued 20,000 shares of its common
stock to Nancy Plotkin and 5,000 shares to the John C. Jacobs Trust.
In May 1999 the Company extended the maturity date of these promissory
notes to July 14, 1999 and issued a warrant to purchase 12,000 shares of common
stock to Nancy Plotkin and a warrant to purchase 3,000 shares of common stock to
the John G. Jacobs Trust as consideration for this extension. The warrants are
exercisable for three years from the date of grant at an exercise price of $4.00
per share.
On March 31, 1999, Aviation Holdings Group purchased 600,000 shares of
Aviation Holdings International common stock from Argaman, Inc. ("Argaman") in
exchange for 500,000 shares of the common stock and a warrant to purchase an
additional 100,000 shares at an exercise price of $3.75 per share.
On June 1, 1999, Aviation Holdings Group issued warrants to purchase
210,000 shares of common stock to the D.A.R. Group, Inc. and Dallas Investments,
Ltd. in consideration for the cancellation of warrants to purchase 1,000,000
shares of common stock of Aviation Holdings International.
34
<PAGE>
DESCRIPTION OF SECURITIES
General
We are authorized to issue 18,000,000 shares of common stock, $.0001
par value per share, of which 4,208,315 shares are outstanding. An additional
750,000 shares of common stock are reserved for issuance pursuant to our Stock
Option Plan.
Within the limits and restrictions contained in the Certificate of
Incorporation, 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, 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, we have
no preferred stock issued and outstanding.
Shares of preferred stock issued by our board of directors could be
utilized, under certain circumstances, to make an attempt to gain control of us
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 our best interests of us and our
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.
Units
Each unit offered hereby consists of two shares of common stock and one
Class A Warrant. The two shares of common stock and Class A Warrants that make
up each unit may not be separated or sold separately until 45 days after the
date of issuance.
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 our liquidation 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.
Class A Warrants
Each Class A Warrant will entitle the registered holder to purchase one
share of common stock at an exercise price of $4.25 per share during the three
year period commencing on the issuance date. No fractional shares of common
stock will be issued in connection with the exercise of Class A Warrants. Upon
exercise, we will pay the holder the value of any such fractional shares in
cash, based upon the market value of the common stock at such time.
Unless extended by us at our discretion, the Class A Warrants will
expire at 5:00 p.m., New York time, on the third anniversary of the original
issuance date. In the event a holder of Class A Warrants fails to exercise the
Class A Warrants prior to their expiration, the Class A Warrants will expire and
the holder thereof will have no further rights with respect to the Class A
Warrants.
We may redeem the Class A Warrants at a price of $.01 per Class A
Warrant, at any time once they become
35
<PAGE>
exercisable upon not less than 30 days prior written notice if the average
closing price or bid price of the common stock as reported by the principal
exchange on which the common stock is traded, the Nasdaq National Market or
SmallCap Market or the National Quotation Bureau, Incorporated, as the case may
be, equals or exceeds $____ per share for any twenty (20) consecutive trading
days ending within five (5) days prior to the date on which notice of redemption
is given.
No Class A Warrants will be exercisable unless at the time of exercise
there is a current prospectus covering the shares of common stock issuable upon
exercise of such Class A Warrants under an effective registration statement
filed with the qualification under the securities laws of the state or residence
of the holder of such Class A Warrants. Although we intend to have all shares so
qualified for sale in those states where the units are being offered and to
maintain a current prospectus relating thereto until the expiration of the Class
A Warrants, subject to the terms of the Warrant Agreement, there can be no
assurance that it will be able to do so.
A holder of Class A Warrants will not have any rights or privileges as
a shareholder prior to the exercise of the Class A Warrants. We are required to
keep available a sufficient number of authorized shares of common stock to
permit exercise of the Class A Warrants.
The exercise price of the Class A Warrants and the number of shares
issuable upon exercise of the Class A Warrants will be subject to adjustment to
protect against dilution in the event of stock dividends, stock splits,
combinations, subdivisions and reclassifications. No assurance can be given that
the market price of our common stock will exceed the exercise price of the Class
A Warrants at any time during the exercise period.
Outstanding Warrants
Warrants to purchase 1,000,000 shares of Aviation Holdings
International common stock were issued in June 1, 1997 in connection with its
organization. This included warrants to purchase 950,000 shares issued to D.A.R.
Group, Inc., of which Michael J. Cirillo is the principal. On June 1, 1999, all
of these warrants were exchanged for warrants to purchase 210,000 shares of
Aviation Holdings Group common stock. Each warrant entitles the holder to
purchase one share of Aviation Holdings Group common stock at an exercise price
of $4.50 until June 30, 2002. We may redeem the warrants at $.05 upon the
occurrence of both of the following events: (a) the listing of our common stock
on a securities exchange and (b) our common stock trading in excess of $5.25 per
share for a ten day period.
On March 31, 1999, we issued to Argaman, Inc. a warrant to purchase up
to 100,000 shares of common stock at an exercise price of $3.75 per share until
March 4, 2002.
On May 15, 1999, Aviation Holdings Group issued to Nancy Plotkin and
the John G. Jacobs Trust warrants to purchase 12,000 shares and 3,000 shares,
respectively, of our common stock at an exercise price of $4.00 per share until
May 15, 2004.
The warrants described above 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 our common stock. A 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 our transfer agent,
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)
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 Aviation Holdings International
and the Company.
36
<PAGE>
UNDERWRITING
Silver Capital Group, a division of LCP Capital has agreed, subject to
the terms and conditions contained in an underwriting agreement to purchase the
750,000 units offered hereby at the offering price less the underwriting
discount set forth on the cover page of the Prospectus. The underwriter is
committed to purchase all of such units, if any are purchased.
The underwriter has advised us that it proposes to offer the units 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 us as set forth on the cover
page of this prospectus.
We have 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 us 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 we 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.
Aviation Holdings Group, 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 Aviation Holdings Group, or any securities
convertible into, or exercisable or exchangeable for, any shares of common stock
or other capital stock of Aviation Holdings Group or any right to purchase or
acquire common stock or other capital stock of Aviation Holdings Group 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 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 Aviation Holdings Group and the
underwriter. Among the factors considered in making such determination will be
prevailing market conditions, Aviation Holdings Group's financial and operating
history and condition, its prospects and the prospects of the industry in
general, its management, of Aviation Holdings Group, and the market prices of
securities for companies in businesses similar to that of Aviation Holdings
Group. The offering prices of the units do not necessarily bear any relationship
to the assets, book value, net worth or earnings history of Aviation Holdings
Group. The offering price of the units should not necessarily be considered an
indication of the actual value of the units.
In connection with the offering of the units, 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 Aviation Holdings Group, 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 underwriter 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
<PAGE>
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 and its predecessors have been actively engaged in the
securities brokerage and investment banking business since 1984. However, they
have engaged in only limited underwriting activities, and have been the lead or
sole underwriter in only a few public offerings during the last five years.
Accordingly, there can be no assurance that the underwriter's lack 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. The underwriter is a member of the
National Association of Securities Dealers Inc. and is registered as a
Securities broker-dealer in 46 states. See "Risk Factors - The Underwriter has
Limited Underwriting Experience."
LEGAL MATTERS
The validity of the common stock offered hereby will passed upon for us
by Klehr, Harrison, Harvey, Branzburg & Ellers LLP, Philadelphia, Pennsylvania,
and for the underwriter by ___________________.
37
<PAGE>
EXPERTS
The financial statements of the Company for the fiscal years ended
December 31, 1998 and 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.
38
<PAGE>
AVIATION HOLDINGS GROUP, INC.
INDEX TO THE FINANCIAL STATEMENTS
---------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
AVIATION HOLDINGS GROUP, INC.
Independent Auditors' Report F2
Consolidated Balance Sheets as of December 31, 1998 and March 31, 1999 (Unaudited) F3
Consolidated Statements of Operation for the Years Ended December 31, 1997 and 1998
and for the Three Months Ended March 31, 1998 and 1999 (Unaudited) F5
Consolidated Statements of Changes in Stockholders' Equity for the Years Ended
December 31, 1997 and 1998 and for the Three Months Ended March 31, 1999 (Unaudited) F6
Consolidated Statements of Cash Flows for the Years Ended December 31, 1997 and 1998
and for the Three Months Ended March 31, 1998 and 1999 (Unaudited) F7
Notes to Financial Statements F9
JET AVIATION TRADING, INC.
Independent Auditors' Report F28
Balance Sheet as of August 31, 1997 F29
Statement of Income, October 3, 1996 (Date of Inception) to August 31, 1997 F30
Statement of Changes in Stockholders' Equity, October 3, 1996
(Date of Inception) to August 31, 1997 F31
Statement of Cash Flows October 3, 1996 (Date of Inception) to August 31, 1997 F32
Notes to Financial Statements F33
AVIATION HOLDINGS INTERNATIONAL, INC.
Condensed Consolidated Balance Sheet as of May 31, 1998 (Unaudited) F41
Condensed Consolidated Statements of Operations and Accumulated Deficit for the Periods
October 3, 1996 (Date of Inception) Through May 31, 1997 (Unaudited) and the Nine
Months Ended May 31, 1998 (Unaudited) F43
Condensed Consolidated Statements of Cash Flows for the Periods October 3, 1996 (Date of
Inception) Through May 31, 1997 (Unaudited) and the Nine Months Ended May 31,
1998 (Unaudited) F44
Notes to Interim Financial Statements (Unaudited) F45
PRO FORMA CONDENSED CONSOLIDATED COMBINED FINANCIAL STATEMENTS Pro Forma
Condensed Consolidated Combined Statement of Operations for the
Year Ended December 31, 1998 (Unaudited) P2
Pro Forma Condensed Consolidated Combined Statement of Operations for the
Three Months Ended March 31, 1999 (Unaudited) P3
Notes to Unaudited Pro Forma Condensed Consolidated Combined Financial
Statements (Unaudited) P4
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Aviation Holdings Group, Inc.
Miami, FL
We have audited the accompanying consolidated balance sheets of Aviation
Holdings Group, Inc. (the "Company") as of December 31, 1998, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the years ended December 31, 1997 and 1998. 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, 1998, and the consolidated results of its
operations, changes in stockholders' equity and cash flows for the years ended
December 31, 1997 and 1998 in conformity with generally accepted accounting
principles.
L J SOLDINGER ASSOCIATES
Arlington Heights, Illinois
June 22, 1999
F-2
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets
Cash $ 363,690 $ 691,074
Trade receivables, net 2,842,545 2,876,375
Inventory 3,220,062 3,244,744
Employee advances 4,040 4,600
Advances to stockholder - related party 75,181 125,181
Prepaid expenses 24,728 29,340
Refundable income taxes 16,200 16,200
Deferred tax benefit 241,000 393,000
---------- -----------
Total Current Assets 6,787,446 7,380,514
---------- -----------
Property and Equipment, Net 303,121 300,405
---------- -----------
Other Assets
Investment in joint venture 503,042 709,595
Deposits 17,382 17,382
Note receivable, net 900,000 900,000
Interest receivable from stockholders - related party 25,827 31,203
Intangibles, net 357,766 1,287,414
Deferred offering costs 109,782 302,873
Deferred tax benefit 601,000 489,000
---------- -----------
Total Other Assets 2,514,799 3,737,467
---------- -----------
Total Assets $9,605,366 $11,418,386
========== ===========
</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, March 31,
1998 1999
------------ -----------
(Unaudited)
<S> <C> <C>
Current Liabilities
Short-term borrowings - bank $1,500,000 $ 1,500,000
Short-term borrowings - others 148,685 234,120
Current portion of long-term debt 3,272 3,320
Accounts payable 2,130,906 2,279,805
Accrued expenses 404,498 646,223
Advances from stockholders 782,500 782,500
Income taxes payable 204,700 253,700
---------- -----------
Total Current Liabilities 5,174,561 5,699,668
---------- -----------
Long-term debt, net of current portion 13,124 12,201
---------- -----------
Total Liabilities 5,187,685 5,711,869
---------- -----------
Minority Interest 1,350,050 656,567
---------- -----------
Commitments and Contingencies
Stockholders' Equity
Preferred stock; no par value; At December 31, 1998 authorized -
2,000,000 shares; issued - none. At March 31, 1999 authorized -
2,000,000; issued - none - -
Common stock; $.0001 par value; At December 31, 1998 authorized -
18,000,000 shares; issued, issuable and outstanding - 3,474,815 shares At
March 31, 1999 authorized - 18,000,000 shares; issued,
issuable and outstanding - 4,092,815 347 409
Additional paid-in capital 4,148,457 6,148,458
Less subsidiary stock subscription receivable - related parties (280,000) (280,000)
Accumulated deficit (801,173) (819,917)
---------- -----------
Total Stockholders' Equity 3,067,631 5,049,950
---------- -----------
Total Liabilities and Stockholders' Equity $9,605,366 $11,418,386
========== ===========
</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>
Three Months Ended
Year Ended December 31, March 31,
---------------------------- ----------------------------
1997 1998 1998 1999
---------- ----------- ---------- ----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales $ - $ 8,365,197 $ - $3,147,373
Cost of Goods Sold - 5,839,049 - 2,192,272
---------- ----------- ---------- ----------
Gross Profit - 2,526,148 - 955,101
---------- ----------- ---------- ----------
Operating Expenses
Salaries and wages - 1,300,172 - 318,270
General and administrative 15,950 1,771,560 463,631 417,810
Professional fees 48,227 617,099 101,130 56,199
---------- ----------- ---------- ----------
Total Operating Expenses 64,177 3,688,831 564,761 792,279
---------- ----------- ---------- ----------
Income (Loss) from Operations (64,177) (1,162,683) (564,761) 162,822
Other Income (Expense)
Interest expense - (96,044) - (157,109)
Interest income 6,740 72,825 27,763 5,376
Income (loss) from joint venture - (8,313) - 6,553
---------- ----------- ---------- ----------
Total Other Income (Expense) 6,740 (31,532) 27,763 (145,180)
---------- ----------- ---------- ----------
Income (Loss) Before Income Taxes and
Minority Interest (57,437) (1,194,215) (536,998) 17,642
Income Tax Benefit (Expense) - 532,470 (9,000)
---------- ----------- ---------- ----------
Income (Loss) Before Minority Interest (57,437) (661,745) (536,998) 8,642
Minority Interest - (44,121) - (26,386)
---------- ----------- ---------- ----------
Net Loss $ (57,437) $ (705,866) $ (536,998) (17,744)
========== =========== ========== ==========
Basic and Diluted Loss Per Common Share $ (.06) $ (.23) $ (.23) $ ( .01)
========== =========== ========== ==========
Average Common Shares - Basic and Diluted 1,046,235 3,035,856 2,350,000 3,507,483
========== =========== ========== ==========
</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, 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 - -
Additional offering costs - - (46,143) - -
Liabilities paid or forgiven by
stockholder - related party - - 24,332 - -
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 2,619,626 - -
Stock subscription receivable from
officers' subsidiary stock - related
parties - - (280,000) -
Compensatory common stock
options issued - - 360,200 - -
Common stock issued to officer -
related party 4,000 - 20,128 - -
Common stock and warrants issued
in connection with $250,000 note 25,000 2 138,886 - -
Net loss - - - - (705,866)
--------- ---- ---------- ---------- ---------
Balances as of December 31, 1998 3,474,815 347 4,148,457 (280,000) (801,173)
Common stock issued in the Aviation
Holdings International, Inc.
acquisition 500,000 50 1,528,998 - -
Common stock issued in connection
with 506 offering 118,000 12 294,988 - -
Common stock issued by major
shareholder on behalf of Company in
connection with $250,000 note payable - - 176,015 - -
Net loss (17,744)
--------- ---- ---------- --------- ---------
Balances as of March 31, 1999 4,092,815 $409 $6,148,458 $(280,000) $(818,917)
========= ==== ========== ========= =========
</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>
Three Months Ended
Year Ended December 31, March 31,
---------------------------- --------------------------
1997 1998 1998 1999
---------- ------------ ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ (57,437) $ (705,866) $(536,998) $ (17,744)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities
Compensatory common stock and options - 401,161 - -
Common stock issued for services - related parties 1,000 - -
Minority interest - 44,121 - 26,386
Loss (income) from joint venture - 3,976 - (6,553)
Depreciation and amortization - 92,552 - 135,907
Provision for bad debts - 841,410 467,101 -
Reserve for obsolete inventory - 66,579 - -
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 10,673 -
Deferred income taxes - (708,000) - (40,000)
Change in assets and liabilities -
(Increase) decrease in
Trade receivables - (1,059,241) - (33,830)
Inventory - (613,306) - (24,682)
Interest receivable (6,740) (64,351) (24,861) (5,376)
Prepaid expenses (2,957) 27,905 2,957 24,728
Refundable income taxes (16,200) - -
Increase (decrease) in
Due to stockholder - related party (7,207) - - -
Accounts payable - (180,414) 107,953 148,899
Accrued expenses 8,000 (173,823) - 98,633
Income taxes payable - 204,700 - 49,000
--------- ----------- --------- ---------
Total Adjustments 16,428 (1,122,258) 563,823 373,112
--------- ----------- --------- ---------
Net Cash (Used in) Provided by Operating Activities (41,009) (1,828,124) 26,825 355,368
--------- ----------- --------- ---------
Cash Flows from Investing Activities
Note receivable advances (940,000) (535,100) (395,500) -
Employee advances - (4,040) - (560)
Purchases of equipment - (88,198) - (15,852)
Cash acquired in Aviation Holdings International,
Inc. acquisition - 830,331 - -
Investment in joint venture - (300,000) - (200,000)
Payments for deferred acquisition costs (10,673) - - -
--------- ----------- --------- ---------
Net Cash Used in Investing Activities (950,673) (97,007) (395,500) (216,412)
--------- ----------- --------- ---------
</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>
Three Months Ended
Year Ended December 31, March 31,
-------------------------- ---------------------------
1997 1998 1998 1999
-------- ---------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Cash Flows From Financing Activities
Proceeds from bank line of credit $ - $1,500,000 $ - $ -
Proceeds from short-term borrowing - 250,000 - -
Repayments of short-term borrowings - - - (5,697)
Repayments on long-term debt - (2,270) - (875)
Payments of deferred offering costs - (11,368) - -
Advances from (to) stockholders,
net of repayments - 550,284 366,500 (100,000)
Proceeds from sale of stock, net of
offering costs paid 993,857 - - 295,000
-------- ---------- --------- ----------
Net Cash Provided by Financing Activities 993,857 2,286,646 366,500 188,428
-------- ---------- --------- ----------
Net Increase (Decrease) in Cash 2,175 361,515 (2,175) 327,384
Cash, Beginning of Period - 2,175 2,175 363,690
-------- ---------- --------- ----------
Cash, End of Period $ 2,175 $ 363,690 $ - $ 691,074
======== ========== ========= ==========
Supplemental Disclosure of Cash Flow Information
Cash Paid for Interest and Income Taxes
Interest $ - $ 21,202 $ - $ 21,510
======== ========== ========= ==========
Income Taxes $ - $ 8,191 $ - $ -
======== ========== ========= ==========
</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
Background
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. 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. 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.
During the period May through July 1998, the Company acquired 74% of Aviation
Holdings International, Inc. ("AHI") (formerly Jet Aviation Trading, Inc.)
through common stock share exchanges and by a block purchase of common stock. In
March 1999, the Company increased its ownership interest to 92% through a
common stock share exchange. 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.
On March 26, 1999 the Company filed a registration statement with the United
States Securities and Exchange Commission to sell its securities to the public
in an initial public offering of its common stock.
Nature of Operations
The nature of operations for each entity is as follows:
AHI is in the business of buying, selling, leasing and exchanging spare
parts and engines 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 March 31, 1999.
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 March
31, 1999.
Aero HK and its wholly-owned subsidiary, Aero-Link Flight Systems, Inc., a
Florida corporation, have entered into an agreement to act as the global
marketing representative (except the Taiwan region) for China Airlines,
Taiwan.
F-9
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 1 - DESCRIPTION OF THE BUSINESS (Continued)
In this capacity they are responsible for promoting and marketing China
Airlines' aircraft maintenance, turbine engine and component repair and
overhaul business. This entity 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 March 31, 1999.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
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.
Development Stage Enterprise
The Company was a Development Stage Enterprise, as defined in Statement of
Financial Accounting Standards No. 7, "Accounting and Reporting for Development
Stage Enterprises." 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 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.
Consolidated Financial Statements and Interim Information
The interim consolidated financial data as of March 31, 1999 and for the three
months ended March 31, 1999 and 1998 is unaudited. The information reflects all
adjustments, consisting only of normal recurring adjustments that, in the
opinion of management, are necessary to fairly present 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 consolidated interim financial statements include the accounts
of the Company and its 92% owned subsidiary, AHI. The operations of AHI have
been included in these consolidated financial statements since the initial date
of acquisition (May 1998), ratably based on the percentage of ownership of AHI.
The accounts of AHI include all of 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 formerly maintained 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 changed 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.
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. Significant estimates
included here in the financial statements and the accompany notes include the
allowance for doubtful accounts, loan valuation allowance, reserve for obsolete
and slow-moving inventory, depreciable lives for property and equipment and
income tax rates. It is at least reasonably possible that the estimates used
will change within the next year.
F-10
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Share
Earnings per share is calculated in accordance with Statement of Financial
Accounting Standard No. 128 "Earnings Per Share" ("SFAS 128"). Basic earnings
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.
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.
Concentration of 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.
During the periods presented in these financial statements, AHI maintained cash
balances in excess of the Federal Deposit Insurance Corporation ("FDIC") insured
limits. At December 31, 1998 and March 31, 1999, the amount of funds that
exceeded FDIC insurance was $403,377 and $665,321, respectively. AHI also
maintained funds in banks that were not FDIC insured. At December 31, 1998 and
March 31, 1999, AHI maintained a balance of $22,536 and $2,536, respectively, in
the Israel Discount Bank Limited, an international bank that operates in the
United States. 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 December 31, 1998 and the three
months ended March 31, 1999, PASCO HK maintained bank accounts in Hong Kong with
the Kwong On Bank, Limited. The accounts were denominated in United States
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 United States
Dollars were immaterial.
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. 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 one percent of net sales
for the periods ended December 31, 1998 and March 31, 1999. 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, unamortized bond discounts and deferred
offering costs. Goodwill, which originated from the PASCO acquisition and the
March 1999 share exchange (Note 4), is being amortized over fifteen years using
the straight-line method. Unamortized note discounts, which originated from the
shares issued in connection with the $250,000 notes, are being amortized using
the effective interest method over the life of the loan including the extension
period exercised.
Fair Value of Financial Instruments
The carrying value of accounts receivable, accounts payable and accrued expenses
approximates the fair market value due to the relatively short maturity of these
instruments.
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
are 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, was offset by a valuation reserve.
F-12
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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
In April 1998, the American Institute of Certified Public Accountants issued SOP
98-5, "Reporting on the Costs of Start-up Activities." SOP 98-5, which is
effective for fiscal years beginning after December 15, 1998, provides guidance
on the financial reporting of start-up costs and organizations costs. It
requires costs of start-up activities and organization costs to be expensed as
incurred. As the Company has expensed these costs historically, the adoption of
this standard during the first quarter of 1999 did not have a significant impact
on results of operations, financial position or cash flows.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging
Activities" ("SFAS 133"), which establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives), and for hedging
activities. SFAS 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999. The Company does not expect the adoption of this
statement to have a significant impact on results of operations, financial
position or cash flows.
NOTE 3 - REINCORPORATION/CHANGE OF CORPORATE NAME
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.
On August 31, 1998, both the Company and AHI amended their Articles of
Incorporation to change their corporate names to Aviation Holdings Group, Inc.
and Aviation Holdings International, Inc., respectively.
NOTE 4 - ACQUISITION
During the second and third quarters of 1998, the Company acquired 74.08% of
AHI. The business combination was treated as a purchase in accordance with
Accounting Principles Board Opinion No. 16, "Business Combinations." 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 acquired 80,000 shares of AHI common stock from a
stockholder of the Company in repayment of a loan from the Company for $100,000.
Through these exchanges and the acquisition from a stockholder, the Company
issued 1,095,815 shares of its common stock in return for 2,468,080 shares
(74.08%) of AHI's issued and outstanding common stock as of December 31, 1998.
The original shareholders of the Company continued to maintain majority
ownership after the AHI acquisition. The Company shares of common stock received
by the former shareholders of AHI gave them the same rights as all other common
shareholders of the Company. No special controlling or voting rights were
accorded to any shares. The acquisitions have been accounted for as a purchase
by the Company with a purchase price of $2,719,736. The purchase price was
derived from the underlying book value of the assets and liabilities of AHI. No
fair value adjustments were deemed necessary as management believes that the
values of the assets and liabilities approximated the fair values at the time of
the acquisitions. The operations of AHI, since the acquisition, have been
included in the accompanying consolidated financial statements for the year
ended December 31, 1998 and the three months ended March 31, 1999.
F-13
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 4 - ACQUISITION (Continued)
In March 1999, the Company entered into a share exchange agreement with a
stockholder of AHI, thereby increasing the Company's ownership percentage of AHI
to 92%. In return for 600,000 shares of AHI stock, the Company exchanged 500,000
shares of its common stock and a warrant to purchase 100,000 shares of its
common stock at an exercise price of $3.75 per share and an exercise period of
three years. The value of the Company's securities that were tendered in the
exchange were valued at $1,529,048, resulting in the Company recording goodwill
of $809,179.
NOTE 5 - 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 March 31, 1999, $708,332 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 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 March 31,
1999.
Condensed financial information for the Company's investment in the joint
venture is as follows:
December 31, March 31,
1998 1999
------------ ----------
(Unaudited)
Balance Sheet:
Total Assets $3,706,753 $3,980,441
Total Liabilities 223,515 271,521
Statement of Operations:
Revenues 510,610 212,833
Expenses 526,516 186,622
---------- ----------
(15,906) 26,211
========== ==========
Aviation Holdings International's Share of
(Loss)/Income $ (3,976) $ 6,553
========== ==========
NOTE 6 - 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") (see Note 1). 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,
F-14
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 6 - DISCONTINUED MERGER (Continued)
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. 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 year ending December 31, 1998.
NOTE 7 - TRADE RECEIVABLES
Trade receivables consisted of the following at:
December 31, March 31,
1998 1999
----------- -----------
(Unaudited)
Accounts receivable $3,162,545 $3,196,375
Allowance for doubtful accounts (320,000) (320,000)
---------- ----------
Net Trade Receivables $2,842,545 $2,876,375
========== ==========
NOTE 8 - INVENTORIES
Inventories are comprised of the following:
December 31, March 31,
1998 1999
------------ -----------
(Unaudited)
Inventory $3,440,062 $3,464,744
Allowance for obsolete and slow-moving goods (220,000) (220,000)
---------- ----------
Total $3,220,062 $3,244,744
========== ==========
NOTE 9 - 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") 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.
F-15
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 9 - DC-10 FLIGHT SIMULATOR AND SUPPORT PACKAGE (Continued)
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 was $500,000,
and AHI satisfied its obligation by issuing 200,000 shares of its common stock
at an ascribed value of $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 prior to the acquisition in order to reflect the decrease in market
value of the avionics and structure as spare parts. The remaining value is
recorded with the Company's other inventory.
This Seller is also a purchaser and supplier of spare parts from and to the
Company.
NOTE 10 - NOTES RECEIVABLE AND CREDIT RISK
Credit Facility
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 July 1, 1998, EWS had disbursed all of the funds received from the
Company, had no business operations, and had not consummated the acquisitions of
the three companies it was to acquire before merging with the Company. The
Company may need to foreclose on the property to recover the principal and
interest receivable and foreclosure costs. During 1998, the Company and EWS
restructured the loan by extending the 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, along with
additional advances, accrued 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 December 31, 1998 and
March 31, 1999 was $900,000 (principal balance of $1,475,100 plus interest
receivable of $58,310, less a valuation allowance of $633,410). The loan is
currently in default and management may be required to foreclose on the
property. The Company has received no interest payments on the loan. An
independent market value appraisal, dated October 16, 1998, that values the
secured real estate at $1,000,000, based on the assumptions and limiting
conditions set forth in the report, has been furnished to the Company.
F-16
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 11 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
December 31, March 31,
1998 1999
----------- -----------
(Unaudited)
Leasehold improvements $143,321 $155,521
Office furniture and equipment 76,687 77,857
Computer equipment 81,372 81,669
Software 45,184 47,372
Trucks 28,676 28,676
-------- --------
375,240 391,095
Accumulated depreciation (72,119) (90,690)
-------- --------
Total $303,121 $300,405
======== ========
NOTE 12 - INTANGIBLES
Intangibles consisted of the following:
December 31, March 31,
1998 1999
----------- -----------
(Unaudited)
Goodwill $375,000 $1,184,179
Deferred financing costs 7,500 183,515
-------- ----------
382,500 1,367,694
Less accumulated amortization (24,734) (80,280)
-------- ----------
Total $357,766 $1,287,414
======== ==========
NOTE 13 - 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,
and was paid in full in May 1998. The second note is a three-year promissory
note for $200,000 bearing interest at prime, 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 March 31, 1999.
In October 1996, AHI issued 192,000 shares of its common stock to its Chief
Executive Officer in exchange for a demand promissory note of $80,000 which
remains outstanding as of March 31, 1999. The note bears interest at 6% per
annum.
F-17
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 13 - STOCK SUBSCRIPTION RECEIVABLE (Continued)
AHI recorded interest income of approximately $19,844 and $5,376 for the year
ended December 31, 1998 and the three months ended March 31, 1999, respectively,
on the outstanding stock subscription receivables. As of December 31, 1998 and
March 31, 1999, the accrued interest receivable on the stock subscription
receivables were $25,827 and $31,203, respectively.
NOTE 14 - ADVANCES AND BORROWINGS - STOCKHOLDERS AND RELATED PARTIES
The Company advanced funds to and received advances from certain stockholders
during 1998. At December 31, 1998 and March 31, 1999, the Company owed $781,500
of such advances to IP Services, Inc. and $1,000 to FAC Enterprises, Inc. The
stockholder advances bear interest at 10% per annum. 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 (see Note 10).
AHI made non-interest bearing advances, net of repayments, to an officer
amounting to $75,181and $125,181 at December 31, 1998 and March 31, 1999,
respectively.
NOTE 15 - SHORT-TERM BORROWINGS
On August 12, 1998, AHI obtained a revolving working capital line of credit from
Comerica Bank. At December 31, 1998 and March 31, 1999, the amount outstanding
on the credit line was $1,500,000. The loan agreement, which provides for a
maximum aggregate borrowing limit of $3,500,000, is a revolving line of credit,
is secured by substantially all of AHI's assets, and is due on demand. The line
of credit bears interest at the Bank's prime rate plus 1%. The loan agreement
contains certain covenants which require AHI to maintain minimum thresholds on
specific financial ratios.
As of December 31, 1998 and March 31, 1999, AHI had not met the tangible net
worth covenant required by the credit agreement. Under the terms of the loan
agreement, the bank has the right to demand full and immediate repayment of its
loan. As of the date of this report, the bank has not indicated to the Company
that it intends to make such a demand.
Short term borrowings - other consisted of the following:
December 31, March 31,
1998 1999
------------ -----------
(Unaudited)
Unrelated investor notes $250,000 $250,000
Financed insurance premium - 23,644
-------- --------
250,000 273,644
Less Unamortized Note Discount 101,315 38,029
-------- --------
$148,685 $235,615
======== ========
On October 15, 1998, the Company borrowed $250,000 in the aggregate from two
unrelated investors. The loans have an initial maturity date of March 15, 1999
with two one-month extension periods 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 conveyed to the investors warrants to purchase 75,000 shares of the
Company's common stock at an
F-18
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 15 - SHORT-TERM BORROWINGS (Continued)
exercise price of $4.00 per share, and agreed to transfer a maximum of 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. On
March 15, and April 15, 1999, the Company exercised its option to extend payment
for one month.
The Company recorded a note discount of $138,888 as a result of the stock issued
as an inducement for making the loans of $250,000. The discount is being
amortized over the term of the notes using the effective interest method. The
effective interest rate is 343%. As of December 31, 1998 and March 31, 1999, the
unamortized discount totaled $101,315 and $38,029, respectively. In addition,
the Company incurred financing fees of $176,015 on March 15, 1999 as a result of
the stock transferred by a shareholder of the Company to the noteholders as
consideration for the extension of the maturity date. The financing fee is being
amortized over sixty days. The unamortized balance at March 31, 1999 was
$129,847. The note discount and financing fees represented the fair market value
of the securities tendered at the date of issuance.
In March 1999, AHI financed its insurance obligations through a nine-month note
with Premium Assignment Corporation. The note bears interest at an annual rate
of 8.5 % with monthly principal and interest payments of $2,721. As of March 31,
1999, the outstanding balance of the note was $23,644.
NOTE 16 - 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 December 31, 1998 and March 31, 1999, the outstanding balance of
the note was $16,395 and $15,521, respectively.
Maturities of long-term debt are as follows:
Year ended December 31:
1999 $ 3,272
2000 3,776
2001 4,005
2002 4,247
2003 1,096
-------
$16,396
=======
NOTE 17 - 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:
F-19
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 17 - INCOME TAXES (Continued)
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
--------- --------
<S> <C> <C>
Deferred tax assets :
Federal and state deferred tax benefit arising from
net operating loss carryforwards $ 27,397 $162,000
Accrued expenses - 30,000
Reserves and allowances - 410,000
Note discount amortization - 12,000
Compensation for employee stock options - 144,000
Undistributed loss from foreign subsidiaries - 93,000
-------- --------
27,397 851,000
Less valuation allowance (27,397) -
-------- --------
Total deferred tax assets - 851,000
-------- --------
Deferred tax liability
Accelerated depreciation - (9,000)
-------- --------
Net deferred tax asset $ - $842,000
======== ========
</TABLE>
These amounts have been presented in the Company's
financial statements as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
--------- --------
<S> <C> <C>
Current deferred tax assets $ - $241,000
Noncurrent deferred tax asset - 601,000
-------- --------
$ - $842,000
======== ========
</TABLE>
Income tax (expense) benefit consists of the following:
<TABLE>
<CAPTION>
December 31,
------------------------
1997 1998
--------- --------
<S> <C> <C>
Current
Federal $ - $(172,800)
State - (38,893)
Deferred
Federal - 500,900
State - 103,863
Tax benefit of net operating loss carryforward 27,397 139,400
-------- ---------
27,397 532,470
Less valuation allowance (27,397) -
-------- ---------
Income Tax Benefit $ - $ 532,470
======== =========
</TABLE>
F-20
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 17 - INCOME TAXES (Continued)
The Company has a loss carryforward of approximately $410,000 as of December 31,
1998 that may be offset against future taxable income. The carryforward will
expire between the years 2009 and 2014.
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 rate of 34%.
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1998
---------- ----------
<S> <C> <C>
U.S. federal statutory income tax rate 34% 34%
Federal income tax benefit at statutory rate $ 9,359 $ 406,000
State and local income tax benefits, net of effect of
federal benefit 5,165 65,700
Non-deductible expenses - (11,100)
Tax benefit from NOL carryback and carryforward - 60,800
Other differences - 11,070
Valuation allowance for deferred income tax benefit (14,524) -
--------- ---------
Income Tax Benefit $ - $ 532,470
========= =========
Effective Income Tax Rate 0% 37.7%
========= =========
</TABLE>
NOTE 18 - OFFICE AND WAREHOUSE FACILITY
AHI leases its Miami, Florida office and warehouse facility from a company
partially owned by one of its stockholders. The lease expires December 31, 2000
and has two one-year options to renew. The monthly rental is $6,529 plus the
pass through of certain expenses. Pasco HK leases office space in Hong Kong. The
Hong Kong lease expires December 31, 1999 and contains monthly rental
obligations of $2,500 for 1998 and $2,650 for 1999.
Rent expense for the periods ended December 31, 1998 and March 31, 1999 was
$56,586 and $35,148, respectively. AHI's minimum obligation under existing
leases is as follows:
December 31, March 31,
1998 1999
------------ -----------
(Unaudited)
Year Ending:
1999 $109,850 $ -
2000 78,350 101,975
2001 - 58,763
-------- --------
$188,200 $160,738
======== ========
F-21
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 19 - CAPITAL STOCK ACTIVITY
Common Stock
On August 15, 1997, the Company issued 1,000,000 shares of 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 then existing
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 and have been reflected as a
reduction of additional paid-in capital.
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.
On June 11, 1998, AHI's Board of Directors granted its Chief Financial Officer
("CFO"), 25,000 shares of AHI's common stock valued at $62,500. The shares of
common stock were issued by AHI in consideration of services rendered by the CFO
for the fiscal year ended August 31, 1998.
On August 1, 1998, the Company issued 4,000 shares to its Chief Executive
Officer for services rendered, resulting in compensation expense of $20,128.
On October 15, 1998, the Company borrowed $250,000 from two unrelated investors.
As an inducement to make the loans, the Company issued 25,000 shares of the
Company's common stock and warrants to purchase shares of its common stock at an
exercise price of $4.00 per share to the investors.
In March 1999, the Company completed a private offering of 118,000 shares of
common stock at a price of $2.50 per share, amounting to gross proceeds of
$295,000.
In March 1999, the Company entered into a share exchange agreement with a
stockholder of AHI to acquire additional shares of AHI stock. The Company issued
500,000 shares of its common stock and a warrant to purchase 100,000 shares of
its common stock at an exercise price of $3.75 per share in connection with this
transaction.
During 1997, the Company adopted the provisions of Statement Financial
Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("SFAS
123"). As permitted under SFAS 123, the Company has continued to follow
Accounting Principles Board No. 25 "Accounting for Stock-Based Compensation"
("APB 25") in accounting for its stock-based compensation. SFAS 123 recognizes
compensation expense using the fair market value of stock options, warrants and
common stock issuances as of the grant date. APB 25 recognizes the intrinsic
value of the instruments issued by the Company as of the measurement date, which
is generally the date at which both the number of shares that an individual is
entitled to receive and the purchase price are known. Had compensation expense
for the year ended 1998
F-22
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 19 - CAPITAL STOCK ACTIVITY (Continued)
and the three months ended March 31, 1999 been determined under the fair value
provisions of SFAS 123, the Company's net loss and net loss per share would have
differed as follows:
<TABLE>
<CAPTION>
December 31, March 31,
1998 1999
-------------------------- ----------------------------
(Unaudited)
------------ ------------ ------------ --------------
Net Loss Per Share Net Loss Per Share
------------ ------------ ------------ --------------
<S> <C> <C> <C> <C>
As Reported Under APB 25 $ (782,242) $ (.26) $ (17,744) $ (.01)
============ ============ ============ =============
Pro Forma Under SFAS 123 $ (864,261) $ (.28) $ (24,325) $ (.01)
============ ============ ============ =============
</TABLE>
No such differences between the application of APB 25 and SFAS 123 existed for
1997 and the three months ended March 31, 1998.
These pro forma amounts may not be representative of future disclosures since
the estimated fair value of stock options is amortized to expense over the
vesting period and additional options may be issued in future years. The
weighted average fair values of options at their grant date during 1998, where
exercise price equals the market price on the grant date, was $0. The weighted
average fair value of options at their grant date during 1998, where the
exercise price exceeds the market price on the grant date, was $0. No such
options were granted during 1997. The estimated fair value of each option
granted is calculated using the Black Scholes option pricing model. The
following summarizes the weighted average of the assumptions used in the model.
1997 1998
------------- -------------
Risk free rate - 5.09%
Expected years until exercise - 2.25%
Expected stock volatility - 33.08%
Dividend yield - 0%
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 20 - 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 the 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.
F-23
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 20 - COMPENSATORY STOCK OPTION PLAN (Continued)
During 1998, the Company granted options to the CEO to purchase 200,000 shares
of common stock at an exercise price of $2.50 per share. All of these options
vested upon the execution of the CEO's employment agreement and expire five
years later. The Company recognized compensation expense of $360,200 for
services rendered.
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 sets forth applicable rules and regulations for stock
options granted to non-employee directors. The Board of Directors authorized the
issuance of 250,750 stock options under the Plan, and of these options, 49,500
were subsequently canceled. No stock options had been exercised under this Plan.
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.
The following table summarizes information about fixed stock options
outstanding:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ----------------------------
Weighted
Average Weighted Weighted
Number of Remaining Average Number Average
Outstanding Contractual Exercise Outstanding Exercise
Shares Life Price Shares Price
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
December 31, 1998
$2.50 200,000 4.42 $ 2.50 200,000 $ 2.50
============ ============ ============ ============ ==============
March 31, 1999
$2.50 401,250 4.04 $ 2.50 391,250 $ 2.50
============ ============ ============ ============ ==============
</TABLE>
NOTE 21 - 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 22 - LOSS PER SHARE
The Company adopted SFAS 128 in 1997, and has followed the guidelines of SFAS
128 in the presentation of earnings and loss per share for all periods presented
in the financial statements. Options and warrants to purchase common stock are
not included in the computation of diluted loss per share because the effect of
these instruments would be anti-dilutive for the loss periods presented. The
common shares potentially issuable arising from these instruments, which were
outstanding during the periods presented in the financial statements, are as
follows:
F-24
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
<TABLE>
<CAPTION>
December 31,
Exercise -------------------------- March 31,
Price 1997 1998 1999
------------ ------------ ------------ --------------
(Unaudited)
<S> <C> <C> <C>
Options $2.50 - 200,000 401,250
Warrants $3.75 - - 100,000
------------ ------------ --------------
Total common shares potentially issuable - 200,000 501,250
============ ============ ==============
</TABLE>
The following table represents AHI's outstanding options and warrants:
<TABLE>
<CAPTION>
Exercise December 31, March 31,
Price 1998 1999
------------ ---------------- ---------------
(Unaudited)
<S> <C> <C>
Options $2.50 212,750 -
Warrants $4.00 1,000,000 1,000,000
---------------- ---------------
Total common shares potentially issuable 1,212,750 1,000,000
================ ===============
</TABLE>
NOTE 23 - 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.
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 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.
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 AHI to serve as Vice President (the "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 based
upon a percentage of sales to China, 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.
F-25
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 24 - SEGMENT INFORMATION
The Company is in the business of acquiring companies and 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
which it considers to be an additional segment.
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 December 31, 1998 and the three months
ended March 31, 1999.
May -Dec. Jan. - March
1998 1999
--------------- ---------------
(Unaudited)
United States $ 4,632,079 $ 1,785,644
Africa and Middle East 104,396 62,797
Europe 659,898 271,934
Latin America 59,694 82,635
Asia 2,909,130 944,363
--------------- ---------------
Total $ 8,365,197 $ 3,147,373
=============== ===============
<TABLE>
<CAPTION>
December 31, 1999 March 31, 1999
------------------------------------ ------------------------------------
Business Segments Acquisitions Aviation Parts Acquisitions Aviation Parts
---------------- ----------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Revenues $ - $ 8,365,197 $ - $ 3,147,373
Interest income 54,472 18,353 - 5,376
Interest expense 57,768 30,652 115,669 23,363
Depreciation and amortization 2,679 52,300 3,214 18,570
Segment profit (loss) (856,869) 151,003 (141,346) 102,602
Segment assets 1,484,000 8,121,366 2,312,199 9,085,207
Capital expenditures - 88,198 - 15,852
</TABLE>
NOTE 25 - EMPLOYEE BENEFIT PLAN
On January 1, 1999 the Company adopted a 401(k) savings plan that covers
substantially all employees. Under the terms of the 401(k) savings plan,
employees are entitled to contribute a maximum of 15% of their total
compensation, within limitations established by the Internal Revenue Code.
F-26
<PAGE>
AVIATION HOLDINGS GROUP, INC.
Notes to Financial Statements
NOTE 26 - SALES AND PURCHASES FROM MAJOR CUSTOMERS AND SUPPLIERS
During the three months ended March 31, 1999, AHI had sales to one customer
amounting to $390,000 and had purchases from one vendor amounting to $326,000,
representing an excess of 10% of total sales and purchases for the period.
NOTE 27 - SUPPLEMENTAL CASH FLOW INFORMATION
The Company had $40,000 of deferred acquisition costs in accrued expenses at
December 31, 1997.
In 1998, the Company advanced funds to one of its stockholders. The Company
received 80,000 shares of AHI stock as repayment of $100,000 of the
stockholder's obligation.
In 1998, the Company issued 1,095,815 shares of its common stock in exchange for
2,368,880 shares of AHI common stock.
In October, 1998, the Company issued 25,000 shares of its common stock to two
unrelated investors in connection with a loan to the Company of $250,000.
The Company had $105,915 and $143,090 of deferred offering costs in accrued
expenses at December 31, 1998 and March 31, 1999, respectively.
In March, 1999, AHI financed a portion of its insurance premium amounting to
$29,341 with a note payable.
On March 15, 1999, the Company recorded $176,015 in deferred financing costs
when a major shareholder of the Company transferred 35,000 shares of the
Company's common stock to the investors of the $250,000 notes.
In March, 1999, the Company issued 500,000 shares of its common stock in
exchange for 600,000 shares of AHI common stock, resulting in goodwill of
$809,179 and a reduction in minority interest of $719,869.
NOTE 28 - SUBSEQUENT EVENTS
In April and June 1999, the Company entered into a series of share exchanges
with certain remaining AHI stockholders. The Company exchanged 115,500 shares of
its common stock in return for 137,500 shares of AHI common stock, bringing the
Company's ownership of AHI to 96%.
In June 1999 the Company issued warrants to purchase 210,000 shares of the
Company's common stock at an exercise price of $4.50 per share, with an exercise
period through June 30, 2002 ("Warrants"). The Warrants were issued by the
Company to replace warrants issued by AHI in June 1997 to purchase 1,000,000
shares of AHI common stock. The terms of the Warrants are identical to the terms
of the AHI warrants. The Warrants were issued to a related party, an entity
whose president is a director of the Company, and to an unrelated investor. The
related party received 200,000 Warrants and the unrelated investor received
10,000 Warrants. The Warrants include certain anti-dilutive provisions. The
Company has the right to call the Warrants for $.05 per Warrant share if the
Company's common stock meets certain performance objectives and the Company
offers its common stock for trading on a national exchange.
In June 1999, the Company and the holders of the $250,000 note payable (see Note
15) agreed to extend the maturity date of the note to July 14, 1999. In
consideration of the extension, the Company issued warrants to purchase 15,000
of the Company's common stock at an exercise price of $4.00, with an exercise
period through May 15, 2004. These warrants include certain anti-dilutive
provisions, and the shares of the Company's common stock to be issued have
restrictions on transfer for one year.
F-27
<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-28
<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-29
<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-30
<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-31
<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-32
<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-33
<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-34
<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-35
<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-36
<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-37
<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-38
<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-39
<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-40
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC
Condensed Consolidated Balance Sheet
ASSETS
<TABLE>
<CAPTION>
May 31,
1998
----------------
(Unaudited)
<S> <C>
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 135,000
----------------
Total Current Assets 5,289,101
----------------
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 $ 6,268,218
================
</TABLE>
See notes to financial statements.
F-41
<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 $ 2,139,672
Current portion of long-term debt 14,334
Advances from stockholder - related party 57,035
Accrued expenses 424,407
----------------
Total Current Liabilities 2,635,448
----------------
Noncurrent Liabilities
Long-term debt, net of current portion 4,332
Deferred income taxes 1,000
----------------
Total Noncurrent Liabilities 5,332
----------------
Total Liabilities 2,640,780
----------------
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 (1,711,477)
----------------
Total Stockholders' Equity 3,627,438
----------------
Total Liabilities and Stockholders' Equity $ 6,268,218
================
</TABLE>
See notes to financial statements.
F-42
<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 8,591,981
---------------- ----------------
Gross Profit 999,448 1,249,024
---------------- ----------------
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) (445,311)
---------------- ----------------
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) (438,836)
---------------- ----------------
Income Tax Benefit (Expense)
Current (34,000) -
Deferred 19,000 111,000
---------------- ----------------
Total Income Tax Benefit (Expense) (15,000) 111,000
---------------- ----------------
Net Loss (1,309,730) (327,836)
Accumulated Deficit, Beginning of Period - (1,383,641)
---------------- ----------------
Accumulated Deficit, End of Period $ (1,309,730) $ (1,711,477)
================ ================
Basic and Diluted Loss Per Common Share (.91) (.11)
================ ================
Weighted Average Number of Common Shares
Outstanding: 1,439,742 3,119,137
================ ================
</TABLE>
See notes to financial statements
F-43
<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)
<S> <C> <C>
Cash Flows from Operating Activities
Net Loss $ (1,309,730) $ (327,836)
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) (111,000)
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 1,161,966
Income taxes payable 34,000 (37,200)
Accrued expenses 97,372 260,256
---------------- -------------
Total Adjustments (152,746) 699,862
---------------- -------------
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-44
<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.
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.
F-45
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
NOTE 2 -ACQUISITIONS AND MERGERS (Continued)
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 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.
F-46
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
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-47
<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-48
<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:
<TABLE>
<CAPTION>
Weighted
Number Average
of Exercise
Shares Price
------------------ -----------------
<S> <C> <C>
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
==================
</TABLE>
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 Outstanding 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>
F-49
<PAGE>
AVIATION HOLDINGS INTERNATIONAL, INC.
Notes to Interim Financial Statements
NOTE 11 - STOCK OPTION PLAN (Continued)
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.
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-50
<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
and March 1999 (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, 1998, the pro forma results of operations of the Company for
the three months ended March 31, 1999 and for the year ended December 31, 1998.
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, 1998 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
preacquisition results of operations of AHI are included in the accompanying pro
forma financial information.
P-1
<PAGE>
AVIATION HOLDINGS GROUP, INC
Pro Forma Condensed Consolidated Combined Statement of Operations
For the Year Ended December 31, 1998
<TABLE>
<CAPTION>
Aviation
Aviation Holdings
Holdings International As
Group, Inc. Inc. Adjustments Restated
--------------- -------------- --------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 0 $ 14,201,107 $ 14,201,107
Cost of Goods Sold 10,972,724 10,972,724
--------------- -------------- --------------- -------------
Gross Profit 0 3,228,383 0 3,228,383
Operating Expenses
Salaries and wages 380,328 1,340,879 1,721,207
General and administrative 709,872 1,602,965 2,312,837
Professional fees 283,734 315,010 598,744
--------------- -------------- --------------- -------------
Total Operating Expenses 1,373,934 3,258,854 0 4,632,788
--------------- -------------- --------------- -------------
Loss from Operations (1,373,934) (30,471) 0 (1,404,405)
Other (Expense) Income
Interest expense (65,391) (29,067) (94,458)
Interest income 54,472 28,888 83,360
Loss from joint venture (5,290) (5,290)
--------------- -------------- --------------- -------------
Total Other Expense (10,919) (5,469) (16,388)
--------------- -------------- --------------- -------------
Loss Before Income Taxes and Minority Interest (1,384,853) (35,940) 0 (1,420,793)
--------------- -------------- --------------- -------------
Income Tax (Expense) Benefit
Current (8,893) (115,615) (124,508)
Deferred 581,000 109,000 690,000
--------------- -------------- --------------- -------------
Total Income Tax Benefit 572,107 (6,615) 0 565,492
--------------- -------------- --------------- -------------
Loss Before Minority Interest (812,746) (42,555) 0 (855,301)
Minority Interest 1,617 1,617
--------------- -------------- --------------- -------------
Net Loss $(812,746) $(42,555) $ 1,617 $ (853,684)
=============== ============== =============== =============
Basic and Diluted Loss Per Common Share $ (0.21)
=============
Weighted Average Number of Common Shares
Outstanding 4,035,047
=============
</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
Pro Forma Condensed Consolidated Combined Statement of Operations
For the Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
Aviation
Aviation Holdings
Holdings International As
Group, Inc. Inc. Adjustments Restated
--------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 0 $ 3,147,373 $ 3,147,373
Cost of Goods Sold 2,192,272 2,192,272
--------------- --------------- --------------- -------------
Gross Profit 0 955,101 0 955,101
Operating Expenses
Salaries and wages 318,270 318,270
General and administrative 3,214 414,596 417,810
Professional fees 56,199 56,199
--------------- --------------- --------------- -------------
Total Operating Expenses 3,214 789,065 0 792,279
--------------- --------------- --------------- -------------
Income (Loss) from Operations (3,214) 166,036 0 162,822
Other (Expense) Income
Interest expense (133,746) (23,363) (157,109)
Interest income 5,376 5,376
Income from joint venture 6,553 6,553
--------------- --------------- --------------- -------------
Total Other (Expense) Income (133,746) (11,434) 0 (145,180)
--------------- --------------- --------------- -------------
Income (Loss) Before Income Taxes and
Minority Interest (136,960) 154,602 0 17,642
--------------- --------------- --------------- -------------
Income Tax (Expense) Benefit
Current (49,000) (49,000)
Deferred 43,000 (3,000) 40,000
--------------- --------------- --------------- -------------
Total Income Tax Benefit (Expense) 43,000 (52,000) 0 (9,000)
--------------- --------------- --------------- -------------
Income (Loss) Before Minority Interest (93,960) 102,602 0 8,642
Minority Interest (3,899) (3,899)
--------------- --------------- --------------- -------------
Net Income (Loss) $ (93,960) $ 102,602 $ (3,899) $ 4,743
=============== =============== =============== =============
</TABLE>
<TABLE>
<CAPTION>
Basic Diluted
--------------- -------------
<S> <C> <C>
Earnings Per Common Share - -
=============== =============
Weighted Average Number of Common Shares
Outstanding 4,089,983 4,489,266
=============== =============
</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 (UNAUDITED)
(1) The unaudited pro forma information for the year ended December 31, 1998
and for the Three months ended March 31, 1999 has been prepared using the
hypothetical assumption that the acquisition of 96% of the outstanding
stock of AHI occurred as of January 1, 1998. A 61% 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 and March and April 1999 which increased
the ownership percentage of AHI to 96%. These transactions have been
accounted for as a purchase.
(2) This presentation assumes that the issuance of approximately 1,711,315
shares of AHGI's common stock, exchanged in the acquisition, were
exchanged at January 1, 1998 instead of at the time of the acquisitions in
1998, and 1999.
(3) There were no intercompany sales during the periods presented. All
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.
================================================================================
================================================================================
750,000 Units, each Unit Consisting of
Two Shares of Common Stock
and One Class A Warrant
----------------------
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.
Our 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 our best
interest and, with respect to any criminal action or proceeding, the indemnified
party had no reason to believe his conduct was unlawful.
We intend to enter into indemnification agreements with our directors
and executive officers in addition to the indemnification provided for in our
bylaws, and intend 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 our directors and officers in certain circumstances
as provided therein.
We intend 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,
Aviation Holdings International has the power to indemnify directors, officers,
employees or agents. Aviation Holdings International's Articles of Incorporation
and Bylaws provide for indemnification of directors and officers. In addition,
Aviation Holdings International's executive officers and directors have entered
into agreements with the Aviation Holdings International 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 Aviation Holdings Group, Aviation Holdings International
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 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, we 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, we 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 totaling $250,000, pursuant to Rule 506 promulgated under the
Securities Act.
In May 1999 we extended the maturity date of these promissory notes to July 14,
1999 and issued a warrant to purchase 12,000 shares of common stock to Nancy
Plotkin and a warrant to purchase 3,000 shares of common stock to the John G.
Jacobs Trust as consideration for this extension. The warrants are exercisable
for three years from the date of grant at an exercise price of $4.00 per share.
On March 31, 1999, we issued 500,000 shares of its common stock and a
warrant to purchase an additional 100,000 shares of the 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 Aviation Holdings International
common stock.
In March 1999, we issued 118,000 shares of common stock to five
accredited investors pursuant to Rule 506 promulgated under the Securities Act
in exchange for $295,000.
In April and June, 1999 we issued 115,000 shares of common stock to
thirteen shareholders of Aviation Holdings International pursuant to Rule 506
under the Securities Act in consideration of the receipt of 137,500 shares of
Aviation Holdings International common stock. Each Aviation Holdings
International shareholder participating in the transaction represented that he
or she was an "accredited investor."
Aviation Holdings International
The following sets forth all sales of unregistered securities during
the past three years by Aviation Holdings International 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.
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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.
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, Aviation Holdings International 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 promissory notes totaling
$365,000.
On June 11, 1998, Aviation Holdings International 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.
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*
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<TABLE>
<S> <C> <C>
3.2 Bylaws of the Company, as amended to date*
4.1 Form of Common Stock Certificate*
4.2 Form of Class A Warrant**
4.3 Warrant Agreement**
4.4 Deposit Agreement**
4.5 Plotkin Warrant
4.6 Jacobs Warrant
4.7 D.A.R. Group Warrant
4.8 Dallas Investments Warrant
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*
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.*
(y) Share Exchange Agreement between Gary Cunningham and EYEQ Networking, Inc.
(z) Share Exchange Agreement between Ron Halper and EYEQ Networking, Inc.
(aa) Share Exchange Agreement between John Hunter and EYEQ Networking, Inc.
(bb) Share Exchange Agreement between Eugene Savonen and EYEQ Networking, Inc.
(cc) Share Exchange Agreement between William Voohees and EYEQ Networking, Inc.
(dd) Share Exchange Agreement between Arthur Lucchesi and EYEQ Networking, Inc.
(ee) Share Exchange Agreement between Gerard Bartolomeo and EYEQ Networking, Inc.
(ff) Share Exchange Agreement between Neal Erps and EYEQ Networking, Inc.
(gg) Share Exchange Agreement between Tor Osmundsen and EYEQ Networking, Inc.
(hh) Share Exchange Agreement between James Catania and EYEQ Networking, Inc.
(ii) Share Exchange Agreement between Legal America of Virginia, Ltd. and EYEQ Networking, Inc.
(jj) Share Exchange Agreement between Joseph Janusz and EYEQ Networking, Inc.
(kk) Share Exchange Agreement between Rozel International Holdings, Ltd. and EYEQ Networking, Inc.
10.6 (a) Share Purchase Agreement with Argaman, Inc.*
(b) Argaman, Inc. Stock Purchase Warrant*
</TABLE>
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<TABLE>
<S> <C> <C>
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
10.18 Cooperative Agreement between PASCO International Aviation Corporation, Inc. and China Northern Airlines
10.19 Consignment Contract between Jet Aviation Trading, Inc. and Fersam International, Ltd. dated December 1, 1996
10.20 Manufacturers Representative Agreement with Mirandy Products, Ltd. dated January 27, 1997
10.21 Sales Representation Agreement between Aviation Holdings International, Inc. and Accessory Technologies
Corporation dated January 1, 1995
10.22 Sales Representation Agreement between Aviation Holdings International at Aero Kool Corporation dated January 1,
1999
10.23 Sales Representation Agreement between Aviation Holdings International and AAS Landing Gear Services, inc. dated
April 1, 1999
10.24 Agreement between Aero-Link Flight Systems Corp. Ltd. and China Airlines
11 Computation of Net Loss Per Share
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>
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* Previously Filed
**To be filed by amendment
Item 28. Undertakings.
The undersigned registrant hereby undertakes that it will:
(1) 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.
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<PAGE>
(2) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(3) 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.
(4) 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.
(5) 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 our directors, officers and
controlling persons pursuant to the foregoing provisions, or otherwise, we have
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.
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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 12th day of
July, 1999.
AVIATION HOLDINGS GROUP, INC.
By: JOSEPH J. NELSON
--------------------------------------
Joseph J. Nelson
President and Chief Executive Officer
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 ________ day of July, 1999.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
JOSEPH J. NELSON President and Chief Executive July 12, 1999
- -------------------------------------
Joseph J. Nelson Officer, Director
(Principal Executive Officer)
JOSEPH F. JANUSZ Vice President and Chief Financial July 12, 1999
- ------------------------------------
Joseph F. Janusz Officer
(Principal Accounting and
Financial Officer)
SIMON CHIANG Vice President and Director July 12, 1999
- ------------------------------------
Simon Chiang
MICHAEL J. CIRILLO Director July 12, 1999
- ------------------------------------
Michael J. Cirillo
THEODORE H. GREGOR Director July 12, 1999
- ------------------------------------
Theodore H. Gregor
</TABLE>
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<PAGE>
Exhibit 4.5
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.
May 15, 1999
AVIATION HOLDINGS GROUP, INC.
STOCK PURCHASE WARRANT
AVIATION HOLDINGS GROUP, INC., a Delaware corporation ("Aviation"), for value
received, hereby certifies that Nancy Plotkin, an individual with a mailing
address at c/o Plotkin, Jacobs & Orlofsky, Ltd., 116 South Michigan Avenue,
Suite 1300, Chicago, IL 60603, or her registered assigns, is entitled to
purchase from Aviation, at any time or from time to time during the period
specified in Section 2 hereof, 12,000 fully paid and nonassessable shares of
common stock, par value $.0001 (the "Common Stock"), of Aviation, owned by
Aviation, at an exercise price equal to $4.00 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
Aviation during normal business hours on any business day at Aviation's
principal executive offices (or such other office or agency of Aviation as it
may designate by notice to the holder hereof), and upon payment to Aviation in
cash, by certified or official bank check or by wire transfer to an account
specified by Aviation 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 five 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, Aviation shall also deliver a new
warrant to the holder hereof, which
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<PAGE>
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 May 15, 2004 (the "Exercise Period").
3.Certain Agreements of Aviation. Aviation 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, Aviation shall at all
times have reserved for the purpose of issuance upon exercise of this Warrant, a
sufficient number of shares of Common Stock to provide for the exercise of this
Warrant.
(c) Successors and Assigns. This Warrant shall be binding upon any entity
succeeding to Aviation by merger, consolidation, or acquisition of all or
substantially all of Aviation'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. Aviation shall be responsible for all rights and
obligations provided in this Section 4.
(a)Subdivision or Combination of Common Stock. If Aviation 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 Aviation 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 Aviation 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 Aviation and Aviation
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 at the time of
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<PAGE>
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. Aviation shall not effect any such consolidation, merger, or
sale of assets, or capital reorganization or reclassification unless prior to
the consummation thereof, Aviation 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 Aviation 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 Aviation, 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, Aviation shall give notice thereof to the
holder of this Warrant, which notice shall state theExercise 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 lessthan 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 Aviation 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) Aviation 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) Aviation shall offer for subscription pro rata to the holders of the Common
Stock any additional shares of stock of any class or other rights;
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<PAGE>
(iii) there shall be any capital reorganization of Aviation, or reclassification
of the Common Stock, or consolidation or merger of Aviation 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 Aviation;
then, in each such case, Aviation shall give to the holder of this Warrant
notice of (a) the date on which the books of Aviation 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
Aviation) 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 Aviation'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, Aviation shall
giveAviation notice of such event, who shall in turn give notice thereof to the
holder of this Warrant 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
Aviation, 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 Aviation or any other matter or to receive any
notice of any proceedings of Aviation, 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 Aviation 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 Aviation may
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<PAGE>
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
Aviation 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 Aviation, or, in the
case of any such mutilation, upon surrender and cancellation of this Warrant,
Aviation, at its expense, shall execute and deliver, in lieu thereof, a new
Warrant of like tenor.
(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 Aviation. Aviation 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. Aviation shall maintain, at its principal executive offices (or
such other office or agency of Aviation as it may designate by notice to the
holder hereof), a register for this Warrant, in which Aviation 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, Aviation 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 Aviation a written opinion of counsel, which opinion and counsel are
acceptable to Aviation, 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
Aviation, or at such other address as such holder shall have furnished to
Aviation. All notices, requests and other communications required or permitted
to be given or delivered hereunder to Aviation 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 Aviation
Holdings Group, Inc. 15675 Northwest 15th Avenue, Miami, Florida 33169, or to
such other address as Aviation 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.
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<PAGE>
10.Miscellaneous.
(a) Amendments. This Warrant may only be amended by an instrument in writing
signed by Aviation and the holder hereof.
(b) 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.
IN WITNESS WHEREOF, Aviation has caused this Warrant to be signed by its duly
authorized officer.
AVIATION HOLDINGS GROUP, INC.
By: /s/ Joseph Nelson
-----------------
Joseph Nelson
President and CEO
6
<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
Aviation Holdings Group, Inc.
15675 Northwest 15th Avenue
Miami, Florida 33169
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.
7
<PAGE>
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.
8
<PAGE>
Exhibit 4.6
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.
May 15, 1999
AVIATION HOLDINGS GROUP, INC.
STOCK PURCHASE WARRANT
AVIATION HOLDINGS GROUP, INC., a Delaware corporation ("Aviation"), for
value received, hereby certifies that the John G. Jacobs Trust, John G. Jacobs,
Trustee, a trust with a mailing address at c/o Plotkin, Jacobs & Orlofsky, Ltd.,
116 South Michigan Avenue, Suite 1300, Chicago, IL 60603, or its registered
assigns, is entitled to purchase from Aviation, at any time or from time to time
during the period specified in Section 2 hereof, 3,000 fully paid and
nonassessable shares of common stock, par value $.0001 (the "Common Stock"), of
Aviation, owned by Aviation, at an exercise price equal to $4.00 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 Aviation during normal business hours on any business day at
Aviation's principal executive offices (or such other office or agency of
Aviation as it may designate by notice to the holder hereof), and upon payment
to Aviation in cash, by certified or official bank check or by wire transfer to
an account specified by Aviation 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 five
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, Aviation shall
also deliver a new
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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 May 15, 2004 (the "Exercise
Period").
3. Certain Agreements of Aviation. Aviation 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,
Aviation shall at all times have reserved for the purpose of issuance upon
exercise of this Warrant, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant.
(c) Successors and Assigns. This Warrant shall be binding upon
any entity succeeding to Aviation by merger, consolidation, or acquisition of
all or substantially all of Aviation'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. Aviation shall be responsible for all
rights and obligations provided in this Section 4.
(a) Subdivision or Combination of Common Stock. If Aviation 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 Aviation 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 Aviation 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 Aviation and
Aviation 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
2
<PAGE>
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. Aviation shall not effect any such
consolidation, merger, or sale of assets, or capital reorganization or
reclassification unless prior to the consummation thereof, Aviation 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 Aviation 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
Aviation, 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, Aviation 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 Aviation 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) Aviation 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) Aviation shall offer for subscription pro rata
to the holders of the Common Stock any additional shares of stock of any class
or other rights;
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<PAGE>
(iii) there shall be any capital reorganization of
Aviation, or reclassification of the Common Stock, or consolidation or merger of
Aviation 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 Aviation;
then, in each such case, Aviation shall give to the holder of this Warrant
notice of (a) the date on which the books of Aviation 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
Aviation) 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 Aviation'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,
Aviation shall give Aviation notice of such event, who shall in turn give notice
thereof to the holder of this Warrant 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 Aviation, 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 Aviation or any other matter or to receive any
notice of any proceedings of Aviation, 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 Aviation 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 Aviation
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<PAGE>
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 Aviation 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 Aviation, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, Aviation, at its expense, shall
execute and deliver, in lieu thereof, a new Warrant of like tenor.
(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 Aviation. Aviation 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. Aviation shall maintain, at its principal
executive offices (or such other office or agency of Aviation as it may
designate by notice to the holder hereof), a register for this Warrant, in which
Aviation 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, Aviation 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 Aviation a written opinion of counsel,
which opinion and counsel are acceptable to Aviation, 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
Aviation, or at such other address as such holder shall have furnished to
Aviation. All notices, requests and other communications required or permitted
to be given or delivered hereunder to Aviation 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 Aviation
Holdings Group, Inc. 15675 Northwest 15th Avenue, Miami, Florida 33169, or to
such other address as Aviation 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.
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<PAGE>
10. Miscellaneous.
(a) Amendments. This Warrant may only be amended by an
instrument in writing signed by Aviation and the holder hereof.
(b) 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.
IN WITNESS WHEREOF, Aviation has caused this Warrant to be signed by
its duly authorized officer.
AVIATION HOLDINGS GROUP, INC.
By: /s/ Joseph Nelson
-------------------------------
Joseph Nelson
President and CEO
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<PAGE>
FORM OF EXERCISE AGREEMENT
Dated: ________, ____.
Aviation Holdings Group, Inc.
15675 Northwest 15th Avenue
Miami, Florida 33169
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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<PAGE>
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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Exhibit 4.7
No. W-1 Number of Shares Subject to Warrant: 200,000
VOID AFTER 5:00 P.M. EASTERN DAYLIGHT TIME ON JUNE 30, 2002.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
AVIATION HOLDINGS GROUP, INC.
THIS IS TO CERTIFY, that for value received, The D.A.R. Group, Inc. ("Holder")
is entitled to purchase, subject to the provisions of this Warrant from Aviation
Holdings Group, Inc., a Delaware corporation ("Company"), 200,000 shares of
Common Stock, $.001 par value, of the Company ("Common Stock"), at an exercise
price per share equal to $4.50, at any time during the period beginning June 1,
1999 (the "Commencement Date") and ending at 5:00 p.m. Philadelphia,
Pennsylvania time on June 30, 2002 (the "Termination Date"). The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for a share of Common Stock may be adjusted from time to time
as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares," and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price".
(a) Exercise of Warrant. Subject to the provisions of Section
(h) hereof, this Warrant may be exercised in whole or in part at any time or
from time to time on or after the Commencement Date until the Termination Date
or, if either such day is a day on which banking institutions in the State of
Delaware are authorized by law to close, then on the next succeeding day which
shall not be such a day, by presentation and surrender hereof to the Company at
its principal office, or at the office of its stock transfer agent, with the
Purchase Form annexed hereto duly executed and accompanied by payment of the
Exercise price for the number of shares specified in such form in lawful money
of the United States of America in cash or by official bank or certified check
made payable to Aviation Holdings Group, Inc. If this Warrant shall be exercised
in part only, the Company shall upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent of the
Company at its office, in proper form for exercise and together with payment of
the Exercise Price in the manner provided herein, the Holder shall be deemed to
be the holder of record of the shares of Common Stock or other securities
issuable upon such exercise, provided, however, that if at the date of surrender
of such Warrants and payment of such Exercise Price, the transfer books
<PAGE>
for the Common Stock or such other securities shall be closed, the certificates
for the shares or other securities in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened and until such date, the Company shall be under no duty to deliver any
certificate for such shares or other securities and the Holder shall not be
deemed to have become a holder of record of such shares or the owners of such
other securities.
(b) Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and/or delivery upon exercise of
this Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
(c) Fractional Shares. The Company shall not be required to
issue fractions of shares on the exercise of Warrants. If any fraction of a
share would, except for the provisions of this Section, be issuable on the
exercise of any Warrant, the Company will (i) if the fraction of a share
otherwise issuable is equal to or less than one-half, round down and issue to
the Holder only the largest whole number of shares of Common Stock to which the
Holder is otherwise entitled, or (ii) if the fraction of a share otherwise
issuable is greater than one-half, round-up and issue to the Holder one
additional share of Common Stock in addition to the largest whole number of
shares of Common Stock to which the holder is otherwise entitled.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other Warrants of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to the provisions of Section (h),
upon surrender of this Warrant to the Company or at the office of its stock
transfer agent, if any, with the Assignment Form annexed hereto duly executed
and funds sufficient to pay any applicable transfer tax, the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the office of the Company or
at the office of its stock transfer agent, if any, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued and signed by the Holder thereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of such indemnification as the Company may in its discretion
impose, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will execute and deliver a new Warrant of like tenor and date.
(e) Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to
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<PAGE>
any rights of a stockholder in the Company, either at law or in equity, and the
rights of the Holder are limited to those expressed in the Warrant are not
enforceable against the Company except to the extent set forth herein.
(f) Anti-Dilution Provisions. The Exercise Price and the
number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time as hereinafter provided:
(i) In the case of the Company issuing Common Stock as a
dividend upon Common Stock or in payment of a dividend thereon, shall subdivide
the number of outstanding shares of its Common Stock into a greater number of
outstanding shares or shall contract the number of outstanding shares of its
Common Stock into a lesser number of shares, the Exercise Price then in effect
shall be adjusted, effective at the close of business on the record date for the
determination of stockholders entitled to receive such dividend or be subject to
such subdivision or contraction, to the price (computed to the nearest cent)
determined by dividing (A) the product obtained by multiplying the Exercise
Price in effect immediately prior to the close of business on such record date
by the number of shares of Common Stock outstanding prior to such dividend,
subdivision or contraction, by (B) the number of shares of Common Stock
outstanding immediately after such dividend, subdivision or contraction.
(ii) If any capital reorganization or reclassification of the
capital stock of the Company (other than as set forth in subsection (i) of this
section (f)), or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the holder of each Warrant shall thereafter have the right
to purchase and receive upon the basis and upon the terms and conditions
specified in the Warrant and in lieu of the shares of Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented by such Warrant, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of
Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented by such Warrant had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any such
case appropriate provision shall be made with respect to the rights and interest
of the Holder to the end that the provisions of the Warrants (including, without
limitation, provisions for adjustment of the Exercise Price and of the number of
shares issuable upon the exercise of Warrants) shall thereafter be applicable as
nearly as may be practicable in relation to any shares of stock, securities, or
assets thereafter deliverable upon exercise of Warrants. The Company shall not
effect any such consolidation, merger or sale unless prior to or simultaneously
with the consummation thereof, the successor corporation purchasing such
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<PAGE>
assets shall assume, by written instrument, the obligation to deliver to the
Holder such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase.
(iii) Upon such adjustment of the Exercise Price
pursuant to subsection (i) of this Section (f), the number of shares of Common
Stock specified in each Warrant shall thereupon evidence the right to purchase
that number of shares of Common Stock (calculated to the nearest hundredth of a
share of Common Stock) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
purchasable immediately prior to such adjustment upon exercise of such Warrant
and dividing the product so obtained by the Exercise Price in effect after such
adjustment.
(iv) Irrespective of any adjustments of the number or
kind of securities issuable upon exercise of warrants or the Exercise Price,
Warrants theretofore or thereafter issued may continue to express the same
number of shares of Common Stock and Exercise Price as are stated in similar
Warrants previously issued.
(v) The Company may, at its sole option, retain the
independent public accounting firm regularly retained by the Company, or another
firm of independent public accountants of recognized standing selected by the
Company's Board of Directors, to make any computation required under this
Section (f), and a certificate sighed by such firm shall be conclusive evidence
of any computation made under this Section (f).
(vi) Whenever there is an adjustment in the Exercise
Price or in the number or kind of securities issuable upon exercise of the
Warrants, or both, as provided in this Section (f), the Company shall (i)
promptly file in the custody of its Secretary or Assistant Secretary a
certificate signed by the Chairman of the board of the President or Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company, setting forth the facts
requiring such adjustment and the number and kind of securities issuable upon
exercise of each Warrant after such adjustment; and (ii) cause a notice stating
that such adjustment has been effected and stating the Exercise Price then in
effect and the number and kind of securities issuable upon exercise of each
Warrant to be sent to each registered holder of a Warrant.
(vii) The Exercise Price and the number of shares
issuable upon exercise of a Warrant shall not be adjusted except in the manner
and only upon the occurrence of the events heretofore specifically referred to
in this Section (f).
(viii) The Board of Directors of the Company may,
without the prior consent of the Holder, reduce the Exercise Price or increase
the number of shares of Common Stock or other securities issuable upon exercise
of the Warrant.
4
<PAGE>
(ix) No adjustment of the Exercise Price shall be
made in an amount of 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
(g) Redemption
(i) The Company shall have the right, upon thirty
(30) days written notice, to call this Warrant for redemption, in whole or in
part at a call price of $.05 per Warrant Share 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 trading in excess of
$5.25 per share for a ten day period.
(ii) In the event the Company shall desire to
exercise its right to so redeem the Warrants, it shall mail a notice of
redemption to each of the Registered Holders of the Warrants to be redeemed,
first class, postage prepaid, not later than the thirtieth (30th) day before the
date fixed for redemption, at their last address as shall appear on the records
of the Warrants. Any notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given whether or not the Registered
Holder receives such notice.
(iii) The notice of redemption shall specify (a) the
redemption price; (b) the date fixed for redemption; (c) the place where the
Warrant Certificates shall be delivered and the redemption price paid; and (d)
that the right to exercise the Warrant shall terminate at 5:00 p.m. (Eastern
Daylight Time) on the business day immediately preceding the date fixed for
redemption. The date fixed for the redemption of the Warrants shall be the
Redemption Date. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such redemption
except as to a Holder (i) to whom notice was not mailed or (ii) whose notice was
defective. An affidavit of any agent of the company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. Any document evidencing hand delivery to the Holder at the
Holder's address such as a signed receipt of acceptance of the notice, or
affidavit of the person making the hand delivery and any document evidencing
delivery by U.S. Mail to Holder's address such as a certified mail receipt.
shall be conclusive evidence of delivery of notice to Holder.
(iv) Any right to exercise a Warrant shall terminate at 5:00
p.m. (Eastern Daylight Time) on the business day immediately preceding the
Redemption Date. On or after the
5
<PAGE>
Redemption Date, Holders of the Warrants shall have no further rights except to
receive, upon surrender of the Warrant, the Redemption Price.
(v) From and after the date specified for redemption, the
Company shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the Registered
Holder thereof of one or more Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Holder a sum in cash equal to the
redemption price of each such Warrant. From and after the date fixed for
redemption and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
certificates, except the right to receive payment of the redemption price shall
cease.
(h) Transfer to Company with the Securities Act of 1933 and
Other Applicable Securities Laws. This Warrant or the Warrant Shares or any
other security issued or issuable upon exercise of this Warrant may not be sold
or otherwise disposed of unless the Holder provides the Company with an opinion
of counsel satisfactory to the Company in form satisfactory to the Company that
this Warrant or the Warrant Shares may be legally transferred without violating
the Act and any other applicable securities laws and then, if such opinion
states that certificates representing the Warrants or
6
<PAGE>
Warrants Shares being transferred shall be required to bear a legend restricting
further transfer only against receipt of an agreement of the transferee to
comply with the provisions of this Section (h) with respect to any resale or
other disposition of such securities.
AVIATION HOLDINGS GROUP, INC.
BY:/s/ Joseph J. Nelson
--------------------
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS BEEN
TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR
DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED OR DISPOSED OF WITHOUT AN
OPINIOIN OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION
DOES NOT VIOLATE THE SECURITIES ACTOF 1933, AS AMENDED, OR THE RULES AND
REGULATIONS THEREUNDER.
PURSUANT TO SECTION 203(d) OF THE PENNSYLVANIA SECURITIES ACT OF 1972 AND TO THE
EXTENT, IF ANY, REQUIRED THEREBY, THE PURCHASER OF THIS SECURITY WHICH IS A
RESIDENT OF THE COMMONWEALTH OF PENNSYLVANIA HEREBY AGREES NOT TO SELL THIS
SECURITY WITHIN TWELVE MONTHS AFTER THE DATE OF PURCHASE.
7
<PAGE>
PURCHASE FORM
--------------
Dated:_________________________, ____
The Undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________________ shares of Common Stock
and hereby makes payment of $__________________ in payment of the Exercise Price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name: __________________________________________________________________________
[Please typewrite or print]
Address:________________________________________________________________________
________________________________________________________________________________
Social Security or Tax I.D. Number:_____________________________________________
Signature:______________________________________________________________________
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _______________________________ hereby sells,
assigns and transfers unto:
Name: ________________________________________________________________________
[Please typewrite or print]
Address:______________________________________________________________________
________________________________________________________________________________
Social Security or Tax I.D. Number:_____________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
____________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _____________________, Attorney to transfer
the Shares on the books of the Company with full power of substitution in
_________________________________ the premises.
__________________________________ ____________________
Signature Date
8
<PAGE>
Exhibit 4.8
No. W-2 Number of Shares Subject to Warrant: 10,000
VOID AFTER 5:00 P.M. EASTERN DAYLIGHT TIME ON JUNE 30, 2002.
WARRANT TO PURCHASE SHARES OF COMMON STOCK
OF
AVIATION HOLDINGS GROUP, INC.
THIS IS TO CERTIFY, that for value received, Dallas Investments, Ltd. ("Holder")
is entitled to purchase, subject to the provisions of this Warrant from Aviation
Holdings Group, Inc., a Delaware corporation ("Company"), 10,000 shares of
Common Stock, $.001 par value, of the Company ("Common Stock"), at an exercise
price per share equal to $4.50, at any time during the period beginning June 1,
1999 (the "Commencement Date") and ending at 5:00 p.m. Philadelphia,
Pennsylvania time on June 30, 2002 (the "Termination Date"). The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for a share of Common Stock may be adjusted from time to time
as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares," and the exercise price of a share of Common Stock in
effect at any time and as adjusted from time to time is hereinafter sometimes
referred to as the "Exercise Price".
(a) Exercise of Warrant. Subject to the provisions of Section
(h) hereof, this Warrant may be exercised in whole or in part at any time or
from time to time on or after the Commencement Date until the Termination Date
or, if either such day is a day on which banking institutions in the State of
Delaware are authorized by law to close, then on the next succeeding day which
shall not be such a day, by presentation and surrender hereof to the Company at
its principal office, or at the office of its stock transfer agent, with the
Purchase Form annexed hereto duly executed and accompanied by payment of the
Exercise price for the number of shares specified in such form in lawful money
of the United States of America in cash or by official bank or certified check
made payable to Aviation Holdings Group, Inc. If this Warrant shall be exercised
in part only, the Company shall upon surrender of this Warrant for cancellation,
execute and deliver a new Warrant evidencing the rights of the Holder thereof to
purchase the balance of the shares purchasable thereunder. Upon receipt by the
Company of this Warrant at its office, or by the stock transfer agent
1
<PAGE>
of the Company at its office, in proper form for exercise and together with
payment of the Exercise Price in the manner provided herein, the Holder shall be
deemed to be the holder of record of the shares of Common Stock or other
securities issuable upon such exercise, provided, however, that if at the date
of surrender of such Warrants and payment of such Exercise Price, the transfer
books for the Common Stock or such other securities shall be closed, the
certificates for the shares or other securities in respect of which such
Warrants are then exercised shall be issuable as of the date on which such books
shall next be opened and until such date, the Company shall be under no duty to
deliver any certificate for such shares or other securities and the Holder shall
not be deemed to have become a holder of record of such shares or the owners of
such other securities.
(b) Reservation of Shares. The Company hereby agrees that at
all times there shall be reserved for issuance and/or delivery upon exercise of
this Warrant such number of shares of its Common Stock as shall be required for
issuance and delivery upon exercise of this Warrant.
(c) Fractional Shares. The Company shall not be required to
issue fractions of shares on the exercise of Warrants. If any fraction of a
share would, except for the provisions of this Section, be issuable on the
exercise of any Warrant, the Company will (i) if the fraction of a share
otherwise issuable is equal to or less than one-half, round down and issue to
the Holder only the largest whole number of shares of Common Stock to which the
Holder is otherwise entitled, or (ii) if the fraction of a share otherwise
issuable is greater than one-half, round-up and issue to the Holder one
additional share of Common Stock in addition to the largest whole number of
shares of Common Stock to which the holder is otherwise entitled.
(d) Exchange, Transfer, Assignment or Loss of Warrant. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other Warrants of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to the provisions of Section (h),
upon surrender of this Warrant to the Company or at the office of its stock
transfer agent, if any, with the Assignment Form annexed hereto duly executed
and funds sufficient to pay any applicable transfer tax, the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the office of the Company or
at the office of its stock transfer agent, if any, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued and signed by the Holder thereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of such indemnification as the Company may in its discretion
impose,
2
<PAGE>
and upon surrender and cancellation of this Warrant, if mutilated, the Company
will execute and deliver a new Warrant of like tenor and date.
(e) Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a stockholder in the Company, either at law
or in equity, and the rights of the Holder are limited to those expressed in the
Warrant are not enforceable against the Company except to the extent set forth
herein.
(f) Anti-Dilution Provisions. The Exercise Price and the
number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time as hereinafter provided:
(i) In the case of the Company issuing Common Stock as a
dividend upon Common Stock or in payment of a dividend thereon, shall subdivide
the number of outstanding shares of its Common Stock into a greater number of
outstanding shares or shall contract the number of outstanding shares of its
Common Stock into a lesser number of shares, the Exercise Price then in effect
shall be adjusted, effective at the close of business on the record date for the
determination of stockholders entitled to receive such dividend or be subject to
such subdivision or contraction, to the price (computed to the nearest cent)
determined by dividing (A) the product obtained by multiplying the Exercise
Price in effect immediately prior to the close of business on such record date
by the number of shares of Common Stock outstanding prior to such dividend,
subdivision or contraction, by (B) the number of shares of Common Stock
outstanding immediately after such dividend, subdivision or contraction.
(ii) If any capital reorganization or reclassification of the
capital stock of the Company (other than as set forth in subsection (i) of this
section (f)), or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provisions
shall be made whereby the holder of each Warrant shall thereafter have the right
to purchase and receive upon the basis and upon the terms and conditions
specified in the Warrant and in lieu of the shares of Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented by such Warrant, such shares of stock, securities or
assets as may be issued or payable with respect to or in exchange for a number
of outstanding shares of such Common Stock equal to the number of shares of
Common Stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented by such Warrant had such reorganization,
reclassification, consolidation, merger or sale not taken place, and in any such
case appropriate provision shall be made with respect to the rights and interest
of the Holder to the end that the provisions of the Warrants (including, without
limitation, provisions for adjustment of the Exercise Price and of the
3
<PAGE>
number of shares issuable upon the exercise of Warrants) shall thereafter be
applicable as nearly as may be practicable in relation to any shares of stock,
securities, or assets thereafter deliverable upon exercise of Warrants. The
Company shall not effect any such consolidation, merger or sale unless prior to
or simultaneously with the consummation thereof, the successor corporation
purchasing such assets shall assume, by written instrument, the obligation to
deliver to the Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Holder may be entitled to
purchase.
(iii) Upon such adjustment of the Exercise Price
pursuant to subsection (i) of this Section (f), the number of shares of Common
Stock specified in each Warrant shall thereupon evidence the right to purchase
that number of shares of Common Stock (calculated to the nearest hundredth of a
share of Common Stock) obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
purchasable immediately prior to such adjustment upon exercise of such Warrant
and dividing the product so obtained by the Exercise Price in effect after such
adjustment.
(iv) Irrespective of any adjustments of the number or
kind of securities issuable upon exercise of warrants or the Exercise Price,
Warrants theretofore or thereafter issued may continue to express the same
number of shares of Common Stock and Exercise Price as are stated in similar
Warrants previously issued.
(v) The Company may, at its sole option, retain the
independent public accounting firm regularly retained by the Company, or another
firm of independent public accountants of recognized standing selected by the
Company's Board of Directors, to make any computation required under this
Section (f), and a certificate sighed by such firm shall be conclusive evidence
of any computation made under this Section (f).
(vi) Whenever there is an adjustment in the Exercise
Price or in the number or kind of securities issuable upon exercise of the
Warrants, or both, as provided in this Section (f), the Company shall (i)
promptly file in the custody of its Secretary or Assistant Secretary a
certificate signed by the Chairman of the board of the President or Vice
President of the Company and by the Treasurer or an Assistant Treasurer or the
Secretary or an Assistant Secretary of the Company, setting forth the facts
requiring such adjustment and the number and kind of securities issuable upon
exercise of each Warrant after such adjustment; and (ii) cause a notice stating
that such adjustment has been effected and stating the Exercise Price then in
effect and the number and kind of securities issuable upon exercise of each
Warrant to be sent to each registered holder of a Warrant.
(vii) The Exercise Price and the number of shares
issuable upon exercise of a Warrant shall not be adjusted except in the manner
and only upon the occurrence of the events heretofore specifically referred to
in this Section (f).
4
<PAGE>
(viii) The Board of Directors of the Company may,
without the prior consent of the Holder, reduce the Exercise Price or increase
the number of shares of Common Stock or other securities issuable upon exercise
of the Warrant.
(ix) No adjustment of the Exercise Price shall be
made in an amount of 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
(g) Redemption
(i) The Company shall have the right, upon thirty
(30) days written notice, to call this Warrant for redemption, in whole or in
part at a call price of $.05 per Warrant Share 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 trading in excess of
$5.25 per share for a ten day period.
(ii) In the event the Company shall desire to
exercise its right to so redeem the Warrants, it shall mail a notice of
redemption to each of the Registered Holders of the Warrants to be redeemed,
first class, postage prepaid, not later than the thirtieth (30th) day before the
date fixed for redemption, at their last address as shall appear on the records
of the Warrants. Any notice mailed in the manner provided herein shall be
conclusively presumed to have been duly given whether or not the Registered
Holder receives such notice.
(iii) The notice of redemption shall specify (a) the
redemption price; (b) the date fixed for redemption; (c) the place where the
Warrant Certificates shall be delivered and the redemption price paid; and (d)
that the right to exercise the Warrant shall terminate at 5:00 p.m. (Eastern
Daylight Time) on the business day immediately preceding the date fixed for
redemption. The date fixed for the redemption of the Warrants shall be the
Redemption Date. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such redemption
except as to a Holder (i) to whom notice was not mailed or (ii) whose notice was
defective. An affidavit of any agent of the company that notice of redemption
has been mailed shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. Any document evidencing hand delivery to the Holder at the
Holder's address such as a signed receipt of acceptance of the notice, or
affidavit of the person making the hand delivery and any document evidencing
delivery by U.S. Mail to Holder's address such as a certified mail receipt.
shall be conclusive evidence of delivery of notice to Holder.
5
<PAGE>
(iv) Any right to exercise a Warrant shall terminate at 5:00
p.m. (Eastern Daylight Time) on the business day immediately preceding the
Redemption Date. On or after the Redemption Date, Holders of the Warrants shall
have no further rights except to receive, upon surrender of the Warrant, the
Redemption Price.
(v) From and after the date specified for redemption, the
Company shall, at the place specified in the notice of redemption, upon
presentation and surrender to the Company by or on behalf of the Registered
Holder thereof of one or more Warrants to be redeemed, deliver or cause to be
delivered to or upon the written order of such Holder a sum in cash equal to the
redemption price of each such Warrant. From and after the date fixed for
redemption and upon the deposit or setting aside by the Company of a sum
sufficient to redeem all the Warrants called for redemption, such Warrants shall
expire and become void and all rights hereunder and under the Warrant
certificates, except the right to receive payment of the redemption price shall
cease.
(h) Transfer to Company with the Securities Act of 1933 and
Other Applicable Securities Laws. This Warrant or the Warrant Shares or any
other security issued or issuable upon exercise of this Warrant may not be sold
or otherwise disposed of unless the Holder provides the Company with an opinion
of counsel satisfactory to the Company in form satisfactory to the Company that
this Warrant or the Warrant Shares may be legally transferred without violating
the Act and any other applicable securities laws and then, if such opinion
states that certificates representing the Warrants or
6
<PAGE>
Warrants Shares being transferred shall be required to bear a legend restricting
further transfer only against receipt of an agreement of the transferee to
comply with the provisions of this Section (h) with respect to any resale or
other disposition of such securities.
AVIATION HOLDINGS GROUP, INC.
BY: /s/ Joseph J. Nelson
--------------------
THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE WARRANT REPRESENTED BY THIS CERTIFICATE HAS BEEN
TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT A VIEW TO RESALE OR
DISTRIBUTION THEREOF, AND MAY NOT BE TRANSFERRED OR DISPOSED OF WITHOUT AN
OPINIOIN OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION
DOES NOT VIOLATE THE SECURITIES ACTOF 1933, AS AMENDED, OR THE RULES AND
REGULATIONS THEREUNDER.
PURSUANT TO SECTION 203(d) OF THE PENNSYLVANIA SECURITIES ACT OF 1972 AND TO THE
EXTENT, IF ANY, REQUIRED THEREBY, THE PURCHASER OF THIS SECURITY WHICH IS A
RESIDENT OF THE COMMONWEALTH OF PENNSYLVANIA HEREBY AGREES NOT TO SELL THIS
SECURITY WITHIN TWELVE MONTHS AFTER THE DATE OF PURCHASE.
7
<PAGE>
PURCHASE FORM
-------------
Dated:_________________________, ____
The Undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing __________________ shares of Common Stock
and hereby makes payment of $__________________ in payment of the Exercise Price
thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
--------------------------------------
Name: __________________________________________________________________________
[Please typewrite or print]
Address:________________________________________________________________________
________________________________________________________________________________
Social Security or Tax I.D. Number:_____________________________________________
Signature:______________________________________________________________________
ASSIGNMENT FORM
---------------
FOR VALUE RECEIVED, _______________________________ hereby sells,
assigns and transfers unto:
Name: ________________________________________________________________________
[Please typewrite or print]
Address:______________________________________________________________________
________________________________________________________________________________
Social Security or Tax I.D. Number:_____________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
____________ shares as to which such right is exercisable and does hereby
irrevocably constitute and appoint _____________________, Attorney to transfer
the Shares on the books of the Company with full power of substitution in
_________________________________ the premises.
____________________________________ ___________________
Signature Date
8
<PAGE>
Exhibit 10.5(y)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between Gary Cunningham located at 10570 West 101st Place, Broomfield,
CO 80020 ("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ Gary Cunningham EYEQ NETWORKING, INC.
/s/ Susan Cunningham
Gary Cunningham
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
10570 West 101st Place
Broomfield, CO 80020
10,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(z)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between Ron Halper located at 919 N. Michigan Avenue, Suite 2100,
Chicago, IL 60611 ("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ Ron Halper EYEQ NETWORKING, INC.
Ron Halper
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
919 N. Michigan Avenue, Suite 2100
Chicago, IL 60611
10,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(aa)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between John Hunter located at 3201 Goodman Road, Yakima, WA 98903
("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ John Hunter EYEQ NETWORKING, INC.
John Hunter
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
3201 Goodman Road
Yakima, WA 98903
15,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(bb)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between Eugene Savonen located at 14129 Los Nietos, Poway, CA 92064
("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ Eugene Savonen EYEQ NETWORKING, INC.
Eugene Savonen
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
14129 Los Nietos
Poway, CA 92064
6,500
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(cc)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between William Voorhees located at RR 2 Box 7, Maroa, IL 61756
("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ William Voorhees EYEQ NETWORKING, INC.
William Voorhees
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
RR 2 Box 7
Maroa, IL 61756
5,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(dd)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between Arthur Lucchesi located at 6 Benedict Road, Staten Island, NY
10304 ("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ Arthur Lucchesi EYEQ NETWORKING, INC.
Arthur Lucchesi
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
6 Benedict Road
Staten Island, NY 10304
2,500
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(ee)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between Gerard Bartolomeo located at 1617 Neptune Avenue, Brooklyn, NY
11224 ("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ Gerard Bartolomeo EYEQ NETWORKING, INC.
Gerard Bartolomeo
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
1617 Neptune Avenue
Brooklyn, NY 11224
3,500
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(ff)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between Neal Erps located at 1 Willowbrook Drive, North Brunswick, NJ
08902 ("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ Neal Erps EYEQ NETWORKING, INC.
Neal Erps
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
1 Willowbrook Drive
North Brunswick, NJ 08902
5,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(gg)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between Tor Osmundsen located at 1720 Huckelberry Drive, Alken, SC
29803 ("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ Tor Osmundsen EYEQ NETWORKING, INC.
Tor Osmundsen
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
1720 Huckelberry Drive
Alken, SC 29803
5,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(hh)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between James Catania located at 6 Judson Lane, Campbell Hall, NY 10916
("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ James Catania EYEQ NETWORKING, INC.
James Catania
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
6 Judson Lane
Campbell Hall, NY 10916
15,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(ii)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated September 16,
1998, is between Legal America of Virginia, Ltd. located at 1100 Main Street,
#418, Kansas City, MO 64105 ("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 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 August 7, 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 August 15, 1998 (the "Closing Date") 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,
1
<PAGE>
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.
(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.
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,
3
<PAGE>
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.
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
4
<PAGE>
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
5
<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:
/s/ Legal America of Virginia EYEQ NETWORKING, INC.
Legal America of Virginia
By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
1100 Main Street, #418
Kansas City, MO 64105
5,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
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Exhibit 10.5(jj)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated April 9, 1999,
is between Joseph Janusz located at 15657 N.W. 15th Ave., Miami, FL 33169
("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") 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
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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, ransfer, 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.
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 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
4
<PAGE>
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.
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.
5
<PAGE>
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.
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:
/s/ Joseph Janusz EYEQ NETWORKING, INC.
Joseph Janusz By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
15657 N.W. 15th Ave.
Miami, FL 33169
25,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.5(kk)
SHARE EXCHANGE AGREEMENT
THIS SHARE EXCHANGE AGREEMENT (the "Agreement"), dated April 9, 1999,
is between Rozel International Holdings, Ltd. located at White Hill House, Newby
Road Industrial Estates, Hazel Grove, Stockport, Cheshire ("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.
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.
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
3
<PAGE>
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.
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.
4
<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
5
<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:
/s/ EYEQ NETWORKING, INC.
President
Rozel International Holdings, Ltd. By: /s/ Joseph Nelson
Name: Joseph Nelson
Address: Title:
White Hill House, Newby Road Industrial Estates
Hazel Grove, Stockport, Cheshire
30,000
Shares of Jet Aviation Trading, Inc.
Common Stock
6
<PAGE>
Exhibit 10.9(a)
================================================================================
CREDIT AGREEMENT
DATED AS OF AUGUST 12, 1998
COMERICA BANK
================================================================================
Execution Copy
CREDIT AGREEMENT
----------------
This Credit Agreement, made as of the 12th day of August, 1998, by and
between Jet Aviation Trading, Inc., a Florida corporation, (herein called
"Borrower") and COMERICA BANK, a Michigan banking corporation, of Detroit,
Michigan (herein called "Bank");
RECITALS:
<PAGE>
A. Borrower desires to obtain certain credit facilities from Bank.
B. Bank is willing to extend such credit facilities on the terms and
conditions set forth herein.
NOW, THEREFORE, the Bank and Borrower agree as follows:
WITNESSETH:
1. DEFINITIONS
For the purposes of this Agreement the following terms will have the
following meanings:
"Account" shall have the meaning assigned to it in the Michigan Uniform
Commercial Code on the date of this Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and executive- officers of such Person), controlled by, or under direct or
indirect common control with such Person. A Person shall be deemed to control a
corporation for the purposes of this definition if such Person possesses,
directly or indirectly, the power (i) to vote 10% or more of the securities
having ordinary voting power for the election of directors of such corporation
or (ii) to direct or cause the direction of the management and policies of such
corporation, whether through the ownership of voting securities, by contract or
otherwise.
"Business Day" shall mean any day on which commercial banks are open
for domestic and international business (including dealings in foreign exchange)
in Detroit, Michigan and Miami, Florida.
"Capital Expenditure" shall mean, without duplication, any payment made
directly or indirectly for the purpose of acquiring or constructing fixed
assets, real property or equipment which in accordance with GAAP would be added
as a debit to the fixed asset account of a Person, including, without
limitation, amounts paid or payable under any conditional sale or other title
retention agreement or under any lease or other periodic payment arrangement
which is of such a nature that payment obligations of such Person thereunder
would be required by GAAP to be capitalized and shown as liabilities on the
balance sheet of such Person.
"Capital Lease" shall mean any lease of any property (whether real,
personal or mixed) by a Person as lessee which, in conformity with GAAP, is, or
is required to be accounted for as a capital lease on the balance sheet such
Person, together with any renewals of such leases (or entry into new leases) on
substantially similar terms.
"Consolidated" or "Consolidating" shall, when used with reference to
any financial information pertaining to (or when used as a part of any defined
term or statement pertaining to the financial condition of) Borrower and its
Subsidiaries, mean the accounts of Borrower and its Subsidiaries determined on a
consolidated or consolidating basis, as the case may be, all determined as to
principles
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of consolidation and, except as otherwise specifically required by the
definition of such ten-n or by such statements, as to such accounts, in
accordance with GAAP.
"Debt" shall mean, as of any applicable date of determination, all
items of indebtedness, obligation or liability of a Person, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, that should be classified as liabilities in
accordance with GAAP.
"Environmental Laws" shall mean all federal, state and local laws
including statutes, regulations, ordinances, codes, rules, and other
governmental restrictions and requirements, relating to environmental pollution,
contamination or other impairment of the environment or any hazardous or toxic
substances of any nature. These Environmental Laws shall include but not be
limited to -the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and Recovery Act of
1976, the Federal Comprehensive Environmental Response, Compensation and
Liability Act of 1980, and the Federal Superfund Amendments and Reauthorization
Act of 1986.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, or any successor act or code.
"Event of Default" shall mean any of the Events of Default specified in
Section 8 hereof.
"GAAP" shall mean, as of any applicable date of determination,
generally accepted accounting principles consistently applied, as in effect on
the date of this Agreement.
"Indebtedness" shall mean all loans, advances, indebtedness,
obligations and liabilities of Borrower to Bank under this Agreement, together
with all other indebtedness, obligations and liabilities whatsoever of Borrower
to Bank arising under or in connection with this Agreement, whether matured or
unmatured, liquidated or unliquidated, direct or indirect, absolute or
contingent, joint or several, due or to become due, now existing or hereafter
arising.
"Letter of Credit" shall have the meaning set forth in Section 2.4.
"Letter of Credit Reserve" shall mean as of any date of determination,
an amount equal to the undrawn amount of outstanding Letters of Credit as of
such date and the outstanding principal amount of draws under Letters of Credit
honored by Bank for which Borrower has not reimbursed Bank.
"Loan Documents" shall mean collectively, this Agreement, the Revolving
Credit Note, the Security Agreement and any other instruments or agreements
executed at any time pursuant to or in connection with any such documents.
"Material Adverse Effect" means (a) a material adverse effect on the
financial condition, operations, assets, business or properties of the Borrower,
(b) a material impairment of the ability of the Borrower to perform its
obligations under the Loan documents to which it is a party, or (c) an
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impairment of the validity or enforceability of, or a material impairment of
the rights, remedies or benefits available to Bank under this Agreement or any
other Loan Document.
"Permitted Liens" means for a Person:
(a) liens for taxes or assessments or governmental charges or levies
not yet due or delinquent, or which can thereafter be paid without penalty, or
which are being contested in good faith by proceedings diligently pursued;
(b) unfilled inchoate mechanics' and materialmen's liens for
construction work in progress;
(c) workmen's, repairmen's, warehousemen's and carriers' liens and
other similar liens, if any, arising in the ordinary course of business;
(d) all of the following, if they do not in the opinion of Bank, upon
advice of its legal counsel or professional engineer, individually or in the
aggregate materially impair the use of such Person's material properties by such
Person: any easements, restrictions, mineral, oil, gas and mining rights and
reservations, zoning laws and defects in title;
(e) any lien for the satisfaction and discharge of which a sum of money
deemed adequate by Bank is on deposit with Bank or an institution acceptable to
Bank;
(f) liens created by or resulting from any litigation or other
proceeding (including liens arising out of judgments or awards against such
Person) with respect to which such Person is in good faith prosecuting an appeal
or proceeding for review, if such liens do not in the opinion of counsel for
Bank individually or in the aggregate materially impair the use of any of such
Person's material properties by such Person;
(g) any other lien, encumbrance or charge acceptable to and approved in
writing by Bank.
"Person" or "person" shall mean any individual, corporation,
partnership, joint venture, limited liability company, association, trust,
unincorporated association, joint stock company, government, municipality,
political subdivision or agency, or other entity.
"Prime Rate" shall mean the per anum interest rate established by Bank
as its prime rate for its borrowers as such rate may vary from time to time,
which rate is not necessarily the lowest rate on loans made by Bank at any such
time.
"Request for Advance" shall mean a Request for Advance issued by
Borrower under this Agreement in the form annexed to this Agreement as Exhibit
"A".
"Revolving Credit Note" shall mean the Note described in Section 2.1
hereof made by Borrower to Bank in the form annexed to this Agreement as Exhibit
"B".
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"SEC" shall mean the United States Securities and Exchange Commission
and any successor thereto.
"Security Agreement" shall mean the Security Agreements in the form and
content of Exhibit "C" to this Agreement pursuant to which Borrower grants to
Bank a first priority security interest in all accounts, chattel paper,
documents, equipment, fixtures, general intangibles, goods, instruments and
inventory, parts, aircraft, aircraft engines and all other tangible and
intangible personal property wherever located and whether now owned or hereafter
acquired, together with all replacements thereof, substitutions therefor,
accessions thereto and all proceeds and products of all the foregoing.
"Subsidiary" shall mean a corporation or other entity of which more
than fifty percent (50%) of the outstanding voting stock or other equity
interests is owned by Borrower, either directly or indirectly, through one or
more intermediaries.
"Tangible Net Worth" shall mean the excess of (i) the net book value of
the assets of Borrower (excluding from assets however, amounts due, if any, from
affiliates, officers, directors and employees and patents, patent rights,
trademarks, trade names, franchises, copyrights, licenses, good will and similar
intangible assets) after all appropriate deductions determined in accordance
with generally accepted accounting principles, consistently applied (including,
without limitation, reserves for doubtful receivables, obsolescence, etc.), over
(ii) all Debt of Borrower.
2. THE INDEBTEDNESS: Revolving Credit
2.1 Bank may lend to Borrower at any time and from time to time from
the effective date hereof until the earlier to occur of (i) demand or (ii) the
occurrence of an Event of Default sums not to exceed under the line of credit
Three Million Five Hundred Thousand Dollars ($3,500,000) in aggregate principal
amount at any one time outstanding. The borrowings hereunder shall be evidenced
by the Revolving Credit Note under which advances, repayments and readvances may
be made, subject to the terms and conditions of this Agreement; provided,
however, in no event shall Bank be obligated to make any advance under this
Agreement.
2.2 The Revolving Credit Note shall be payable upon demand, and the
balance from time to time outstanding shall bear interest at a per anum rate
equal to one percent (1%) above the Bank's Prime Rate. Upon the occurrence of
any Event of Default hereunder, interest shall accrue on the unpaid principal
balance at the per anum rate of three percent (3%) above the rate otherwise in
effect. Interest shall be payable monthly commencing on September 1, 1998 and on
the first day of each month thereafter. Interest shall be computed on a daily
basis using a year of 360 days, assessed for the actual number of days elapsed,
and in such computation effect shall be given to any change in the interest rate
resulting from a change in the Prime Rate on the date of such change in the
Prime Rate.
2.3 Bank shall not make any advances under the Revolving Credit Note
unless Borrower shall have first filed with Bank a Request for Advance executed
by an authorized officer of Borrower; provided, however, at the option of Bank,
in lieu of written Requests for Advances, Borrower may utilize Bank's "Sweep to
Loan" automated system for obtaining advances. Each time an advance is made
using the "Sweep to Loan" system, it shall constitute a certificate by Borrower
of the matters set forth
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in the Request for Advance form as of such date. Bank may revoke Borrower's
privilege to use the "Sweep to Loan" system at any time and after any such
revocation, the regular procedures set forth herein shall apply. Bank may, at
its option, lend under the Revolving Credit Note upon the telephone request of
an authorized officer of Borrower and, in the event Bank makes any such advance
upon a telephone request, the requesting officer shall mail to Bank, on the same
day as such telephone request, a Request for Advance. Borrower hereby authorizes
Bank to disburse advances under the Revolving Credit Note pursuant to the
telephone instructions of any person purporting to be an authorized officer of
Borrower and Borrower shall bear all risk of loss resulting from disbursements
made upon any telephone request.
2.4 In addition to advances under the Revolving Credit Note to be
provided to Borrower by Bank under and pursuant to Section 2.1 of this
Agreement, Bank may issue, or commit to issue, from time to time, standby and
trade letters of credit for the account of Company (herein individually called a
"Letter of Credit" and collectively "Letters of Credit") provided, however that
the sum of the aggregate amount of advances outstanding under the Revolving
Credit Note plus the Letter of Credit Reserve shall not exceed Three Million
Five Hundred Thousand Dollars ($3,500,000) at any one time. In addition to the
terms and conditions of this Agreement, the issuance of any Letters of Credit
shall also be subject to the terms and conditions of any letter of credit
applications and agreements executed and delivered by Company unto Bank with
respect thereto.
2.5 Borrower may prepay the Revolving Credit Note in whole or in part
without premium or penalty.
2.6 The aggregate principal amount at any one time outstanding under
the Revolving Credit Note and the Letter of Credit Reserve shall never exceed
the formula set forth in the Advance Formula Agreement dated as of the date
hereof or in any Advance Formula Agreement delivered by Borrower to Bank- in
substitution therefor. Borrower shall immediately make all payments necessary to
comply with this provision.
2.7 Advances under the Revolving Credit Note shall be used for working
capital purposes and, subject to the prior approval of Bank (which approval may
be given or withheld in the sole discretion of Bank) for permitted acquisitions.
2.8 Borrower acknowledges that the Revolving Credit Note and the
Indebtedness under this Section 2 matures upon issuance and that the Bank-, at
any time, without notice, and without reason, may demand that the Revolving
Credit Note and the Indebtedness be immediately repaid in full.
3. CONDITIONS
3.1 Borrower agrees to furnish Bank prior to the initial borrowing
under this Agreement, in form and substance to be satisfactory to Bank, with (1)
certified copies of resolutions of the Board of Directors of the Borrower
evidencing approval of the borrowings and transactions contemplated hereunder;
(11) a certificate of good standing from the state of Borrower's formation and
from the state(s) in which it is required to be qualified to do business; and
(iii) such other documents, instruments and legal opinions as Bank may
reasonably require.
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3.2 As security for all indebtedness of Borrower to Bank hereunder,
Borrower agrees to furnish, execute and deliver to Bank, or cause to be
furnished, executed and delivered to Bank, prior to or simultaneously with the
initial borrowing hereunder, in form to be satisfactory to Bank and supported by
appropriate resolution in certified form authorizing same, the following:
(a) The Security Agreements;
(b) Financing Statements required or requested by Bank to
perfect all security interests to be conferred upon Bank under this Agreement
and to accord Bank a perfected first priority security position under the
Uniform Commercial Code (subject only to the encumbrances permitted hereunder);
(c) Such other documents or agreements of security and
appropriate assurances of validity and perfected first priority of lien or
security interest as Bank may reasonably request at any time, including, without
limitation. landlord waivers.
3.3 On the date of execution of this Agreement, Borrower shall pay to
Bank a non refundable closing fee in the amount of $ 10,000 (Bank hereby
acknowledging the prior receipt of $5,000 of such fee).
4. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants and such representations and
warranties shall be deemed to be continuing representations and warranties
during the entire life of this Agreement:
4.1 It is a corporation duly organized and existing in good standing
under the laws of the State of Florida; it is duly qualified and authorized to
do business as a foreign corporation in each jurisdiction where the character of
its assets or the nature of its activities makes such qualification necessary;
execution, delivery and performance of this Agreement, and any other documents
and instruments required under this Agreement, and the issuance of the Revolving
Credit Note by Borrower are within its corporate powers, have been duly
authorized, are not in contravention of law or the terms of Borrower's Articles
of Incorporation or Bylaws, and do not require the consent or approval of any
governmental body, agency or authority: and this Agreement and any other
documents and instruments required under this Agreement, when issued and
delivered under this Agreement, will be valid and binding in accordance with
their terms.
4.2 The execution, delivery and performance of this Agreement and any
other documents and instruments required under this Agreement, and the issuance
of the Revolving Credit Note by Borrower, are not in contravention of the
unwaived terms of any indenture, agreement or undertaking to which Borrower is a
party or by which it is bound.
4.3 No litigation or other proceeding before any court or
administrative agency is pending, or other knowledge of the officers of Borrower
threatened against Borrower, the outcome of which could materially impair
Borrower's or any of its financial condition or its ability to carry on its
business.
4.4 There are no security interests in, liens, mortgages, or other
encumbrances on any of Borrower's assets, except to Bank, or as permitted in
this Agreement.
4.5 There are no Subsidiaries of Borrower.
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4.6 There exists no default by Borrower under the provisions of any
instrument evidencing any permitted debt or of any agreement relating thereto.
4.7 Borrower does not maintain or contribute to any Pension Plans
subject to ERISA except the plans listed on Schedule 4.7 hereto ("Pension
Plans"). The "unfunded past service liability" of the Pension Plans, as of May 3
1, 1998, was as noted on Schedule 4.7, and there is no accumulated funding
deficiency within the meaning of ERISA. or any existing liability with respect
to the Pension Plan owed to the Pension Benefit Guaranty Corporation or any
Successor thereto.
4.8 The balance sheets and operating statements of Borrower dated
August 31, 1997, November 30, 1997 and May 3 1, 1998 previously furnished Bank-,
are complete and correct and fairly present the financial condition of Borrower
and the results of its operations; since said dates there has been no material
adverse change in the financial condition of Borrower; to the knowledge of
Borrower's officers, Borrower does not have any contingent obligations
(including any liability for taxes) not disclosed by or reserved against in said
balance sheets, and at the present time there are no material unrealized or
anticipated losses from any present commitment of Borrower.
4.9 All tax returns and tax reports of Borrower required by law to be
filed have been duly filed or extensions obtained, and all taxes, assessments
and other governmental charges or levies (other than those presently payable
without penalty and those currently being contested in good faith for which
adequate reserves have been established) upon Borrower (or any of its
properties) which are due and payable have been paid. The charges, accruals and
reserves on the books of Borrower in respect of the Federal income tax for all
periods are adequate in the opinion of Borrower.
4.10 Borrower is, in the conduct of its business, in compliance in all
material respects with all federal, state or local laws, statutes, ordinances
and regulations applicable to it. the enforcement of which, if they were not in
compliance, would adversely affect its business or the value of its property or
assets. Borrower has all approvals, authorizations, consents, licenses, orders
and other permits of all governmental agencies and authorities, whether federal,
state or local, required to permit the operation of their business as presently
conducted, except such approvals, authorizations, consents, licenses, orders and
other permits with respect to which the failure to have can be cured without
having an adverse effect on the operation of such business.
4.11 No representation or warranty by Borrower in this Agreement, nor
any statement or certificate (including financial statements) furnished or to be
furnished to Bank pursuant hereto contains or will contain any materially untrue
statement of any fact or omits or will omit to state a fact necessary to make
such representation, warranty, statement or certificate not misleading.
4.12 Borrower is not a party to any litigation or administrative
proceeding, nor so far as is known by Borrower is any litigation or
administrative proceeding threatened against Borrower, which in either case (A)
asserts or alleges that Borrower violated Environmental Laws (B) asserts or
alleges that Borrower is required to clean up, remove, or take remedial or other
response action due to the disposal, depositing, discharge, leaking or other
release of any hazardous substances or materials, (C) asserts or alleges that
Borrower is required to pay all or a portion of the cost of any past, present,
or future cleanup, removal or remedial or other response action which arises out
of or is related to the disposal, depositing, discharge, leaking or other
release of any hazardous substances or materials by Borrower.
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4.13 To the best knowledge of Borrower, there are no conditions
existing currently or likely to exist during the term of this Agreement which
would subject Borrower to damages, penalties, injunction relief or cleanup costs
under any applicable Environmental Laws or which require or are likely to
require cleanup, removal, remedial action or other response pursuant to
applicable Environmental Laws by Borrower.
4.14 Borrower is not subject to any judgment, decree, order or citation
related to or arising out of applicable Environmental Laws and to the best
knowledge of the Borrower, Borrower has not been named or listed as a
potentially responsible party by any governmental body or agency in a matter
arising under any applicable Environmental Laws.
4.15 To the best knowledge of Borrower, Borrower has all permits,
licenses and approvals required under applicable Environmental Laws.
4.16 Borrower is not an "investment company" within the meaning of the
Investment Borrower Act of 1940, as amended. Borrower is not engaged
principally, or as one of its important activities, directly or indirectly, in
the business of extending-, credit for the purpose of purchasing or carrying
margin stock, and none of the proceeds of any of the loans hereunder will be
used, directly or indirectly, for any Purpose which would violate the provisions
of Regulation U or X of the Board of Governors of the Federal Reserve System.
Terms for which meanings are provided in Regulation U of the Board of Governors
of the Federal Reserve System or any regulations substituted therefor, as from
time to time in effect, are used in this paragraph with such meanings.
4.17 Borrower has good and valid title to the property pledged,
mortgaged or otherwise encumbered or to be encumbered by it under the Security
Agreement.
5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that it will, so long as Bank may make
any advance under this Agreement and thereafter so long as any Indebtedness
remains outstanding under this Agreement:
5.1 Furnish Bank:
(a) within one hundred twenty (120) days after and as of the
end of each fiscal year of Borrower, a balance sheet and statement of profit and
loss and changes in cash flow prepared on an audited basis in accordance with
the requirements of the SEC by independent certified public accountants
satisfactory to Bank;
(b) within forty five (45) days after and as of the end of
each fiscal quarter, a balance sheet and statement of profit and loss and
changes in cash flow of Borrower Prepared in accordance with the requirements of
the SEC certified by an authorized officer of Borrower as being correct and
accurate to the best of his knowledge;
(c) so long as Borrower shall be required to file reports with
the SEC, promptly upon transmission thereof, copies of all such financial
statements, proxy statements, notices and reports as it shall send to its public
stockholders generally and copies of all registration statements (without
exhibits) and all reports which it files with the SEC;
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(d) within fifteen (15) days after and as of the end of each
month a borrowing base report in form satisfactory to Bank;
(e) on or before August I of each year, a copy of any foreign
credit insurance policy therein effect with respect to which Borrower is the
beneficiary;
(f) promptly upon receipt thereof, copies of all management
letters prepared with respect to Borrower by any independent certified public
accountants;
(g) such information as required by the terms and conditions
of any security agreements referred to in this Agreement;
(h) promptly, and in form to be satisfactory to Bank, Such
other information as Bank may reasonably request from time to time.
5.2 Pay and discharge all taxes and other governmental charges and all
contractual obligations calling for the payment of money, before any interest or
penalties shall accrue, unless and to the extent only that such payment is being
contested in good faith.
5.3 Maintain insurance coverage on its physical assets and against
other business risks in such amounts and of such types as are customarily
carried by companies similar in size and nature, and in the event of acquisition
of additional property, real or personal, or of incurrence of additional risks
of any nature, increase such insurance coverage in such manner and to such
extent as prudent business judgment and Present practice would dictate; and in
,he case of all policies covering property mortgaged or pledged to Bank or
property in which Bank shall have a security interest of any kind whatsoever,
other than those policies protecting against casualty liabilities to strangers,
all such insurance policies shall provide that the loss payable thereunder shall
be payable to Borrower and Bank as their respective interests may appear; copies
of all said policies, including all endorsements thereon and those required
hereunder, to be deposited with Bank.
5.4 Permit Bank, through its authorized attorneys, accountants, and
representatives, to examine Borrower's books, accounts, records, ledgers and
assets of every kind and description during regular business hours, including,
without limitation, collateral audits at Borrower's cost and expense. Prior to
the occurrence of an Event of Default under this Agreement, collateral audits
shall be conducted not more frequently than twice a year; provided, however,
following the occurrence of an Event of Default, the limitation on the frequency
of audits shall no longer apply.
5.5 Promptly notify Bank of any condition or event which constitutes or
with the running of time and/or the giving of notice would constitute a default
under this Agreement, and promptly inform Bank of any material adverse change in
Borrower's financial condition.
5.6 Maintain in good standing all licenses and certifications required
by the State of Florida, or any agency thereof, or the FAA or any other
governmental authority that may be necessary or required for Borrower to carry
on its general business objects and purposes.
5.7 Furnish Bank, upon Bank's request, in form satisfactory to Bank
with pledges, assignments, mortgages, lien instruments or other security
instruments covering any or all of Borrower's real or personal
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property, of every nature and description, whether now owned or hereafter
acquired, to the extent that Bank may in its sole and reasonable discretion
require. Borrower shall notify Bank of the acquisition of any aircraft engines
or aircraft in which a security interest must be perfected by filing with the
FAA within five days of the acquisition thereof and shall provide Bank a copy of
the applicable purchase agreement related thereto.
5.8 Comply with all requirements imposed by ERISA as presently in
effect or hereafter promulgated including, but not limited to, the minimum
funding requirements of the Pension Plans.
5.9 Promptly notify Bank after the occurrence thereof in writing of any
of the following events:
(a) the termination of Borrower's Pension Plan pursuant to
Subtitle C of Title IV of ERISA or otherwise;
(b) the appointment of a trustee by a United States District
Court to administer the Pension Plan;
(c) the commencement by the Pension Benefit Guaranty
Corporation, or any successor thereto of any proceeding to terminate the
Borrower's Pension Plan;
(d) the failure of the Borrower's Pension Plan to satisfy the
minimum funding requirements for any plan year as established in Section 412 of
the Internal Revenue Code of 1954, as amended;
(e) the withdrawal of the Borrower from a Pension Plan; or
(f) a reportable event, within the meaning of Title IV of
ERISA.
5.10 Maintain all cash collection and general disbursement accounts
with Bank or another financial institution which is acceptable to Bank.
5.11 Maintain as of the end of each fiscal quarter a Tangible Net Worth
of not less than $4,250,000.
5.12 Maintain as of the end of each fiscal year a ratio of Debt to
Tangible Net Worth of not more than 1.7 to 1.0.
5.13 Use its best efforts to maintain net income of not less than
$350,000 for fiscal year 1998 and not less than $425,000 for fiscal year 1999.
6. NEGATIVE COVENANTS
Borrower covenants and agrees that, so long as Bank may make any
advances under this Agreement and thereafter so long as any Indebtedness remains
outstanding, under this Agreement, it will not, without the prior written
consent of Bank:
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6.1 Purchase, acquire or redeem any of its capital stock or make any
material change in its capital structure, except purchases and redemptions of
stock so long as no Event of Default exists or would result therefrom.
6.2 Enter into any merger or consolidation or sell, lease, transfer, or
dispose of all, substantially all, or any part of its assets, except in the
ordinary course of its business.
6.3 Guarantee, endorse, or otherwise become secondarily liable for or
upon the obligations of others, except by endorsement for deposit in the
ordinary course of business and guaranties in favor of Bank.
6.4 Purchase or otherwise acquire or become obligated for the purchase
of all or substantially all of the assets or business interests of any person,
firm or corporation or any shares of stock of any corporation, trusteeship or
association or in any other manner effectuate or attempt to effectuate
expansion. of present business by acquisition.
6.5 Become or remain obligated for any indebtedness for borrowed money,
or for any indebtedness incurred in connection with the acquisition of any
property, real or personal, tangible or intangible, except:
(a) indebtedness to Bank;
(b) current unsecured trade payables and accrued liabilities
arising in the ordinary course of Borrower's business;
(c) purchase money indebtedness to acquire fixed assets in an
amount not exceeding$100,000 incurred during any single year.
6.6 Affirmatively pledge or mortgage any of its assets, whether now
owned or hereafter acquired, or create, suffer or permit to exist any lien,
security interest in, or encumbrance thereon, except:
(a) to Bank,
(b) the Permitted Liens;
(c) liens described in attached Schedule 6.6; and
(d) liens and security interests upon fixed assets acquired by
Borrower after the date of this Agreement (including by virtue of a Capital
Lease) provided that (i) any such lien or security interest is created solely
for the purpose of securing indebtedness representing, or incurred to finance,
the cost of the item of property subject thereto; (ii) the principal amount of
the indebtedness secured by such lien does not exceed 100% of the fair value of
the property at the time it was acquired, and (iii) the lien or security
interest does not cover any other property other than such item of property.
6.7 Sell, assign, transfer or confer a security interest in any
account, contract, trade acceptance or other receivable, except to Bank.
6.8 Materially alter the character of its businesses from that
conducted as of the date of this Agreement.
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6.9 Enter into any transaction or series of transactions with any
Affiliate other than on terms and conditions as favorable to Borrower as would
be obtainable in a comparable arms-length transaction with a Person other than
an Affiliate.
6.10 Make or allow to remain outstanding any investment (whether such
investment shall be or the character of investment in shares of stock,,evidence
of indebtedness or other securities or otherwise) in, or any loans or advances
or extensions of credit to, any person, firm, corporation or other entity or
association, except
(a) advances made for expenses or purchases in the ordinary
course of business; and
(b) loans or advances made to officers, directors. or
employees of Borrower, not to exceed in the aggregate One Hundred Thousand
Dollars ($ 100,000) at any one time outstanding.
6.11 Enter into or become subject to any agreement (other than this
Agreement) (i) prohibiting the creation or assumption of any lien or encumbrance
upon the properties or assets of Borrower or (ii) requiring an obligation to
become secured (or further secured) if another obligation is secured or further
secured.
6.12 Modify or amend the Employment Agreement dated October 31, 1996
between Borrower and Joseph Nelson if the effect of such amendment is to shorten
the term thereof or materially change the scope of Mr. Nelson's duties.
7. ENVIRONMENTAL PROVISIONS
7.1 Borrower shall comply in all material respects with all applicable
Environmental Laws.
7.2 Borrower shall provide to Bank, immediately upon receipt, copies of
any correspondence, notice, pleading, citation, indictment, complaint, order,
decree, or other document from any source asserting, or alleging a circumstance
or condition which requires or may require a financial contribution by Borrower
or a cleanup, removal, remedial action, or other response by or on the part of
Borrower or any Subsidiary tinder applicable Environmental Laws or which seeks
damages or civil, criminal or punitive penalties from Borrower or any Subsidiary
for an alleged violation of Environmental Laws.
7.3 Borrower shall promptly notify Bank in writing as soon as Borrower
becomes aware of any condition or circumstance which makes the environmental
warranties contained in this Agreement incomplete or inaccurate in any material
respect as of any date.
7.4 In the event of any condition or circumstance that makes any
environmental warranty, representation and/or agreement incomplete or inaccurate
in any material respect as of any date, Borrower shall, at the reasonable
request of Bank., at, Borrower's's sole expense, retain an environmental
professional consultant, reasonably acceptable to Bank, to conduct a thorough
and complete environmental audit regarding the changed condition and/or
circumstance and any environmental concerns arising from that changed condition
and/or circumstance. A copy of the environmental consultant's report will be
promptly delivered to Bank upon completion.
12
<PAGE>
7.5 At any time Borrower., directly or indirectly through any
professional consultant or other representative, deter-mines to under-take an
environmental audit, assessment or investigation, Borrower shall promptly
provide Bank with written notice of the initiation of the environmental audit,
fully describing the purpose and intended scope of the environmental audit. Upon
receipt, Borrower will promptly provide to Bank copies of all final findings and
conclusions of any such environmental investigation. Preliminary findings and
conclusions shall be provided if final reports have not been completed and
delivered to Bank within 60 days following completion of the preliminary
findings and conclusions.
7.6 Borrower hereby indemnifies, saves and holds Bank and any of its
past, present and future officers, directors, shareholders, employees,
representatives and consultants harmless from any and all loss, damages, suits,
penalties, costs, liabilities and expenses (including but not limited to
reasonable investigation, environmental audit(s), and legal expenses) arising
out of any claim, loss or damage of any property, injuries to or death of
persons, contamination of or adverse affects on the environment, or any
violation of any applicable Environmental Laws, caused by or in any way related
to property owned by Borrower or any Subsidiaries, or due to any acts of
Borrower, its officers, directors, shareholders, employees, consultants and/or
representatives; provided, however, that the foregoing indemnification shall not
be applicable when arising from events or conditions occurring while the Bank is
in sole possession (subject to the rights of any creditors of Borrower) of the
property. In no event shall Borrower be liable hereunder for any loss, damages,
suits, penalties, costs, liabilities or expenses arising from any act of gross
negligence or willful misconduct of Bank, or its agents or employees.
7.7 Borrower shall maintain all permits, licenses and approvals
required under applicable Environmental Laws.
8. EVENTS OF DEFAULT
8.1 Upon occurrence of any of the following Events of Default:
(a) non-payment of any installment of the principal or
interest on the Revolving Credit Note when due in accordance with the terms
thereof, or upon non-payment of any other outstanding Indebtedness when due in
accordance with the terms thereof;
(b) default in the observance or performance of any of the
conditions, covenants or agreements of Borrower set forth in Section 5 or
Section 6.
(c) default in the observance or performance Of any of the
other conditions, covenants or agreements of Borrower set forth in this
Agreement and continuance thereof for thirty (30) days after notice to Borrower
by Bank;
(d) any material representation or warranty made by Borrower
herein or by Borrower in any instrument submitted pursuant hereto proves untrue
in any material respect when made or deemed made:
(e) default in the observance or performance of any of the
conditions, covenants or agreements of Borrower set forth in any collateral
document of security which may be given to secure the indebtedness hereunder or
in any other document related to or connected with this Agreement or the
indebtedness hereunder;
13
<PAGE>
(f) default in the payment of any other obligation of Borrower
for borrowed money in an aggregate amount in excess of Ten Thousand Dollars
($10,000), or in the observance or performance of any conditions, covenants or
agreements related or given with respect to any obligations for borrowed money
in an aggregate amount in excess of Ten Thousand Dollars ($10,000) sufficient to
permit the holder thereof to accelerate the maturity of such obligation;
(g) judgments for the payment of money in excess of the sum of
Ten Thousand Dollars ($10,000) in the aggregate shall be rendered against
Borrower and such judgments shall remain unpaid, unvacated, unbonded or unstayed
by appeal or otherwise for a period of thirty (30) consecutive days from the
date of its entry and such judgment is not covered by insurance from a solvent
insurer who is defending such action without reservation of rights;
(h) the occurrence of any "reportable event", as defined in
the Employee Retirement Income Security Act of 1974 and any amendments thereto,
which is determined to constitute grounds for termination by the Pension Benefit
Guaranty Corporation of any employee pension benefit plan maintained by or on
behalf of Borrower or any Subsidiary for the benefit of any of its employees or
for the appointment by the appropriate United States District Court of a trustee
to administer such plan and is reasonably likely that the occurrence of such
event would result in a material adverse effect on Borrower, and such reportable
event is not corrected and Such determination is not revoked within thirty (30)
days after notice thereof has been given to the plan administrator or Borrower;
or the institution of proceedings by the Pension Benefit Guaranty Corporation to
terminate any such employee benefit pension plan or to appoint a trustee to
administer such plan, or the appointment of a trustee by the appropriate United
States District Court to administer any such employee benefit pension plan;
(i) if there shall be any change for any reason in the
management or control of Borrower which in. the sole judgment of Bank adversely
affects Borrower, including, without limitation, if Joseph Nelson no longer is
actively involved in the day to day management of Borrower;
(j) if there shall occur an event which has a Material Adverse
Effect or if the Bank shall deem itself to be insecure;
then, or at any time thereafter, unless such default is remedied, Bank may give
notice to Borrower declaring all outstanding indebtedness hereunder and tinder
the Revolving Credit Note to be due an payable, whereupon all indebtedness then
outstanding hereunder and under the Revolving Credit Note shall immediately
become due and payable without further notice and demand.
8.2 If a creditors' committee shall have been appointed for the
business of Borrower in connection with any bankruptcy or insolvency; or if
Borrower shall have made a general assignment for the benefit of creditors or
shall have been adjudicated bankrupt, or shall have filed a voluntary petition
in bankruptcy or for reorganization or to effect a plan or arrangement with
creditors; or shall file an answer to a creditor's petition or other petition
filed against it, admitting the material allegations thereof for an adjudication
in bankruptcy or for reorganization; or shall have applied for or permitted the
appointment of a receiver, or trustee or custodian for any of its property or
assets; or Such receiver, trustee or custodian shall have been appointed for any
of its property or assets (otherwise than upon application or consent of
Borrower), and such receiver, trustee or custodian so appointed shall not have
been discharged within sixty (60) days after the date of his appointment or if
an order shall be entered and shall not be dismissed or stayed within sixty (60)
days from its entry, approving any petition for reorganization of Borrower then
the
14
<PAGE>
Revolving Credit Note and all indebtedness then outstanding hereunder and under
any Letters of Credit shall automatically become immediately due and payable.
8.3 Upon the occurrence and during the continuance of an Event of
Default, unless all of the Indebtedness is then immediately fully paid, Bank
shall have and may exercise any one or more of the rights and remedies for which
provision is made for a secured party under the UCC, under the Security
Agreements or under any other document contemplated hereby or for which
provision is provided by law or in equity, including, without limitation, the
right to take possession and sell, lease or otherwise dispose of any or all of
the collateral and to set off against the Indebtedness any amount owing by Bank
to Borrower and/or any property of Borrower in possession of Bank. Borrower
agrees, upon request of Bank, to assemble the collateral and make it available
to Bank at any place designated by Bank which is reasonably convenient to Bank
and Borrower.
8.4 All of the Indebtedness shall constitute one loan secured by Bank's
security interest in the collateral and by all other security interests,
mortgages, liens. claims, and encumbrances now and from time to time hereafter
granted from Borrower to Bank. Upon the occurrence and during the continuance of
an Event of Default which is not cured, within the cure period, if any, provided
hereunder, Bank may in its sole discretion apply the collateral to any portion
of the Indebtedness. The proceeds of any sale or other disposition of the
Collateral authorized by this Agreement shall be applied by Bank, first upon all
expenses authorized by the Michigan Uniform Commercial Code (or other applicable
law) or otherwise in connection with the sale and all reasonable attorneys' fees
and legal expenses incurred by Bank; the balance of the proceeds of such sale or
other disposition shall be applied in the payment of the Indebtedness, first to
interest, then to principal, then to other Indebtedness and the surplus, if any,
shall be paid over to Borrower or to such other Person or Persons as may be
entitled thereto under applicable law. Borrower shall remain liable for any
deficiency, which Borrower shall pay to Bank immediately upon demand.
8.5 The remedies provided for herein are cumulative to the remedies for
collection of the Indebtedness as provided by law, in equity or by any mortgage,
security agreement or other document contemplated hereby. Nothing herein
contained is intended, nor shall it be construed, to preclude Bank from pursuing
any other remedy for the recovery of any other sum to which Bank may be or
become entitled for the breach of this Agreement by Borrower.
9. MISCELLANEOUS
9.1 This Agreement shall be binding upon and shall inure to the benefit
of Borrower and Bank and their respective successors and assigns, except that
the credit provided for under this Agreement and no part thereof and no
obligation of Bank- hereunder shall be assignable or otherwise transferable by
Borrower.
9.2 Borrower shall pay all closing costs and expenses, including, by
way of description and not limitation, reasonable Outside attorney fees and lien
search fees, incurred by Bank in connection with the commitment, consummation
and closing of this Agreement. All of said amounts required to be paid by
Borrower may, at Bank's option, be charged by Bank as an advance against the
proceeds of the Revolving Credit Note. All costs, including reasonable attorney
fees incurred by Bank in protecting or enforcing any of its or any of the Bank's
rights against Borrower or any collateral or in defending Bank from any claims
or liabilities by any party or otherwise incurred by Bank in connection with an
event of default or the enforcement of this Agreement or the related documents,
including by way of description and not limitation, such charges in any court or
bankruptcy proceedings or arising out of any claim or action by any person
15
<PAGE>
against Bank which would not have been asserted were it not for Bank's
relationship with Borrower hereunder, shall also be paid by Borrower.
9.3 Where the character or amount of any asset or liability or item of
income or expense is required to be determined or any consolidation or other
accounting computation is required to be made for the purposes of this
Agreement, it shall be done in accordance with GAAP.
9.4 No delay or failure of Bank in exercising any right, power or
privilege hereunder shall affect such right, power or privilege, nor shall any
single or partial exercise thereof preclude any further exercise thereof, or the
exercise of any other power, right or privilege. The rights of Bank under this
Agreement are cumulative and not exclusive of any right or remedies which Bank
would otherwise have.
9.5 All notices with respect to this Agreement shall be deemed to be
completed upon mailing by certified mail to the following:
To Borrower:
15675 NW 15th Avenue
Miami, Florida 33169
Attention: Joseph Janusz
To Bank:
100 NE Third Avenue, Suite 200
Fort Lauderdale, Florida 33301
Attention: Joseph Marchese
9.6 This Agreement and the Revolving Credit Note have been delivered at
Detroit, Michigan, and shall be governed by and construed and enforced in
accordance with the laws of the State of Michigan. Whenever possible each
provision of this Agreement shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
reduced to such maximum rate and all previous payments in excess of such maximum
rate shall be deemed to have been payments in reduction of principal and not of
interest.
9.7 THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY
16
<PAGE>
RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE
OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE
REVOLVING CREDIT NOTE.
9.8 In the event of any express inconsistency between the provisions of
this Agreement and the provisions of any of the other Loan Documents, the
provisions of this Agreement shall control.
9.9 Borrower submits, in any legal proceeding related to this Agreement
or the Revolving Credit Note, to the nonexclusive in personam jurisdiction of
any court of competent Jurisdiction sitting in the State of Florida and agrees
to a suit being brought in any such court; waives any objection that it may now
have or hereafter have to the venue of such proceeding in any such court or that
such proceeding was brought in an inconvenient court; agrees that service of
process and any such legal proceeding may be made, and shall be conclusively
deemed sufficient and adequate, by mailing of copies thereof (by registered or
certified mail, if practicable) postage prepaid to Borrower at its address set
forth herein or such other address of which the Bank- shall be notified in
writing, in which event, service shall be deemed complete upon the filing with
the court of a copy of the process mailed and an affidavit attesting the
mailing. Borrower agrees that nothing herein shall affect the Bank's right to
affect service or process in any other manner permitted by law.
9.10 This Agreement shall become effective upon the execution hereof by
Bank and Borrower.
17
<PAGE>
WITNESS the due execution hereof as of the day and year first above
written.
COMERICA BANK JET AVIATION TRADING, INC.
By:/s/ Joseph Marchese By:/s/ Joseph Nelson
-------------------- -----------------
Its: Vice President Its: President
By:/s/ Joseph Janusz
-----------------
Its: Chief Financial Officer
18
<PAGE>
Exhibit 10.9(b)
Master Revolving Note
Variable Rate-Demand - Optional Advances (Business and Commercial Loans Only)
________________________________________________________________________________
AMOUNT NOTE DATE MATURITY DATE TAX IDENTIFICATION
$3,500,000 August 12, 1998 On Demand NUMBER
________________________________________________________________________________
For Value Received, the undersigned promise(s) to pay ON DEMAND to the order of
Comerica Bank ("Bank"), at any office of the Bank in the State of Michigan,
Three Million Five Hundred Thousand Dollars (U.S.) (or that portion of it
advanced by the Bank and not repaid as later provided) with interest until
demand or until Default, as later defined, at a per annum rate equal to the
Bank's prime rate from time to time in effect plus 1% per annum and after that
at a rate equal to the rate of interest otherwise prevailing under this Note
plus 3% per annum (but in no event in excess of the maximum rate permitted by
law). The Bank's "prime rate" is that annual rate of interest so designated by
the Bank and which is changed by the Bank from time to time. Interest rate
changes will be effective for interest computation purposes as and when the
Bank's prime rate changes. Interest shall be calculated on the basis of a
360-day year for the actual number of days the principal is outstanding. Unless
sooner demanded, accrued interest on this Note shall be payable on the first day
of each month commencing September 1, 1998. If the frequency of interest
payments is not otherwise specified, accrued interest on this Note shall be
payable monthly on the first day of each month, unless sooner demanded. If any
payment of principal or interest under this Note shall be payable on a day other
than a day on which the Bank is open for business, this payment shall be
extended to the next succeeding business day and interest shall be payable at
the rate specified in this Note during this extension. A late payment charge
equal to 5% of each late payment may be charged on any payment not received by
the Bank within 10 calendar days after the payment due date, but acceptance of
payment of this charge shall not waive any Default under this Note.
The principal amount payable under this Note shall be the sum of all advances
made by the Bank to or at the request of the undersigned, less principal
payments actually received in cash by the Bank. The books and records of the
Bank shall be the best evidence of the principal amount and the unpaid interest
amount owing at any time under this Note and shall be conclusive absent manifest
error, No interest shall accrue under this Note until the date of the first
advance made by the Bank-, after that interest on all advances shall accrue and
be computed on the principal balance outstanding from time to time under this
Note until the same is paid in full. At no time shall the Bank be under any
obligation to make any advances to the undersigned pursuant to this Note
(notwithstanding anything expressed or implied in this Note or elsewhere to the
contrary, including without limit if the Bank supplies the undersigned with a
borrowing formula) and the Bank, at any time and from time to time, without
notice, and in its sole discretion, may refuse to make advances to the
undersigned without incurring any liability due to this refusal and without
affecting the undersigned's liability under this Note for any and all amounts
advanced.
This Note and any other indebtedness and liabilities of any kind of the
undersigned (or any of them) to the Bank, and any and all modifications,
renewals or extensions of it, whether joint or several, contingent or absolute,
now existing or later arising, and however evidenced (collectively
"Indebtedness") are secured by and the Bank is granted a security interest in
all items deposited in any account of any of the undersigned with the Bank and
by all proceeds of these items (cash or otherwise), all account balances of any
of the undersigned from time to time with the Bank, by all property of any of
the undersigned from time to time in the possession of the Bank and by any other
collateral, rights and properties described in each and every deed of trust,
mortgage, security agreement, pledge, assignment and other security or
collateral agreement which has been, or will at any time(s) later be, executed
by any (or all) of the undersigned to or for the benefit of the Bank
(collectively "Collateral").
If the undersigned (or any of them) or any guarantor under a guaranty of all or
part of the Indebtedness ("guarantor") (i) fail(s) to pay any of the
Indebtedness when due, by maturity, acceleration or otherwise, or fail(s) to pay
any Indebtedness owing on a demand basis upon demand; or (ii) fail(s) to comply
with any of the terms or provisions of any agreement between the undersigned (or
any of them) or any such guarantor and the Bank; or (iii) become(s) insolvent or
the subject of a voluntary or involuntary proceeding in bankruptcy, or a
reorganization, arrangement or creditor composition proceeding, (if a business
entity) cease(s) doing business as a going concern, (if a natural person) die(s)
or become(s) incompetent, (if a partnership) dissolve(s) or any general partner
of it dies, becomes incompetent or becomes the subject of a bankruptcy
proceeding or (if a corporation or a limited liability company) is the subject
of a dissolution, merger or consolidation-, or (a) if any warranty or
representation made by any of the undersigned or
1
<PAGE>
any guarantor in connection with this Note or any of the Indebtedness shall be
discovered to be untrue or incomplete; or (b) if there is any termination,
notice of termination, or breach of any guaranty, pledge, collateral assignment
or subordination agreement relating to all or any part of the indebtedness or
(c) if there is any failure by any of the undersigned or any guarantor to pay
when due any of its indebtedness (other than to the Bank) or in the observance
or performance of any term, covenant or condition in any document evidencing,
securing or relating to such indebtedness-, or (d) if the Bank deems itself
insecure believing that the prospect of payment of this Note or any of the
Indebtedness is impaired or shall fear deterioration, removal or waste of any of
the Collateral-, or (e) if there is filed or issued a levy or writ of attachment
or garnishment or other like judicial process upon the undersigned (or any of
them) or any guarantor or any of the Collateral, including without limit, any
accounts of the undersigned (or any of them) or any guarantor with the Bank,
then the Bank, upon the occurrence of any of these events (each a "Default"),
may at its option and without prior notice to the undersigned (or any of them),
declare any or all of the Indebtedness to be immediately due and payable
(notwithstanding any provisions contained in the evidence of it to the
contrary), sell or liquidate all or any portion of the Collateral, set off
against the Indebtedness any amounts owing by the Bank to the undersigned (or
any of them), charge interest at the default rate provided in the document
evidencing the relevant Indebtedness and exercise any one or more of the rights
and remedies granted to the Bank by any agreement with the undersigned (or any
of them) or given to it under applicable law.
The undersigned acknowledge(s) that this Note matures upon issuance, and that
the Bank, at any time, without notice, and without reason, may demand that this
Note be immediately paid in full. The demand nature of this Note shall not be
deemed modified by reference to a Default in this Note or in any agreement to a
default by the undersigned or to the occurrence of an event of default
(collectively an "Event of Default"). For purposes of this Note, to the extent
there is reference to an Event of Default this reference is for the purpose of
permitting the Bank to accelerate Indebtedness not on a demand basis and to
receive interest at the default rate provided in the document evidencing the
relevant Indebtedness. It is expressly agreed that the Bank may exercise its
demand rights under this Note whether or not an Event of Default has occurred.
The Bank, with or without reason and without notice, may from time to time make
demand for partial payments under this Note and these demands shall not preclude
the Bank from demanding at any time that this Note be immediately paid in full.
All payments under this Note shall be in immediately available United States
funds, without set off or counterclaim.
If this Note is signed by two or more parties (whether by all as makers or by
one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind the undersigned, and the
undersigned's respective heirs, personal representatives, successors and
assigns. The undersigned waive(s) presentment, demand, protest, notice of
dishonor, notice of demand or intent to demand, notice of acceleration or intent
to accelerate, and all other notices and agree(s) that no extension or
indulgence to the undersigned (or any of them) or release, substitution or
nonenforcement of any security, or release or substitution of any of the
undersigned, any guarantor or any other party, whether with or without notice,
shall affect the obligations of any of the undersigned. The undersigned waive(s)
all defenses or right to discharge available under Section 3-605 of the Michigan
Uniform Commercial Code and waive(s) all other suretyship defenses or right to
discharge, The undersigned agree(s) that the Bank has the right to sell, assign,
or grant participation or any interest in, any or all of the Indebtedness, and
that, in connection with this right, but without limiting its ability to make
other disclosures to the full extent allowable, the Bank may disclose all
documents and information which the Bank now or later has relating to the
undersigned or the Indebtedness. The undersigned agree(s) that the Bank may
provide information relating to this Note or relating to the undersigned to the
Bank's parent, affiliates, subsidiaries and service providers.
<PAGE>
The undersigned agree(s) to reimburse the holder or owner of this Note upon
demand for any and all costs and expenses (including without limit, court costs,
legal expenses and reasonable attorney fees, whether inside or outside counsel
is used, whether or not suit is instituted and, if suit is instituted, whether
at the trial court level, appellate level, in a bankruptcy, probate or
administrative proceeding or otherwise) incurred in collecting or attempting to
collect this Note or incurred in any other matter or proceeding relating to this
Note.
The undersigned acknowledge(s) and agree(s) that there are no contrary
agreements, oral or written, establishing a term of this Note and agree(s) that
the terms and conditions of this Note may not be amended, waived or modified
except in a writing signed by an officer of the Bank expressly stating that the
writing constitutes an amendment, waiver or modification of the terms of this
Note. As used in this Note, the word "undersigned" means, individually and
collectively, each maker, accommodation party, indorser and other party signing
this Note in a similar capacity- If any provision of this Note is unenforceable
in whole or part for any reason, the remaining provisions shall continue to be
effective. THIS NOTE IS MADE IN THE STATE OF MICHIGAN AND SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF MICHIGAN,
WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
THE MAXIMUM INTEREST RATE SHALL NOT EXCEED 25% PER ANNUM, OR THE HIGHEST
APPLICABLE USURY CEILING, WHICHEVER IS LESS.
2
<PAGE>
THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.
<TABLE>
<CAPTION>
<S> <C> <C>
Jet Aviation Trading, Inc. By: /s/ Joseph Nelson Its: President
- ------------------------------------ -------------------- --------------------
Obligor Name Typed/Printed Signature of Title (if applicable)
By: /s/ Joseph Janusz Its: Chief Financial Officer
--------------------- ---------------------
Signature of Title (if applicable)
By: _____________________ Its: _____________________
Signature of Title (if applicable)
By: _____________________ Its: _____________________
Signature of Title (if applicable)
15675 NW 15th Avenue Miami Florida 33169 ____________
-------------------- ----- ------- -----
Street Address City State Zip Code
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
For Bank Use Only CCAR#
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loan Officer Initials Loan Group name Obligor Name
- -----------------------------------------------------------------------------------------------------------------
Loan Officer ID No. Loan Group No. Obligor No. Note No. Amount
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
Exhibit 10.9(c)
Security Agreement
(All Assets)
________________________________________________________________________________
As of August 12 , 1998, for value received, the undersigned ("Borrower") grants
to Comerica Bank ("Bank"), a Michigan banking corporation, a continuing security
interest in the Collateral (as defined below) to secure payment when due,
whether by stated maturity, demand, acceleration or otherwise, of all existing
and future indebtedness ("Indebtedness") to the Bank of N/A ("Debtor") and/or
Borrower. Indebtedness includes without limit any and all obligations or
liabilities of the Debtor and/or Borrower to the Bank, whether absolute or
contingent, direct or indirect, voluntary or involuntary, liquidated or
unliquidated, joint or several, known or unknown; any and all obligations or
liabilities for which the Borrower and/or Debtor would otherwise be liable to
the Bank were it not for the invalidity or unenforceability of them by reason of
any bankruptcy, insolvency or other law, or for any other reason; any and all
amendments, modifications, renewals and/or extensions of any of the above; all
costs incurred by Bank in establishing, determining, continuing, or defending
the validity or priority of its security interest, or in pursuing its rights and
remedies under this Agreement or under any other agreement between Bank and
Borrower and/or Debtor or in connection with any proceeding involving Bank as a
result of any financial accommodation to Borrower and/or Debtor; and all other
costs of collecting Indebtedness, including without limit attorney fees.
Borrower agrees to pay Bank all such costs incurred by the Bank, immediately
upon demand, and until paid all costs shall bear interest at-the highest per
annum-rate applicable to any of the Indebtedness, but not in excess of the
maximum rate permitted by law. Any reference in this Agreement to attorney fees
shall be deemed a reference to reasonable fees, costs, and expenses of both
in-house and outside counsel and paralegals, whether or not a suit or action is
instituted, and to court costs if a suit or action is instituted, and whether
attorney fees or court costs are incurred at the trial court level, on appeal,
in a bankruptcy, administrative or probate proceeding or otherwise.
1. Collateral shall mean all of the following property Borrower now or
later owns or has an interest in, wherever located:
(a) all Accounts Receivable (for purposes of this Agreement,
"Accounts Receivable" consists of all accounts, general
intangibles, chattel paper, contract rights, deposit accounts,
documents and instruments),
(b) all Inventory,
(c) all Equipment and Fixtures,
(d) specific items listed below and/or on attached *Schedule A, if
any, is/are also included in Collateral:
(e) all goods, instruments, documents, policies and certificates
of insurance, deposits, money, investment property or other
property (except real property which is not a fixture) which
are now or later in possession or control of bank, or as to
which. Bank now or later controls possession by documents or
otherwise, and
(f) all additions, attachments, accessions, parts, replacements,
substitutions, renewals, interest, dividends, distributions,
rights of any kind (including but not limited to stock splits,
stock rights, voting and preferential rights), products, and
proceeds of or pertaining to the above including, without
limit~ cash or other property which were proceeds and are
recovered by a bankruptcy trustee or otherwise as a
preferential transfer by Borrower.
1
<PAGE>
2. Warranties, Covenants and Agreements. Borrower warrants, covenants and
agrees as follows:
2.1 Borrower shall furnish to Bank, in form and at intervals as
Bank may request, any information Bank may reasonably request
and allow Bank to examine', inspect, and copy any of
Borrower's books and records. Borrower shall, at the request
of Bank, mark its records and the Collateral to clearly
indicate the security interest of Bank under this Agreement.
2.2 At the time any Collateral becomes, or is represented to be,
subject to a security interest in favor of Bank, Borrower
shall be deemed to have warranted that (a) Borrower is the
lawful owner of the Collateral and has the right and authority
to subject it to a security interest granted to Bank; (b) none
of the Collateral is subject to any security interest other
than that in favor of Bank and there are no financing
statements on file, other than in favor of Bank; and (c)
Borrower acquired its rights in the Collateral in the ordinary
course of its business.
2.3 Borrower will keep the Collateral free at all times from all
claims, liens, security interests and encumbrances other than
those in favor of Bank. Borrower will not, without the prior
written consent of Bank, sell, transfer or lease, or permit to
be sold, transferred or leased, any or all of the Collateral,
except for Inventory in the ordinary course of its business
and will not return any Inventory to its supplier. Bank or its
representatives may at all reasonable times inspect the
Collateral and may enter upon all premises where the
Collateral is kept or might be located.
2.4 Borrower will do all acts and will execute or cause to be
executed all writings requested by Bank to establish, maintain
and continue a perfected and first security interest of Bank
in the Collateral. Borrower agrees that Bank has no obligation
to acquire or perfect any lien on or security interest in any
asset(s), whether realty or personalty, to secure payment of
the Indebtedness, and Borrower is not relying upon assets in
which the Bank may have a lien or security interest for
payment of the Indebtedness.
2.5 Borrower will pay within the time that they can be paid
without interest or penalty all taxes, assessments and similar
charges which at any time are or may become a lien, charge, or
encumbrance upon any Collateral, except to the extent
contested in good faith and bonded in a manner satisfactory to
Bank. If Borrower fails to pay any of these taxes,
assessments, or other charges in the time provided above, Bank
has the option (but not the obligation) to do so and Borrower
agrees to repay all amounts so expended by Bank immediately
upon demand, together with interest at the highest lawful
default rate which could be charged by Bank on any
Indebtedness.
2.6 Borrower will keep the Collateral in good condition and will
protect it from loss, damage, or deterioration from any cause.
Borrower has and will maintain at all times (a) with respect
to the Collateral, insurance under an "all risk" policy
against fire and other risks customarily insured against, and
(b) public liability insurance and other insurance as may be
required by law or reasonably required by Bank, all of which
insurance shall be in amount, form and content, and written by
companies as may be satisfactory to Bank, containing a
lender's loss payable endorsement acceptable to Bank. Borrower
will deliver to Bank immediately upon demand evidence
satisfactory to Bank that the required insurance has been
procured. If Borrower fails to maintain satisfactory
insurance, Bank has the option (but not the obligation) to do
so and Borrower agrees to repay all amounts so expended by
Bank immediately upon demand, together with interest at the
highest lawful default rate which could be charged by Bank on
any Indebtedness.
2.7 On each occasion on which Borrower evidences to Bank the
account balances on and the nature and extent of the Accounts
Receivable, Borrower shall be deemed to have warranted that
except as otherwise indicated (a) each of those Accounts
Receivable is valid and enforceable without performance by
Borrower of any act; M each of those account balances are in
fact owing, (there are
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<PAGE>
no setoffs, recoupments, credits, contra accounts,
counterclaims or defenses against any of those Accounts
Receivable, (d) as to any Accounts Receivable represented by a
note, trade acceptance, draft or other instrument or by any
chattel paper or document, the same have been endorsed and/or
delivered by Borrower to Bank, (e) Borrower has not received
with respect to any Account Receivable, any notice of the
death of the related account Borrower, nor of the dissolution,
liquidation, termination of existence, insolvency, business
failure, appointment of a receiver for, assignment for the
benefit of creditors by, or filing of a petition in bankruptcy
by or against, the account debtor, and (f) as to each Account
Receivable, the account debtor is not an affiliate of
Borrower, the United States of America or any department,
agency or instrumentality of it, or a citizen or resident of
any jurisdiction outside of the United States. Borrower will
do all acts and will execute all writings requested by Bank to
perform, enforce performance of, and collect all Accounts
Receivable. Borrower shall neither make nor permit any
modification, compromise or substitution for any Account
Receivable without the prior written consent of Bank. Borrower
shall, at Bank's request, arrange for verification of Accounts
Receivable directly with account debtors or by other methods
acceptable to Bank.
2.8 Borrower at all times shall be in strict compliance with all
applicable laws, including without limit any laws, ordinances,
directives, orders, statutes, or regulations an object of
which is to regulate or improve health, safety, or the
environment ("Environmental Laws").
2.9 If Bank, acting in its sole discretion, redelivers Collateral
to Borrower or Borrower's designee for the purpose of (a) the
ultimate sale or exchange thereof; or M presentation,
collection, renewal, or registration of transfer thereof; or
(c) loading, unloading, storing, shipping, transshipping,
manufacturing, processing or otherwise dealing with it
preliminary to sale or exchange; such redelivery shall be in
trust for the benefit of Bank and shall not constitute a
release of Bank's security interest in it or in the proceeds
or products of it unless Bank specifically so agrees in
writing. If Borrower requests any such redelivery, Borrower
will deliver with such request a duly executed financing
statement in form and substance satisfactory to Bank. Any
proceeds of Collateral coming into Borrower's possession as a
result of any such redelivery shall be held in trust for Bank
and immediately delivered to Bank for application on the
Indebtedness. Bank may (in its sole discretion) deliver any or
all of the Collateral to Borrower, and such delivery by Bank
shall discharge Bank from all liability or responsibility for
such Collateral. Bank, at its option, may require delivery of
any Collateral to Bank at any time with such endorsements or
assignments of the Collateral as Bank may request.
2.10 At any time and without notice, Bank may (a) cause any or all
of the Collateral to be transferred to its name or to the name
of its nominees; M receive or collect by legal proceedings or
otherwise all dividends, interest, principal payments and
other sums and all other distributions at any time payable or
receivable on account of the Collateral, and hold the same as
Collateral, or apply the same to the Indebtedness, the manner
and distribution of the application to be in the sole
discretion of Bank; (c) enter into any extension,
subordination, reorganization, deposit, merger or
consolidation agreement or any other agreement relating to or
affecting the Collateral, and deposit or surrender control of
the Collateral, and accept other property in exchange for the
Collateral and hold or apply the property or money so received
pursuant to this Agreement.
2.11 Bank may assign any of the Indebtedness and deliver any or all
of the Collateral to its assignee, who then shall have with
respect to Collateral so delivered all the rights and powers
of Bank under this Agreement, and after that Bank shall be
fully discharged from all liability and responsibility with
respect to Collateral so delivered.
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<PAGE>
2.12 Borrower delivers this Agreement based solely on Borrower's
independent investigation of (or decision not to investigate)
the financial condition of Debtor and is not relying on any
information furnished by Bank. Borrower assumes full
responsibility for obtaining any further information
concerning the Debtor's financial condition, the status of the
Indebtedness or any other matter which the undersigned may
deem necessary or appropriate now or later. Borrower waives
any duty on the part of Bank, and agrees that Borrower is not
relying upon nor expecting Bank to disclose to Borrower any
fact now or later known by Bank, whether relating to the
operations or condition of Borrower, the existence,
liabilities or financial condition of any guarantor of the
Indebtedness, the occurrence of any default with respect to
the Indebtedness, or otherwise, notwithstanding any effect
such fact may have upon Debtor's risk or Borrower's rights
against Debtor. Borrower knowingly accepts the full range of
risk encompassed in this Agreement, which risk includes
without limit the possibility that Debtor may incur
Indebtedness to Bank after the financial condition of Debtor,
or Debtor's ability to pay debts as they mature, has
deteriorated.
2.13 Borrower shall defend, indemnify and hold harmless Bank, its
employees, agents, shareholders, affiliates, officers, and
directors from and against any and all claims, damages, fines,
expenses, liabilities or causes of action of whatever kind,
including without limit consultant fees, legal expenses, and
attorney fees, suffered by any of them as a direct or indirect
result of any actual or asserted violation of any law,
including, without limit, Environmental Laws, or of any
remediation relating to any property required by any law,
including without limit Environmental Laws.
3. Collection of Proceeds.
3.1 Borrower agrees to collect and enforce payment of all
Collateral until Bank shall direct Borrower to the contrary.
Immediately upon notice to Borrower by Bank and at all times
after that, Borrower agrees to fully and promptly cooperate
and assist Bank in the collection and enforcement of all
Collateral and to hold in trust for Bank all payments received
in connection with Collateral and from the sale, lease or
other disposition of any Collateral, all rights by way of
suretyship or guaranty and all rights in the nature of a lien
or security interest which Borrower now or later has regarding
Collateral. Immediately upon and after such notice, Borrower
agrees to (a) endorse to Bank and immediately deliver to Bank
all payments received on Collateral or from the sale, lease or
other disposition of any Collateral or arising from any other
rights or interests of Borrower in the Collateral, in the form
received by Borrower without commingling with any other funds,
and (b) immediately deliver to Bank all property in Borrower's
possession or later coming into Borrower's possession through
enforcement of Borrower's rights or interests in the
Collateral. Borrower irrevocably authorizes Bank or any Bank
employee or agent to endorse the name of Borrower upon any
checks or other items which are received in payment for any
Collateral, and to do any and all things necessary in order to
reduce these items to money. Bank shall have no duty as to the
collection or protection of Collateral or the proceeds of it,
nor as to the preservation of any related rights: beyond the
use of reasonable care in the custody and preservation of
Collateral in the possession of Bank. Borrower agrees to take
all steps necessary to preserve rights against prior parties
with respect to the Collateral. Nothing in this Section 3.1
shall be deemed a consent by Bank to any sale, lease or other
disposition of any Collateral.
3.2 Borrower agrees that immediately upon Bank's request (whether
or not any Event of Default exists) the Indebtedness shall be
on a "remittance basis" as follows: Borrower shall at its sole
expense establish and maintain (and Bank, at Bank's option may
establish and maintain at Borrower's expense): (a) an United
States Post Office lock box (the "Lock Box"), to which Bank
shall have exclusive access and control. Borrower expressly
authorizes Bank, from time to time, to remove contents from
the Lock Box, for disposition in accordance with this
Agreement. Borrower agrees to notify all account debtors and
other parties obligated to Borrower that all payments made to
Borrower
4
<PAGE>
(other than payments by electronic funds transfer) shall be
remitted, for the credit of Borrower, to the Lock Box, and
Borrower shall include a like statement on all invoices; and
(b) a non-interest bearing deposit account with Bank which
shall be titled as designated by Bank (the "Cash Collateral
Account") to which Bank shall have exclusive access and
control. Borrower agrees to notify all account debtors and
other parties obligated to Borrower that all payments made to
Borrower by electronic funds transfer shall be remitted to the
Cash Collateral Account, and Borrower, at Bank's request,
shall include a like statement on all invoices. Borrower shall
execute all documents and authorizations as required by Bank
to establish and maintain the Lock Box and the Cash Collateral
Account.
3.3 All items or amounts which are remitted to the Lock Box, to
the Cash Collateral Account, or otherwise delivered by or for
the benefit of Borrower to Bank on account of partial or full
payment of, or with respect to, any Collateral shall, at
Bank's option, (i) be applied to the payment of the
Indebtedness, whether then due or not, in such order or at
such time of application as Bank may determine in its sole
discretion, or, (ii) be deposited to the Cash Collateral
Account. Borrower agrees that Bank shall not be liable for any
loss or damage which Borrower may suffer as a result of Bank's
processing of items or its exercise of any other rights or
remedies under this Agreement, including without limitation
indirect, special or consequential damages, loss of revenues
or profits, or any claim, demand or action by any third party
arising out of or in connection with the processing of items
or the exercise of any other rights or remedies under this
Agreement. Borrower agrees to indemnify and hold Bank harmless
from and against all such third party claims, demands or
actions, and all related expenses or liabilities, including,
without limitation, attorney fees.
4. Defaults, Enforcement and Application of Proceeds.
4.1 Upon the occurrence of any of the following events (each an
"Event of Default"), Borrower shall be in default under this
Agreement:
(a) Any failure to pay the Indebtedness or any other
indebtedness when due, or such portion of it as may
be due, by acceleration or otherwise; or
(b) Any failure or neglect to comply with, or breach of
or default under, any term of this Agreement, or any
other agreement or commitment between Borrower,
Debtor, or any guarantor of any of the Indebtedness
("Guarantor") and Bank; or
(c) Any warranty, representation, financial statement, or
other information made, given or furnished to Bank by
or on behalf of Borrower, Debtor, or any Guarantor
shall be, or shall prove to have been, false or
materially misleading when made, given, or furnished;
or
(d) Any loss, theft, substantial damage or destruction to
or of any Collateral, or the issuance or filing of
any attachment, levy, garnishment or the commencement
of any proceeding in connection with any Collateral
or of any other judicial process of, upon or in
respect of Borrower, Debtor, any Guarantor, or any
Collateral; or
(e) Sale or other disposition by Borrower, Debtor, or any
Guarantor of any substantial portion of its assets or
property or voluntary suspension of the transaction
of business by Borrower, Debtor, or any Guarantor, or
death, dissolution, termination of existence, merger,
consolidation, insolvency, business failure, or
assignment for the benefit of creditors of or by
Borrower, Debtor, or any Guarantor; or commencement
of any proceedings under any state or federal
bankruptcy or insolvency laws or laws for the relief
of debtors by or against Borrower, Debtor, or any
Guarantor; or the appointment of a receiver, trustee,
court
5
<PAGE>
appointee, sequestrator or otherwise, for all or any
part of the property of Borrower, Debtor, or any
Guarantor; or M Bank deems the margin of Collateral
insufficient or itself insecure, in good faith
believing that the prospect of payment of the
Indebtedness or performance of this Agreement is
impaired or shall fear deterioration, removal, or
waste of Collateral.
4.2 Upon the occurrence of any Event of Default, Bank may at its
discretion and without prior notice to Borrower declare any or
all of the Indebtedness to be immediately due and payable, and
shall have and may exercise any one or more of the following
rights and remedies:
(a) Exercise all the rights and remedies upon default, in
foreclosure and otherwise, available to secured
parties under the provisions of the Uniform
Commercial Code and other applicable law;
(b) Institute legal proceedings to foreclose upon the
lien and security interest granted by this Agreement,
to recover judgment for all amounts then due and
owing as Indebtedness, and to collect the same out of
any Collateral or the proceeds of any sale of it;
(c) Institute legal proceedings for the sale, under the
judgment or decree of any court of competent
jurisdiction, of any or all Collateral; and/or
(d) Personally or by agents, attorneys, or appointment of
a receiver, enter upon any premises where Collateral
may then be located, and take possession of all or
any of it and/or render it unusable; and without
being responsible for loss or damage to such
Collateral, hold, operate, sell, lease, or dispose of
all or any Collateral at one or more public or
private sales, leasings or other disposition, at
places and times and on terms and conditions as Bank
may deem fit, without any previous demand or
advertisement; and except as provided in this
Agreement, all notice of sale, lease or other
disposition, and advertisement, and other notice or
demand, any right or equity of redemption, and any
obligation of a prospective purchaser or lessee to
inquire as to the power and authority of Bank to
sell, lease, or otherwise dispose of the Collateral
or as to the application by Bank of the proceeds of
sale or otherwise, which would otherwise be required
by, or available to Borrower under, applicable law
are expressly waived by Borrower to the fullest
extent permitted.
At any sale pursuant to this Section 4.2, whether
under the power of sale, by virtue of judicial
proceedings or otherwise, it shall not be necessary
for Bank or a public officer under order of a court
to have present physical or constructive possession
of Collateral to be sold. The recitals contained in
any conveyances and receipts made and given by Bank
or the public officer to any purchaser at any sale
made pursuant to this Agreement shall, to the extent
permitted by applicable law, conclusively establish
the truth and accuracy of the matters stated
(including, without limit, as to the amounts of the
principal of and interest on the Indebtedness, the
accrual and nonpayment of it and advertisement and
conduct of the sale); and all prerequisites to the
sale shall be presumed to have been satisfied and
performed. Upon any sale of any Collateral, the
receipt of the officer making the sale under judicial
proceedings or of Bank shall be sufficient discharge
to the purchaser for the purchase money, and the
purchaser shall not be obligated to see to the
application of the money. Any sale of any Collateral
under this Agreement shall be a perpetual bar against
Borrower with respect to that Collateral.
6
<PAGE>
4.3 Borrower shall at the request of Bank, notify the account
debtors or obligors of Bank's security interest in the
Collateral and direct payment of it to Bank. Bank may, itself,
upon the occurrence of any Event of Default so notify and
direct any account debtor or obligor.
4.4 The proceeds of any sale or other disposition of Collateral
authorized by this Agreement shall be applied by Bank first
upon all expenses authorized by the Uniform Commercial Code
__________ reasonable attorney fees and legal expenses
incurred by Bank; the balance of the proceeds of the sale or
other disposition shall be applied in the payment of the
Indebtedness, first to interest, then to principal, then to
remaining Indebtedness and the surplus, if any, shall be paid
over to Borrower or to such other person(s) as may be entitled
to it under applicable law. Borrower shall remain liable for
any deficiency, which it shall pay to Bank immediately upon
demand.
4.5 Nothing in this Agreement is intended, nor shall it be
construed, to preclude Bank from pursuing any other remedy
provided by law for the collection of the Indebtedness or for
the recovery of any other sum to which Bank may be entitled
for the breach of this Agreement by Borrower. Nothing in this
Agreement shall reduce or release in any way any rights or
security interests of Bank contained in any existing agreement
between Borrower, Debtor, or any Guarantor and Bank.
4.6 No waiver of default or consent to any act by Borrower shall
be effective unless in writing and signed by an authorized
officer of Bank. No waiver of any default or forbearance on
the part of Bank in enforcing any of its rights under this
Agreement shall operate as a waiver of any other default or of
the same default on a future occasion or of any rights.
4.7 Borrower irrevocably appoints Bank or any agent of Bank (which
appointment is coupled with an interest) the true and lawful
attorney of Borrower (with full power of substitution) in the
name, place and stead of, and at the expense of, Borrower:
(a) to demand, receive, sue for, and give receipts or
acquittances for any moneys due or to become due on
any Collateral and to endorse any item representing
any payment on or proceeds of the Collateral;
(b) to execute and file in the name of and on behalf of
Borrower all financing statements or other filings
deemed necessary or desirable by Bank to evidence,
perfect, or continue the security interests granted
in this Agreement; and
(c) to do and perform any act on behalf of Borrower
permitted or required under this Agreement.
4.8 Upon the occurrence of an Event of Default, Borrower also
agrees, upon request of Bank, to assemble the Collateral and
make it available to Bank at any place designated by Bank
which is reasonably convenient to Bank and Borrower.
5. Miscellaneous.
5.1 Until Bank is advised in writing by Borrower to the contrary,
all notices, requests and demands required under this
Agreement or by law shall be given to, or made upon, Borrower
at the first address indicated in Section 5.15 below.
5.2 Borrower will give Bank not less than 90 days prior written
notice of all contemplated changes in Borrower's name, chief
executive office location, and/or location of any Collateral,
but the giving of this notice shall not cure any Event of
Default caused by this change.
7
<PAGE>
5.3 Bank assumes no duty of performance or other responsibility
under any contracts contained within the Collateral.
5.4 Bank has the right to sell, assign, transfer, negotiate or
grant participations or any interest in, any or all of the
Indebtedness and any related obligations, including without
limit this Agreement. In connection with the above, but
without limiting its ability to make other disclosures to the
full extent allowable, Bank may disclose all documents and
information - which Bank now or later has relating to
Borrower, the Indebtedness or this Agreement, however
obtained. Borrower further agrees that Bank may provide
information relating to this Agreement or relating to Borrower
to the Bank's parent, affiliates, subsidiaries, and service
providers.
5.5 In addition to Bank's other rights, any indebtedness owing
from Bank to Borrower can be set off and applied by Bank on
any Indebtedness at any time(s) either before or after
maturity or demand without notice to anyone.
5.6 Borrower waives any right to require the Bank to: (a) proceed
against any person or property; (b) give notice of the terms,
time and place of any public or private sale of personal
property security held from Debtor or any other person, or
otherwise comply with the provisions of Section 9-504 of the
Uniform Commercial Code; or (c) pursue any other remedy in the
Bank's power. Borrower waives notice of acceptance of this
Agreement and presentment, demand, protest, notice of protest,
dishonor, notice of dishonor, notice of default, notice of
intent to accelerate or demand payment of any Indebtedness,
any and all other notices to which the undersigned might
otherwise be entitled, and diligence in collecting any
Indebtedness, and agree(s) that the Bank may, once or any
number of times, modify the terms of any Indebtedness,
compromise, extend, increase, accelerate, renew or forbear to
enforce payment of any or all Indebtedness, or permit Debtor
to incur additional indebtedness, all without obligation to,
Borrower and without affecting in any manner the unconditional
obligation of Borrower under this Agreement. Borrower
unconditionally and irrevocably waives each and every defense
and setoff of any nature which, under principles of guaranty
or otherwise, would operate to impair or diminish in any way
the obligation of Borrower under this Agreement, and
acknowledges that such waiver is by this reference
incorporated into each security agreement, collateral
assignment, pledge and/or other document from Borrower now or
later securing the Indebtedness, and acknowledges that as of
the date of this Agreement no such defense or setoff exists.
5.7 Borrower waives any and all rights (whether by subrogation,
indemnity, reimbursement, or otherwise) to recover from Debtor
any amounts paid or the value of any Collateral given by
Borrower pursuant to this Agreement.
5.8 In the event that applicable law shall obligate Bank to give
prior notice to Borrower of any action to be taken under this
Agreement, Borrower agrees that a written notice given to
Borrower at least five days before the date of the act shall
be reasonable notice of the act and, specifically, reasonable
notification of the time and place of any public sale or of
the time after which any private sale, lease, or other
disposition is to be made, unless a shorter notice period is
reasonable under the circumstances. A notice shall be deemed
to be given under this Agreement when delivered to Borrower or
when placed in an envelope addressed to Borrower and
deposited, with postage prepaid, in a post office or official
depository under the exclusive care and custody of the United
States Postal Service or delivered to an overnight courier.
The mailing shall be by overnight courier, certified, or first
class mail.
5.9 Notwithstanding any prior revocation, termination, surrender,
or discharge of this Agreement in whole or in part, the
effectiveness of this Agreement shall automatically continue
or be reinstated in
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<PAGE>
the event that any payment received or credit given by Bank in
respect of the Indebtedness is returned, disgorged, or
rescinded under any applicable law, including, without
limitation, bankruptcy or insolvency laws, in which case this
Agreement, shall be enforceable against Borrower as if the
returned, disgorged, or rescinded payment or credit had not
been received or given by Bank, and whether or not Bank relied
upon this payment or credit or changed its position as a
consequence of it. In the event of continuation or
reinstatement of this Agreement, Borrower agrees upon demand
by Bank to execute and deliver to Bank those documents which
Bank determines are appropriate to further evidence (in the
public records or otherwise) this continuation or
reinstatement, although the failure of Borrower to do so shall
not affect in any way the reinstatement or continuation.
5.10 This Agreement and all the rights and remedies of Bank under
this Agreement shall inure to the benefit of Bank's successors
and assigns and to any other holder who derives from Bank
title to or an interest in the Indebtedness or any portion of
it, and shall bind Borrower and the heirs, legal
representatives, successors, and assigns of Borrower. Nothing
in this Section 5.10 is deemed a consent by Bank to any
assignment by Borrower.
5.11 If there is more than one Borrower, all undertakings,
warranties and covenants made by Borrower and all rights,
powers and authorities given to or conferred upon Bank are
made or given jointly and severally.
5.12 Except as otherwise provided in this Agreement, all terms in
this Agreement have the meanings assigned to them in Article 9
(or, absent definition in Article 9, in any other Article) of
the Uniform Commercial Code. "Uniform Commercial Code" means
Act No. 174 of the Michigan Public Acts of 1962, as amended.
5.13 No single or partial exercise, or delay in the exercise, of
any right or power under this Agreement, shall preclude other
or further exercise of the rights and powers under this
Agreement. The unenforceability of any provision of this
Agreement shall not affect the enforceability of the remainder
of this Agreement. This Agreement constitutes the entire
agreement of Borrower and Bank with respect to the subject
matter of this Agreement. No amendment or modification of this
Agreement shall be effective unless the same shall be in
writing and signed by Borrower and an authorized officer of
Bank. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Michigan,
without regard to conflict of laws principles.
5.14 To the extent that any of the Indebtedness is payable upon
demand, nothing contained in this Agreement shall modify the
terms and conditions of that Indebtedness nor shall anything
contained in this Agreement prevent Bank from making demand,
without notice and with or without reason, for immediate
payment of any or all of that Indebtedness at any time(s),
whether or not an Event of Default has occurred.
5.15 Borrower's chief executive office is located and shall be
maintained at 5675 NW 15th Avenue
STREET ADDRESS
Miami Florida 33169 Dade
----- ------- ----- ------
City State Zip Code County
If Collateral is located at other than the chief executive office, such
Collateral is located and shall be maintained at:
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See attached list of Collateral Locations
-----------------------------------------
Street Address ________________________________________________________
_______________________________________________________________________
City State Zip Code County
Collateral shall be maintained only at the locations identified in this
Section 5.15.
5.16 A carbon, photographic or other reproduction of this Agreement
shall be sufficient as a financing statement under the Uniform
Commercial Code and may be filed by Bank in, any filing
office.
5.17 This Agreement shall be terminated only by the filing of a
termination statement in accordance with the applicable
provisions of the Uniform Commercial Code, but the obligations
contained in Section 2.13 of this Agreement shall survive
termination.
6. BORROWER AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH
PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND
VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE
PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT OR THE INDEBTEDNESS.
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Special Provisions Applicable to this Agreement. (*None, if left blank)
Borrower:
Jet Aviation Trading, Inc.
----------------------------
Borrower Name Typed/Printed
By:/s/ Joseph Nelson
-------------------------
Signature of
By:/s/ Joseph Janusz
-------------------------
Its: Chief Financial Officer
-----------------------
Title
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<PAGE>
Exhibit 10.9(d)
ADVANCE FORMULA AGREEMENT
================================================================================
As of August 12, 1998, this Agreement is made between Jet Aviation Trading,
Inc., a Florida corporation ("Borrower") and COMERICA BANK ("Bank"). For and in
consideration of the loans and other credit which Borrower may now or hereafter
obtain or request from Bank which are secured pursuant to certain Security
Agreements dated August 12, 1998, ("Security Agreement"), and for other good and
valuable consideration, Borrower agrees as follows:
1. FORMULA LOANS. The credit which Bank may now or hereafter extend to
Borrower subject to the limitations of this Agreement and to the
conditions and limitations of any other agreement between Borrower and
Bank is identified as follows:
$3,500,000 secured, demand line of credit
and any extensions, renewals or substitutions, whether in a greater or
lesser amount, including any letters of credit issued thereunder
("Formula Loans").
2. ADVANCE FORMULA. Borrower warrants and agrees that Borrower's
indebtedness to Bank for the Formula Loans shall never exceed the sum
of:
2.1 Eighty Five percent (85%) of its Eligible Accounts, as defined
below; and
2.2 Thirty Five percent (35%) of its Eligible Inventory, as defined
below.
3. FORMULA COMPLIANCE. If the limitations in paragraph 2, above, are
exceeded at any time, Borrower shall immediately pay Bank sums
sufficient to reduce the Formula Loans by the amount of such excess.
4. ELIGIBLE ACCOUNT. "Eligible Account" shall mean an Account (as defined
in the Michigan Uniform Commercial Code, as amended "UCC"), but shall
not include interest and service charges) arising in the ordinary
course of Borrower's business which meets each of the following
requirements:
4.1 it is not owing more than ninety (90) days after the date of
the original invoice or other writing evidencing such Account;
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4.2 it arises from the sale or lease of goods and such goods have
been shipped or delivered to the Account Debtor under such
Account; or it arises from services rendered and such services
have been performed;
4.3 it is evidenced by an invoice, dated not later than the date
of shipment or performance, rendered to such Account Debtor or
some other evidence of billing acceptable to Bank;
4.4 it is not evidenced by any note, trade acceptance, draft or
other negotiable instrument or by any chattel paper, unless
such note or other document or instrument previously has been
endorsed and delivered by Borrower to Bank;
4.5 it is a valid, legally enforceable obligation of the Account
Debtor thereunder, and is not subject to any offset,
counterclaim or other defense on the part of such Account
Debtor or to any claim on the part of such Account Debtor
denying liability thereunder in whole or in part;
4.6 it is not subject to any sale of accounts, any rights of
offset, assignment, lien or security interest whatsoever other
than to Bank;
4.7 it is not owing by a subsidiary or affiliate of Borrower, nor
by an Account Debtor which (i) does not maintain its chief
executive office in the United States of America, (ii) is not
organized under the laws of the United States of America, or
any state thereof, or (iii) is the government of any foreign
country or sovereign state, or of any state, province,
municipality or other instrumentality thereof (the Account
Debtors described in subclauses (i), (ii) and (iii) being
referred to as "Foreign Account Debtors"); provided, however,
an Account with respect to which the Account Debtor is a
Foreign Account Debtor shall be eligible if the Account is an
insured Account under a foreign credit insurance policy which
is acceptable to Bank in the exercise of its sole discretion;
4.8 it is not an account owing by the United States of America or
any state or political subdivision thereof, or by any
department, agency, public body corporate or other
instrumentality of any of the foregoing, unless all necessary
steps are taken to comply with the Federal Assignment of
Claims Act of 1940, as amended, or with any comparable state
law, if applicable, and all other necessary steps are taken to
perfect Bank's security interest in such account;
4.9 it is not owing by an Account Debtor for which Borrower has
received a notice of (i) the death of the Account Debtor or
any partner of the Account Debtor, (ii) the dissolution,
liquidation, termination of existence, insolvency or business
failure of the Account Debtor, (iii) the appointment of a
receiver for any part of the property of the Account Debtor,
or (iv) an assignment for the benefit of creditors, the filing
2
<PAGE>
of a petition in bankruptcy, or the commencement of any
proceeding under any bankruptcy or insolvency laws by or
against the Account Debtor;
4.10 it is not an account billed in advance, payable on delivery,
for consigned goods, for guaranteed sales, for unbilled sales,
for progress billings, payable at a future date in accordance
with its terms, subject to a retainage or holdback by the
Account Debtor or insured by a surety company; and
4.11 it is not owing by any Account Debtor whose obligations Bank,
acting in its sole discretion, shall have notified Borrower
are not deemed to constitute Eligible Accounts.
An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account.
5. ELIGIBLE INVENTORY. "Eligible Inventory" shall be valued at the lesser
of cost or present market value in accordance with generally accepted
accounting principles, consistently applied, and shall mean all of
Borrower's Inventory (as defined in the UCC) which is in good and
merchantable condition, is not obsolete or discontinued, and which
consists of parts, engines and supplies, excluding (a) Borrower's
repairable parts which have not yet been repaired, salvage and scrap
inventory, consigned goods, inventory located outside the United States
of America, (b) inventory covered by or subject to a seller's right to
repurchase, or any consensual or nonconsensual lien or security
interest (including without limitation purchase money security
interests) other than in favor of Bank, whether senior or junior to
Bank's security interest, (c) inventory in which Bank does not have a
first priority perfected security interest, and (d) inventory that
Bank, acting in its sole discretion, after having notified Borrower,
excludes. Inventory which is at any time Eligible Inventory, but which
subsequently fails to meet any of the foregoing requirements, shall
forthwith cease to be Eligible Inventory.
6. CERTIFICATES, SCHEDULES AND REPORTS. Borrower will within fifteen (15)
days after and as of the end of each month (and at such other times as
Bank may request), deliver to Bank agings of the Accounts and a
schedule identifying each Eligible Account (not previously so
identified) and reports as to the amount of Eligible Inventory.
Borrower will from time to time deliver to Bank such additional
schedules, certificates and reports respecting all or any of the
Collateral (as defined in the Security Agreement), the items or amounts
received by Borrower in fall or partial payment of any of the
Collateral, and any goods (the sale or lease of which by Borrower shall
have given rise to any of the Collateral) possession of which has been
obtained by Borrower, all and as to such extent as Bank may request.
Any such schedule, certificate or report shall be executed by a duly
authorized officer of Borrower and shall be in such form and detail as
Bank may specify. Any such schedule identifying any Eligible Account
shall be accompanied (if Bank so requests) by a
3
<PAGE>
true and correct copy of the invoice evidencing such Eligible Account
and by evidence of shipment or performance.
7. INSPECTIONS; COMPLIANCE. Borrower shall permit Bank and its designees
from time to time to make such inspections and audits, and to obtain
such confirmations or other information, with respect to any of the
Collateral or any Account Debtor as Bank is entitled to make or obtain
under the Security Agreement, and shall reimburse Bank on demand for
all costs and expenses incurred by Bank in connection with such
inspections and audits. Borrower shall further comply with all of the
other terms and conditions of the Security Agreement.
8. DEFAULT. Any failure by Borrower to comply with this Agreement shall
constitute a default under the Formula Loans and under the Security
Agreement and the Indebtedness, as defined therein.
9. AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
terminated only in writing duly executed by Borrower and Bank. No delay
by Bank in requiring Borrower's compliance herewith shall constitute a
waiver of such right. The rights granted to Bank hereunder are
cumulative, and in addition to any other rights Bank may have by
agreement or under applicable law. This Agreement shall supersede and
replace in their entirety any prior advance formula agreements in
effect between Bank and Borrower. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Michigan, without regard to conflict of laws principles.
10. DEMAND BASIS FORMULA LOANS. Notwithstanding anything to the contrary
set forth in this Agreement, in the event that the Formula Loans are at
any time on a demand basis, Borrower hereby acknowledges and agrees
that the formula set forth in paragraph 2 hereof is merely for advisory
and guidance purposes and Bank shall not be obligated to make any loans
or advances under the Formula Loans, and, notwithstanding the terms of
paragraph 3 above, Bank may at any time, at its option, demand payment
of any or all of the Formula Loans, whereupon the same shall become due
and payable-
11. JURY WAIVER. BORROWER AND BANK ACKNOWLEDGE THAT THE RIGHT
TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE
OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT
WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION
REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY
RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
4
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.
Borrower's Chief Executive Office Address: BORROWER:
JET AVIATION TRADING, INC.
15675 NW 15th Avenue
Miami, Florida 33169
By: /s/ Joseph Nelson
----------------------
Its: President
By: /s/ Joseph Janusz
----------------------
Its: Chief Financial Officer
Accepted and Approved:
COMERICA BANK
By: /s/ Joseph Marchese
-------------------
Its: Vice President
5
<PAGE>
Exhibit 10.15
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of February 12,
1998, by and among JET AVIATION TRADING, INC., a Florida corporation ("Jet" or
the "Purchaser"), 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 ("Financial") and Aero-Link Flight Systems Limited, a Hong Kong
corporation ("Aero"), (PASCO Florida, PASCO HK, Financial an Aero are sometimes
hereinafter referred to collectively as the "Companies" or singly as the
"Company"), and Sheng Kuang Chiang, a/k/a Simon Chiang and Bing Ju Chiang, a/k/a
Ann Chiang (collectively or individually, the "Seller").
WHEREAS, the Companies are engaged in various aspects of the aviation
parts and repair business, including, but not limited to, PASCO Florida's
participation in a joint venture know as Shenyang northern Aircraft Maintenance
and Engineering Co., Ltd. (the "Joint Venture") (the "Business").
WHEREAS, the Seller owns the issued and outstanding shares of capital
stock of the Company as set forth on Schedule A (the "Stock"),
WHEREAS, Jet desires to purchase and acquire from the Seller, and the
Seller desires to sell, transfer and deliver to Jet the Stock upon the terms and
subject to the conditions set forth herein;
WHEREAS, upon the closing of the transaction contemplated by this
Agreement, the Companies shall be and become subsidiaries of Jet; and
WHEREAS, the parties intend the transaction to qualify as a
"reorganization" within the meaning of Section 368(a)(1)(B) of the Internal
Revenue Code, as amended, and all parties have agreed to use their best efforts
to accomplish this result.
NOW THEREFORE, for an in consideration of the mutual benefits to be
derived hereby and the premises, representations, warranties, covenants and
agreements herein contained, Jet, the Companies and the Seller hereby agree,
intending to be legally bound, as follows:
ARTICLE 1.
1.1. Purchase and Sale of Capital Stock. Subject to the terms and
conditions of this Agreement, Seller agrees to sell, transfer and deliver to the
Purchaser, and the Purchaser agrees to purchase, acquire and accept delivery
from Seller of the Stock, owned or held by Seller.
<PAGE>
ARTICLE 2.
2.1. Purchase Price. Upon the sale, transfer and delivery to the
Purchaser by the Seller of the Stock at the Closing (as much term is defined in
Section 8.1 hereof), and in consideration therefor, Jet shall deliver to the
Seller certificates evidencing 150,000 shares of Common Stock, par value $.001
per share, of Jet (the "Jet Stock").
2.2. Jet Stock. The Purchaser shall issue the Jet Stock to the seller
as set forth in Schedule 2.2 subject to the conditions and restrictions set
forth in the Section 2.2.
(a) Restrictions on Transfer.
(i) The Seller shall not transfer any shares of the
Jet Stock at any time that such transfer would constitute a violation of any
federal or state securities (or "blue sky")laws, rules or regulations
(collectively, "Securities Laws") or a breach of the conditions to any exemption
from registration of the Jet Stock under any such Securities Laws, or a breach
of any undertaking or agreement of the Seller entered into with jet pursuant to
such Securities Laws or in connection with obtaining an exemption thereunder,
and Jet shall not transfer upon its books any shares of Jet Stock unless prior
thereto Jet shall have received an opinion of counsel to the Seller, in form and
substance satisfactory to Jet, of counsel, reasonably satisfactory to Jet, that
such transfer is in compliance with the Securities Laws.
(ii) For purposes of this Agreement (and the
restrictions set forth in this Section 2.2), the term "Jet Stock" shall mean and
include (i) the shares of Jet Stock issued, granted, conveyed and delivered to
the Seller pursuant to Section 2.1 hereof (the "Primary Shares"), and (ii) any
and all other additional shares of capital stock of Jet issued or delivered by
Jet with respect to the shares of Jet Stock described in clause (i) hereof,
including without limitation any shares of capital stock of Jet issued or
delivered with respect to such shares as a result of any stock split, stock
dividend, stock distribution, recapitalization or similar transaction (the
"Additional Shares").
(iii) Representations. The Seller understands that,
in connection with the issuance of the Jet Stock, Jet is relying upon the
representation and warranties being made by the Seller to Jet in Section 3.23
hereof.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SELLER
The Seller and the Companies jointly and severally, make the following
representations and warranties to the Purchaser, each of which shall be deemed
material and the Purchaser, in executing, delivering and consummating this
Agreement, has relied and will rely upon the correctness and
<PAGE>
3.1. Organization Qualification, etc.
(a) The Companies are corporations duly organized, validly
existing and in good standing under the laws of the state of Florida and Hong
Kong with full corporate power and authority to carry on their business as it is
now being conducted, and to own, operate and lease their properties and assets.
(b) The Companies are duly qualified or licensed to do
business and are in good standing in the jurisdictions set forth on Schedule 3.1
attached hereto, those being every jurisdiction in which conduct of each
Company's business, the ownership or lease of each of their properties, or the
transactions contemplated by this Agreement, require each to be so qualified,
registered or licensed and the failure to be so qualified or licensed would have
a Material Adverse Effect (as defined in Section 10.3).
(c) True, complete and correct copies of each of the Company's
articles of incorporation and by-laws, as presently in effect, are attached
hereto as Exhibit 3.1.
3.2. Subsidiaries. Other than Aero-Link Flight Systems, Inc. (a Florida
corporation), a subsidiary of Aero, and the Joint Venture, the Companies have no
Subsidiaries (as defined in Section 10.3) nor any investment or other interest
in any Person (as defined in Section 10.3).
3.3. Capital Stock. As of the date hereof, the authorized capital stock
of each Company is as set forth in Schedule 3.3. All of the issued and
outstanding common stock of each Company is as set forth in Schedule 3.3.
3.4. Corporate Record Books. The corporate minute books of each Company
have been made available to the Purchaser, are complete and correct and contain
all of the proceedings of the shareholders and directs of each Company.
3.5. Title to Stock. All of the shares of Stock are, and immediately
prior to the transfer to Purchaser at the Closing will be, owned by the Seller,
and duly authorized, validly issued and fully paid, nonassessable, and are free
of all Liens (as defined in Section 10.3). Upon delivery of the purchase price
to the seller at the Closing, Seller will convey, and the Purchaser will own and
hold, good and marketable title to the Stock free and clear of all Liens or
contractual restrictions or limitations whatsoever.
3.6. Option and Rights. There are no outstanding subscriptions,
options, warrants, rights, securities, contracts, commitments, understandings or
arrangements under which any Company bound or obligated to issue any additional
shares of its capital stock or rights to purchase shares of its capital stock.
There are no agreements, arrangements or understandings between the Seller
and/or any Company and any other Person (as defined in Section 10.3) regarding
the shares of capital stock of any Company (or the transfer, disposition,
holding or voting thereof). The Seller does not have, or hereby waives, any
preemptive or other right to acquire shares of capital stock of any Company that
the Seller has or may have had on the date hereof.
3.7. Authorization, Etc. Each Company has full power and authority and
the Seller has
<PAGE>
full capacity to enter into this Agreement and the agreements and documents
contemplated hereby and perform its or their respective obligations hereunder
the thereunder. The execution, delivery and performance of this Agreement and
all other agreements and transactions contemplated hereby have been duly
authorized by the Board of Directors and shareholders of each Company and no
other have been duly authorized by the Board of Directors and shareholders of
each Company and no other corporate proceedings on their part are necessary to
authorize this Agreement and the transactions contemplated hereby. The Seller is
entering into this Agreement on the Seller's own volition, free from any undue
influence or coercion. Upon execution and delivery of this Agreement by the
parties hereto this Agreement and all other agreements contemplated hereby shall
constitute the legal, valid and binding obligation of each Company and the
Seller, enforceable against each such party in accordance with their respective
terms.
3.8. No Volition. The execution and delivery by each Company and the
Seller of this Agreement, and any and all other agreements contemplated hereby,
and the fulfillment of and compliance with the respective terms hereof and
thereof by each Company and the Seller do not and will not, except as set forth
on Schedule 3.8 attached hereto, (a) conflict with or result in a breach of the
terms, conditions or provisions of, (b) constitute a default or event of default
under (with due notice, lapse of time or both), (c) result in the creation of
any Lien upon the capital stock or assets of any Company pursuant to, (d) give
any third party the right to accelerate any obligation under, (e) result in a
violation of, or (f) require any authorization, consent, approval, exemption or
other action by or notice to any court or Authority (as defined in Section 10.3)
pursuant to, the articles of incorporation or by-laws of each Company or any
Regulation (as defined in Section 10.3), Order (as defined in Section 10.3) or
Contract (as defined in Section 10.3)to which each Company or the Seller is
subject. each Company and the Seller will comply with all applicable Regulations
and Orders in connection with the execution, delivery and performance of this
agreement and the transactions contemplated hereby.
3.9. Financial Statements. Attached as Schedule 3.9 hereto are the
following financial statement of each Company for the year ended December 31,
1997 and for the period ended February 11, 1998. The Financial Statements are
true and correct as to the respective dates thereof.
3.10. Accrued Liabilities Accounts Receivable. Schedule 3.10(a) set
forth complete list of each of the Company's accounts payable and accrued
liabilities as of February 11, 1998. The accounts receivable of each Company as
of February 11, 1998 are reflected on Schedule 3.10(d) attached hereto.
3.11. Employees; Independent Contractors. Each Company has delivered to
Jet an accurate list (which is set forth on Schedule 3.11) showing all officers,
directors and key employees of each Company, listing all employment agreements
with such officers, directors and key employees and the rate of compensation
(and the portions thereof attributable to salary, bonus and other compensation,
respectively) of each such person (i) as of February 11, 1998 (the "Employment
Date"). The Company has provided to Jet true, complete and correct copies of any
employment agreements for persons listed on Schedule 3.11. Since the Employment
Date, there have been no
<PAGE>
increases in the compensation payable or any special bonuses to any officer,
director, key employees or other employee, except ordinary salary increases
implemented on a basis consistent with past practices, except as set forth on
Schedule 3.11. Except as set forth on Schedule 3.11, the Seller is not related
by blood or marriage to, or otherwise affiliated with, any person listed in
Schedule 3.11.
3.12. Absence of Certain Changes. Except as otherwise disclosed on
Schedule 3.12, since December 31, 1997, there has not been (a) any Material
Adverse change (as defined in Section 13.3) in the business, financial
condition, revenues, expenses, accounts receivable, accounts payable ro not,
having a Material Adverse Effect, with regard to each Company's properties and
business; (c) any payment by any Company to, any Company's insurance carrier, if
any, in connection with any amounts or liabilities under health insurance
covering employees of any Company; (d) any declaration, setting aside or payment
of any dividend or distribution (whether in cash, stock or property) in respect
of any Company's capital stock, or any redemption or other acquisition of such
capital stock by any Company; (e) any increase in the rate of compensation or in
the benefits payable or to become payable by any Company to its directors,
officers, employees or consultants; (f) any amendment, modification or
termination of any existing, or entering into any new, Contract or plan relating
to any salary, bonus, insurance, pension, health or other employee Company; (g)
any entry into any material Contract not in the ordinary course of business,
including without limitation relating to any borrowing ro capital expenditure;
(h) any disposition by any Company of any material asset.
3.13. Contracts.
(a) Each Company has listed on Schedule 3.13(a) all written or
oral contracts, commitments and similar agreements over $1,000 to which each
Company is a party or by which it or any of its properties are bound (including,
but not limited to, contracts with significant suppliers, customers, joint
venture or partnership agreements, contract s with any labor organizations and
strategic alliances), in existence as of February 12, 1998, including Contracts,
with Affiliates and had delivered true, complete and correct copies of such
agreements to Jet.
(b) Except as set forth on Schedule 3.8, no consent of any
party to any Contract is required in connection with the execution, delivery or
performance of this Agreement, or the consummation of the transactions
contemplated hereby.
(c) Each Company has performed in all material respects all
obligations required to be performed by it and is not in default in any respect
under or in breach or nor in receipt of any claim of default or breach under any
Contract listed on Schedule 3.13(a); no event has occurred which the passage of
time or the giving of notice or both would result in a default, breach or event
of non-compliance under any material Contract to which each Company is subject
(including without limitation all performance bonds, warranty obligations or
otherwise); each Company does not have any present expectation or intention of
not fully performing all such obligations; each Company does not have any
knowledge of any breach or anticipated breach by the other parties to any such
Contract to which is a party.
<PAGE>
3.14. True and Complete Copies. Copies of all Contracts and documents
delivered and to be delivered hereunder by the Seller or each Company are and
will be true and complete copies of such agreements, contracts and documents.
3.15. Title and Relating Mattes.
(a) Each Company has good and marketable title to all of the
properties and assets reflected in the balance sheet included in the Financial
Statements or acquired after the date thereof and for properties sold or
otherwise disposed of since the date thereof in the ordinary course of business,
free and clear of all Liens, except (i) statutory Liens not yet delinquent, (ii)
such imperfections or irregularities of title, Liens, easements, charges or
encumbrances as do not detract from or interfere with the present use of the
properties or assets subject thereto or affected thereby, or otherwise impair
present business operations at such properties; or do not detract from the value
of such properties and assets, taken as a whole, or (iii) as reflected in the
balance sheet included in the Financial Statements.
(b) There has not been since December 31, 1997, any sale,
lease, or any other disposition or distribution by the Company of any of its
assets or properties and any other assets now or hereafter owned by it, except
transactions in the ordinary course of business or otherwise consented by the
Purchaser. After the Closing, each Company, as a subsidiary of the Purchaser,
will own, or have the unrestricted right to use, all properties and assets that
are currently used in the connection with the business of the Company, except
for accounts receivable existing as of the Closing Date and set forth on
Schedule 3.15(b).
(c) Schedule 3.15(c) attached hereto sets forth a description
of all real and personal property owned or leased by each Company.
3.16. Litigation. Except as set forth on Schedule 3.16, there is not
Claim (as defined in Section 13.3) pending or, to the best knowledge of the
Seller and each Company, threatened against the Seller or any Company which, if
adversely determined, would have a Material Adverse Effect on any Company. Nor
is there any Order outstanding against the Seller or any Company having, or
which, insofar as can reasonably be foreseen, in the future may have, a Material
adverse Effect on any Company.
3.17. Tax Matters.
(a) Each Company has filed all federal, state and local tax
reports, returns, information returns and other documents (collectively, the"Tax
Returns") required to be filed with any federal, state, local, foreign or other
taxing authorities (each a "Taxing Authority", collectively, the "Taxing
Authorities") in respect of all relevant taxes, including without limitation
income, premium, gross receipts, net proceeds, alternative or add-on minimum, ad
valorem, value added, turnover, sales, use, property, personal property
(tangible and intangible), stamp, leasing, lease, user, excise, duty, franchise,
transfer, license, withholding, payroll, employment, fuel, excess profits,
occupational and interest equalization, windfall profits, severance, and other
charges (including
<PAGE>
interest and penalties) (collectively, the "Taxes") and in accordance with all
tax sharing agreements to which the Seller or the Company may be a party. Al
Taxes required or anticipated to be paid for all periods prior to and including
the Closing Date have been or will be paid, including any of each Company's
Taxes that may be due or claimed to be due as a result of the consummation of
the transactions contemplated by this Agreement. All Taxes which are required to
be withheld or collected by each Company have been duly withheld or collected
and, to the extent required, have been paid to the proper Taxing Authority or
properly segregated or deposited as required by applicable laws. There are no
Liens for Taxes upon any property or assets of the Company except for liens for
Taxes not yet due and payable. Neither the Seller nor any Company has executed a
waiver of the statute of limitations on the right of the Internal Revenue
Service or any other Taxing Authority to assess additional Taxes or to contest
the income or loss with respect to any Tax Return. The basis of any depreciable
assets, and the methods used in determining allowable depreciation (including
cost recovery), is correct and in compliance with the Code.
(b) No audit of any Company or any Company's Tax Returns by
any Taxing Authority is currently pending or threatened, and no issue have been
raised by any Taxing Authority Taxing Authority in connection with any Tax
Returns. No material issues have been raised in any examination by any Taxing
Authority with respect to any Company which reasonably could be expected to
result in a proposed deficiency for any other period no so examined, and there
are no unresolved issues or operation s of each Company on the Tax Returns filed
by or on behalf of each Company for all taxable years (including the supporting
schedules filed therein), available copies of which have been suppled to the
Purchase, state accurately the information requested with respect to the Company
and such information was derived from the books, and records of the Company.
(c) The Seller shall cause each Company to file all Tax
Returns and reports with respect to Taxes which are required to be filed for Tax
periods ending on or before the Closing Date (a "Pre-Closing Tax Return"), and
the Seller shall pay all Taxes due in respect of such Pre-closing Tax Returns to
the appropriate Taxing Authority; and the Seller shall pay all costs associated
with the preparation thereof.
(d) PASCO Florida has had in effect at all times since its
formations through the date hereof (an d will have through the Closing Date) a
valid election to be taxed under Subchapter S of the Code. Set forth as Exhibit
3.17 attached hereto are genuine copies of Subchapter S elections filed by PASCO
Florida.
3.18. Compliance with Law and Applicable Government and other
Regulations. Each Company is presently complying in respect of its operations,
equipment, practices, real property, plants laboratories, structures, and other
property, and all other aspects of its business and operations, with all
applicable Regulations and Orders, all Regulations relating to the safe conduct
of business, environmental protection, quality and labeling, antitrust, taxes,
consumer protection, equal opportunity, discrimination, health, sanitation,
fire, zoning, building and occupations safety where such failure or failures
would individually or in the aggregate have a Material Adverse Effect. There are
no Claims pending, nor to the best knowledge of Seller are there any Claims
threatened, nor has
<PAGE>
the Seller received any written notice, regarding any violations or any
Regulations and Orders enforced by any Authority claiming jurisdiction over
Company, including any requirement of OSHA or any pollution and environmental
control agency (including air and water)
(a) Schedule 3.18(a) attached hereto set forth all permits,
licenses, provider number, orders, franchises, registrations and approvals
(collectively, "Permits") from all Federal, state, local and foreign
governmental regulatory bodies held by each Company. The Permits listed on
Schedule 3.18(a) are the only Permits that are required for each Company to
conduct its business as presently conducted, except for those the absence of
which would not have any Material Adverse Effect on the company. each such
Permit is in full force and effect and, to the best of the knowledge of Seller,
no suspension or cancellation of any such Permit is threatened and there is no
basis of believing that such Permit will not be renewable upon expiration.
3.19. Intellectual Property.
(a) Except as set forth on Schedule 3.19, each Company has no
trade name, service mark, patent, copyright or trademark related to its
business. PASCO HK has previously assigned all right, title and interest to
three trademarks. Copies of said assignments have been delivered to Purchaser.
(b) Each Company has the right to use Proprietary Right listed
in Schedule 3.19, and except as otherwise set forth therein, each of such
Proprietary Rights is, and will be on the Closing Date, free and clear of all
realty obligations and Liens. There are no Claims pending, or to the best
knowledge of the Seller, threatened, against any Company or the Seller that each
Company's use of any of the Proprietary Rights listed on Schedule 3.19 infringes
the rights of any Person. The seller has no knowledge of any conflicting use of
any such Proprietary Rights.
(c) The Company is not a party in any capacity to any
franchise, license or realty agreement respecting any Proprietary Right and the
is not conflict with the rights of others in respect to any Proprietary right
now used in the conduct of its business.
3.20. Banding Arrangement. Schedule 3.20 attached hereto sets forth the
name of each bank in or with which each Company has an account, credit line or
safety deposit box, and a brief description of each such account, credit line or
safety deposit box, including the names of all Persons currently authorized to
draw thereon or having access thereto. Except as set forth on Schedule 3.20, no
Company has any liability or obligation relating to funds or money borrowed or
loaned to any Company (whether under any credit facility, line of credit, loan,
indenture, advance, pledge or otherwise).
3.21. Insurance. Schedule 3.21 attached hereto sets forth a list of
brief description, including dollar amounts of coverage, of all policies of
property, fire, liability, business interruption, workers' compensation and
other forms of insurance held by each Company as of the date hereof, as well as
the schedule of Claims filed with each Company's current insurance carrier,
including a
<PAGE>
history of such Claims and a description and estimated dollar amount of any
unresolved Claims. Such policies are valid, outstanding and enforceable
policies, as to which premiums have been paid currently. Neither any Company nor
the Seller know of any state of facts, or of the occurrence of any event which
might reasonably (a) form the basis for any claim against the Company not fully
covered by insurance for liability on the account of any express or implied
warranty or tortious omission or commission, or (b) result in material increase
in insurance premiums of the Company.
3.22. Consent. Schedule 3.22 attached hereto, sets forth a complete
list of consents of governmental and other regularity agencies or authorities,
foreign or domestic, required to be received by or the party of each Company and
the Seller to enable each Company or the Seller to enter into and carry out this
Agreement in all material respects. All such requisite consents have been, or
prior to the Closing will have been, obtained.
3.23. Investment Representations. In connection with this Agreement or
any agreement or transaction contemplated hereby, the Seller hereby represents
and warrants to Jet as follows:
(a) The Seller has been offered, and up to the Closing date
and the time(s) of issuance of the Jet Stock shall be offered, the opportunity
to ask questions of, and receive answers from, Jet, and the Seller has been
given full and complete access to all available information and data relating to
the business and assets of Jet which the Seller has deemed necessary in order to
evaluate the opportunities both financial and otherwise, with respect to Jet
and, except as set forth herein, have not relied on any representation, warranty
and other statement concerning the Jet in their evaluation of the decision to
consummate the transactions contemplated herein.
(b) The Seller understands that she must bear the economic
risk of the Jet Stock for an indefinite period of time because, except as
provided in this Agreement, (i) the Seller understand that Jet proposes to issue
and deliver the shares of Jet Stock issuable in accordance with this Agreement,
without compliance with the registration requirements of the Securities Act of
1933, as emended (the "Securities Act") or the securities laws of the state of
Florida, that for such purpose Jet will rely upon the representations,
warranties, covenants, agreements and certifications reasonably requested by Jet
to be delivered by the Seller at such time(s) of issuance of reissuance of the
Jet Stock; and that such noncompliance with registration is not permissible
unless such representations and warranties are correct and such covenants and
agreements are performed at and as of the time of issuance; (ii) the seller
understands that, under existing rules of the Securities and exchange Commission
(the "SEC"), there are substantial restrictions in the transferability of the
shares of Jet Stock; the shares of Jet Stock may be transferred only if
registered under the Securities Act or if an exemption from such registration is
availably; Seller may not be able to utilize the provisions of Rule 144
promulgated by the SEC under the Securities Act with respect to the transfer of
such shares; (iii) the Jet stock may not be sold, transferred, pledged, or
otherwise disposed of (absent a registration statement covering such shares),
without the consent of Jet and an opinion of counsel for or satisfactory to Jet
that registration under the Securities Act or any applicable state securities
law is not required; and (iv) Jet neither has an obligation to register a sale
of the Jet Stock held by Seller nor has it agreed to do so in the future.
<PAGE>
(c) The Seller is an "accredited investor", as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act; the
Seller, as of the dat of this Agreement, either (a) (either individually or
jointly with the Seller's spouse) has a net worth in excess of $1,000,000; or
(b) had an individual income in excess of $200,000 in each of the two most
recent years or joint income with the Seller's spouse in excess of $300,000 in
each of those years, and reasonably expects reaching the same income level in
the current year.
(d) The Seller has relied upon advisors who are familiar with
the type of risk inherent in the acquisition of securities such as the shares of
Jet Stock and the Seller's financial position is such that the Seller can afford
to retain the shares of Jet Stock for an indefinite period of time.
(e) The Seller received this agreement and first learned of
the transactions contemplated hereby in Florida. The Company and the Seller
executed and will execute all documents contemplated hereby in Florida, and
intends that the laws of Florida govern this transaction. The Seller is a
resident of Florida.
(f) The Seller is acquiring their shares of Jet Stock for
their own account and not with a view to, or for sale in connection with, the
distribution thereof with the meaning of the Securities Act. The Seller has no
present plan, intention, commitment, binding agreement or arrangement to dispose
of any share or Jet Stock.
(g) The seller understands that the certificates evidencing
the share of Jet Stock with bear appropriate restrictive legends.
3.24. Brokerage. Neither any Company nor Seller has employed any
broker, finder, advisor, consultant or other intermediary in connection with
this Agreement or the transactions contemplated by this Agreement who is or
might be entitled to any fee, commission or other compensation any Company or
the Seller, or from the Purchaser or its Affiliates, upon or as a result of the
execution or this Agreement or the consummation of the transaction contemplated
hereby.
3.25. Improper and Other Payment. Except as set forth on Schedule 3.25
hereto, (a) neither any Company, any director, officer, employee thereof, nor,
to the Seller's knowledge, any agent or representative of any Company nor any
Person acting on behalf of any of them, has made, paid or received any unlawful
bribes, kickbacks or other similar payments to or from any Person or Authority,
(b) no contributions have been made, directly or indirectly, to a domestic or
foreign political party or candidate, and (c) no imposer foreign payment (as
defined in the Foreign Corrupt Practices Act) has been made.
3.26. Financial Condition at Closing. At and as of Closing, each
Company shall have no liabilities, either contingent, accrued or absolute, which
arose prior to the Closing, all such liabilities to be conveyed to Seller at
Closing.
<PAGE>
3.27. Disclosure. Neither this Agreement nor any of the exhibits,
attachment, written statements, documents, certificates or other items prepared
for or supplied to the Purchaser by or on behalf of the Seller or any Company
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact necessary to make each statement contained herein
or therein misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller as follows:
4.1. Corporate Organization, etc.. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets. The Purchaser is duly qualified or licensed to do
business is in good standing in every jurisdiction in which the conduct of its
business, the ownership or lease of its properties, or the transactions
contemplated by this Agreement, require ti to be so qualified or licensed and
the failure to be so qualified or licensed would have a Material Adverse Effect
on its business.
4.2. Authorization. Etc. The Purchaser has full corporate power and
authority to enter into this Agreement and all other agreements contemplated
hereby to which Purchaser is a party, and to carry out the transactions
contemplated hereby and thereby. The Board of Directors of the Purchaser has
duly authorized the execution, delivery and performance of this Agreement and
the other agreements and transactions contemplated hereby, and not other
corporate proceedings on its part are necessary to authorize this agreement and
the transactions contemplated hereby. Upon execution and delivery of this
Agreement by the parties hereto this Agreement shall constitute the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with its terms.
4.3. No Violation. The execution, delivery and performance by the
Purchaser of this Agreement, and all other agreements contemplated hereby, and
the fulfillment of an compliance with the respective terms hereof and thereof by
the Purchaser, do not and will not (a) conflict with or result in a material
breach of the terms, conditions or provisions of, (b) result in a violation of,
or (c) require any authorization, consent, approval, exemption or other action
by or notice to any Authority pursuant to, the certificate of incorporation or
by-laws of the Purchaser, or any Regulation to which the Purchaser is subject,
or any material Contract. The Purchaser will comply with all applicable
Regulations and Orders in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
4.4. Governmental Authority. The Purchaser has complied in all material
respects with
<PAGE>
all applicable Regulations in connection with the execution, delivery and
performance of this Agreement and the agreements and transactions contemplated
hereby. The Purchaser is not required to submit any notice, report, or other
filing with any governmental authority in connection with the execution or
delivery of this Agreement or the consummation of the transactions contemplated
hereby. No authorization, consent, approval, exemption or notice is required to
be obtained by the Purchaser in connection with the execution, delivery, and
performance of this Agreement and the agreements and transactions contemplated
hereby.
4.5. Issuance of Jet Stock. The shares of Jet Stock that are required
to be issued by Jet to the Seller, in accordance with the terms and subject to
the conditions set forth in this Agreement, shall, upon issuance and delivery,
be duly authorized, validly issued, fully paid and non-assessable.
4.6. Capitalization. As of the date hereof, the authorized capital
stock of the Purchaser consists of 30,000,000 shares of common stock, par value
$.001 per share, and 3,000,000 shares of preferred stock, par value $.10 per
share, of which 2,996,500 shares of common stock are outstanding and no shares
of preferred stock are outstanding.
4.7. Financing Statements. The financial statements dated as of August
31, 1997 contained in Purchaser's Registration Statement on Form SB-2 and the
financial statements for the quarter ended November 30, 1997 (previously
delivered to Seller) fairly presented, in accordance with GAAP, the Purchaser's
financial position and its results of operations as of and for the year ended
August 31, 1997 and the three month period ended November 30, 1997 and the
Purchaser has not experienced a Material Adverse Change in its financial
condition since such date.
4.8. Disclosure. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Companies or the Seller by or on behalf of the Purchaser
with respect to the transactions contemplated hereby (including the Registration
Statement on Form SB-2) contains any untrue statement of a material fact or
omits a material fact necessary to make each statement contained herein or
therein not misleading (as of the respective dates thereof, with respect to the
Registration Statement on Form SB-2).
4.9. Litigation. There is no material litigation pending or, to
Purchaser's knowledge, threatened against the Purchaser as of the date hereof.
4.10. No Brokers. The Purchaser has not employed any broker, finder,
advisor, consultant or other intermediary in connection with this Agreement or
the transactions contemplated by this Agreement who is or might be entitled to
any fee, commission or other compensation from the Purchaser or from any Company
or the Seller, upon or as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
<PAGE>
ARTICLE 5.
OTHER AGREEMENTS
The parties hereto further agree as follows:
5.1. Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
made effective the transactions contemplated by this Agreement. If at any time
after the Closing Date the Purchaser shall consider or be advised that any
further deeds, assignments or assurances in law or in any other things are
necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, in the Purchaser (or the Company, as appropriate), the title to any
property or rights of Seller acquired or to be acquired by reason of, or as a
result of, the acquisition, the Seller agrees that the Seller shall execute and
deliver all such proper deeds, assignments and assurances in law and do all
things necessary, desirable or proper to vest, perfect or confirm title to such
property or rights in the Company and otherwise to carry out the purpose of this
Agreement.
5.2. Agreement to Defend. In the event any action, suit, proceeding or
investigation of the nature specified is commenced, after the Closing Date, all
the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto.
5.3. Public Announcements. Neither the Seller nor any Company nor any
Affiliate, representative, employee or shareholder of either of such Persons,
shall disclose any of the terms of this Agreement to any third party (other than
the Purchaser's advisors and the Seller's advisors) without the other party's
prior written consent unless required by any applicable law. The form, content
and timing of any and all press releases, public announcements or publicity
statements with respect to this Agreement or the transactions contemplated
hereby shall be subject to the prior approval of the Purchaser. No press
releases, public announcements or publicity statements shall be released by
either party without such prior mutual agreement.
5.4. Deliveries After Closing. From time to time after the Closing, at
the Purchaser's request and without expense to any Company and without further
consideration from the Purchaser or any Company, the Seller shall execute and
deliver such other instruments of conveyance and transfer and take such other
action as the Purchaser reasonably may require to convey, transfer to and vest
in the Purchaser, and to put the Purchaser in possession of, any rights or
property to be sold, conveyed, transferred or delivered hereunder.
5.5. Non-Competition Covenant.
(a) As a material and valuable inducement for the Purchaser to
enter into this Agreement, pay and deliver the Purchase Price consideration and
consummate the transactions provided for herein, during the "Restricted Period"
(as hereinafter defined) the Seller agrees, unless
<PAGE>
otherwise permitted by Jet in writing, that they shall not, directly or
indirectly, for themselves or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder,
owner, partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor or as a sales
representative, in any aviation parts and repair business in direct competition
with those aspects of the business of Jet or any subsidiary or affiliate of Jet
(collectively with Jet; the "Jet Entities" and each (including Jet), a "Jet
Entity"), with which Seller has had any involvement, within the United States or
within 100 miles of any other geographic area in which any Jet Entity conducts
business, including any territory services by any Jet Entity (the "Restricted
Territory");
(ii) solicit any person who is, at that time, or who
has been within one (1) year prior to that time, an employee of any Jet Entity
for the purpose or with the intent of enticing such employee away from or out of
the employ of any Jet Entity;
(iii) solicit any person or entity which is, at that
time, or which has been within one (1) years prior to that time, a customer or
supplier of any Jet Entity for the purpose of soliciting or selling products or
services in direct competition with those aspects of the business of any Company
or Jet or any Jet Entity with which any Company or Seller have had any
involvement, within the Restricted Territory; or
(iv) solicit any prospective acquisition candidate,
on any Company's or the Seller's own behalf or on behalf of any competitor or
potential competitor, which candidate was, to the Seller's knowledge, either
called upon by any Jet Entity or which Jet made an acquisition analysis, for the
purpose of acquiring such entity. Notwithstanding the above, the foregoing
covenant shall not be deemed to prohibit the Seller from acquiring as an
investment not more than two percent (2%) of the capital stock of a competing
business, whose stock is traded on a national securities exchange or
over-the-counter.
(b) As used in this Agreement, the term "Restricted Period"
shall mean in the case of Bing Jun Chiang, five years and in the case of Simon
Chiang shall mean the "Non-Compete Period" as defined in an Employment Agreement
dated as of February 14, 1998, annexed hereto as Exhibit "6.5".
(c) In recognition of the substantial nature of such potential
damages and the difficulty of measuring economic losses to Jet as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to Jet fro which it would have no other adequate
remedy, the Seller agrees that in the event of breach by the Seller of the
foregoing covenant, Jet shall be entitled to specific performance of this
provision and injunctive and other equitable relief. In any such action, the
non-prevailing party will be responsible for the payment of court costs and
reasonable attorneys' fees incurred by the other.
<PAGE>
(d) It is agreed by the parties that the foregoing covenants
in this Section 5.5 impose a reasonable restraint on the Seller in light of the
activities and business of the Jet Entities on the date of the execution of this
Agreement and the current plans of the Jet Entities; but it is also the intent
of Jet and the Seller that such covenants be construed and enforced in
accordance with the changing activities, business and locations of the jet
Entities, whether before or after the date of termination of the employment of
the Seller. For example, if, during the Restricted Period, a Jet Entity engages
in new and different aviation parts or repair activities or establishes new
locations for its current activities or business in addition to its existing
activities or business and Seller is involved with Jet in providing such new
services or products, then Seller will be precluded from soliciting the
customers or employees of such new activities or business or from such new
location and from directly competing with such new aviation business within 100
miles of its then- established operating location(s) through the Restricted
Period.
(e) The covenants in this Section 5.5 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall be reformed in accordance therewith.
(f) All of the covenants in this Section 5.5 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of the Seller against Jet,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by Jet of such covenants. Further, this Section 5.5
shall survive the Closing and the termination of the Seller's employment with a
Jet Entity. It is specifically agreed that the Restricted Period, during which
the agreements and covenants of the Seller made in this Section 5.5 shall be
effective, shall be computed by excluding from such computation any time during
which the Seller is in violation of any provision of this Section 5.5.
5.6. Joint Venture Participation. Seller shall retain a 22% interest in
distributions received by PASCO Florida from the Joint Venture after PASCO
Florida shall have been repaid its then outstanding capital investment of up to
$1 million. Seller shall be paid within ten days after receipt of such funds by
PASCO Florida. In the event that the Joint Venture requires more than $1 million
in capital from PASCO Florida, Seller shall be given the right to contribute 22%
of such additional capital in a manner to be agreed upon by the parties. If
Seller chooses not to make such capital contribution, and if PASCO Florida does,
Seller's interest in the distributions shall be reduced proportionately.
Conversely, if PASCO Florida chooses not to make such capital contribution, and
if Seller makes such contribution, Seller's interest in the distributions shall
be increased proportionately.
5.7. Reimbursement. Jet guarantees payment of the liability in the
amount of $108,332.32, presently due to Seller by PASCO HK for contribution to
the Joint Venture. Such payment shall be made by PASCO HK to the Seller on or
before November 1, 1998.
<PAGE>
ARTICLE 6.
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, unless waived in writing by the Purchaser:
6.1. No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
6.2. Third Party Consents. The Purchaser, the Seller and the Companies
shall have obtained all consents, approvals, waivers or other authorizations
with respect to the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, such that the
Contracts and leases listed in Schedule 3.8 hereto shall remain in effect
(without default, acceleration, termination, assignment, right of termination or
assignment, payment, increase in rates or compensation payable, penalty,
interest or other adverse effect) from and after the Closing Date as such
contracts and leases operated and were in effect before the Closing Date. In
this regard, the Purchaser shall be satisfied that the Joint Venture has been
established, is operative and will remain effective upon Closing. With respect
to the material Contracts of each Company for which notice of the transaction
had been, or should have been, delivered to the other party thereto pursuant to
Section 5.3 hereof; (a) all such parties to such Contracts shall have been
notified of the transactions contemplated hereby and (b) neither the Purchaser
nor the Seller or each Company shall have received any notice of terminations or
amendments of, or any indication from such party of their intent to terminate or
amend, such contract, unless such amendment shall not adversely affect the
Purchaser or the Seller.
6.3. Regulatory Approvals. The Federal, State and foreign regulatory
agencies or authorities listed in Schedule 6.3 thereto shall have approved the
applications listed in such Schedule with respect to the change of control
represented by the transactions contemplated by this Agreement, and such
approval shall not impose financial obligations on the Purchaser that are
objectionable to it.
6.4. Opinion of Companies' Counsel. The Purchaser shall have received
an opinion of counsel to the Seller and the Companies (which will be addressed
to the Purchaser), dated the Closing Date, in the form of Exhibit 6.4 hereto.
6.5. Employment Agreements. The Seller shall have terminated its
existing employment agreements with the Company and shall have executed and
delivered to the Purchaser an Employment Agreement with Jet in the form of
Exhibit 6.5.
<PAGE>
6.6. Delivery of the Company Share Certificates and Records. Seller
shall have executed and delivered this Agreement, or a counterpart hereof, and
shall have delivered at the Closing stock certificates representing all of the
Stock duly endorsed for transfer to the Purchaser, together with stock powers
duly executed in blank, and all minute books and stock transfer records of the
Companies.
ARTICLE 7.
CONDITIONS TO THE OBLIGATIONS OF THE COMPANIES
AND THE SELLER
Each and every obligation of the Companies and the Seller under this
Agreement shall be subject to the satisfaction, on or before the Closing Date,
of each of the following conditions unless waived in writing by the Companies
and the Seller.
7.1. No Injunction. No preliminary injunction or other Order, decree or
ruling issued by any Authority, or any Regulation promulgated or enacted by any
Authority shall be in effect, which would prevent the consummation of the
transactions contemplated hereby.
7.2. Purchase Consideration. The Seller shall have received the
consideration (in the form of Jet Stock) required to be delivered at Closing and
to which the Seller is entitled pursuant to Section 2.1 hereof.
7.3. Employment Agreements. Jet shall have executed and delivered to
the Seller, an Employment Agreement between Jet and such party in the form of
Exhibit 6.5 attached hereto with respect to Seller.
7.4. Opinion of Counsel. The Seller shall have received an opinion of
counsel to the Purchaser, dated the Closing Date, in the form of Exhibit 7.4.
ARTICLE 8.
CLOSING
8.1. Closing Deliveries. At the Closing,
(a) the Seller and each Company shall deliver or cause to be
delivered to the Purchaser:
(i) a certificate or certificates evidencing all of
the Stock duly endorsed for transfer with all necessary transfer stamps affixed;
(ii) copies of all consents and approvals required
(including UCC termination
<PAGE>
statements, releases of mortgages or other releases of Liens);
(iii) the Opinion of the Seller and each Company's
Counsel required by Section 6.4;
(iv) the Employment Agreements required by Section
6.5;
(v) a certificate, signed by the secretary of each
Company, as to the articles of incorporation and by-laws of each Company, the
resolutions adopted by the board of directors and shareholders of each Company
in connection with this Agreement, the incumbency of certain officers of each
Company and the jurisdictions in which each Company is qualified to conduct
business, in form acceptable to the Purchaser;
(vi) certificates issued by the appropriate
governmental authorities evidencing the good standing, with respect to both the
conduct of business and the payment of all franchise taxes, of each Company as
of a date not more than 10 days prior to the Closing Date, as a corporation
organized under the laws of the State of Florida and Hong Kong and as a foreign
corporation authorized to do business under the laws of the various
jurisdictions where it is so qualified; and
(vii) such other certified resolutions, documents and
certificates as are required to be delivered by the Seller or the Companies
pursuant to the provisions of this Agreement.
(b) The Purchaser shall deliver to the Seller:
(i) the consideration (in the form of Jet Stock)
required to be paid or delivered to the Seller at Closing in accordance with
Section 2.1.
(ii) the Employment Agreement required by Section
6.5.
(iii) opinion of Purchaser's counsel required by
Section 6.4.
(iv) such other certified resolutions, documents and
certificates as are required to be delivered by the Purchaser pursuant to the
provisions of this Agreement.
ARTICLE 9.
SURVIVAL OF TERMS; INDEMNIFICATIONS
9.1. Survival. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing
notwithstanding any investigation heretofore or hereafter made by or on
<PAGE>
behalf of any party hereto; provided, however, that (a) the agreements and
covenants set forth in this Agreement shall survive and continue until all
obligations set forth therein shall have been performed and satisfied; and (b)
all representations and warranties shall survive and continue until:
(i) with respect to the representations and
warranties in Section 3.17 (tax matters) and 3.19 (ERISA matters) and 3.21
(environmental matters), until sixty (60) days following the expiration of the
applicable statute of limitations;
(ii) with respect to the representations and
warranties in Section 3.3 (capitalization), 3.5 (title to stock), 3.6 (options
and right on capital stock) and 3.15 (title and related matters), these
representations shall survive and continue forever and without limitation; and
(iii) with respect to all other representations and
warranties, the date upon which Jet receives from its outside auditors the
audited financial statements for Jet's fiscal year ending August 30, 1999 (the
"1999 Audit Date"), except for representations, warranties and indemnities for
which an indemnification Claim shall be pending as of the 1999 Audit Date, in
which event such indemnities shall survive with respect to such Claim until the
final disposition thereof.
9.2. Indemnification by the Companies and the Seller. Subject to this
Article IX, the Purchaser and its officers, directors, employees, shareholders,
representatives and agents shall be indemnified and held harmless by the Seller
at all times after the date of this Agreement, against and in respect of any and
all damage, loss, deficiency, liability, obligation, commitment, cost or expense
(including the fees and expenses of counsel) resulting from, or in respect of,
any of the following:
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of the Seller or any Company under
this Agreement, any document relating thereto or contained in any schedule or
exhibit to this Agreement;
(b) Any and all liabilities of each Company of any nature
whether accrued, absolute, contingent or otherwise, and whether known or
unknown, existing at the Closing Date, including, without limitation:
(i) All Tax liabilities of each Company, together
with any interest or penalties thereon or related thereto, through the Closing
Date and any Tax liability of each Company arising in connection with the
transactions contemplated hereby. Any Taxes, penalties or interest attributable
to the operations of each Company payable as a result of an audit of any tax
return shall be deemed to have accrued in the period to which such Taxes,
penalties or interest are attributable;
(ii) All environmental liabilities relating to any of
the Company's properties, including federal, state and local environmental
liability, together with any interest or penalties thereon or related thereto,
through the Closing date;
<PAGE>
(c) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any Claim incident
to any of the foregoing;
(d) All other Claims of the Purchaser shall be resolved in
accordance with Section 9.4.
9.3 Indemnification by the Purchaser. Subject to this Article IX, each
Company, the Seller and each of its and their heirs, assigns, representatives
and agents shall be indemnified and held harmless by the Purchaser, at all times
after the date of this Agreement, against and in respect of any and all damage,
loss, deficiency, liability, obligation, commitment, cost or expense (including
the fees and expenses of counsel) resulting from, or in respect of, any
misrepresentation or omission of a material fact, breach of warranty, or
non-fulfillment of any obligation on the part of the Purchaser under this
Agreement, any document relating thereto or contained in any schedule or exhibit
to this Agreement.
9.4 Third-Party Claims. Except as otherwise provided in this Agreement,
the following procedures shall be applicable with respect to indemnification for
third-party Claims. Promptly after receipt by the party seeking indemnification
hereunder (hereinafter referred to as the "indemnitee") of notice of the
commencement of any (a) Tax audit or proceeding for the assessment of Tax by any
taxing authority or any other proceeding likely to result in the imposition of a
Tax liability or obligation or (b) any action or the assertion of any Claim,
liability or obligation by a third party (whether by legal process or
otherwise), against which Claim, liability or obligation the other party to this
Agreement (hereinafter the "indemnitor") is, or may be required under this
Agreement to indemnify such indemnitee, the indemnitee will, if a Claim thereon
is to be, or may be, made against the indemnitor, notify the indemnitor in
writing of the commencement or assertion thereof and give the indemnitor a copy
of such Claim, process and all legal pleadings. the indemnitor shall have the
right to participate in the defense of such action with counsel of reputable
standing. The indemnitor shall have the right to assume the defense of such
action unless such action (i) may result in injunction or other equitable
remedies in respect of the indemnitee or its business; (ii) may result in
liabilities which, taken with other then existing Claims under this Article IX,
would not be fully indemnified hereunder; or (iii) may have a material adverse
impact on the business or financial condition of the indemnitee after the
Closing Date (including an effect on the Tax liabilities, earnings or ongoing
business relationships of the indemnitee). The indemnitor and the indemnitee
shall cooperate in the defense of such Claims. In the case that the indemnitor
shall assume or participate in the defense of such audit, assessment or other
proceeding as provided herein, the indemnitee shall make available to the
indemnitor all relevant records and take such other action and sign such
documents as are necessary to defend such audit, assessment or other proceeding
in a timely manner. If the indemnitee shall be required by judgment or a
settlement agreement to pay any amount in respect of any obligation or liability
against which the indemnitor has agreed to indemnify the indemnitee under this
Agreement, the indemnitor shall promptly reimburse the indemnitee in an amount
equal to the amount of such payment plus all reasonable expenses (including
legal fees and expenses) incurred by such indemnitee in connection with such
obligation or liability subject to this Article IX.
<PAGE>
Prior to paying or settling any Claim against which an indemnitor is,
or may be, obligated under this Agreement to indemnify an indemnitee, the
indemnitee must first supply the indemnitor with a copy of a final court
judgment or decree holding the indemnitee liable on such claim or failing such
judgment or decree, and must first receive the written approval of the terms and
conditions of such settlement from the indemnitor. An indemnitor shall have the
right to settle any Claim against it, subject to the prior written approval of
the indemnitee, which approval shall not be unreasonably withheld.
An indemnitee shall have the right to employ its own counsel in any
case, but the fees and expenses of such counsel shall be at the expense of the
indemnitee unless (a) the employment of such counsel shall have been authorized
in writing by the indemnitor in connection with the defense of such action or
Claim, (b) the indemnitor shall not have employed, or is prohibited under this
Section 9.4 from employing, counsel in the defense of such action or Claim, or
(c) such indemnitee shall have reasonably concluded that there may be defenses
available to it which are contrary to, or inconsistent with, those available to
the indemnitor, in any of which events such fees and expenses of not more than
one additional counsel for the indemnified parties shall be borne by the
indemnitor.
ARTICLE 10.
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by each Company, the Purchaser and the Seller.
10.2 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
10.3. Certain Definitions.
"Affiliate" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or controlling
such Person, (b) any Person, directly or indirectly, in which such Person holds,
of record or beneficially, five percent or more of the equity or voting
securities, (c) any Person that holds, of records of beneficially, five percent
or more of the equity or voting securities of such Person, (d) any Person that,
through Contract, relationship or otherwise, exerts a substantial influence on
the management of such Person's affairs, (e) any Person
<PAGE>
that, through Contract, relationship or otherwise, is influenced substantially
in the management of their affairs by such Person, or (f) any director, officer,
partner or individual holding a similar position in respect of such Person.
"Authority" means any governmental, regulatory or administrative
body, agency, arbitrator or authority, any court or judicial authority, any
public, private or industry regulatory agency, arbitrator authority, whether
foreign, national, federal, state or local.
"Claim" means any action, claim, obligation, liability, expense,
lawsuit, demand, suit, inquiry, hearing, investigation, notice of a violation,
litigation, proceeding, arbitration, or other dispute, whether civil, criminal,
administrative or otherwise, whether pursuant to contractual obligations or
otherwise.
"Contract" means any agreement, contract, commitment, instrument
or other binding arrangement or understanding, whether written or oral.
"GAAP" means generally accepted accounting principles, applied on
a consistent basis.
"Lien" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction or interest of another
Person of any kind or nature.
"Material Adverse Change" means any development or change which
has, had or would have a Material Adverse Effect.
"Material Adverse Effect" means any circumstances, state of facts
or matters which has, or might reasonably be expected to have, a material
adverse effect in respect of Jet's or each Company's (as the case may be)
business, operations, properties, assets, condition (financial or otherwise),
results, plans, strategies or prospects, based on Jet or each Company (as the
case may be) taken as a whole.
"Order" means any decree, consent decree, judgment, award, order,
injunction, rule, consent of or by an Authority.
"Person" means any corporation, partnership, joint venture,
company, syndicate, organization, association, trust, entity, Authority or
natural person.
"Proprietary Rights" means any patent, patent application,
copyright, trademark, trade name, service name, trade secret, know-how,
confidential information or other intellectual property or proprietary rights.
"Regulation" means any law, statute, rule, regulation, ordinance,
requirement, announcement or other binding action of or by an Authority.
<PAGE>
"Subsidiary" means any Person which the Purchaser or the Company,
as the case may be, owns, directly or indirectly, 50% or more of the outstanding
stock or other equity interests.
10.4. Notices. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, two business days after mailing first
class certified mail with postage paid, or by overnight receipted courier
service:
(a) If to the Seller or the Company, to:
Simon Chiang
600 S.E. 10th Avenue
Pompano Beach, Florida 33060
with a copy to:
Norman B. Getson, Esquire
2450 Hollywood Boulevard, Suite 501
Hollywood, Florida 33022
or to such other person or address as the Seller or any Company shall furnish by
notice to the Purchaser in writing.
(b) If to the Purchaser to:
Joseph Nelson, President
Jet Aviation Trading, Inc.
15675 N.W. 15th Avenue
Miami, Florida 33169
with a copy to:
Leonard H. Bloom, Esquire
Shapo, Freedman & Bloom, P.A.
200 South Biscayne Boulevard, Suite 4750
Miami, Florida 33131
or to such other person or address as the Purchaser shall furnish by notice to
the Seller in writing.
10.5. Waiver of Compliance; Consents. Any failure of any party to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a wavier of, or estoppel with respect to, any
subsequent
<PAGE>
or other failure. Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent shall be given in writing.
10.6. Assignment. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights, interests and obligations
hereunder to any wholly-owned Subsidiary, and may grant Liens or security
interests in respect of its rights and interests hereunder, without the prior
approval of the Seller.
10.7. Governing Law. The Agreement shall be governed by the internal
laws of the State of Florida as to all matters, including but not limited to
matters of validity, construction, effect and performance.
10.8. Consent to Jurisdiction; Service of Process. Each Company and the
Seller hereby irrevocably submit to the jurisdiction of the state or federal
courts located in Dade County, Florida in connection with any suit, action or
other proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby, and hereby agree not to assert, by way of
motion, as a defense, or otherwise in any such suit, action or proceeding that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced by such courts.
10.9. Injunctive Relief. The parties hereto agree that in the event of
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
10.10. Headings. The article, section and other headings contained in
this Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement (or any provision hereof).
10.11. Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular forms of nouns, pronouns, and verbs
include the plural and vice versa.
10.12. Construction. The parties acknowledge that each party has
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be
<PAGE>
resolved against the drafting party shall not be employed in the interpretation
of this Agreement.
10.13. Dealings in Good Faith; Best Efforts. Each party hereto agrees
to act in good faith with respect to the other party in exercising its rights
and discharging its obligations under this Agreement. Each party further agrees
to use its best efforts to ensure that the purposes of this Agreement are
realized and to take all further steps as are reasonably necessary to implement
the provisions of this Agreement. Each party agrees to execute, deliver and file
any document or instrument necessary or advisable to realize the purposes of
this Agreement.
10.14. Binding Effect. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
10.15. Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afford to any party, shall be cumulative and
not alternative.
10.16. Severability. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
10.17. Expenses. All fees, costs and expenses (including, without
limitation, legal, auditing and accounting gees, costs and expenses) incurred in
connection with considering, pursuing, negotiating, documenting or consummating
this Agreement and the transactions contemplated hereby shall be borne and paid
solely by the party incurring such fees, costs and expenses.
10.18. Attorneys' Fees. If any party to this Agreement seeks to enforce
the terms and provisions of this Agreement, then the prevailing party in such
action shall be entitled to recover from the losing party all costs in
connection with such action, including without limitation reasonable attorneys'
fees, expenses and costs incurred with respect to trials, appeals and
collection.
10.19. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
PURCHASER:
JET AVIATION TRADING, INC., A
Florida corporation
By: /s/ Joseph Nelson
---------------------------
Name: Joseph Nelson
---------------------------
Title: President
---------------------------
SELLER:
/s/ Sheng Kuang Chiang
----------------------------------
SHENG KUANG CHIANG, a/k/a
SIMON CHIANG
/s/ Bing Ju Chiang
----------------------------------
BING JU CHIANG a/k/a ANN CHIANG
<PAGE>
COMPANY:
PASCO INTERNATIONAL AVIATION
CORP., a Florida corporation
By: /s/ Bing Ju Chiang
---------------------------
Name: Bing Ju Chiang
---------------------------
Title: President
---------------------------
PASCO INTERNATIONAL AVIATION
CORPORATION LIMITED, a Hong Kong
corporation
By: /s/ Sheng Kuang Chiang
---------------------------
Name: Sheng Kuang Chiang
---------------------------
Title: Managing Director
---------------------------
PASCO FINANCIAL SERVICES LIMITED,
a Hong Kong corporation
By: /s/ Sheng Kuang Chiang
---------------------------
Name: Sheng Kuang Chiang
---------------------------
Title: Managing Director
---------------------------
AERO-LINK FLIGHT SYSTEMS LIMITED,
a Hong Kong corporation
By: /s/ Sheng Kuang Chiang
---------------------------
Name: Sheng Kuang Chiang
---------------------------
Title: Managing Director
---------------------------
<PAGE>
Exhibit 10.17
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into and effective this 13th day
of October 1997 by and between Jet Aviation Trading, Inc., a Florida Corporation
(the "Company"), and Joseph Janusz ("Employee").
Witnesseth
WHEREAS, the Company desires to enter into an agreement providing for
the Employee's employment as Chief Financial Officer;
WHEREAS, the Employee is willing to be employment by the Company for
two (2) years;
NOW, THEREFORE, in consideration of the premises and covenants set
forth herein, the parties agree as follows:
1.) The Company will employ Employee and Employee will serve the
Company as Chief Financial Officer for a period of two (2)
years (The "Employment Period")
2.) Employee will devote his best efforts and attention to the
affairs of the Company.
3.) (a) As Compensation hereunder, the Company will pay,
and Employee will accept:
(i) Base Compensation of $78,000.00 per annum for the
period of employment from the date hereof through the
second anniversary hereof, payable biweekly, with
such upward adjustments as may from time to time be
granted.
(ii) Such bonus, supplemental or incentive
compensation and health, disability or other payment
or benefits as are consistent with the Company's then
current policies.
(iii) Such discretionary expenses as are necessary
for his performance of this agreement and for the
benefit of the Company, subject to the submission and
approval of written statements in accordance with the
Company's standard policies as in effect from time to
time.
<PAGE>
(b) Employee will be entitled to two (2) weeks of paid
vacation per year.
(c) Employee will participate in the Company's stock
option plan. The Company will grant options to
purchase 20,000 shares of the Common Stock of Jet
Aviation Trading, Inc. under the Company's stock
option plan.
4.) Employee's employment hereunder may be terminated by the Company at
any time for "cause" or "disability" as defined herein. "Cause" shall mean
conviction of a felony relating to the business of the Company, or act of
dishonesty either involving Employee's employment or harmful to Employer or
other employees, including fraud, misappropriation, embezzlement or the like or
the misfeasance, malfeasances or non-feasance of Employee in carrying out the
duties of Employee's employment with Employer, not cured with thirty (30) days
prior notice. "Disability" shall mean a physical condition of employee which
renders him unable to perform his duties for the Company for a period of six
months or longer, as confirmed in writing by Employee's independent physician,
Employee's employment hereunder will terminate upon Employee's attainment of age
65 or upon the death of Employee. Upon any such termination of employment for
cause, disability, attainment of age 65 or because of death, the Company will
have no further obligations hereunder.
a) Upon termination of employee's employment hereunder
at the end of the Term or because of the death or
permanent disability of Employees, Employee or in the
event of his death or his mental incapacity his
person representative, shall be paid his Basis
Compensation hereunder, prorated through the date of
termination. 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 Basis Compensation for sixty (60) days
after the date of Employee's death.
b) In the event that employee incurs a disability of
either a physical or mental character which, in the
opinion of the 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 Basis
Compensation for the first ninety (90) days or any
part thereof of continuous disability.
c) Upon termination of Employees employment 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 dismissal of the Employee by Employer
for reasons not for cause, or the dissolution of the
Employer, Employee shall be
<PAGE>
entitled to receive his Basis Compensation for twelve
(12) months payable no less often than semi-monthly
following Termination of employee's employment under
this Employment Agreement immediately above,
("Severance") prorated, annualized and calculated
through the Employment Period.
5.) Any dispute or controversy arising under or in connection with
this agreement will be settled by arbitration, conducted
before a panel of three arbitrator in Miami, Florida in
accordance with the rules of the American Arbitration
Association then in effect. The arbitrators must be approved
by both the Company and Employee and their decision will be
binding on the parties and conclusive for all purposes.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction. The expenses of such arbitration will be
borne by the Company.
6.) The Company will pay or reimburse Employee for all cost and
expenses (including without limitation, attorney's fees, fines
and penalties) incurred by Employee as a result of (i) any
claim action or proceeding ("claim"), including, without
limitation, a claim by Employee against the Company arising
out of, or challenging the validity, advisability or
enforceability of this Agreement or any provision hereof and
(ii) any claim in which Employee is a defendant and with
respect to which Employee certifies to the Company that the
claim resulted from action or the failure to act by Employee
in the interest of, or not contrary to the interest of, the
Company or any corporation, person or other entity affiliated
with the Company.
7.) The Company will promptly require any successor (whether
direct or indirect, by purchase, merger consolidation or
otherwise) to all or substantially all of the business or
assets of the Company, by agreement in form and substance
satisfactory to Employee expressly, absolutely, and
unconditionally to assume and agree to perform this agreement
in the same manner and to the same extent that the Company
would be required to perform if no such succession had taken
place.
As used herein, "the Company" includes any successor to all or
substantially all of the Company's business or assets which
executes and delivers an agreement provided for in this
Section 7 or which otherwise becomes bound by all the terms
and provision of this Agreement by law.
8.) Any termination of Employee's employment by the Company will
be communicated to the Employee at the address set forth below
(or such other address as Employee shall have notified the
Company of in writing for purposes of this agreement) in a
written notice and, will specify a termination date no sooner
than 30 days after giving such notice.
<PAGE>
9.) Employee represents and warrants to the Company that he is
under no contractual or other restriction which is
inconsistent with his execution of this Agreement the
performance by him of his duties hereunder, or with the rights
of the Company hereunder.
10.) It is the desire and the intent of the parties that the terms
and conditions of this Agreement be enforced to the fullest
extent permissible under the laws and public policies applied
in each jurisdiction in which enforcement is sought.
Accordingly, if any particular term or condition of this
Agreement is adjudicated or becomes by operation of law
invalid or unenforceable, the Agreement will be deemed amend
to delete therefrom such terms or condition to the extent
necessary to preserve its validity and enforceability, and the
remainder of this Agreement will remain in full force and
effect. A deletion resulting from adjudication will apply only
with respect to the operation of that term or condition in the
particular jurisdiction in which such adjudications's made.
11.) Except as otherwise specifically provided, herein, Employee's
entitlement to benefits hereunder will not be governed by any
duty to mitigate his damages by seeking further employment no
offset by any compensation which he may receive from future
employment.
12.) No right, benefit, or interest hereunder will be subject to
assignment, anticipation, alienation, sale, encumbrances,
charge, pledge hypothecation or set-off in respect to any
claim, debt or obligation, or to execution, attachment, levy
or similar process; provided, however, that Employee may
assign any right, benefit or interest hereunder if such
assignment is permitted under the terms of any plan or policy
of insurance or annuity contract governing such right, benefit
or interest.
13.) This Agreement constitute the full and complete understanding
and agreement of the parties with respect to the subject
matter hereof and may not be changed or terminated orally.
14.) This Agreement will be governed by and construed in accordance
with the law of the State of Florida conflict of law
principles.
15.) Each notice or communication required or permitted to be given
hereunder will be in writing and will be delivered or mailed
by air or express mail to the address of the Company, or of
Employee, as the case may be, set forth below (or such other
address as any of them may specify as its address by written
notice to the other):
<PAGE>
If to the Company:
Jet Aviation Trading, Inc.
15675 N.W. 15 the Avenue
Miami, Florida 33169
If to the Employee:
Joseph Janusz
P.O. Box 4652
Miami Lakes, Florida 33014
16.) This Agreement may be executed in one or more counterpart
copies, each of which will be deemed an original and will
become effective when one or more counterparts shall have been
signed by each of the parties hereto and delivered to the
other party.
In Witness whereof, the parties have duly executed this Agreement on the date
first above written.
JET AVIATION TRADING, INC.
By:
-----------------------------------
Joseph J. Nelson
President & CEO
Date:
-----------------------------------
EMPLOYEE
By:
-----------------------------------
Joseph Janusz
Date:
-----------------------------------
<PAGE>
EXTENSION OF EMPLOYMENT AGREEMENT
FOR JOSEPH JANUSZ
This extension of employment agreement referring to the employment agreement
dated 13th day of October 1997 is made and entered into this 11th day of June
1999 and effective October 14th 1999 by and between Joseph Janusz ("employee")
and Aviation Holding International, Inc. fka (Jet Aviation Trading, Inc.) a
Florida Corporation.
WITNESSETH
The parties agree as follows:
1. The term of employment has been extended for the period
commencing as of October 14th, 1999 and continuing until April
30th, 2000 (extension period) or unless sooner terminated as
provided in employment agreement dated 13 day of October 1997.
2. Basic Compensation in extension period of employees term of
employment. Employee shall receive as basis compensation
("Basis Compensation") for all services rendered by the
employee hereunder, an annual salary during the extension
period of $89,500,00 payable in accordance with the customary
payroll practices of employee, but in no event less frequently
than semi-monthly.
3. Employee will participate in Aviation Holdings Group, Inc.
Stock Option Plan. All 55,000 stock options granted to the
employee by Aviation Holdings Group, Inc., which replaced the
same number of options granted under the predecessor plan of
Aviation Holdings International, Inc. shall expire five (5)
year from the date hereof.
Employer
Attest: Aviation Holdings, International, Inc.
Fka (Jet Aviation Trading, Inc.)
By: By: /s/ Joseph Nelson
-------------------------------- -------------------------------
Joseph Nelson
President & CEO
Witnesses:
/s/ Cynthia S. Taylor /s/ Joseph Janusz
- ----------------------------------- --------------------------
Joseph Janusz
<PAGE>
Exhibit 10.18
COOPERATIVE CONTRACT
BETWEEN
CHINA NORTHERN AIRLINES
AND
U.S.PASCO INTERNATIONAL AVIATION CORP.
1
<PAGE>
COOPERATIVE CONTRACT
FOREWORD
In accordance with the "Law of the People's Republic of China for the
Sino- foreign Cooperative Enterprises" and other laws and regulations of China,
China Northern Airlines (hereafter referred to as "Party A") and U. S. Pasco
International Aviation Corp. (hereafter referred to as "Party B") signed the
cooperative contract of Shenyang Northern Aircraft Maintenance Engineering
Corporation (hereafter referred to as "the contract") in Shenyang, China on
February 28, 1996 an the principle of equality and mutual benefit to carry out
maintenance and repair fo avionics, instruments and accessaries of aircraft.
12. Definitions
(a) The "Constitution" means the constitution of the cooperative
enterprise.
(b) The "Board of Director" means the board of director of the
cooperative enterprise.
(c) China means the People's Republic of China.
(d) The "cooperative enterprise" means the facilities in Shenyang,
Liaoning Province, China invested jointly by both parties and permitted
specially by China Aviation Bureau.
(e) The "effective date" means the effective date of this contract
which is the date of this contract that is examined and approved by the
authority department.
(f) The "authority department" means China Civil Aviation Bureau.
(g) "Reminbi" or "RMB" means the legal currency of China.
(h) "US Dollars" or "US$"means the legal currency of the United States
of America.
13. Both parties of cooperation
Both parties of this contract are as follows:
Party A. China Northern Airlines
Registered Place: Shenyang, Liaoning Province, China
Legal person: Jiang Lianying
Title: General Manager
Nationality: The People's Republic of China
Party B: U.S. Pasco International Aviation Corp.
Registered place: Florida, U.S.A.
2
<PAGE>
Legal person: Simon Chiang
Title: President
Nationality the United States of America
Declaration and guarantee of both parties
(a) Both parties are the legal persons who are organized and existing
according to the laws of establishment place.
(b) Both parties will not violate any arrangements or agreements
because of signing or performing this contract.
(c) Both parties and their representatives are legally authorized to
sign this contract.
14. Establishment of the cooperative enterprises
(a) Both parties agree to establish the cooperative enterprise in
accordance with the "Law of the People's Republic of China for the Sino-foreign
Cooperative Enterprise" and other laws and regulations of China as well as the
clauses of this contract. The legal person of the cooperative enterprise is
organized according to the laws of the People's Republic of China, and protected
and governed by China laws.
(b) The name of the cooperative enterprise is
____________________________ in Chinese and Shenyang Northern Aircraft
Maintenance Engineering Corporation in English.
The legal address of the cooperative enterprise is Taoxian Airport in
Shenyang, Liaoning Province, China.
(c) This contract is controlled the applicable laws, decrees,
regulations and rules of the People's Republic of China. If the Chinese
Government, the provincial governments or local governments give the cooperative
enterprise or either party or allow it to have the more advantageous treatment
than clauses in this contract with their new laws regulations and rules or in
other manners after this contract is signed, both parties and the cooperative
enterprise should cooperate and apply quickly for such treatment.
(d) The cooperative enterprise should be run as an independent and
profitable enterprise unless there is a special requirement and concrete
stipulations in this contract.
(e) The responsibilities of both parties for the cooperative enterprise
will depend upon the investment amount of each party. Both parties will share
profits and take any risk or loss according to the investment proportion. Within
thirty (30) days upon receipt of the approval certificate of the authority
department, the cooperative enterprise will be registered in Liaoning
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Provincial Industrial and Commercial Administration in accordance with the
registration stipulations of the People's Republic of China for enterprise's
legal person.
(f) The establishment date of the cooperative enterprise is the day
when Liaoning Provincial Industrial and Commercial Administration issues the
business license to the cooperative enterprise.
15. Purpose and scope
(a) The purpose of cooperation is to use the advanced maintenance
facilities that Party A and the advantages of Party B in sales of air materials
to establish the cooperative enterprise in Shenyang, China for maintaining and
repairing avionics, instruments and accessaries of aircraft in the world.
The cooperative enterprise should manage to bring satisfactory economical
'benefits to both parties.
(b) The business scope of the cooperative enterprise is to maintain and
repair aircraft parts,
16. Total investment and registered capital
(a) Total investment of the cooperative enterprise is US$ 4 million.
(b) The registered capital of Party A for the cooperative enterprise is
US$ 3 million, making up 75% of the total registered capital.
(c) The registered capital of Party B is US$ 1 million, making UP 25%.
For the additional funds that the cooperative enterprise requires, the
cooperative enterprise can obtain the loan from the financial organizations at
home and abroad. The management department of the cooperative enterprise should
with the help of both parties, finance the additional funds under the most
competitive condition. Both parties should give the guarantee according to their
investment proportion.
(d) Both parties should fund the registered capital as follows:
(1) Party A funds US$ 3 million including: 1.85 million or
production equipment; 0.8 million for technical documentation; 0.35 million for
air materials and spare parts.
(2) Party B funds US$ 1 million.
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(e) The investment amount of both parties must be assessed according to
the laws and regulations of China with the effective assessment report.
17. Duties of both parties
To execute this contract, both parties should undertake the following
responsibilities specified for each party.
(a) Party A's responsibility:
In addition to other responsibilities specified in this
contract, Party A should be responsible for the following things:
(1) According to the related stipulations of this contract pay
its investment amount within six months upon the issuance of the business
license.
(2) Help employees who are despatched by Party B to the
cooperative enterprise to get the necessary visa, work permit and traveling
formalities in China.
(3) Give the administrative support including but not limited
the Chinese managers, production and technician (including, translators and
other persons involved).
(4) Obtain the approval, permit and license from the competent
authorities in China.
(5) Help the cooperative enterprise go through the custom
procedures.
(6) Help the cooperative enterprise select machines,
equipment, components and parts inside or outside China with the most
competitive price.
(7) Provide the qualified person to accept the straining and
arrange these persons to operate the special equipment.
(8) Help the cooperative enterprise open the. foreign exchange
account and Reminbi account in the bank approved by China Bank and the National
Foreign exchange Administration and get the loan from China which is allowed by
the law.
(9) Help the cooperative enterprise get the necessary approval
for foreign exchange balance activity according to the law of the People's
Republic of China.
(10) Help the cooperative enterprise get the necessary
approval from the National Foreign exchange Administration for collecting the
foreign exchange from customers inside China because of maintenance and repair
services.
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(11) Give suggestions and renew the information on the basis
of the laws and regulations of the Chinese Government and local government,
which axe applicable for the management of the cooperative enterprise in order
to keep the cooperative enterprise following these laws and regulations.
(12) Being in charge of other matters entrusted by the
cooperative enterprise or designated in this contract.
(b) Party B's responsibilities:
In addition to other responsibilities specified in this contract, Party
B should be responsible for the followings:
(1) According to the related stipulations in this contract.
pay its investment amount within six months upon the issuance of the business
license.
(2) Provide foreign employees according to the requirements.
(3) Help the cooperative enterprise select machines,
equipment, components and parts inside or outside China with the most
competitive price.
(4) Undertake the international sales and market development
to ensure the cooperative enterprise to have the maximum maintenance volume.
(5) Help the cooperative enterprise apply for and get the
complete FAA permit within three years.
(6) Support the relative trainings both inside and outside
China.
(7) Be responsible for other matters entrusted by the
cooperative enterprise or designated in this contract.
(8) Both parties agree to maintain and repair all the
components and parts of aircrafts that China Northern Airlines free of charge
during the period of cooperation.
18. Board of Directors
(a) The Board of Directors should be established upon the date of
registration of the enterprise.
(b) The Board of Directors should be consisted of five directors. Four
of them should be nominated by Party A and one by Party B. The President should
be nominated by Party A and the Vice-president by Party B.
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(c) Director (including tile President and the Vice President) have
four (4) years' term of office. They can be reappointed by the original
nominator. Any vacant position of the Board of directors (including the
President and vice president) can be filled up by the original nominator.
(d) The president is the legal person of the cooperative enterprise. If
the President or any director cannot perform his (her) responsibility, He (she)
can authorize other person as his (her) representative.
(e) The Board of Directors should be the highest power organ that
discusses and decides all the important things about the cooperative enterprise.
The Board of Directors can authorize the general manager of the cooperative
enterprise to be responsible for some business. The board meeting should be held
at least twice a year on the date and in the place that both parties agree. The
board meeting may be a telephone meeting in the time and the manner agreed by
both parties. Two third (2/3) directors including director from Party B)
constitute the quorum of the boarding meeting. The Board of Directors can adopt
the resolution in the form of written mobile vote.
(f) The President should give the written notice thirty (30) days
before the meeting is held containing the subjects under discussion, time and
place. Such notice should be made both in Chinese and English and include the
detail agenda and all the related or necessary reports, documents and other
materials.
(g) In case of emergence, the President should use the fastest
telecommunication means to note directors the necessary action that the
cooperative enterprise needs to take and the time for such action. If he quorum
of the board meeting cannot be reached in the time when the cooperative
enterprise is allowed to take action because of emergent situation. both parties
can appoint a director respectively to give the written consent by fax
authorizing the management department of the cooperative enterprise to take
action. Afterwards, the Board of Directors should hold the board meeting in the
reasonable and possible time to adopt such action
(h) If any director cannot attend the board meeting for some reason, he
can appoint a representative in written form to attend the meeting and make a
vote. One representative can represent one or more directors. If one director
cannot attend the meeting and does not appoint a representative, he abstain from
voting.
(i) Directors of the cooperative enterprise should be paid by the
cooperative enterprise in accordance with the post. The cooperative enterprise
should pay such expenses as flight ticket, land communication and board and
lodging due to the 4 board meeting to directors and their representatives.
(j) Every director has one vote. When the affirmative vote and negative
vote for a resolution are the same, the President should have a final decision
vote.
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(k) The resolution concerning the following issues must 'be adopted
only when all the directors or their representatives at the meeting give the
affirmative vote:
(1) Revision of the constitution;
(2) Addition, reduction or transfer of the registered capital (except
clause 14 in this contract and adjustment of the investment proportion of both
parties;
(3) Termination, dismission and liquidation of the cooperative
enterprise;
(4) Transformation of surplus to capital increase which is outside the
requirement of China laws;
(5) Any guarantee provided by the cooperative enterprise;
(6) Suggestions upon profit distribution and payment which axe not made
by the maximum limit proved reasonably from surplus of previous period;
(7) Any agreement, trade and series agreement trade between the
cooperative enterprise and associated corporation of either party exceeding
200,000 US$ in value;
(8) Any important trade between any director,'senior staff or employee
in their own name or in the name of the third party and the cooperative
enterprises'.
(9) Reasonable arguments put forward by either party that suffers from
great or unfavourable influence due to any action that belongs the regular
business of the cooperative enterprise.
(l) The resolution concerning the following issues should be adopted
only if three (3) directors (at least including a director from Party B) give
the affirmative vote:
(1) The reserve fund that is used for the capital increase which is
outside of the requirement of China laws;
(2) The loan sum exceeding 100,000 US$ in any twelve (12) months in the
name of the cooperative enterprise;
(3) Approval of yearly budget and business plan;
(4) Great changes in the management organ;
(5) Establishment of branches;
(6) Change of legal address of the cooperative enterprise;
(7) Approval of the maintenance and. repair contract which is outside
the regular business scope of the cooperative enterprise;
(8) Appointment and disappointment of chartered auditor and lawer;
(9) Some services or some items of which expenditures exceed 100,000
US$;
(10) Suggestions upon profit distribution and payment by the maximum
limit reasonably proved by surplus of the previous period;
(11) Investigation. dispute and reconciliation of claim or lawsuit put
forward by noncooperative party; and the relative resolution made by the
cooperative enterprise for the important claim and lawsuit of non-cooperative
party;
(12) Any other matters that need the Board of Directors to make
resolution.
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(m) Every board meeting should be recorded and signed by directors or
their representatives attending to the meeting. The President should designate a
special person to make record both in Chinese and English. The record should be
submitted to the Headquarter of the cooperative enterprise for record. The
record copies should be delivered to both parties as soon as possible. When
Chinese and English versions are in consistent, the Chinese version is the right
one for the lawful interpretation.
19. Business management
(a) The Board of directors of the cooperative enterprise should have an
organ that is responsible for daily operation and management of the cooperative
enterprise, for which one General Manager should be appointed,
(b) The General Manager should be nominated by Party A and appointed
after all directors of the Board agree unanimously for four (4) years' term of
office. The General Manager can be reappointed the Board of Directors after
expiration of term of office.
(c) The Board of Directors should elect the General Manager from
nominated candidates, who should do the best until he hands in his resignation
or is replaced. Any managers can be recalled by the majority of the Board of
Meeting and their candidates should be elected according to clause 8 (b).
(d) The General Manager is responsible for execution of decisions made
by the Board of Directors, and for organizing and leading the daily business and
management of the cooperative enterprise. The concrete functions, rights and
duties of the General Manager are stipulated in the Constitution of the
cooperative enterprise.
(e) There are three (3) vice general managers under the General
Manager. They are nominated by the General Manager and appointed after the
majority of directors of the Board agree. The vice general managers should
assist the General Manager to operate daily transactions. The vice general
managers can be recalled by the General Manager through agreement of the
majority.
(f) Staff members of the business and management departments should
carry out the tasks given by the General Manager.
(g) Foreign employees despatched by Party B could be paid by the
cooperative enterprise according to the standard used in the similar cooperative
enterprises in this region. Same number of persons from Party A will share the
same treatment in the cooperative enterprise.
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(h) Anyone who misuses his right, seeks personal interests corrupts and
ignores his duties or is unequal to his duty should be dismissed. The General
Manager should be replaced according to clause 8 (c).
20. Annual business plan and budget
(a) The General manager and his hands should be responsible for
developing the annual business plan and budget of the cooperative enterprise.
The annual business plan and budget of every fiscal year ( including the assets
liability statement, balance sheet, fund expenditure plan and forecasting
statement for cash flow, should be submitted to the Board of Directors for
examination and check before September of previous year together with detail
information about the following items:
(1) Purchase of equipment and other assets.;
(2) Financing and application of funds foreign exchange and Reminbi)
(3) Maintenance and repair of assets and equipment;
(4) Revenue and expenditure budget included in the annual business plan
and budget;
(5) Plan for training employees;
(6) Plan for employing foreign staff members;
(7) Other matters required by the Board of Directors for the
time;
(b) The annual business plan and budget should be examined and approved
by the Board of directors at a meeting before the beginning of next year, and
then submitted to the concerned department that is in charge of the cooperative
enterprise for record if it is necessary. The General Manager should be
responsible for implementing the annual business plan and budget approved by the
Board of Directors.
21. Foreign exchange
(a) Act on "Provisional regulations of the People's Republic of China
for the Foreign Exchange" and the related laws and regulations.
(b) Unless otherwise specified by the Board of directors, the
cooperative enterprise should apply the foreign exchange in the following
priority order:
(1) Loan capital and interests and concerned liabilities that
require the foreign exchange;
(2) Payment for imported materials services and equipment that are
necessary for the business and require the foreign exchange;
(3) Payment for some administrative expense that are necessary the
business and require the foreign exchange;
(4) All costs, payment and expenditures of both parties due to this
contract should be reimbursed by the foreign exchange.
(5) Payment for pure profits and proper incomes after Party B pays tax
by the laws.
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22. Labour Management
(a) The cooperative enterprise should have the enterprise autonomy
granted for the foreign- funded enterprise and the right to employ and dismiss
employees. Appointment, employment dismission and resignation of employees and
their wage, salary, labour insurance, welfare, bonus, labour discipline and
other matters in the cooperative enterprise will be carried out according to
"Labour Management Regulation of the People's Republic of China for the Foreign-
funded Enterprise" and the related laws and regulations.
(b) Employees in the cooperative enterprise must abide by the rules and
regulations and the system of the cooperative enterprise and fulfil their tasks.
The Board of Directors will authorize the General Manager to work out and issue
the associated management rules and regulations and system.
23. Auditing of accounting and taxation
(a) The cooperative enterprise should have an accountant manager who is
nominated by Party A and appointed after the majority of directors agree.
(b) The cooperative enterprise should pay tax according to the related
laws and regulations of China. In accordance with the government approval, the
cooperative enterprise should enjoy all the preferential treatment about tax and
duty.
(c) The fiscal year of the cooperative enterprise should start from
January 1 of each year and end on December 31 of the said year. The first fiscal
year of the cooperative enterprise should start from date of issuing the
business license of the cooperative enterprise and end on December 31 of said
year. The final fiscal year should start from January 1 of the terminated year
until its termination day.
(d) The cooperative enterprise will adopt the current accrual basis in
the world. All accounting records, slips, accounting books and statements in the
cooperative enterprise should be made according to the accounting principle of
China, written in Chinese and kept. The cooperative enterprise use Reminbi as
its entry currency. The annual and quarterly statements should be approved and
signed by the General Manager, written in Chinese and kept.
(e) In accordance with the requirements of the Ministry of Finance of
the People's Republic of China and related regulations and on the basis of the
concrete condition of the cooperative enterprise, the cooperative enterprise
should draw out its financial accounting and administration method and submit
them to the competent department and the concerned financial and tax department
for approval and record.
(f) The cooperative enterprise will designate an accountant office
chartered in China and appoint it as the auditor of the cooperative enterprise
after approved by the Board of Director
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to examine and verify the" accounts and account books, and submit the inspection
report to the Board of Directors and the General Manager within sixty (60) days
after each fiscal year.
(g) Within thirty (30) days after each calendar quarter is ended, the
General Manager should prepare the quarter accounting statements and deliver
them to both parties. The quarter accounting statement should contain the
business results, financial status and other information that either party wants
to get during this period.
(h) The following accounting principle should be taken as the guide
principle for the sustained business of the cooperative enterprise:
(1) Unless specified otherwise, the Profits obtained by the cooperative
enterprise should deduct the reserve fund, bonus, welfare fund, and development
fund specified in the constitution of the cooperative enterprise after the
cooperative enterprise pays its income tax according to the taxation law and
regulations of the People's Republic of China and the net profit be distributed
according to the proportion of the registered capital of each party.
(2) The financial statement and management after each stage is ended
should comply with the standard required by China for foreign-funded enterprise.
24. Cooperative period
Except for the termination in clause 14, the cooperative period is
eleven (11) years, which is calculated from the day when the business license is
issued. If both parties want to extend the cooperative period, they should set
forth the application to the examination and approval department six months
before the expiration of the cooperative period. After the approval, the period
can be extended, and the registration procedure for change must be carried out
the Liaoning Provincial Industrial and Commercial Administration.
25. Termination and liquidation
(a) Based on the following reasons, either party can give the written
notice to other party for termination of this contract ninety (90) days in
advance:
(1) If any party violates this contract seriously and does not correct
within sixty (60) days upon receipt of notice from the party that does not
violate the contract;
(2) If any party violates the stipulations of this contract and
transfer its right and interest of the cooperative enterprise;
(3) If the governmental government that has the control right over
either party or the cooperative enterprise develops any policy, laws and
regulations that possibly of cause severe and disadvantageous results to either
party of the cooperative enterprise and both parties cannot discuss and decide
the necessary adjustment specified in clause 17 (b) of this contract;
(4) If the cooperative enterprise cannot get the approval from U.S.
Federal Aviation Bureau and the approval obtained is reversed;
(5) If the unexpected conditions take place so as that the majority of
directors thinks the business of the cooperative enterprise is profitless;
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(6) If the physical performance of this contract cannot be carried out
over one hundred and eighty (180) days due to the force majeure;
(b) If either party gives the notice that requires to terminate this
contract according to clause 14 (a) (1) and (2) this party can process according
to the applicable laws.
(c) If either party gives the notice that requires to terminate this
contract according to clause 14 (a) (3) and six both parties is should hold
negotiation within sixty (60) days upon delivery of the notice to get
understanding about this notice. When a period of sixty (60) days is ended, both
parties should take steps immediately for liquidation if the party that gives
the notice upon termination still wish to terminate this contract.
(d) Regardless of the reason why the cooperative enterprise want to
terminate, the other assets should be evaluated and liquidated according to the
related stipulations of China except for 25 thousand US$ invested once by Party
B.
(e) Within five years' establishment of the cooperative enterprise, if
either party requires to terminate this contract beyond the reasons in clause 14
(a) (1) to (6) (e. g.) adjustment of corporation structure, changes in the
business status and bankrupt(y), either one cannot get any assets from the
cooperative enterprise.
26. Breach responsibility
If either party violates this contract, it should compensate the direct
losses suffered by another party. If both parties in this contract are in breach
they should undertake their liabilities respectively due the violation. It does
not mean the waive if a party does not give a notice to the party this is in
breach. Any waive to the violation of this contract does not constitute the
waive to any other violation of this contract. In any cases, special, occasional
or indirect compensation such as surplus losses, profitable losses or losses in
economical advantage in future due to performance or non-performance of this
contract will not 'be borne by either party.
27. Applicable law
(a) The effectiveness, interpretation, performance and dispute solution
of this contract should be controlled by the laws published in China. However,
if some specific matter is not under the control of the laws published in China,
the general international practice should be followed. Party A should let Party
B know the Chinese laws.
(b) If China or U.S. issues the new laws or regulations or the existing
laws and regulations are revised or interpreted after this contract is signed,
both parties should discuss immediately the severe and unfavourable influences
on either party's economical benefits and make the greatest effort on the
necessary adjustment in order that the economical benefits of both
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parties in this contract are not lower than those given before those laws or
regulations are issued newly or revised or interpreted.
28. Force majeure
(a) The force majeure means:
(1) Accidents that cannot be controlled by both parties or he
cooperative enterprise in this contract;
(2) Accidents that cannot be expected or are unavoidable even though
they can be expected;
(3) Accidents that take place after the contract is signed;
(4) All the states that cause either party or the cooperative
enterprise not to perform wholly or partly this contract;
These accidents include but not limited to non- human accidents, fire,
flood, dry, typhoon, earthquake or other natural disasters, traffic accidents,
war or governmental action.
(b) If either party of this contract cannot perform this contract due
to the force majeure accidents, the period to perform this contract should be
extended to one affected by the force.
(c) Either party that is affected by the force majeure should notice
another party about the force majeure by telex or fax in the time as short as
possible, and post the accident certificate issued witnessed by the associated
departments to another party with registered air mail within thirty (30) clays.
(d) If the force majeure accidents prolongs for more than one hundred
and eighty (180) days, both parties should discuss friendly the problems how to
perform further this contract ( if the further performance is necessary).
29. Insurance
(a) Both parties agree to make insurance according to the relative
stipulations of Chinese People's Insurance Company.
(b) All these insurance slips should be calculated in Reminbi.
30. Revision and change of the contract
Both parties should sign the written document for revision and/or
supplement of any contents of this contract. Both parties recognize and agree
that any change can come into force only after approved by the defined
government.
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31. Dispute solution
(a) Taking the right that both parties can have to terminate this
contract according to clause 14 in this contract as the prerequisite, either
party should notice another party the dispute nature and its wish to solve the
dispute perfectly in case any dispute arides from the interpretation or
performance of this contract and its attachments. Both parties should make the
great efforts on solving the dispute perfectly within sixty (60) days upon
delivery of this notice.
(b) If both parties cannot solve the dispute perfectly with sixty (60)
days, either party can submit the dispute to the arbitration organization in
China for adjustment and arbitration.
(1) The arbitrator should refer to Chinese and English versions of this
contract, but the Chinese version is the right one.
(2) All the procedures of any arbitration should be carried out both in
Chinese and English, and every day record sorted out both in Chinese and
English;
(3) The arbitrator should be a qualified professional lawyer who can
speak a good English;
(4) The award is released in English;
(5) Both parties should bear expenses associated with the arbitration
respectively respectively, and expenses for arbitrator should, be apported by
both parties.
(c) The arbitrate adjudication is final which constrains both parties.
Both parties agree to accept the constraint of this adjudication and act as such
adjudication.
(d) When any dispute occurs and is arbitrated, both parties should
continue to exercise their rights and perform their obligation under the
contract.
(e) Any contents in this clause cannot be considered not to allow
either party to get help from the lawful or administrative departments.
32. Language text
This contract (including attachments) is written in Chinese and
English, four (4) copies each. Each party will have two (2) Chinese copies and
two (2) English copies. When they are inconsistent, the Chinese version is the
right one.
33. Miscellaneous stipulations
(a) If either party cannot exercise or prolong the exercise of any
right or special right under this contract, this is not considered as the waive.
Any right or special right that is not completely exercised will not block their
exercise in the future.
(b) Both parties agree to keep the cooperative enterprise sincerely
abiding by the Chinese laws applicable for the cooperative enterprise. Party A
agrees to support Party B to
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follow U.S. laws and regulations applicable for the cooperative enterprise
including but not limited to U.S. Federal Aviation Administration Law and
regulations as well as the restriction of the technical transformation issued
by U.S. Government.
(c) This contract and its attachments are the complete agreement of
this contract for both parties and substitute and past discussion, exchange,
memorandum, negotiation, understanding and other documents as well as
agreements. The documents and letters signed previously by both parties will
automatically lose their effectiveness since this contract becomes effective.
(d) The right and obligations of both parties under the contract during
the cooperative period existing always. The establishment of the cooperative
enterprise and adoption of the constitution should not block the right and
obligations under the contract. When this contract is inconsistent with the
constitution, this contract is the right one.
(e) If a party sends the notice to another party by telegram, telex,
fax or air registered letter under the following addresses or other addresses
that are replaced by the notice, the notice or telecommunication should be
considered as received twenty (20) days after the stamp date, e.g. the notice or
telecommunication on this contract by air registered letter. The notice by telex
or fax should be taken as received upon two (2) work days when they are sent.
Party A: China Northern Airlines
Shenyang Taixian Airport, the People's Republic of China
Addressee: Li Danbin
Telephone: (024) 9392602
Fax:(024) 9392954
Party B: U.S. Pasco International Aviation Corp.
Address: 1100 N. W. 54th Street,
Ft. Lauderdale, FL 33309, USA
Addressee: Mr. Simon Chiang
Telephone: 001-954-351-9880
Fax: 001-9-54-351-9862
(f) If both parties of the cooperative enterprise produce the liability
relationship mutually during the cooperative period or produce the liability
relationship for the cooperative enterprise, the uncompensated payment resulted
from any above liability relationship before the termination will not affected
due to the termination. When this contract is terminated, the obligation of
debtor to compensate the creditor should not be released.
(g) Attachments of this contract are the complete part of this contract
and have the same effectiveness as the contract itself.
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(h) This contract is signed by the representatives authorized by both
parties on February 28, 1996.
Signature on behalf of Signature on behalf of
Party A Party B
/s/ Jiamg Lianying /s/ Simon Chiang
Jiang Lianying Simon Chiang
China Northern Airlines Pasco International Aviation Corp.
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Exhibit 10.19
CONSIGNMENT
CONTRACT
1
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THIS AGREEMENT is made the First day of December, 1996.
between FERSAM INTERNATIONAL Ltd.
-------------------------
of Pa Verkuyllaan 51-55 achter,
1171 EB Badhoevedorp,
The Netherlands
(hereinafter called the "consignor")
and JET AVIATION TRADING Inc.
-------------------------
of 1170 N.W. 163rd Drive,
Miami, FL 33169
United States of America
(hereinafter called the "consignee")
1. IN THIS AGREEMENT
a) The expression "expendable items" shall mean item for which no
authorized repair procedure exists and the cost of repair of which would
normally be expected to exceed that of replacement.
b) The expression "rotable items" shall mean items which can be
economically restored to a serviceable condition and in the normal course of
operations is repeatedly rehabilitated to a fully serviceable condition over a
period approximating to the life of the flight equipment to which it relates.
c) The expression "material" shall include rotable and expendable items
listed in Appendix A hereto.
d) The expression "shelf life expired" shall mean that the length of
time for which an item can be stored under specified requirement has been
reached or exceeded.
e) The expression "net sales price" shall mean:
1) In respect of expendable items the selling price ex
consignee's warehouse.
2) In respect of rotable items the selling price or the loan
charges receivable or the exchange charges receivable or
the lease charges receivable, less any reconditioning,
overhaul or recertification charges incurred by the
consignee.
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f) The expression "disposal" shall mean the sale, loan, lease or
exchange of any material.
2. AGREEMENT TO CONSIGN AND SELL
The consignor hereby appoints the consignee as its marketing and sales
organization for such materials the consignor may in its sole judgement decide
from time to time to consign to the consignee pursuant to the terms hereof and
the consignee agrees to accept the consigned material and to market and sell,
loan, lease or exchange such material on the terms and condition herein
contained.
3. PERIOD OF THE AGREEMENT
The period of this agreement shall supersede the current one on the
date hereof and shall remain in effect for an initial period of two years
subject to paragraph 12 below and will continue thereafter until determined by
no less than three months notice given by either party to the other on or after
the second anniversary of such date.
4. DELIVERY OF MATERIAL
The following procedure shall be followed when material is delivered by
the consignor to the consignee.
a) NOTICE
The consignor shall provide the consignee with written notice of its
intention to deliver material at least two working days before the
intended delivery date and accompanying such notice shall be a
duplicate copy of the delivery note for the material to be delivered.
b) IDENTIFICATION
To the extent reasonably possible and practical each unit of material
delivered will be tagged by the consignor at the time of delivery which
shall identify the unit as the property of the consignor stating to the
most current manufacturer's part number and its condition, together
with FAA certification.
c) INVENTORY STOCK LIST
Each delivery shall be accompanied by a delivery note identifying the
material.
2
<PAGE>
d) RECEIPT
The consignee shall execute and deliver to the consignor at the time of
delivery of the material a receipt for-all such material delivered
subject to correction that might arise pursuant to paragraph 10 hereof
e) COST, PACKAGING, AND SHIPPING
Initially the consignor and consignee shall be responsible for all
costs of packaging and shipping the material to the consignee's store
and the consignor shall bear the risk of loss or damage prior to
delivery to the consignee's store.
f) DELIVERY POINT
The consignor shall deliver the material to the consignee's warehouse
facility at 1170 N.W. 163rd Drive, Miami, Florida, or such other
location as the consignor and the consignee might agree to in writing.
g) STORAGE
The consignee shall be responsible for storing the material in a
segregated area within its main store and for ensuring that at all
times all appropriate storage conditions and security requirements are
met.
5. SALES
Disposal of the material shall be by the consignee as undisclosed agent
and on behalf of the consignor. The sales prices shall be determined in the
following manner:
a) LOAN, LEASE OR EXCHANGE
The consignee agrees to use its best effort to loan, lease or exchange
the material promptly and for the best prices obtainable in the market
at that time and to be responsible for all amounts due pursuant to any
loan, lease or exchange hereunder.
b) OUTRIGHT SALE
The consignee agrees to use its best efforts to sell the material
promptly and for the best prices obtainable in the market at that time
and to be responsible for any and all amounts due pursuant to any sale
hereunder.
3
<PAGE>
c) COSTS
The consignee shall be responsible for ( I ) all costs of disposal and
distribution including packaging, shipping documents and handling
charges and ( 11 ) the recovery of any and all amounts due pursuant to
any disposal of material hereunder.
d) TERMS OF SALE
With respect to the sale of any material by the consignee pursuant to
the terms hereof said material shall be sold either ex warehouse for
US-customer or FOB US- airport for overseas customers. All such sales
shall provide that title to material shall not pass until full payment
has been received.
e) SHELF LIFE EXPIRED MATERIAL
In respect to material which is shelf life expired, the consignee shall
ensure that all overhaul and/or recertification work required shall be
carried out by a party approved for that purpose by the FAA or any
other Aviation Authority.
6. PAYMENT
The consignee shall pay the consignor by standard accepted payment
methods, with telegraphic transfer preferred, from the proceeds of the disposal
of the material the amount set forth below on the following terms and
conditions:
a) REPORT
The consignee shall within 14 days after the last day of each calendar
month during the term of this Agreement report to the consignor all
disposals made during the said month which shall include an itemized
list of the items disposed, the items returned and the debits in
respect thereof pursuant to sub-paragraph ( c) of this paragraph, the
gross sale price, the net sales price and the amount payable to the
consignor. The consignor reserves the right to audit the consignee's
method of consigned inventory control during business hours.
b) PAYMENT
The consignee shall pay to the consignor a sum equal to 75% of the net
sales price of all material disposed of by the consignee as declared in
each report submitted under sub-paragraph ( a ) of this paragraph.
Invoices shall be submitted by the consignor for the payments due as
shown in the reports to in ( a) above and shall be payable within 30
days from date of invoice
4
<PAGE>
c) RETURN OF MATERIAL
Should material be returned to consignee by third party purchaser
during a period of 14 days from the date of shipment of the material to
the consignee by reason of the material not complying with the
purchaser's purchase order then the consignee upon verifying the reason
for the return of the material shall, providing the net sales price of
the said item has been credited to the consignor's account, debit the
consignor's next monthly accounting report and reduce the payment to
the consignor's by amount of the previous credit for such material.
This procedure will be followed providing it does not create a
consignee cash-flow problem, and any amended between consignee /
consignor taking into account the vagaries of business.
d) BAD DEBTS.
Providing consignee is using all reasonable methods to obtain payment
from third party purchasers, consignee / consignor will have the option
to negotiate acceptable terms for sharing of burden when all reasonable
payment method have been exhausted, including the hiring of collectors
agencies. In the event that a dispute may not be resolved within 30
days then the local Legal Arbitrators shall resolve matters accordingly
and its findings shall be final and binding on both parties.
7. TITLE TO MATERIAL
Title to all material consigned hereunder shall be and remain with the
consignor and shall be clearly marked as such until such time as said material
is sold and shipped or transferred to a good faith purchaser and paid for at
which time the title to the material sold will transfer from the consignor to
the purchaser thereof.
8. LIENS AND ENCUMBRANCES
The consignor warrants that all material at the time of consignment and
thereafter until sold by the consignee shall be free of mortgages, liens,
conditional sales agreements or other encumbrances or charges.
9. CUSTODIANSHIP
The consignee shall store all material in its warehouse facilities at
1170 N.W. 163rd Drive, Miami, FL 331169, and shall be responsible for the
insurance against all risks for the same, at no cost to the consignor.
5
<PAGE>
10. INVENTORY CONTROL
Upon receipt of the material from the consignor, the consignee shall
compile an inventory listing of the material to ascertain whether the Delivery
Note provided by the consignor is correct and the items are properly tagged. If
discrepancies are revealed the consignee will notify the consignor in writing
within 10 working days after the discovery of the particular discrepancies and
correct its inventory stocking list accordingly unless advised otherwise by the
consignor within 10 working days of the consignee's written notification. The
consignee shall keep at all times a full and complete listing of the material in
its store which will be available to the consignor upon request and the
consignee shall have the responsibility to preserve the tagging and identity of
the material attached by consignor unless corrected as above. The consignor's
representatives shall have reasonable access to the material for the purpose of
verifying said lists or inspecting the condition of such material or for any
other reasonable purposes related to this Agreement.
11. RISK OF LOSS AND INSURANCE
The consignee assumes all risk of loss or damage to the material upon
receipt of the material from the consignor. In addition the consignee agrees to
maintain in effect at its expense "all risks' insurance on all material until
such material is received by purchaser, such insurance is to provide against all
risk of physical loss or damage in an amount as is mutually agreed between the
parties.
12. LIEN
A breach shall arise upon the happening of one or more of the following
events which shall constitute an Event of Default namely:
a) Either party shall fail to perform or observe any of the terms
and conditions or agreements to be performed or observed by it
as herein contained and such failure shall continue unremedied
after written notice thereof has been given to the other
(I) for thirty days in the event of the beach relating to
non-payment by the consignee.
(II) for sixty days in the event of any other breach.
b) Either party shall generally not be paying its debts as they
become due or cease operations or have any action taken
against it for administration or liquidation under the
Insolvency Act (not being a voluntary liquidation for the
purpose of reconstruction or amalgamation) or have a receiver
appointed then and in any such event either party shall have
the right to terminate this
6
<PAGE>
Agreement without prejudice to the rights and remedies of
either party against the other in respect of any antecedent
claim, or breach of this Agreement.
14. FORCE MAJEURE
The consignee shall not be liable for any damages and/or excess costs
or any other losses to the consignor to the extent that such damages costs or
losses arise through the failure by the consignee in observing the terms and
conditions and which could not with reasonable diligence have been anticipated
and was without its fault or neglect including acts of God or public enemy acts
of Government, fires, floods, epidemics, quarantine restrictions, strikes,
freight embargoes, unusually severe weather and delays and failures of
sub-contractors due to any of such causes as above provided the consignee
notifies the consignor in writing of the cause of such failure within 30 days.
15. TERMINATION
Upon the termination of this Agreement and upon written agreement of
termination procedure between the consignee and consignor all remaining material
will be made available for return, transportation, and/or disposal by the
consignee to the consignor. Consignee will co-operate fully with consignor's
authorized agents for removal of consignor's property.
16. LAW AND DISPUTE
The parties hereto agree that this Agreement shall be governed by and
construed and the performance thereof shall be determined in accordance with the
Laws of England. In event that a dispute may not be resolved within 30 days then
the local Legal Arbitrators shall resolve matters accordingly and its findings
shall be final and binding for both parties.
17. NOTICES
All notices and other communications hereunder shall be in writing (
including facsimile transmissions or telexes) and shall be duly given when
received by party to whom it is addressed at its address specified below or at
such other address as one party may notify to the other as being its address for
the receipt of such notices pursuant to this Agreement.
CONSIGNEE
JET AVIATION TRADING, Inc., 1170 N.W. 163rd Drive, Miami, FL 33169, U. S. A..
Phone 1 305 624 6700, Fax 1 305 624 2944.
7
<PAGE>
Mr. Joseph J. NELSON, President & C.O.O., Jet Aviation Trading, Inc.
CONSIGNOR
FERSAM INTERNATIONAL, Ltd., Pa Verkuyllaan 51-55 achter, 1171 EB Badhoevedorp,
The Netherlands. Phone 31 20 659 7771, Fax 31 20 659 7688 / 659 7788.
Mr. Nazie A. EL MASRY, Managing Director, Fersam International, Ltd.
Mrs. Patricia M. EL MASRY, Financial Director, Fersam International, Ltd.
8
<PAGE>
APPENDIX TO CONSIGNMENT AGREEMENT, BROKERAGE
There will arise such time that the consignee and consignor will face a
situation to improve the sale of the consignment stock and "BROKERING' is
involved i.e. the purchase of items separate from the consignment.
As each brokered deal has it's own particular characteristics, there
will be some deals where consignee purchased items outside vendor and consignor
invoices the end user. Equally possible, there will be some cases where the
consignor purchases the goods and the consignee invoices the end user. In either
case, the party purchasing the goods is responsible for invoicing the other
party in a timely manner with their percentage of the agreed upon margin
included.
The division of the proceeds/profits margin will be determined as
follows: After removal of the acquisition cost and repair costs (if applicable),
profit will be defined as that amount left from invoice to end user divided into
two equal parts and split evenly.
Any freight charges not billable to the end user will be divided
equally between the two parties and invoiced accordingly.
Monthly sales of "BROKERED" items will be on a separate monthly sales
return independent from the sales return of consignment stock.
In certain pre-arranged instances, the consignee or consignor will both
purchase part from an outside vendor and invoice end user. In such a case all
brokering criteria referenced above applies and monies due either party will be
included on "BROKERED" items statement as above.
Any notice hereunder shall be deemed received at the time of its
despatch in the case of a facsimile transmission or at the time of its delivery
in the case of a delivery by hand or recorded delivery post.
9
<PAGE>
AS WITNESS the hands of the parties the day and year first before written.
SIGNED on behalf of the CONSIGNOR BY (Mr. N.A. EL MASRY)
Company Seal
Being duly authorized
/s/ N. El Masry
---------------------
SIGNED on behalf of the CONSIGNEE BY (Mr. J. J. NELSON)
Company Seal
Being duly authorized
/s/ Joseph J. Nelson
---------------------
10
<PAGE>
Exhibit 10.20
Mirandy Products Ltd.
1078 GRAND AVE. -SO. HEMPSTEAD. N.Y. 11550/ (516)489-6800/1-600-344-5637/
FAX (516)489-6073
MANUFACTURER'S REPRESENTATIVE AGREEMENT
Agreement made this 23rd day of January, 1997 between Mirandy Products, a New
York Corporation and Joe Nelson of Jet Aviation Trading, Inc.
The parties agree as follows:
The company appoints Joe Nelson as a Manufacturer's Representative on a straight
commission basis as distributor for specific carriers. All valid orders shipped
and billed at book price are payable at ________ commission. On orders shipped
and billed at less than book price, the difference in
percentage shall be deducted from said commissions.
Commissions are paid upon receipt of payment for each order.
Mirandy Products Ltd.
By:_______________________________
Manufacturer's Representative:
/s/ Joseph Nelson
- -----------------------------------
1
<PAGE>
Exhibit 10.21
AVIATION HOLDINGS INT'L.
------------------------
JANUARY 1, 1999
SALES REPRESENTATION AGREEMENT BETWEEN
AVIATION HOLDINGS INTERNATIONAL, INC. (AHI)
15675 N.W. 15th Avenue
MIAMI, FLORIDA 33169
AND
ACCESSORY TECHNOLOGIES CORPORATION (ATC)
219 CENTRAL AVENUE
FARMINGDALE, NEW YORK 11735
ARTICLE I
- ---------
TERM
----
Term of initial agreement will be one (1) year, beginning January 1,
1999 and expiring December 31, 1999. This agreement will automatically
renew itself unless modified or terminated in accordance with
provisions in Article V of this agreement.
ARTICLE II
- ----------
TERRITORY
---------
The territory of this sales agreement covers all of Mainland China,
Hong Kong, Taiwan, Korea and . This agreement will be considered
mutually exclusive to both parties.
ARTICLE III
- -----------
RESPONSIBILITIES
----------------
ATC will provide AHI, upon request, capability listing's including
pricing/quotations, airworthiness certificates, drug and alcohol
compliance certificates, and any other facility information, which may
be used as a sales tool. Upon request, ATC will provide AHI status
reports on all open jobs and will quote each customer prior to
conducting any repair work.
1
<PAGE>
AHI will be asked to provide status reports on a monthly basis
providing information on current status for all accounts solicited
which fall under the territory of this agreement.
All correspondence and monthly reports between ATC and AHI will be
forwarded to the attention of Domenick DeGirolamo, President,
(Accessory Technologies Corporation) and Simon Chiang, Vice President
(AHI) by fax, and/or E-mail as main contract.
AHI will be responsible for working as liaison on behalf of ATC for all
customers, which fall under this agreement. AHI will be responsible for
its sales agents and employees from and against any and all claims,
cost, and liabilities, whether in contract or in tort, arising, or in
any way connected with injury to or death of personnel or loss of use
or damage to any property of ATC which may result or arise in any
matter to, of or in relation to the services provided under this
agreement.
AHI will assist in recovery of payment on all accounts as billed in the
territory of this agreement.
ARTICLE IV
- ----------
COMMISSIONS
-----------
A standard commission of fifteen percent (15%) will be paid on all paid
invoices, excluding freight charges and hazardous material handling
fee, for all sales up to $250,000. A seventeen percent (17%) commission
will be paid on all sales exceeding $250,000. A twenty percent (20%)
commission will be paid on all sales exceeding $500,000. This
commission schedule is based on annualized sales during the term of
this agreement. Commissions will be paid on overhaul, repair, parts
sales and outright sales of overhauled units including exchange sales.
ARTICLE V
- ---------
TERMINATION
-----------
ATC and AHI have reserved the right, upon 30 days written notice, to
terminate this agreement without penalty to either party. All
commissions accrued from units received in house up to date of
termination will be paid by ATC.
2
<PAGE>
ARTICLE VI
- ----------
CONDITIONS OF AGREEMENT
-----------------------
AHI must use its best efforts to solicit component repairs from above
mentioned territory listed in this agreement. A forecast is to be
provided by AHI for review no later that April 30, 1999 in order to
estimate sales/volume growth budgeting for a 12-month period.
ACCEPTED AND AGREED:
- --------------------
AVIATION HOLDINGS INT'L. INC. ATC CORPORATION
Joseph J. Nelson Domenick De Girolamo
President & C.E.O. President
Signature Signature
/s/ Joseph J. Nelson /s/ Domenick De Girolamo
- -------------------- ------------------------
Date: 3/9/99 Date: 3/9/99
-------------- ------------------
3
<PAGE>
Exhibit 10.22
AVIATION HOLDINGS INT'L.
JANUARY 1. 1999
SALES REPRESENTATION AGREEMENT BETWEEN
AVIATION HOLDINGS INTERNATIONAL, INC. (AHI)
15675 N.W. 15th Avenue
MIAMI, FLORIDA 33169
AND
AERO KOOL CORPORATION
1495 S. E. 10th AVENUE
HIALEAH, FLORIDA 33010
ARTICLE I
- ---------
TERM
----
Term of initial agreement will be one (1) year, beginning January 1,
1999 and expiring December 31, 1999. This agreement will automatically
renew itself unless modified or terminated in accordance with
provisions in Article V of this agreement.
ARTICLE II
- ----------
TERRITORY
---------
The territory of this sales agreement covers all of Mainland China,
Hong Kong, Taiwan, Korea and Thailand. This agreement will be
considered mutually exclusive to both parties.
ARTICLE III
- -----------
RESPONSIBILITIES
----------------
AERO KOOL will provide AHI, upon request, capability listing's
including pricing/quotations, airworthiness certificates, drug and
alcohol compliance certificates, and any other facility information,
which may be used as a sales tool. Upon request, Aero Kool will provide
AM status reports on all open jobs and will quote each customer prior
to conducting any repair work.
1
<PAGE>
AHI will be asked to provide status reports on a monthly basis
providing information on current status for all accounts solicited
which fall under the territory of this agreement.
All correspondence and monthly reports between AERO KOOL and AHI will
be forwarded to the attention of Theodore Gregor, President, (AERO KOOL
CORPORATION) and Simon Chiang, Vice President. (AHI) by fax, and/or
Email as main contract.
AHI will be responsible for working as liaison on behalf of AERO KOOL
for all customers, which fall under this agreement. AHI will be
responsible for its sales agents and employees from and against any and
all claims, cost, and liabilities, whether in contract or in tort,
arising, or in any way connected with injury to or death of personnel
or loss of use or damage to any property of AERO KOOL which may result
or arise in any matter to, of or in relation to the services provided
under this agreement.
AHI will assist in recovery of payment on all accounts as billed in the
territory of this agreement.
ARTICLE IV
- ----------
COMMISSIONS
-----------
A standard commission of fifteen percent (13%) will be paid on all paid
invoices, excluding freight charges and hazardous material handling
fee, for all sales up to $250,000. A seventeen percent (15%) commission
will be paid on all sales exceeding $250,000. A twenty percent (17%)
commission will be paid on all sales exceeding $500,000. This
commission schedule is based on annualized sales during the term of
this agreement. Commissions will be paid on overhaul, repair, parts
sales and outright sales of overhauled units including exchange sales.
ARTICLE V
- ---------
TERMINATION
-----------
AERO KOOL and AHI have reserved the right, upon 30 days written notice,
to terminate this agreement without penalty to either party. All
commissions accrued from units received in house up to date of
termination will be paid by AERO KOOL.
2
<PAGE>
ARTICLE VI
- ----------
CONDITIONS OF AGREEMENT
-----------------------
AHI must use its best efforts to solicit component repairs from above
mentioned territory listed in this agreement. A forecast is to be
provided by AM for review no later that April 30, 1999 in order to
estimate sales/volume growth budgeting for a 12-month period.
ACCEPTED AND AGREED:
- -------------------
AVIATION HOLDINGS INT'L. INC. AERO KOOL CORPORATION
Joseph J. Nelson Theodore Gregor
- ---------------- ---------------
President & C.E.O. President
- ------------------ ---------
Signature Signature
Joseph J. Nelson Theodore Gregor
- ------------------------ ---------------------------
Date:___________________ Date:_________________
3
<PAGE>
Exhibit 10.23
AVIATION HOLDINGS INT'L.
APRIL 1, 1999
SALES REPRESENTATION AGREEMENT BETWEEN
AVIATION HOLDINGS INTERNATIONAL, INC. (AHI)
15675 N.W. 15th AVENUE
MIAMI, FLORIDA 33169
AND
AAS LANDING GEAR SERVICES, INC.
6929 N. W. 46 STREET
MIAMI, FLORIDA 33166
ARTICLE I
- ---------
TERM
----
Term of initial agreement will be two (2) years, beginning April 1,
1999 and expiring March 31, 2001. This agreement will automatically
renew itself unless modified or terminated in accordance with
provisions in Article V of this agreement.
ARTICLE II
- ----------
TERRITORY
---------
The territories of this sales agreement covers all of Taiwan, China and
Thailand. This agreement will be considered mutually exclusive to both
parties.
ARTICLE III
- -----------
RESPONSIBILITIES
----------------
AAS Landing Gear Services will provide AHI, upon request, capability
listing's including pricing/quotations, airworthiness certificates,
drug and alcohol compliance certificates, and any other facility
information, which may be used as a sales tool. Upon request, AAS
1
<PAGE>
Landing Gear Services will provide AHI status reports on all open jobs
and will quote each customer prior to conducting any repair work.
AHI will be asked to provide status reports on a monthly basis
providing information on current status for all accounts solicited
which fall under the territory of this agreement.
All correspondence and monthly reports between AAS Landing Gear
Services and AHI will be forwarded to the attention of Ned Angene,
President, (AAS Landing Gear Services) and Simon Chiang, Vice President
(AHI) by fax, and/or E-mail as main contract.
AHI will be responsible for working as liaison on behalf of AAS Landing
Gear Services for all customers, which fall under this agreement. AHI
will be responsible for its sales agents and employees from and against
any and all claims, cost, and liabilities, whether in contract or in
tort, arising, or in any way connected with injury to or death of
personnel or loss of use or damage to any property of AAS Landing Gear
Services, which may result or arise in any matter to, of or in relation
to the services provided under this agreement.
AHI will assist in recovery of payment on all accounts as billed in the
territory of this agreement.
ARTICLE IV
- ----------
COMMISSIONS
-----------
A standard commission of fifteen percent (15 %) will be paid on all
paid invoices, excluding freight charges and hazardous material
handling fee, for all sales up to $250,000. A seventeen percent (17%)
commission will be paid on all sales exceeding $250,000. A twenty
percent (20%) commission will be paid on all sales exceeding $500,000.
This commission schedule is based on annualized sales during the term
of this agreement. Commissions will be paid on overhaul, repair, parts
sales and outright sales of overhauled units including exchange sales.
ARTICLE V
- ---------
TERMINATION
-----------
AAS LANDING GEAR SERVICES and AHI have reserved the right, upon 30 days
written notice, to terminate this agreement without penalty to either
party. All commissions accrued from units received in house up to date
of termination will be paid by AAS Landing Gear Services.
2
<PAGE>
ARTICLE VI
- ----------
CONDITIONS OF AGREEMENT
-----------------------
AHI must use its best efforts to solicit component repairs from above
mentioned territory listed in this agreement. A forecast is to be
provided by AHI for review no later that April 30, 1999 in order to
estimate sales/volume growth budgeting for a 12-month period.
ACCEPTED AND AGREED:
- --------------------
AVIATION HOLDINGS INT'L. INC. AAS LANDING GEAR
SERVICES, INC.
Simon Chiang Ned Angene
- ------------ ----------
Vice President President
- -------------- ---------
Signature Signature
/s/ Simon Chiang /s/ Ned Angene
- ------------------------ ----------------------
Date: 4/14/99 Date: 4/15/99
------------------ ---------------
3
<PAGE>
Exhibit 10.24
Engineering & Maintenance Division, China Airlines
&
Aero-Link Flight Systems Corp. Ltd
Agreement on Marketing &, Promotion of Aircraft Maintenance,
Turbine Engine &, Component Repair &, Overhaul Business
1
<PAGE>
CHINA AIRLINES' ENGINEERING AND MAINTENANCE DIVISION (hereinafter referred to as
China Airlines) makes this Agreement with AERO-LINK FLIGHT SYSTEMS CORP. LTD.
(hereinafter referred to as Aero-Link) under the condition that Aero-Link agrees
to promote the aircraft maintenance, turbine engine and component repair and
overhaul business on behalf of China Airlines within the sphere of the
maintenance certificates, issued by relevant aviation authorities, of China
Airlines. It is agreed by China Airlines and AeroLink as the following so that
both parties shall abide by.
1. China Airlines has its registered address at No.15
HangChienNanLu,C..K.C. International Airport, Taoyuan, Taiwan, R.O.;
and Aero-Link has its registration address at Rm#108, 1/F Hang Bong
Comm. Center, 28 Shanghai Street, Kowloon, Honq Kong. All the notices
on activities conducted in accordance with the Agreement should be in
written form, and they will only be in effect if they are delivered to
the above mentioned address. Should either party change its address,
the other party should be informed in writing on thirty (30) days
notice.
2. China Airlines holds Maintenance Organization Certificate of CAAC,
[Registration No. 09011 valid until December 31, 2000, Federal Aviation
Administration (FAA) Certificate, [Registration No. SAJY979H] valid
until May 1, 1999 and Joint Aviation Administration (JAA) Certificate,
[Registration No. RAI-147] valid until December 26, 1998. Should be any
changes of these certificates, China Airlines shall inform Aero-Link in
writing on thirty (30) days notice. Aero-Link shall promote and market
aircraft maintenance, turbine engine and component repair and overhaul
business on behalf of China Airlines within the sphere of its
maintenance certificate in all territories except Taiwan as
non-exclusive representative. Aero-Link is not considered as the legal
agent of China Airlines, thus Aero-Link is not allowed to conduct legal
activities of any kind in the name that is of China Airlines' legal
agent. China Airlines has the full authority to make any decision
(without any reason) to accept or partially accept the business
opportunities brought by Aero-Link. And Aero-Link shall not be entitled
to have any objections. If in any case, there will be any objections
from any third party, it is of Aero-Link's responsibility to solve the
dissent without any implication or damage of China Airlines' interests.
3. The method of calculation on repair & overhaul job will be: all the
maintenance labor rate for China Airlines will normally be no less than
US Dollar forty (US$40) per hour; and the special maintenance labor
rate such as Eddy Current Inspection-per hour; Ultrasonic
Inspection-per hour, X-Ray Inspection-per exposure, Gamma-Ray
Inspection-per exposure will be no less than US Dollar forty-five
(US$45) per hour. The labor rate is subject to adjust at any time by
China Airlines after thirty (30) days notice to Aero-Link.
4. For all the business opportunities brought by Aero-Link on aircraft
maintenance, turbine engine and component repair and overhaul, China
Airlines will pay Aero-Link the necessary commissions to its appointed
Bank Account: Bank of Kwong On Bank, Ltd. Account No:
2
<PAGE>
73-901-021179, Address: 12-14 Yee Woo Street, Causeway Bay, Hong Kong
within 30 days after China Airlines receives full payment for the
service invoiced to the customers.
(1) China Airlines agrees to pay a commission of six percent (6%) of the
net maintenance labor rate to Aero-Link for the maintenance work
obtained by Aero-Link. However, if approved by China Airlines in
writing, China Airlines agrees to pay Aero-Link a commission of eight
percent (8%) of net maintenance labor rate for all the maintenance work
obtained by Aero-Link from mainland China, a territory with special
situations;
(2) China Airlines agrees to pay a commission of five percent (5%) of the
material price to Aero- Link as a result of the parts supply to
maintenance work obtained by Aero-Link;
(3) China Airlines agrees to pay a commission of two percent (2%) of net
invoice value (not including transportation, issuance, customs etc.) to
Aero-Link for the maintenance work performed by subcontractors to
undertake the accessory and component maintenance.
5. It is also agrees by China Airlines and Aero-Link on the following
terms:
(1) China Airlines will provide all the necessary support regarding
marketing and promotion materials in order to facilitate the marketing
efforts of Aero-Link. Aero-Link will make the marketing advertisements,
produce the promotional materials as well as carry out the marketing
activities in its own name according to the budget and terms approved
by China Airlines. If there should be any objections from the China
Airlines, Aero-Link should immediately stop or correct the various
advertisements or marketing activities. Otherwise, AeroLink will bear
all the responsibilities incurred.
(2) China Airlines will provide transportation, boarding and assist to
obtain the visa for all those inspectors, who come from mainland China
and stay with China Airlines to supervise their maintenance work. The
expenses occurred by other relevant personnel other than the above
mentioned will be covered by Aero-Link;
(3) Aero-Link will assist to collect all the account receivables for China
Airlines in accordance with the relevant invoices under its own name.
(4) Except for the above mentioned commissions, Aero-Link will cover all
other expenses incurred by itself. In no circumstance shall Aero-Link
declare any claims from China Airlines.
(5) China Airlines shall not be liable to any delay or default in
performance of maintenance work, or for any damages suffered by reasons
thereof, when such delay, default or failure is, directly or
indirectly, caused by or in any manner arises from any cause, condition
or contingency affecting, or beyond the control of China Airlines,
including without limitation,
3
<PAGE>
acts of God, fire, earthquake, hurricane, industrial water or
electricity control, riots, strikes, government or military controls.
(6) The explanation, effectiveness and all other issued that are not
included in this Agreement shall be construed in accordance with the
laws of the Republic of China. And both parties agree to submit the
first jurisdiction of instance to Taipei Local Court.
(7) Unless agreed by both parties in writing, the rights and liabilities of
both parties set in the Agreement shall not be transferred to any third
parties.
6. This Agreement shall remain in effect unless subject to termination by
either party thirty (30) days notice, in writing, to either party. The
Agreement shall be ineffective subject to termination immediately, if
either party shall:
(1) Breach or not fulfil the Agreement and fail to make the correction
within 30 days after written notification of the other party;
(2) Be found of illegal performance or malpractice that is in connection
with the Agreement;
(3) Declare bankruptcy.
7. This Agreement shall be effective immediately when duly signed by both
parties except either party terminates in accordance with the
Agreement.
8. The Agreement contains two original copies while each party keeps one as an
evidence.
Agreed and Accepted by: Agreed and Accepted by:
- ----------------------- -----------------------
CHINA AIRLINES AERO-LINK FLIGT SYSTEMS CORP. LTD
By: By:
Signature: Signature:
Yung Lang Lin Simon Chiang
Director Vice President
/s/ Yung Lang Lin /s/ Simon Chiang
- ------------------------ -------------------------
Date Date
4
<PAGE>
Exhibit 11
Computation of Net Loss Per Share
<TABLE>
<CAPTION>
Three Months Ended
Year Ended December 31, March 31,
------------------------------------------ -----------------------------------
1997 1998 1998 1999
--------------------- ------------------- --------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Loss $ (57,437) $ (705,866) $ (536,998) $ (17,744)
Basic and Diluted weighted
average common shares
outstanding 1,046,235 3,035,856 2,350,000 3,507,483
--------------------- ------------------- --------------- -------------------
Basic and Diluted Loss Per
Share $ (0.06) $ (0.23) $ (0.23) $ (0.01)
===================== =================== =============== ===================
</TABLE>
This table has been prepared using Statement of Financial Accounting Standards
No. 128 "Earnings Per Share" for all applicable periods presented.
<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 June 22, 1999, 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 and one Class A
Warrant.
----------------------------
LJ SOLDINGER ASSOCIATES
Arlington Heights, Illinois
July 12, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-END> DEC-31-1998 MAR-31-1999
<CASH> 363,690 691,074
<SECURITIES> 0 0
<RECEIVABLES> 3,162,545 3,196,375
<ALLOWANCES> (320,000) (320,000)
<INVENTORY> 3,220,062 3,244,744
<CURRENT-ASSETS> 6,787,446 7,380,514
<PP&E> 375,240 391,095
<DEPRECIATION> (72,119) (90,690)
<TOTAL-ASSETS> 9,605,366 11,418,386
<CURRENT-LIABILITIES> 5,174,561 5,699,668
<BONDS> 13,124 12,201
0 0
0 0
<COMMON> 347 409
<OTHER-SE> 3,067,284 5,049,541
<TOTAL-LIABILITY-AND-EQUITY> 9,605,366 11,418,386
<SALES> 8,365,197 3,147,373
<TOTAL-REVENUES> 8,365,197 3,147,373
<CGS> 5,839,049 2,192,272
<TOTAL-COSTS> 5,839,049 2,192,272
<OTHER-EXPENSES> 3,015,842 792,279
<LOSS-PROVISION> 672,989 0
<INTEREST-EXPENSE> 96,044 157,109
<INCOME-PRETAX> (1,194,215) 17,642
<INCOME-TAX> (532,470) 9,000
<INCOME-CONTINUING> (705,866) (17,744)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (705,866) (17,744)
<EPS-BASIC> (0.23) (0.01)
<EPS-DILUTED> (0.23) (0.01)
</TABLE>
