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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 24, 1998.
REGISTRATION NO. 333- .
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
(Name of small business issuer in its charter)
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<S> <C> <C>
DELAWARE 5088 52-2081515
(State or jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
KARL F. BROWN
3516 CENTRE CIRCLE DRIVE 3516 CENTRE CIRCLE DRIVE
FORT MILL, SOUTH CAROLINA 29715 FORT MILL, SOUTH CAROLINA 29715
TELEPHONE: (803) 548-2160 TELEPHONE: (803) 548-2160
(Address and telephone number of principal (Name, address and telephone number of agent
executive for service)
offices and principal place of business)
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Copies to:
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ROBERT W. WALTER, ESQ. NOLAN S. TAYLOR, ESQ.
BERLINER ZISSER WALTER & GALLEGOS, P.C. THOMAS R. TAYLOR, ESQ.
SUITE 4700 LEBOEUF, LAMB, GREENE & MACRAE, L.L.P.
1700 LINCOLN STREET 136 SOUTH MAIN STREET, SUITE 1000
DENVER, COLORADO 80203 SALT LAKE CITY, UTAH 84101
TELEPHONE: (303) 830-1700 TELEPHONE: (801) 320-6700
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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [X]
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. [ ] __________
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE MAXIMUM OFFERING AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PRICE PER UNIT(1) OFFERING PRICE(1) FEE
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<S> <C> <C> <C> <C>
Common Stock(2)................... 2,300,000 $8.50 $19,550,000 $5,767.25
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Representative's Warrants for
Common Stock.................... 200,000 -- $100 $.03
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Common Stock underlying
Representative's Warrants(3).... 200,000 $10.20 $2,040,000 $601.80
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Total........................... $21,590,100 $6,369.08
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o).
(2) Includes 300,000 shares of Common Stock contained in the over-allotment
option.
(3) Pursuant to Rule 416, includes such indeterminate number of additional
shares of Common Stock as may be required for issuance upon exercise of the
Representative's Warrants as a result of any adjustment in the number of
shares of Common Stock issuable upon such exercise by reason of the
anti-dilution provisions of the Representative's Warrants.
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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 OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED MARCH , 1998
PROSPECTUS
2,000,000 SHARES
[AMERICAN AIRCARRIERS SUPPORT, INCORPORATED LOGO]
COMMON STOCK
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All of the shares of Common Stock offered hereby are being sold by American
Aircarriers Support, Incorporated (the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
anticipated that the initial public offering price will be between $7.50 and
$8.50 per share. See "Underwriting" for a discussion of the factors considered
in determining the initial public offering price. Application has been made to
have the Common Stock approved for quotation on the Nasdaq National Market under
the symbol "AIRS."
---------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR INFORMATION
PROSPECTIVE INVESTORS SHOULD CONSIDER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share......................... $ $ $
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Total(3).......................... $ $ $
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. The Company has also agreed to sell to the Representative of the
Underwriters warrants to purchase 200,000 shares of Common Stock
exercisable at $ per share (the "Representative's Warrants"). See
"Underwriting."
(2) Before deducting expenses payable by the Company estimated at $980,000,
including the Representative's nonaccountable expense allowance.
(3) The Company has granted to the Underwriters a 45-day option to purchase an
aggregate of up to 300,000 additional shares of Common Stock solely to
cover over-allotments, if any. If this option is exercised in full, the
total Price to Public, Underwriting Discounts and Commissions, and Proceeds
to Company will be $ , $ and $ , respectively.
See "Underwriting."
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The shares of Common Stock are offered by the Underwriters subject to prior
sale when, as and if delivered to and accepted by them, and subject to the right
of the Underwriters to withdraw, cancel or modify such offer without notice and
reject orders in whole or in part. It is expected that delivery of the
certificates for the Common Stock will be made at the offices of Cruttenden Roth
Incorporated, Irvine, California or in book entry form through the book entry
facilities of The Depository Trust Company on or about , 1998.
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[CRUTTENDEN ROTH LOGO]
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE> 3
[FOUR COLOR PICTURES TO COME]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF THE
COMPANY. SUCH TRANSACTIONS MAY INCLUDE STABILIZING BIDS, THE IMPOSITION OF
PENALTY BIDS, THE PURCHASE OF SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND
OVER-ALLOTMENTS IN CONNECTION WITH THE OFFERING. FOR A DISCUSSION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
On the effective date of the Registration Statement of which this
Prospectus forms a part, the Company will become a "reporting company" under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). The Company
intends to register the Common Stock under the 1934 Act as of the effective date
of the Registration Statement. The Company is a "small business issuer" as
defined under Regulation S-B adopted under the Securities Act of 1933, as
amended, and will file reports with the Securities and Exchange Commission (the
"Commission") pursuant to the 1934 Act on forms applicable to small business
issuers.
The Company intends to furnish annual reports to stockholders containing
audited financial statements, quarterly reports and such other periodic reports
as it may determine to be appropriate or as may be required by law.
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless otherwise indicated, the information contained in this
Prospectus (i) assumes no exercise of the Underwriters' over-allotment option or
options granted or reserved under the Company's stock option plan, and (ii)
gives effect to a recapitalization in connection with the Company's
reincorporation in Delaware. Industry data used in this Prospectus was obtained
from industry publications that the Company believes to be reliable, but has not
independently verified. Unless otherwise stated in this Prospectus, references
to the "Company" shall mean American Aircarriers Support, Incorporated and its
predecessor.
THE COMPANY
The Company is a leading international supplier of primarily high-margin
aircraft components and spare parts to major commercial passenger and cargo
airlines, maintenance and repair facilities and other redistributors located
throughout the world. The Company's net sales are principally derived from the
redistribution of complete engines and engine components and spare parts for the
Pratt & Whitney JT8 series and, to a lesser extent, the General Electric CFM56,
as well as rotable, repairable and expendable airframe components and spare
parts for Boeing, McDonnell-Douglas and Airbus aircraft. The Company acquires
engine and airframe components and spare parts for redistribution through
purchases of surplus aircraft for disassembly, bulk purchases of components and
spare parts from aircraft operators, purchases of individual components and
spare parts from other redistributors, consignments from aircraft operators and
others, and exchanges of inventoried aircraft components and spare parts for
components and spare parts that require service or overhaul.
The Company's net sales increased 58.6% to over $13 million in 1997 and net
income increased approximately 110% to over $4 million in 1997. The growth in
net sales and net income reflects (i) increases in sales of complete engines and
engine components and spare parts, which generally carry higher margins than
airframe components and spare parts, (ii) an increase in the average unit price
per sale due to changes in the Company's product mix to encompass higher priced
engine and airframe components and spare parts sales, (iii) diversification of
the Company's engine sales into new engine types such as the CFM56, and (iv)
increasing sales of complete engines and engine and airframe components and
spare parts to both domestic and international customers. The Company believes
it is one of the few aircraft component and spare part redistributors of its
size engaged in the sale of both engine and airframe components and spare parts
to a broad spectrum of domestic and international customers.
The Company believes that the annual worldwide market for aircraft
components and spare parts is approximately $10 billion, of which approximately
$1.3 billion reflects sales of aircraft components and spare parts in the
redistribution market. Since 1993, the airline industry has experienced rapid
growth in business and leisure air travel. The high demand for airline capacity
has increased utilization of aircraft, contributing to demand for aircraft
components and spare parts as aircraft operators must service or replace
aircraft components and spare parts at scheduled intervals. The world fleet of
aircraft is projected to increase from 11,500 aircraft in 1996 to 23,000
aircraft in 2016, according to Boeing's 1997 Current Market Outlook (the "Boeing
Report"). In addition, the average age of the world fleet of aircraft is
expected to increase in the near future, which may increase demand for
aftermarket aircraft components and spare parts. As airlines continue
outsourcing inventory management functions, leasing engines and aircraft
components and spare parts to reduce capital requirements, and limiting
components and spare parts purchases to a smaller number of approved suppliers
capable of providing improved documentation and traceability, larger inventories
and higher standards of quality control, the Company anticipates that a greater
percentage of sales in the aircraft components and spare parts redistribution
industry will become concentrated among a smaller number of larger,
strategically positioned participants.
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The Company attributes its success in the aircraft components and spare
parts redistribution industry and its significant opportunities for growth to
several competitive strengths, including the following:
- Experienced and Committed Management Team. The Company's management has
almost 100 years' combined experience in the aircraft components and
spare parts redistribution industry. In addition, the Chief Executive
Officer and each of the key employees has been employed by the Company
since its inception. The Company has experienced almost no employee
turnover since inception and seeks to provide an entrepreneurial culture
for its highly experienced, "hands-on" management team.
- Exploit Key Niches. Through the industry knowledge developed by its
management team, the Company has been successful in identifying areas of
demand for certain aircraft components and spare parts and has
aggressively acquired inventory of certain key aircraft components and
spare parts through purchase, disassembly of aircraft, and consignment
and exchange transactions. The Company's ability to responsively fill
customer requirements has been a cornerstone of the Company's strategy
since its inception, and has allowed the Company to differentiate itself
from certain of its competitors.
- Focus on Sales of High-Margin Components and Spare Parts. The Company has
increasingly focused on sales of high-margin engines and engine spare
parts in order to increase its net sales. Engine sales have enabled the
Company to realize higher margins, increase total sales, and develop
customer relationships with a wide variety of domestic and international
customers. Approximately 80% of the Company's net sales are derived from
sales of rotables, which tend to be higher-margin, higher demand spare
parts than repairables or expendables. As the Company continues its
efforts to increase sales of higher-margin engine and engine components
and rotable spare parts, the Company will strive to realize high margins
and increase stockholder value.
- Effectively Capitalize on Bulk Purchase Opportunities. The Company has
been successful in identifying and completing bulk purchases of aircraft
components and spare parts. Bulk inventory purchases allow the Company to
obtain large inventories of aircraft components and spare parts at a
lower cost than can ordinarily be obtained by purchasing aircraft
components and spare parts on an individual basis, resulting generally in
higher gross margins on sales of such spare parts. The Company believes
that, through management's extensive contacts with both passenger and
cargo carriers, the Company has access to bulk inventory purchase
opportunities that are not generally available to many aircraft
components and spare parts redistributors.
- Strong Commitment to Growth. The Company has developed a number of growth
strategies that are designed to broaden the Company's domestic and
international customer base, enhance the Company's margins, provide
improved customer service, and facilitate entry into new market niches as
the Company seeks to grow its business. The Company has formulated its
growth strategies to maintain a high-margin product mix to be offered to
a diverse base of domestic and international customers, thereby avoiding
reliance on a single product line, a single customer or a group of
customers in a particular geographic area.
- Aggressively Control Overhead. The Company is committed to aggressively
controlling overhead in order to maximize operating margins. With only 14
full-time employees in 1997, the Company achieved 1997 gross profit per
employee and pro forma net income per employee of approximately $379,000
and $175,000, respectively. Measured by these standards and sales per
employee, the Company believes it maintains a significantly lower
overhead structure, and achieves higher sales and margins, than many of
its competitors.
The Company's strategy is to enhance its position as a leading aircraft
components and spare parts redistributor in order to capitalize on the continued
expansion of the aircraft components and spare parts aftermarket and the
Company's growing customer base. The principal components of the Company's
strategy are to (i) expand the Company's existing business through entry into
the wide-body aircraft market for complete aircraft and engines to be
disassembled, obtaining additional sales agents in select international markets
and hiring additional management personnel experienced in sales of aircraft
components and spare
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parts, (ii) enhance the Company's relationship with key customers through
providing aircraft components and spare parts leasing and inventory management
services and through the purchase and lease of complete aircraft to third
parties, which aircraft will be disassembled for their components and spare
parts upon expiration of the lease term, (iii) undertake strategic acquisitions
in order to accelerate growth, leverage operating efficiencies and capitalize on
opportunities to vertically integrate aircraft components and spare parts
redistribution, repair and manufacturing activities, (iv) increase inventories
of aircraft components and spare parts, enhance management information systems
and continue the Company's commitment to customer service to even further
strengthen customer relationships, and (v) maintain a diversified domestic and
international customer base with continued emphasis on targeting sales
opportunities in both engine and airframe spare parts.
The Company was incorporated in the State of South Carolina under the name
Aviation Alloys, Inc. in June 1985 and commenced active operations under the
name American Aircarriers Support, Inc. in 1990. The Company was reincorporated
in the State of Delaware immediately prior to the date of this Prospectus. The
Company's principal executive offices are located at 3516 Centre Circle Drive,
Fort Mill, South Carolina 29715, and its telephone number is (803) 548-2160.
THE OFFERING
Common Stock offered................ 2,000,000 shares
Common Stock to be outstanding after
this offering....................... 6,100,000 shares(1)
Use of proceeds..................... To purchase engines; extinguish related
party indebtedness and fund S
Corporation distributions; to reduce
bank indebtedness; to purchase aircraft
and engines for disassembly, sale or
lease; to increase inventory of
aircraft and engine components and
spare parts; to acquire complementary
businesses in the aircraft components
and spare parts industry; and for
general corporate purposes. See "Use of
Proceeds."
Nasdaq National Market symbol....... AIRS
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(1) Excludes 258,600 shares of Common Stock issuable upon the exercise of
currently outstanding options and 200,000 shares of Common Stock issuable on
full exercise of the Representative's Warrants. See "Management -- Stock
Option Plan" and "Underwriting."
5
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SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
YEAR ENDED
DECEMBER 31,
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1996 1997
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STATEMENT OF OPERATIONS DATA:
Net sales................................................. $8,352 $13,250
Gross profit.............................................. 2,873 5,304
Income from operations.................................... 1,945 4,037
Net income(1)............................................. 1,943 4,073
Pro forma net income(1)................................... 1,166 2,444
Pro forma basic earnings per share(2)(3).................. $ .28 $ .60
Pro forma diluted earnings per share(2)(3)................ $ .28 $ .59
Weighted average number of diluted shares(3).............. 4,165 4,165
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
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ACTUAL AS ADJUSTED(4)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $4,198 $15,698
Inventory................................................. 5,625 10,125
Accounts receivable....................................... 1,959 1,959
Total assets.............................................. 9,049 17,549
Total liabilities......................................... 4,180 1,180
Stockholders' equity...................................... 4,869 16,369
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(1) Until immediately prior to the date of this offering, the Company was an S
Corporation and not subject to federal or state corporate income taxes. In
connection with its reincorporation in the State of Delaware, the Company
terminated its S Corporation election and changed its tax status from an S
Corporation to a C Corporation and began providing for federal and state
corporate income taxes from and after that date. The statement of operations
data reflects a pro forma provision for income taxes as if the Company were
subject to federal and state corporate income taxes for all periods
presented. This pro forma provision for income taxes is computed using a
combined federal and state tax rate of 40%. See Note 13 to Financial
Statements.
(2) Supplemental pro forma basic earnings per share would have been $0.20 and
$0.41 for 1996 and 1997, respectively, and diluted earnings per share would
have been $0.20 and $0.40 for 1996 and 1997, respectively, after giving
effect to the use of a portion of the net proceeds of this offering to repay
indebtedness outstanding at January 1, 1996, and assuming a 2,000,000 share
increase in the weighted average number of shares outstanding.
(3) The weighted average number of shares outstanding gives retroactive effect
to the shares issued immediately prior to the effective date of this
offering in connection with the reincorporation and the dilutive effect of
options granted prior to the effective date of this offering. See Notes 12
and 13 to Financial Statements.
(4) Adjusted to reflect the sale of 2,000,000 shares of Common Stock by the
Company at an assumed offering price of $8.00 per share, and the application
of the estimated net proceeds therefrom to reduce indebtedness, increase
inventory and make S Corporation distributions. See "Use of Proceeds."
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RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating the Company
and its business before purchasing shares of Common Stock offered hereby. This
Prospectus contains certain forward-looking statements that involve substantial
risks and uncertainties. When used in this Prospectus, the words "may," "will,"
"expect," "anticipate," "continue," "estimate," "project," "intend," "believe"
and similar expressions are intended to identify forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 (the "1933 Act")
and Section 21E of the Securities Exchange Act of 1934 (the "1934 Act")
regarding events, conditions and financial trends that may affect the Company's
future plan of operations, business strategy, operating results and financial
position. Prospective investors are cautioned that any forward-looking
statements are not guarantees of future performance and are subject to risks and
uncertainties and that actual results could differ materially from the results
expressed in or implied by these forward-looking statements as a result of
various factors, many of which are beyond the Company's control. These factors
are described under the headings "Management's Discussion and Analysis of
Financial Condition and Results of Operations," "Business" and in the risk
factors set forth below.
CONCENTRATION ON BOEING 737 AIRCRAFT AND JT8 ENGINES
The Company's results of operations to date have depended substantially
upon aftermarket sales of airframe components and spare parts for Boeing 737
aircraft and engine components and spare parts for the Pratt & Whitney JT8
engine series. While the 737 has been in production since the early 1960s and
the JT8 series of engines is the most widely used engine in commercial aviation,
737s utilizing older engines are generally more expensive to maintain and
operate, due primarily to higher fuel usage. Noise and other regulations adopted
in the United States and the European Union will require most JT8 series engines
to be hush-kitted, relocated to other countries or removed from service by 2000
and 2002, respectively. A decline in the use of 737 aircraft or JT8 engines by
aircraft operators, a decrease in passenger confidence in older aircraft or the
grounding of 737 aircraft or the retirement of aircraft utilizing JT8 series
engines for any reason could have a material adverse effect on the Company's
results of operations. Although the Company believes that some 737-200 aircraft
have already been hush-kitted, disassembly of a significant number of such
aircraft could increase the availability of certain 737 components and spare
parts, some of which are interchangeable with 737-300, -400 and -500 model
aircraft. A significant increase in aircraft or engine components and spare
parts availability could reduce prices of aircraft components and spare parts
inventoried by the Company, with a corresponding material adverse effect on the
Company's financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business."
MANAGEMENT OF INVENTORY
Because the Company does not manufacture aircraft components and spare
parts and is dependent upon purchases from third parties to obtain components
and spare parts inventories, the Company's results of operations are
substantially dependent on its purchasing activities. Because the Company's
sales of aircraft components and spare parts are significantly influenced by the
nature and extent of its available inventory, the success of the Company depends
upon management identifying potential sources of inventory and effecting timely
purchases at acceptable terms and prices. There can be no assurance that
inventory will be available on acceptable terms and prices or at the times
required by the Company. Furthermore, there can be no assurance the Company will
accurately anticipate customer demand for certain types of engines, engine
components or aircraft components and spare parts or that the Company's results
of operations will not be adversely affected by writedowns associated with
excess inventory. See "Business."
EXPANSION OF AIRCRAFT COMPONENTS AND SPARE PARTS INVENTORY
The Company has in the past purchased and sold Airbus A300 aircraft
components and spare parts and has established a strategy for growth through
entry into the wide-body aircraft market, including the purchase and sale of
aircraft components and spare parts for the Boeing 767, the McDonnell-Douglas
DC-10 and the Airbus A300. The Company anticipates that, following the
conclusion of this offering, it will also enter the
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market for engines used to power wide-body aircraft, including the General
Electric CF6, the Pratt & Whitney JT9 and PW4000 engine series. The Company
expanded its product line in 1995 to include the CFM56 series of engines, which
powers Boeing 737 aircraft as well as certain Airbus aircraft. Although
management believes its experience in managing existing engine and aircraft
components and spare parts inventories will enable it to effectively manage such
inventories for additional aircraft and engine types, there can be no assurance
the Company will be successful in managing components and spare parts
inventories for additional aircraft and engine types. In particular, the
Company's lack of prior experience in the market for wide-body aircraft and
engine components and spare parts may cause the Company to misjudge market
prices or demand for airframe or engine components and spare parts. In such
event, the Company could be forced to liquidate excess inventories at prices
that would have a material adverse effect on the Company's financial condition
and results of operations. See "Business."
REGULATION OF, AND DEPENDENCE ON, THIRD-PARTY REPAIR FACILITIES
The Company's inventory consists principally of engines and overhauled,
serviceable and repairable aircraft components and spare parts that have been
purchased from a variety of sources. Before components and spare parts may be
installed in an aircraft, they must meet certain standards of condition
established by the Federal Aviation Administration ("FAA") or equivalent
regulatory agencies in other countries. Specific regulations vary from country
to country, although regulatory requirements in certain other countries
generally coincide with FAA requirements. While the Company is not subject to
direct regulation by the FAA or comparable international agencies, aircraft
operators utilizing the Company's components and spare parts and independent
facilities that repair and overhaul such components and spare parts are subject
to extensive regulation. Aircraft and engine components and spare parts must
also be traceable to sources deemed acceptable by the FAA and comparable
international agencies.
The Company performs no repair or overhaul services itself, but rather
depends entirely on third-party licensed repair facilities to perform necessary
repair and overhaul services. The Company has no direct control over the quality
of repair performed by third-party repair facilities or the accuracy of
airworthiness conditions designated by such facilities. The limited number of
licensed repair facilities has on occasion resulted in long turnaround times for
the repair and overhaul of engines and aircraft components and spare parts. The
FAA has recently increased its scrutiny of third-party repair facilities, which
may result in fewer FAA-licensed repair facilities and longer turnaround times
in the future. It is possible that airframe or engine components and spare parts
could be designated as airworthy by a repair facility, be sold by the Company
and placed on an aircraft, and subsequently be determined to be unsafe or in
need of further repair. In such event, the FAA has the authority to take actions
which may include the grounding of the aircraft. In addition, a customer that
purchased defective airframe or engine components or spare parts from the
Company could demand a replacement component or spare part. Although the Company
has insurance coverage for product liability losses, the adverse effect on
customer relations and the Company's reputation from a parts-related incident
could materially adversely impact the Company's results of operations. See
"Business."
DEPENDENCE ON CHIEF EXECUTIVE OFFICER
The continued success of the Company is dependent to a significant degree
upon the services of Karl F. Brown, Chairman of the Board, Chief Executive
Officer and President. The ability of the Company to operate successfully could
be jeopardized if Mr. Brown were unavailable to the Company for any reason and a
capable successor was not identified and hired. The Company maintains key-man
life insurance on the life of Mr. Brown in the amount of $1,000,000 and has a
three-year employment agreement with Mr. Brown. The employment agreement between
the Company and Mr. Brown is individually terminable by Mr. Brown upon a change
of control of the Company. See "Management."
FLUCTUATIONS IN OPERATING RESULTS
The Company's operating results are affected by many factors, including the
timing of orders from customers, the timing of engine purchases or sales, the
timing of expenditures to purchase inventory in anticipation of future sales,
the timing and availability of bulk inventory purchases, the mix of available
8
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aircraft components and spare parts contained at any time in the Company's
inventory, and many other factors largely outside the Company's control. A
significant portion of the Company's operating expenses are relatively fixed.
Because the Company does not obtain long-term purchase orders or commitments
from its customers, it must anticipate future volume of orders based upon the
historic purchasing patterns of its customers and upon discussions with its
customers as to their future components and spare parts requirements.
Cancellations, reductions or delays in orders by a customer or group of
customers could have a material adverse effect on the Company's financial
condition and results of operations. In addition, due to the value of a single
engine sale relative to the value of components and spare parts typically sold
by the Company, the concentration of engine sales in a particular quarter may
obscure existing or developing trends in the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business."
ACQUISITION STRATEGY
One of the Company's strategies for growth is to pursue acquisitions of
FAA-licensed repair facilities, aircraft components and spare parts
redistributors and small manufacturers of aviation products. Currently, the
Company has no acquisition agreements, understandings or commitments for any
acquisitions. There can be no assurance that any such acquisitions will be
completed on reasonable terms, if at all. Certain of the Company's competitors
may also seek to acquire the same companies that the Company seeks to acquire.
This may increase the price and related costs at which the Company could
otherwise have acquired such companies, perhaps materially. The Company's
inability to complete acquisitions on reasonable terms could limit the Company's
ability to grow its business.
The Company may expend significant funds to pursue and consummate
acquisitions. Such use of funds would reduce the Company's working capital. In
addition, the Company may fund acquisitions in whole or in part by issuing
equity securities, and any such issuances, individually or in the aggregate, may
be dilutive to holders of the Common Stock. Acquisitions also may result in the
Company incurring additional debt and amortizing costs related to goodwill and
other intangible assets, either of which could have a material adverse effect on
the Company's financial condition and results of operations.
The Company may experience difficulties in assimilating the operations,
services and personnel of acquired companies and may be unable to sustain or
improve the historical revenue and earnings levels of acquired companies, any of
which may materially adversely affect the Company's results of operations. In
addition, to the extent it becomes necessary for the Company to fund the working
capital requirements of acquired companies, the Company's working capital
available for its currently existing operations would decrease. Acquisitions
involve a number of risks, including the diversion of management's attention
from ongoing business operations and the potential loss of key employees of
acquired companies. Acquisitions of FAA-licensed repair facilities may pose
additional risks including, among others, the need to maintain FAA licensing to
conduct operations, liability associated with incorrect or inadequate repairs,
and required compliance with extensive FAA and other regulations. There can be
no assurance that the Company can successfully implement its acquisition
strategy. The failure to consummate acquisitions on reasonable terms or the
inability to successfully integrate and manage acquired operations and
assimilate personnel could have a material adverse impact on the Company's
business, financial condition and results of operations. See
"Business -- Business Strategy."
PROPOSED LEASING ACTIVITIES
One of the Company's strategies for growth is to increase market share
through engaging in aircraft components and spare parts leasing and through the
purchase of complete aircraft and engines that can be leased to third parties
and disassembled for components and spare parts or sold at the conclusion of the
lease term. Aircraft components and spare parts leases are typically used by
smaller passenger or cargo carriers to reduce capital expenditures, with the
result that the Company may be subject to an increased risk of financial default
by the lessee. The success of an operating lease depends in part upon having the
components and spare parts, aircraft or engines returned to the Company in
marketable condition as required by the lease. The financial return to the
Company from leased components and spare parts, aircraft or engines depends in
part
9
<PAGE> 11
on the re-lease of such components and spare parts, aircraft and engines on
favorable terms on a timely basis, the ability to sell the components and spare
parts, aircraft or engines at favorable prices, or the realization of sufficient
value from the disassembly for components and spare parts of aircraft or engines
at the end of the lease term. Numerous factors, many of which are beyond the
Company's control, may have an impact on the Company's ability to re-lease, sell
or disassemble aircraft or engines. These factors include general market
conditions, regulatory changes (particularly those imposing environmental,
maintenance and other requirements on the operation of aircraft and engines),
changes in the supply and cost of aircraft or engines and technological
developments. Consequently, there can be no assurance the Company's estimated
residual value for aircraft components and spare parts, complete aircraft or
engines will be realized. The inability to re-lease, sell components and spare
parts, aircraft or engines on favorable terms or to realize sufficient value
from the disassembly for components and spare parts of aircraft or engines on
expiration of a lease may have a material adverse effect on the Company's
financial condition and results of operations. Should the Company be unable to
collect lease payments when due or be required to repossess components and spare
parts, aircraft or engines in the event of a default by a lessee, the Company's
results of operations could also be adversely affected. See "Business."
DEPENDENCE ON INTERNATIONAL CUSTOMERS
The Company estimates that sales to international customers accounted for
approximately 30% of net sales in the fiscal year ended December 31, 1997. The
Company anticipates that international sales will continue to represent a
material portion of the Company's net sales in future periods. International
sales are subject to inherent risks, including variations in local economies,
fluctuating exchange rates, greater difficulty in accounts receivable
collection, changes in tariffs and other trade barriers, adverse foreign tax
consequences, and burdens of complying with a variety of foreign laws. There can
be no assurance that these factors will not have a material adverse impact on
the Company's ability to increase its international sales. Although the
Company's international sales are denominated in U.S. dollars, the Company may
encounter exchange rate risk in the event international sales are denominated in
a currency other than U.S. dollars in future periods. The Company does not
presently hedge against adverse foreign currency fluctuations and does not
currently anticipate entering into hedging transactions in the future. See
"Business."
CUSTOMER CONCENTRATION
Although none of the Company's existing customers accounted for 10% or more
of the Company's net sales in 1997, three customers each accounted for between
5% and 10% of 1997 net sales. Sales to each of these three customers exceeded 5%
of 1997 net sales as a result of the customers each purchasing an engine from
the Company. In a given period, a substantial portion of the Company's net sales
may be attributable to engine sales. The sale of engines or aircraft components
and spare parts during a given period may result in a customer being considered
a significant customer of the Company for that period. While the Company
believes it currently has no customer the loss of which would have a material
adverse effect on the Company's results of operations, the loss of significant
customers in future periods, or an increased dependence on significant customers
due to engine sales or other transactions, may result in a material adverse
effect on the Company's results of operations. See "Business."
PRODUCT LIABILITY
The commercial aviation industry periodically experiences catastrophic
losses. As a redistributor, the Company may be named as a defendant in a lawsuit
as a result of a catastrophic loss if a component or spare part sold or leased
by the Company were installed in an incident-related aircraft. The Company
currently has in force product liability insurance with coverage limits for each
occurrence that it believes to be in a sufficient amount and on terms that are
generally consistent with industry practice. To date, the Company has not
experienced any aviation related claims, and has not experienced any product
liability claims related to its products. The risk of such claims may increase
in the event the Company acquires an FAA-licensed repair facility. An uninsured
or partially insured claim, or a claim for which third-party indemnification is
not available, could have a material adverse effect on the Company's financial
condition and results of operations
10
<PAGE> 12
and may adversely affect the Company's reputation in the aircraft components and
spare parts industry. See "Business -- Product Liability."
COMPETITION
The international aircraft components and spare parts redistribution market
is highly competitive. The market consists of a limited number of
well-capitalized companies selling a broad range of products and numerous small
competitors serving distinct market niches. Certain of these competitors have
substantially greater financial, marketing and other resources than does the
Company. The Company believes that current industry trends will benefit larger,
well-capitalized companies. The Company believes that range and depth of
inventories, quality and traceability of products, service and price are the key
competitive factors in the industry. The principal companies with which the
Company competes are AAR Corp., The AGES Group, Aviation Sales Company, AVTEAM,
Inc., Banner Aerospace and The Memphis Group, all of which are significantly
larger than the Company. Customers in need of aircraft components and spare
parts have access, through computer-generated inventory catalogues, to a broad
array of suppliers, including aircraft manufacturers, airlines and aircraft
services companies, which may have the effect of increasing competition for, and
lowering prices on, aircraft components and spare parts. See
"Business -- Competition."
EFFECT OF GENERAL ECONOMIC CONDITIONS
The Company's business is directly related to economic factors that affect
the airline industry, including the price of aviation fuel, demand for air
travel, availability of new aircraft and general economic conditions. When these
factors adversely affect the airline industry, such factors tend to exert
downward pressure on prices for aircraft components and spare parts. In
addition, days in receivables and difficulties in collecting accounts receivable
could be expected to increase in an adverse economic environment. As the price
of aviation fuel increases, older aircraft become less competitive when compared
with newer, more fuel efficient aircraft, with the result that demand for older
aircraft, and their associated components and spare parts, may decrease.
Although the Company believes that current economic conditions favor continued
growth in the markets it serves, a future economic slowdown or recession could
adversely affect the Company's ability to maintain profitability. See
"Business."
OFFERING PRICE DETERMINATION; ABSENCE OF PUBLIC MARKET; PRICE FLUCTUATIONS
The public offering price of the Common Stock has been determined by the
Company and the Representative of the Underwriters (the "Representative") and
does not necessarily bear any relationship to the assets, book value, or
earnings history of the Company or any other investment criteria. Prior to this
offering, there has been no public market for the Company's Common Stock.
Although the Common Stock is expected to be approved for quotation on the Nasdaq
National Market upon notice of issuance, there can be no assurance that an
active trading market will develop. Factors such as quarterly fluctuations in
results of operations, the Company's ability to meet analysts' expectations,
changes in financial estimates by securities analysts or market conditions in
general may cause the market price of the Common Stock to fluctuate, perhaps
substantially. In addition, in recent years the stock market has experienced
significant price and volume fluctuations. These fluctuations, which are often
unrelated to the operating performance of specific companies, have had a
substantial effect on the market price of the stock of many small capitalization
companies such as the Company. Factors such as those cited above, as well as
other factors that may be unrelated to the operating performance of the Company
and may be beyond its control, could adversely affect the price of the Company's
Common Stock. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE; RIGHTS TO ACQUIRE SHARES
Following this offering, 4,100,000 of the Company's outstanding shares of
Common Stock held by Messrs. Karl F. Brown and Herman O. Brown, Jr. (the
"Existing Common Stockholders") will be "restricted securities" and may in the
future be sold upon registration or in compliance with an exemption from
registration such as the exemption provided by Rule 144 adopted under the 1933
Act. Rule 144 as currently in effect generally provides that beneficial owners
of shares who have held such shares for one year may sell
11
<PAGE> 13
within a three-month period a number of shares not exceeding the greater of 1%
of the total outstanding shares or the average trading volume of the shares
during the four calendar weeks preceding such sale. The outstanding restricted
shares of Common Stock are eligible to be sold in accordance with Rule 144
commencing 90 days following the date of this Prospectus. Pursuant to the terms
of the Underwriting Agreement, the Representative has required that sales of the
outstanding restricted shares of Common Stock may not commence until 12 months
following the date of this Prospectus without the prior written consent of the
Representative. Future sales of restricted shares of Common Stock under Rule 144
or otherwise could negatively impact the market price of the Common Stock. See
"Shares Eligible For Future Sale."
At the date of this Prospectus, the Company has reserved 350,000 shares of
Common Stock for issuance upon exercise of options granted under its 1998
Omnibus Stock Option Plan (the "Option Plan"), of which options to purchase
258,600 shares were outstanding as of February 10, 1998. The exercise prices of
the options outstanding are $6.00 per share. At the completion of this offering,
the Representative will receive warrants (the "Representative's Warrants") to
purchase up to 200,000 shares of Common Stock at an exercise price of
$ (120% of the offering price of the Common Stock) during a period of
four years commencing one year following the date of this Prospectus. During the
terms of the outstanding options and the Representative's Warrants, the holders
thereof are given the opportunity to profit from a rise in the market price of
the Common Stock, and the exercise thereof may dilute the ownership interests of
existing stockholders, including investors in this offering. The existence of
options and the Representative's Warrants may adversely affect the terms on
which the Company may obtain additional equity financing in the future.
Moreover, the holders are likely to exercise their rights to acquire Common
Stock at a time when the Company would otherwise be able to obtain capital on
terms more favorable than through the exercise of such options and warrants. See
"Management -- Stock Option Plan" and "Underwriting."
CONTROL BY PRINCIPAL STOCKHOLDERS; BENEFITS TO RELATED PARTIES
Upon consummation of this offering, the Existing Common Stockholders will
own 67.2% of the Company's outstanding Common Stock (64.1% if the over-allotment
option is fully exercised). Of such outstanding Common Stock, 1,025,000 shares
are the subject of a voting trust under which David M. Furr, a director of the
Company, has been vested with all voting rights relating to such Common Stock.
As a result, Messrs. Karl F. Brown and David M. Furr will, as a practical
matter, exercise control over the activities of the Company, including the
election of directors and other matters submitted to the stockholders for
approval such as acquisitions, mergers or changes in the capitalization of the
Company. The Existing Common Stockholders will receive S Corporation
distributions and will be repaid indebtedness owed by the Company to such
persons from a portion of the proceeds of this offering. The Company will also
reduce the outstanding balance of its bank credit facility using a portion of
the proceeds of this offering, as to which Karl F. Brown has provided a personal
guarantee. Such guarantee will be released upon completion of this offering. See
"S Corporation Distributions," "Management" and "Principal Stockholders."
ANTI-TAKEOVER EFFECTS OF CERTAIN CHARTER AND STATUTORY PROVISIONS
The Company's Certificate of Incorporation authorizes the issuance of up to
2,000,000 shares of Preferred Stock. The Preferred Stock may be issued in series
with the material terms of any series determined solely by the Board of
Directors. Such terms would likely include dividend rights, conversion features,
voting rights, redemption rights and liquidation preferences. The Company does
not currently anticipate that it will issue any Preferred Stock. However, if the
Company does issue any series of Preferred Stock in the future, it is likely
that such shares will have dividend privileges and liquidation preferences
superior to those of the Common Stock. Further, the Preferred Stock may be
issued with voting, conversion or other terms determined by the Board of
Directors including, among others, dividend payment requirements, redemption
provisions, preferences as to dividends and distributions, and preferential
voting rights.
The Company's Certificate of Incorporation contains certain other
provisions that could have the effect of making it more difficult for a third
party to acquire, or discourage a third party from attempting to acquire,
control of the Company. Such provisions include a limitation on the ability of
stockholders to change the number of directors constituting the complete Board
of Directors without the affirmative vote of at least 66 2/3%
12
<PAGE> 14
of the outstanding Common Stock and a limitation on the ability to amend either
the Certificate of Incorporation or By-Laws of the Company without the
affirmative approval of stockholders holding at least 75% of the outstanding
shares of Common Stock. In addition, in the event of certain change of control
transactions, the vesting of options and the expiration of any restriction
periods on stock awards under the Option Plan may be accelerated. These
provisions could have the effect of delaying, deferring or preventing a change
in control of the Company. The Company is also subject to the provisions of
Section 203 of the General Corporation Law of the State of Delaware ("Section
203") regulating corporate takeovers. Section 203 prevents certain Delaware
corporations from engaging, under certain circumstances, in a "business
combination" with an "interested stockholder" (as defined) for three years
following the date that such stockholder became an "interested stockholder,"
unless the business combination or interested stockholder is approved in a
prescribed manner. Section 203 could delay or make more difficult a merger,
tender offer or proxy contest involving the Company. See "Description of
Securities."
ABSENCE OF DIVIDENDS
The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. The Company intends to retain profits, if any,
to fund growth and expansion. In connection with the Company's termination of
its S Corporation status, the Company agreed to distribute a total of
approximately $2.4 million, representing approximately 50% of the undistributed
accumulated taxable income and an amount equal to the estimated 1998 tax
liability of the Existing Common Stockholders through the date of termination of
the S Corporation election. See "Use of Proceeds," "S Corporation Distributions"
and "Dividend Policy."
DILUTION
This offering will result in immediate substantial dilution of $5.32
(66.5%) per share, which amount represents the difference between the pro forma
net tangible book value per share after the offering and an assumed public
offering price of $8.00 per share. See "Dilution."
LIMITATION OF LIABILITY
The Company's Certificate of Incorporation provides that directors of the
Company shall not be personally liable for monetary damages to the Company or
its stockholders for a breach of fiduciary duty in their capacities as
directors, subject to limited exceptions. Although such limitation of liability
does not affect the availability of equitable remedies such as injunctive relief
or rescission, the presence of these provisions in the Certificate of
Incorporation could prevent the recovery of monetary damages against directors
of the Company. See "Management -- Limitation of Liability and Indemnification."
RISKS RELATING TO FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the 1933 Act and Section 21E of the 1934 Act. Such
forward-looking statements include, but are not limited to, statements regarding
the Company's marketing plans, expectations concerning growth in the market, and
the planned use of proceeds. Actual results could differ from those projected in
any forward-looking statement. The forward-looking statements are made as of the
date of this Prospectus and the Company assumes no obligation to update such
forward-looking statements, or to update the reasons why actual results may
differ from those projected in the forward-looking statements. Numerous factors,
including without limitation those factors mentioned in this Risk Factors
section, could cause future results to differ substantially from those
contemplated in such forward-looking statements. A number of the factors that
may influence future results of operations are outside the Company's control.
The safe harbor for forward-looking statements provided by Section 27A of the
1933 Act and Section 21E of the 1934 Act is not applicable to limit the
Company's liability for sales made in this offering.
13
<PAGE> 15
USE OF PROCEEDS
Based on an assumed offering price of $8.00 per share, the net proceeds
from the sale of the 2,000,000 shares of Common Stock offered hereby are
estimated to be approximately $13.9 million ($16.1 million if the Underwriters'
over-allotment option is fully exercised).
The primary purpose of this offering is to provide additional capital
required to support the Company's continued growth and expansion. The Company
intends to use approximately $4.5 million to purchase three JT9 or CF6 engines
in connection with the Company's entry into the wide-body aircraft market. An
additional $3.9 million will be used to repay indebtedness owed, and S
Corporation distributions payable, to the Existing Common Stockholders. Advances
from the Existing Common Stockholders, which totalled approximately $1.5 million
at December 31, 1997, bear interest at rates between 6% and 8% per annum, are
unsecured and mature on or prior to June 30, 1998. See "S Corporation
Distributions" for further information concerning amounts to be distributed to
the Existing Common Stockholders in connection with the termination of the
Company's S Corporation status. An additional $1.5 million will be used to repay
indebtedness expected to be outstanding under a $4.0 million credit facility
maturing in May 1998 (the "Credit Facility") with NationsBank, N.A.
("NationsBank"), which currently bears interest at the London Interbank Offered
Rate ("LIBOR") plus 2%.
The balance of the net proceeds of this offering will be used to purchase
aircraft and engines for disassembly, sale or lease, to increase the Company's
inventory of aircraft components and spare parts, to fund strategic acquisitions
and for other working capital needs. The Company intends to use an undetermined
portion of the net proceeds of this offering to pursue strategic acquisitions of
FAA-licensed repair facilities, aircraft component and spare part
redistributors, and small manufacturers of aviation products. Although the
Company has identified a number of companies engaged in these activities, the
Company has no agreements, understandings or commitments with respect to any
acquisitions and there can be no assurance that any acquisitions will be
completed. Amounts allocated to working capital will also be used to fund
additional marketing activities, for the hiring of additional customer support
personnel and to hire additional personnel experienced in avionics and
instrumentation as the Company executes its strategy of expanding in this market
segment. See "Business -- Business Strategy."
The foregoing represents the Company's best estimate of the use of the net
proceeds to be received in this offering, based on current planning and business
conditions. However, the Company reserves the right to change such uses when and
if market conditions or unexpected changes in operating conditions or results of
operations occur. The amounts actually expended for each use may vary
significantly depending upon a number of factors including, but not limited to,
future growth and the amount of cash generated by the Company's operations. The
Company believes that its existing capital resources, together with a pending
increase in amounts available under the Credit Facility and the net proceeds of
this offering, will be sufficient to maintain its current and planned operations
for a period of at least 18 months from the date of this Prospectus. Net
proceeds not immediately required for the purposes described above will be
invested principally in U.S. government securities, short-term certificates of
deposit, money market funds or other short-term, interest-bearing securities.
14
<PAGE> 16
S CORPORATION DISTRIBUTIONS
At all times immediately prior to this offering, the Company was treated
for federal and state income tax purposes as an S Corporation under the Internal
Revenue Code of 1986, as amended (the "Code"), and comparable state tax laws. As
a result, earnings of the Company were taxed for federal and state income tax
purposes directly to the Existing Common Stockholders, rather than to the
Company. In connection with its reincorporation in the State of Delaware, the
Company terminated its S Corporation election. In connection with the
termination of its S Corporation status, the Company will distribute
approximately $2.4 million to the Existing Common Stockholders. The distribution
is intended to provide the Existing Common Stockholders with funds sufficient to
pay personal tax liabilities related to 1998 taxable income expected to be
earned prior to the date of the termination of the Company's S Corporation
election, together with an amount equal to approximately 50% of the previously
undistributed accumulated taxable income. A portion of the net proceeds to be
received by the Company from this offering will be used to pay such
distribution. See "Use of Proceeds." After the distribution, all remaining
undistributed accumulated taxable income will be reclassified to additional
paid-in capital.
The Company and the Existing Common Stockholders are parties to an S
Corporation Tax Allocation and Indemnification Agreement (the "Tax Agreement")
relating to their respective income tax liabilities. The Tax Agreement provides
for the indemnification by the Company of the Existing Common Stockholders for
any adjustments causing an increase in the Existing Common Stockholders' federal
and state income tax liability (including interest and penalties) related to the
Company's tax years prior to the termination of the S Corporation election,
unless such adjustments result in or are related to a corresponding decrease in
the Existing Common Stockholders' federal and state income tax liability with
respect to another S Corporation taxable year. Subject to certain limitations,
the Tax Agreement also provides that the Company will be indemnified by the
Existing Common Stockholders with respect to federal and state income taxes
(plus interest and penalties) shifted from an S Corporation taxable year to a
Company taxable year subsequent to the consummation of this offering. The
Existing Common Stockholders have given no security for their indemnification
obligation and, therefore, the Company's ability to collect such payments is
dependent upon the financial condition of the Existing Common Stockholders at
the time any such indemnification obligation arises, if ever. The Company is not
aware of any tax adjustments that may arise under the Tax Agreement. Any payment
made by the Company to the Existing Common Stockholders pursuant to the Tax
Agreement may be considered by the Internal Revenue Service or state tax
authorities to be non-deductible by the Company for income tax purposes. See
Note 13 to Financial Statements.
DIVIDEND POLICY
Except as described under "S Corporation Distributions," the Company has
never declared or paid any cash dividends or distributions on its capital stock.
The Company anticipates that for the foreseeable future all earnings will be
retained for use in the Company's business and no cash dividends will be paid to
stockholders. Any payment of cash dividends in the future on the Common Stock
will be dependent upon the Company's financial condition, results of operations,
current and anticipated cash requirements, plans for expansion, restrictions, if
any, under debt obligations, as well as other factors that the Board of
Directors deems relevant. The Company's current Credit Facility does not
prohibit or restrict the payment of cash dividends.
15
<PAGE> 17
DILUTION
As of December 31, 1997, the Company had a net tangible book value of $4.87
million or $1.19 per share based on 4,100,000 pro forma shares of Common Stock
outstanding. After giving effect to the sale of the 2,000,000 shares of Common
Stock offered hereby at an assumed offering price of $8.00 per share and the S
Corporation distributions, the pro forma net tangible book value of the Company
as of December 31, 1997 would have been $16.37 million, or $2.68 per share. This
amount represents an immediate increase in pro forma net tangible book value of
$1.49 per share to the existing holders of Common Stock and an immediate
dilution of $5.32 per share to new investors. "Dilution" is determined by
subtracting pro forma net tangible book value per share after the offering from
the assumed offering price per share of Common Stock, as illustrated by the
following table:
<TABLE>
<S> <C> <C>
Assumed public offering price per share..................... $8.00
Pro forma net tangible book value per share as of December
31, 1997............................................... $1.19
Increase in pro forma net tangible book value per share
attributable to new investors.......................... 1.49
-----
Pro forma net tangible book value per share after the
offering.................................................. 2.68
-----
Dilution per share to new investors......................... $5.32
=====
</TABLE>
The following table sets forth as of December 31, 1997, the number of
shares of Common Stock purchased for cash, the total consideration paid and the
average cash price per share paid by the Existing Common Stockholders and by new
investors (assuming the sale of 2,000,000 shares of Common Stock at the assumed
offering price of $8.00 per share, before deduction of underwriting discounts
and commissions and other estimated offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)........ 4,100,000 67.2% $ 2,469,100 13.4% $0.60
New investors................... 2,000,000 32.8 16,000,000 86.6 $8.00
--------- ----- ----------- -----
Total...................... 6,100,000 100.0% $18,469,100 100.0%
========= ===== =========== =====
</TABLE>
- ---------------
(1) Includes Common Stock of $100 and estimated undistributed accumulated
taxable income of $2,469,000 that will be reclassified to additional paid-in
capital upon termination of the Company's S Corporation status.
The foregoing information assumes no exercise of the over-allotment option,
no exercise of outstanding options to purchase an aggregate of 258,600 shares of
Common Stock, and no exercise of the Representative's Warrants. See
"Management -- Stock Option Plan," "Description of Securities" and
"Underwriting." To the extent that currently outstanding options or warrants are
exercised, there will be further dilution to new investors.
16
<PAGE> 18
CAPITALIZATION
The following table sets forth the pro forma capitalization of the Company
as of December 31, 1997, and as adjusted to give effect to the reincorporation
of the Company in the State of Delaware and the sale of the 2,000,000 shares of
Common Stock offered at an assumed offering price of $8.00 per share (and after
deducting underwriting discounts and commissions and estimated offering
expenses).
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------------
PRO FORMA(1) AS ADJUSTED(2)
------------ --------------
(IN THOUSANDS)
<S> <C> <C>
Stockholders' equity:
Preferred Stock, par value $.01 per share; 2,000,000
shares authorized; no shares issued or outstanding,
as adjusted.......................................... $ -- $ --
Common Stock, par value $.001 per share; 20,000,000
shares authorized; 4,100,000 shares issued and
outstanding, 6,100,000 shares issued and outstanding,
as adjusted(2)....................................... 4 6
Additional paid-in capital(1)........................... 2,510 16,408
------ -------
Total stockholders' equity...................... $2,514 $16,414
====== =======
</TABLE>
- ---------------
(1) Pro forma information at December 31, 1997 has been presented as if the
reincorporation was completed on December 31, 1997 and gives effect to (i) a
one-time benefit for net deferred income tax assets of approximately
$45,000, (ii) the S Corporation distributions to the Existing Common
Stockholders, and (iii) the reclassification of $2,469,000 of undistributed
accumulated taxable income to additional paid-in capital upon termination of
the S Corporation election. See "S Corporation Distributions" and Note 13 to
Financial Statements.
(2) Gives effect to the reincorporation in the State of Delaware and excludes
(i) 300,000 shares of Common Stock issuable upon exercise of the
over-allotment option, (ii) 258,600 shares of Common Stock issuable upon
exercise of outstanding options at February 10, 1998, and (iii) 200,000
shares of Common Stock issuable upon exercise of the Representative's
Warrants.
17
<PAGE> 19
SELECTED FINANCIAL DATA
The selected financial data set forth below as of December 31, 1997 and for
the years ended December 31, 1996 and 1997 have been derived from the financial
statements of the Company included elsewhere herein, which have been audited by
Cherry, Bekaert & Holland, L.L.P., and should be read in conjunction with those
financial statements (including the Notes thereto) and with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" also
included elsewhere herein. The results of operations for the year ended December
31, 1997 are not necessarily indicative of results to be expected for any future
period or for the year ending December 31, 1998.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1996 1997
------- --------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................................. $8,352 $13,250
Cost of sales............................................. 5,479 7,946
------ -------
Gross profit.............................................. 2,873 5,304
Selling and marketing..................................... 551 703
General and administrative................................ 377 564
------ -------
Total expenses............................................ 928 1,267
------ -------
Operating income.......................................... 1,945 4,037
Interest and other, net................................... (2) 36
------ -------
Net income(1)............................................. $1,943 $ 4,073
====== =======
PRO FORMA DATA (UNAUDITED):
Historical net income..................................... $1,943 $ 4,073
Income taxes.............................................. 777 1,629
------ -------
Net income(1)............................................. $1,166 $ 2,444
====== =======
Basic earnings per share(2)(3)............................ $ .28 $ .60
Diluted earnings per share(2)(3).......................... $ .28 $ .59
Weighted average number of diluted shares(3).............. 4,165 4,165
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------
ACTUAL AS ADJUSTED(4)
------ --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $4,198 $15,698
Inventory................................................. 5,625 10,125
Accounts receivable....................................... 1,959 1,959
Total assets.............................................. 9,049 17,549
Total liabilities......................................... 4,180 1,180
Stockholders' equity...................................... 4,869 16,369
</TABLE>
- ---------------
(1) Until immediately prior to the date of this offering, the Company was an S
Corporation and not subject to federal or state corporate income taxes. In
connection with its reincorporation in the State of Delaware, the Company
terminated its S Corporation election and changed its tax status from an S
Corporation to a C Corporation and began providing for federal and state
corporate income taxes from and after that date. The statement of operations
data reflects a pro forma provision for income taxes as if the Company were
subject to federal and state corporate income taxes for all periods
presented. This pro forma provision for income taxes is computed using a
combined federal and state tax rate of 40%. See Note 13 to Financial
Statements.
(2) Supplemental pro forma basic earnings per share would have been $0.20 and
$0.41 for 1996 and 1997, respectively, and diluted earnings per share would
have been $0.20 and $0.40 for 1996 and 1997, respectively, after giving
effect to the use of a portion of the net proceeds of this offering to repay
indebtedness outstanding at January 1, 1996, and assuming a 2,000,000 share
increase in the weighted average number of shares outstanding.
(3) The weighted average number of shares outstanding gives retroactive effect
to the shares issued immediately prior to the effective date of this
offering in connection with the reincorporation and the dilutive effect of
options granted prior to the effective date of this offering. See Notes 12
and 13 to Financial Statements.
(4) Adjusted to reflect the sale of 2,000,000 shares of Common Stock by the
Company at an assumed offering price of $8.00 per share, and the application
of the estimated net proceeds therefrom to reduce indebtedness, increase
inventory and make S Corporation distributions. See "Use of Proceeds."
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading international supplier of aircraft components and
spare parts primarily to maintenance and repair facilities, major commercial
passenger and cargo airlines and other redistributors located throughout the
world. The Company's net sales are principally derived from the redistribution
of engine components and spare parts for the Pratt & Whitney JT8 series of
engines and, to a lesser extent, the General Electric CFM56, as well as rotable,
repairable and expendable airframe components and spare parts for Boeing,
McDonnell-Douglas and Airbus aircraft. The Company acquires engine and airframe
components and spare parts for redistribution through purchases of surplus
aircraft for disassembly, bulk purchases of aircraft components and spare parts
from aircraft operators, purchases of individual components and spare parts from
other redistributors, consignments from aircraft operators and others, and
exchanges of inventoried aircraft components and spare parts for components and
spare parts that require service or overhaul.
The Company's net sales increased 58.6% to over $13 million in 1997. The
Company believes the growth in net sales reflects the broadening of the
Company's customer base, emphasizing sales of engines and engine components and
spare parts for the JT8 and CFM56 series engines, capitalizing on the Company's
expertise in Boeing 737 and McDonnell-Douglas MD-80 and DC-9 aircraft, and
achieving diversity in sales to both domestic and international customers of a
balanced mix of engine and airframe components and spare parts. In this regard,
with the exception of the largest participants in its industry, the Company
believes it is one of the few aircraft component and spare part redistributors
of its size engaged in the sale of both engine and airframe components and spare
parts to a broad spectrum of domestic and international customers.
The Company anticipates that the capital provided by this offering will
allow it to (i) expand its existing business through entry into the wide-body
aircraft market for engines and airframe components and spare parts, (ii)
increase inventories of components and spare parts and provide the Company with
financial flexibility to purchase additional engines for both narrow-body and
wide-body aircraft, (iii) enter the market for inventory management services and
increase leasing of engines and airframe components and spare parts, (iv) expand
its purchases of complete aircraft that can be leased to third parties and
which, upon expiration of the lease term, can be disassembled for their
components and spare parts, and (v) accelerate its market penetration in the
international market for complete engines and engine and airframe components and
spare parts. The Company also anticipates that a portion of the proceeds of this
offering will be utilized to acquire FAA-licensed repair facilities, aircraft
component and spare part redistributors, and small manufacturers of aviation
products. The Company believes that, through strategic acquisitions, it may be
successful in vertically integrating repair and manufacturing activities and
aircraft component and spare part redistribution. The Company expended over $3
million in repairs in 1997 and believes that acquisition of one or more repair
facilities will in particular offer synergistic benefits to the Company.
Although the Company has no agreements, understandings or commitments with
respect to potential acquisitions, the Company has identified a number of
industry participants with which it may initiate discussions following this
offering.
The Company records complete engines held for resale or lease at the lower
of cost or market. Engine and airframe components and spare parts are initially
recorded at cost. Cost of sales relative to bulk purchases of engine and
airframe components and spare parts are recorded for all components and spare
parts in the bulk purchase at a historical ratio of cost of sales to net sales.
The Company records the cost of each engine and airframe component and spare
part sold at the time the related sales are recognized, based on such ratio.
Revenue from the sale of aircraft components and spare parts is recognized when
products are shipped to the customer. Revenue from engine sales is recognized
when the Company has received all consideration and title and the risk of
ownership are transferred to the customer, which is generally upon delivery of
the engine.
Prior to this offering, the Company elected for federal and state income
tax purposes to be treated as an S Corporation under the Code and comparable
state tax laws. As a result, earnings of the Company were taxed for federal and
state income tax purposes directly to the Existing Common Stockholders, rather
than to the Company. Immediately prior to the date of this Prospectus, the
Company terminated its S Corporation
19
<PAGE> 21
election and converted from an S Corporation to a C Corporation in conjunction
with its reincorporation in the State of Delaware. The statement of operations
data for all periods includes a pro forma provision for federal and state income
taxes as if the Company were subject to federal and state income taxes for all
periods presented. This pro forma provision is computed using a combined federal
and state tax rate of 40%. See "S Corporation Distributions" and Note 13 to
Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
of net sales represented by certain items included in the Company's statements
of operations:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------
1996 1997
----- -----
<S> <C> <C>
Net sales................................................... 100.0% 100.0%
Cost of sales............................................... 65.6 60.0
----- -----
Gross profit................................................ 34.4 40.0
Selling and marketing....................................... 6.6 5.3
General and administrative.................................. 4.5 4.3
----- -----
Operating income............................................ 23.3 30.4
Interest and other, net..................................... -- .3
----- -----
Net income.................................................. 23.3 30.7
Pro forma income taxes...................................... 9.3 12.3
----- -----
Pro forma net income........................................ 14.0% 18.4%
===== =====
</TABLE>
Comparison of Years Ended December 31, 1996 and 1997
Net sales increased $4.8 million, or 58.6%, from $8.4 million in 1996 to
$13.2 million in 1997. The increase in net sales primarily reflects the sale of
seven complete engines in 1997, as compared to three complete engines in 1996.
Sales of engines increased $2.3 million from $1.49 million in 1996 to $3.75
million in 1997. Average unit prices of the complete engines sold in 1997
increased by approximately 7.5% from 1996. Sales to international customers
increased $3.2 million, from $1.0 million in 1996 to $4.2 million in 1997, as
the Company obtained new customers in Europe and the Far East during 1997.
Cost of sales increased $2.4 million, or 45.0%, from $5.5 million in 1996
to $7.9 million in 1997. Gross profit increased from $2.9 million in 1996 to
$5.3 million in 1997, reflecting an increase in gross profit as a percentage of
net sales from 34.4% to 40.0%. The increase in gross profit was due primarily to
increased engine and engine component and spare part sales in 1997 as compared
to 1996, which generally carry higher margins than airframe components and spare
parts.
Selling and marketing expenses increased $152,000, or 27.6%, from $551,000
in 1996 to $703,000 in 1997. This increase primarily reflects commissions paid
to agents in 1997, higher compensation to sales personnel and travel related
sales costs. As a percentage of net sales, selling and marketing expenses
declined from 6.6% in 1996 to 5.3% in 1997.
General and administrative expenses increased $186,000, or 49.4%, from
$378,000 in 1996 to $564,000 in 1997. This increase reflects increased personnel
expense resulting from higher staffing levels, expenses associated with the
Company's relocation to its new headquarters facility, increased insurance
expense, and an increase in the Company's discretionary contribution to the
employee profit sharing plan. As a percentage of net sales, general and
administrative expenses declined from 4.5% in 1996 to 4.3% in 1997.
Net other income (expense) increased from net other expense of $1,000 in
1996 to net other income of $42,000 in 1997. While interest expense increased
from $74,000 in 1996 to $79,000 in 1997, interest income increased from $71,000
in 1996 to $81,000 in 1997 and other income increased from $1,000 in 1996 to
$35,000 in 1997.
20
<PAGE> 22
As a result of the above, net income increased $2.1 million, or 109.6%,
from $1.9 million in 1996 to $4.1 million in 1997. As the Company was not
subject to federal and state income taxes, net income represents the difference
between gross profit and other expenses. To allow comparisons with C
Corporations, pro forma federal and state income taxes have been assumed at a
combined 40% rate. Based on this assumption, the Company would have incurred pro
forma income taxes of $777,000 in 1996 and $1.6 million in 1997, resulting in
pro forma net income of $1.2 million and $2.4 million in 1996 and 1997,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity to date have been comprised of
cash flow from operating activities, borrowings under the Credit Facility and
advances from the Existing Common Stockholders. The Company requires capital for
the procurement of inventory, to fund the servicing and overhaul of engine and
airframe components and spare parts performed by third-party repair facilities,
for normal operating expenses and for general working capital purposes.
The Credit Facility was initially established with NationsBank in June
1995, and has been renewed annually through May 1998. The Credit Facility
currently permits borrowings of up to $4.0 million as a revolving credit, with
principal due on maturity and interest payable monthly commencing December 1997.
The Credit Facility bears interest at LIBOR plus 2% and is secured by accounts
receivable, inventory and the personal guarantee of Karl F. Brown. As of
December 31, 1997, the Company had $1.5 million outstanding under the Credit
Facility. In February 1998, the Company received a commitment letter from
NationsBank providing that the amount available under the Credit Facility will
be increased to $10.0 million (including a $2.0 million sub-limit for issuances
of letters of credit) as of March 1998. The commitment letter provides that the
interest rate will be reduced to LIBOR plus an amount between 1.75% and 2.25%.
The Credit Facility will mature in September 1998, be secured by substantially
all of the assets of the Company and provides for certain additional limitations
and restrictions. The personal guarantee of the Credit Facility by Karl F. Brown
will be released upon completion of this offering.
Since 1993, the Company has periodically received advances from the
Existing Common Stockholders, the proceeds of which were used for working
capital purposes. Advances received from the Existing Common Stockholders bear
interest at rates between 6% and 8% per annum and mature between April 15, 1998
and June 30, 1998. At December 31, 1997, amounts outstanding and owed to the
Existing Common Stockholders totalled approximately $1.5 million. Upon
completion of this offering, the Company will apply an aggregate of
approximately $3.0 million to the repayment of the Credit Facility and the
advances from the Existing Common Stockholders, which will reduce current
liabilities by an equal amount. In connection with the termination of its S
Corporation election, the Company also anticipates distributing approximately
$2.4 million to the Existing Common Stockholders from the proceeds of this
offering. See "Use of Proceeds" and "S Corporation Distributions."
As of December 31, 1997, the Company's principal sources of liquidity
included cash and cash equivalents of $750,000 and net accounts receivable of
$1.9 million. The Company had working capital of $4.2 million and no long-term
debt as of December 31, 1997.
For the year ended December 31, 1997, operating activities used cash of
$630,000, primarily for increases in trade receivables and inventory, partially
offset by net income. Net cash used in investing activities during the year
ended December 31, 1997 was $548,000, reflecting the purchase of certain fixed
assets and investments, while net cash provided by financing activities during
the same period was $155,000, consisting primarily of borrowings under the
Credit Facility and from the Existing Common Stockholders partially offset by S
Corporation distributions.
Historically, the Company's business has not required significant capital
expenditures. The Company's capital expenditures were approximately $40,000 and
$263,000 in 1996 and 1997, respectively. The increase in 1997 primarily reflects
capital expenditures on furniture and fixtures installed in the new headquarters
facility during 1997. The Company currently has no material capital commitments.
21
<PAGE> 23
The Company believes that existing cash balances, the Credit Facility
(including the expected March 1998 increase in available borrowings under the
Credit Facility) and the proceeds of this offering will be sufficient to meet
the Company's capital requirements for at least the next 18 months. Thereafter,
if the Company's capital requirements increase, the Company could be required to
secure additional sources of capital. There can be no assurance the Company will
be capable of securing additional capital or that the terms upon which such
capital will be available to the Company will be acceptable.
INFLATION
Although the Company cannot accurately anticipate the effect of inflation
on its operations, the Company does not believe that inflation has had, or is
likely in the foreseeable future to have, a material effect on its results of
operations or financial condition. Increases in fuel costs due to inflation may
adversely affect demand for used aircraft that typically are less fuel
efficient, thereby decreasing demand for aircraft components and spare parts for
these aircraft.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 131, "Disclosure about Segments
of an Enterprise and Related Information" ("Statement 131"), which is effective
for financial statements with fiscal years beginning after December 15, 1997.
Statement 131 requires that public business enterprises report certain
information about operating segments in complete sets of financial statements of
the enterprise and in condensed financial statements of interim periods issued
to stockholders. Statement 131 also requires that public business enterprises
report certain information about their products and services, the geographic
areas in which they operate and their major customers.
In February 1998, the FASB issued Statement of Financial Accounting
Standards No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits" ("Statement 132"), which revises employers' disclosures
about pension and other postretirement benefit plans. Statement 132 does not
change the measurement or recognition of those plans, but requires additional
information on changes in benefit obligations and fair values of plan assets,
and eliminates certain disclosures previously required by SFAS Nos. 87, 88 and
106. Statement 132 is effective for financial statements with fiscal years
beginning after December 15, 1997.
The Company has not determined what additional disclosures, if any, may be
required by the provisions of Statements 131 and 132, but does not expect
adoption of either statement to have a material effect on its results of
operations.
YEAR 2000 ISSUE
The Company has reviewed all of its current computer applications with
respect to the year 2000 issue. The Company believes that certain of its
applications are substantially year 2000 compliant and that any additional costs
with respect to year 2000 compliance will not be material to the Company. The
Company is currently unable to determine the effect on it, if any, of year 2000
compliance by its customers or suppliers.
22
<PAGE> 24
BUSINESS
GENERAL
The Company is a leading international supplier of primarily high-margin
aircraft components and spare parts to major commercial passenger and cargo
airlines, maintenance and repair facilities and other redistributors located
throughout the world. The Company's net sales are principally derived from the
redistribution of complete engines and engine components and spare parts for the
Pratt & Whitney JT8 series and, to a lesser extent, the General Electric CFM56,
as well as rotable, repairable and expendable airframe components and spare
parts for Boeing, McDonnell-Douglas and Airbus aircraft. The Company acquires
engine and airframe components and spare parts for redistribution through
purchases of surplus aircraft for disassembly, bulk purchases of components and
spare parts from aircraft operators, purchases of individual components and
spare parts from other redistributors, consignments from aircraft operators and
others, and exchanges of inventoried aircraft components and spare parts for
components and spare parts that require service or overhaul.
The Company's net sales increased 58.6% to over $13 million in 1997 and net
income increased approximately 110% to over $4 million in 1997. The growth in
net sales and net income reflects (i) increases in sales of complete engines and
engine components and spare parts, which generally carry higher margins than
airframe components and spare parts, (ii) an increase in the average unit price
per sale due to changes in the Company's product mix to encompass higher priced
engine and airframe component and spare part sales, (iii) diversification of the
Company's engine sales into new engine types such as the CFM56, and (iv)
increasing sales of complete engines and engine and airframe components and
spare parts to both domestic and international customers. The Company believes
it is one of the few aircraft component and spare part redistributors of its
size engaged in the sale of both engine and airframe components and spare parts
to a broad spectrum of domestic and international customers.
INDUSTRY OVERVIEW
The Company believes that the annual worldwide market for aircraft
components and spare parts is approximately $10 billion, of which approximately
$1.3 billion represents sales of aircraft components and spare parts to the
redistribution market. The Company believes that this market will continue to
grow due to the following factors:
Growth in Air Transit Activity. According to the Boeing Report, global air
travel is projected to increase approximately 75% by the year 2006, and the
number of passenger and cargo aircraft in service will increase approximately
48% to 17,000 from 11,500. While new aircraft sales remain strong, increased
demand for air travel is expected to cause aircraft operators to retain older
aircraft. As demand for air travel increases, demand for aircraft components and
spare parts is anticipated to grow as aircraft components and spare parts must
be serviced or replaced at specified intervals. The Boeing Report forecasts the
number of aircraft in the worldwide fleet will continue to increase, as
evidenced by the following chart:
23
<PAGE> 25
Line graph illustrating projected increase in number of aircraft in worldwide
fleet from 11,500 in 1996 to approximately 22,500 in year 2016. Side axis of
graph presents number of aircraft and bottom axis presents years.
[CHART]
Source: The Boeing Report
According to the Boeing Report, most of the aircraft delivered to cargo
carriers in the near future are expected to be used aircraft converted from
commercial passenger service. This expected trend appears to be materializing as
well-known cargo carriers have already expanded their fleets of wide-body
aircraft using the Boeing 767, the McDonnell-Douglas DC-10 and the Airbus A300.
In addition, the Boeing Report forecasts a shift to larger aircraft in the cargo
market, as evidenced by the following charts:
Pie chart graphs illustrating breakdown in small, medium and large cargo
aircraft in 1996 and 2006. Pie chart for 1996 sets forth breakdown of 43%, 37%
and 20% for small, medium and large cargo aircraft, respectively; pie chart
for 2006 sets forth breakdown of 38%, 34% and 28% for small, medium and large
cargo aircraft, respectively.
Pie Charts
<TABLE>
<CAPTION>
CARGO AIRCRAFT TYPE
--------------------------------------------------------
SMALL MEDIUM LARGE
(UNDER 30 TONNES) (30 TO 50 TONNES) (OVER 50 TONNES)
----------------- ----------------- ----------------
<S> <C> <C>
727 707 747
737 757 767
DC-9 DC-8 DC-10
BAe-146 A300 MD-11
BAC-111 A310
L-1011
</TABLE>
Source: The Boeing Report
24
<PAGE> 26
Increased Outsourcing of Inventory Management Function. As airlines have
come under increasing pressure to reduce the cost associated with air
transportation, airlines have made an effort to reduce their operating costs
where possible. While some operating costs are beyond an airline's direct
control, such as the price of aviation fuel, inventory outsourcing is one means
by which airlines can reduce their capital invested in inventory and achieve
certain economies of scale. A number of smaller and start-up airlines and air
cargo operators do not currently own an inventory of aircraft components and
spare parts, but rather have entered into agreements with redistributors to
supply all or a portion of their aircraft components and spare parts
requirements. Some airlines have also begun to outsource portions of their
purchasing services, repair and overhaul activities, and warehouse management.
The Company believes that the trend toward outsourcing of inventory management
services will offer opportunities for redistributors, such as the Company, to
expand their market share.
Increase in the Number of Older Commercial Aircraft. Increased demand for
air travel and air cargo deliveries, and the need for aircraft operators to
reduce operating and capital costs, have prompted many airlines to extend the
useful life of older aircraft. The installation of FAA-approved hush-kits and
extended life maintenance programs have also increased the useful life of many
older aircraft. As a result, most aircraft types have had a longer service life
than originally anticipated. The following chart illustrates the increase in the
worldwide aircraft fleet average age from 1965 through 1995:
Line graph illustrating historical increase in worldwide fleet average age from
less than 4 years in 1965 to 12 years in 1995. Side axis of graph presents
fleet average age expressed in years and bottom axis presents years.
Source: World Jet Inventory year-end 1996
Many foreign and domestic aircraft operators and cargo carriers are
increasing their fleets through the acquisition of less expensive used aircraft.
As older aircraft are transitioned from major domestic passenger airlines to
lower cost passenger airlines and cargo carriers, used aircraft have enjoyed
longer service lives than originally anticipated. Older aircraft generally
require more maintenance and replacement components and spare parts than new
aircraft. The FAA recently proposed significant reductions in the maximum
payloads on certain Boeing 727 aircraft modified from passenger to cargo
configurations due to concerns arising from safety and engineering tests. A
final decision on proposed rule changes by the FAA is not expected before April
1998. It is currently unclear what effect, if any, adoption of the proposed rule
changes relating to payloads on certain 727 aircraft would have on demand for
727 aircraft to be converted to cargo use.
Demand for Approved, Full Service Suppliers; Highly Fragmented
Industry. Cost considerations are causing many aircraft operators to reduce the
size of their aircraft component and spare part inventories. In
25
<PAGE> 27
addition, efficiency and quality considerations are causing aircraft operators
to maintain relationships with a more limited number of approved, full service
component and spare part suppliers. The larger, better capitalized participants
in the components and spare parts redistribution industry have added a broad
array of products and services in order to provide aircraft operators with "one
stop shopping" for their components and spare parts and repair and maintenance
requirements. The Company believes that a majority of the redistribution market
is currently divided among a significant number of small and mid-sized
redistributors and that these entities, together with a number of maintenance
and repair facilities and aircraft component and spare part manufacturers, are
viable candidates for acquisition. As airline operators continue to reduce the
number of their suppliers and as the capital required to compete in the
component and spare part redistribution industry increases, the Company
anticipates that the trend toward consolidation will accelerate and provide
industry consolidators with an opportunity to expand their market share.
Leasing. The Company believes that aircraft operators are increasingly
using engine and component and spare part leases in order to reduce working
capital requirements and control overhead expenses. Short-term engine leases are
used by a variety of carriers that do not maintain a pool of spare engines. The
Company believes that leasing of used commercial jet aircraft and complete
engines should grow due to the emphasis by airlines on cost reduction, the
desire of airlines for fleet flexibility and the growth in air travel.
Increased Regulatory Scrutiny and Importance of Capital. In September 1996,
the FAA issued an advisory circular recommending voluntary industry oversight
and accreditation of aircraft component and spare part suppliers. As a result of
heightened regulatory scrutiny, aircraft operators have increased the level of
documentation and traceability required from component and spare part
redistributors. The emphasis on documentation and traceability, which requires
more sophisticated inventory tracking systems, is expected to create additional
barriers to market entry and strain the resources of smaller, less
well-capitalized component and spare part redistributors.
BUSINESS STRATEGY
The Company's strategy is to enhance its position as a leading
redistributor of aircraft components and spare parts to customers worldwide and
to capitalize on the continued expansion of the aircraft components and spare
parts aftermarket. The principal components of the Company's strategy include:
Broaden Engine and Airframe Product Lines. The Company intends to
expand its complete engine and engine components and spare parts product
line by adding products such as the JT9D, CF6 and PW4000 engines used in
Boeing 747 and 767 aircraft, the McDonnell-Douglas DC-10 and the Airbus
A300. In addition, the Company expects to expand its product line to
include airframe components and spare parts for wide-body aircraft, such as
the Boeing 767, McDonnell-Douglas DC-10, and Airbus A300. Following this
offering, the Company also anticipates hiring additional personnel
experienced in avionics and instrumentation in order to allow the Company
to offer an expanded range of higher-margin avionics and instrumentation
products. The Company began purchasing higher thrust CFM56 engines in 1995
and intends to expand its complete engine and engine components and spare
parts inventory for this product. The CFM56 is the second most popular
engine worldwide based on the number of aircraft powered by this engine
type, and is considered likely to be in service for another 25 years. As
fleets of wide-body aircraft and their engines age and as air cargo
carriers transition larger portions of their fleets to widebody aircraft,
the Company will seek to capitalize on the demand for complete engines and
engine and airframe components and spare parts resulting from the aging and
continued use of these aircraft models.
Capitalize on Bulk Inventory Purchase Opportunities. The Company
expects to leverage its management expertise and contacts within the
aviation industry to obtain access to, and exploit, bulk inventory purchase
opportunities. These opportunities arise when aircraft operators, in order
to reduce capital invested in inventory, sell large amounts of inventory in
a single transaction due to the retirement of an aircraft type from their
fleets, inventory reduction programs to reduce costs, the downsizing of
operations or the dissolution of their businesses as a whole. Bulk
inventory purchases allow the Company to obtain large inventories of
aircraft components and spare parts at a lower cost than can ordinarily be
obtained by purchasing aircraft components and spare parts on an individual
basis, resulting generally in
26
<PAGE> 28
higher gross margins on sales of such components and spare parts. In 1997,
the Company successfully completed three significant, and approximately
five small, bulk inventory purchases. Upon completion of this offering, the
Company believes its increased working capital will allow it to respond
quickly to bulk inventory purchase opportunities. The Company believes that
its market presence, experience in evaluating bulk inventory purchases and
capital strength will enable the Company to quickly analyze and complete
large bulk inventory purchase opportunities if the economics of such
purchases are favorable.
Pursue Strategic Acquisitions. The Company intends to implement a
consolidation strategy in the highly fragmented aircraft components and
spare parts industry designed to increase the Company's market share and to
achieve some degree of vertical integration through acquisitions of, among
others, FAA-licensed repair facilities. As a result of management's almost
100 years' combined experience in the aircraft components and spare parts
redistribution industry, the Company is familiar with a number of
FAA-licensed repair facilities, aircraft component and spare part
redistributors and small manufacturers of aviation products. The Company
intends, following this offering, to pursue acquisitions of selected
candidates that will complement the Company's existing business, leverage
operating efficiencies and capitalize on opportunities to vertically
integrate repair and maintenance activities and aircraft components and
spare parts redistribution operations. The Company expended over $3 million
in repairs in 1997 and believes that acquisition of one or more repair
facilities will in particular offer synergistic benefits to the Company.
The Company believes that small aftermarket component and spare part
redistributors, many of which are family-owned or capital constrained, may
be unable to provide the extensive inventory and quality control measures
necessary to comply with applicable regulatory and customer requirements,
and will provide acquisition opportunities for the Company. Acquisitions
are expected to increase the Company's customer base, expand its product
line (both with respect to aircraft and engines in which the Company
currently specializes and into new aircraft and engine types), and to
strengthen its relationships with existing customers through providing a
more extensive range of products and services.
Expand Leasing Activities and Penetrate Inventory Management
Market. As aircraft operators have sought to lower working capital
requirements and reduce overhead, a trend has developed among both large
and small carriers to lease complete engines in order to eliminate the need
to maintain spare engine pools. A number of international and regional
carriers have also implemented aircraft component and spare part leasing
programs as a means of preserving capital while maintaining adequate
aircraft components and spare parts support. The Company has from time to
time leased engines and select airframe components and spare parts to
aircraft operators, has entered into a joint venture to lease an engine to
a cargo carrier, and intends to further develop its leasing activities by
purchasing and leasing complete aircraft and engines to aircraft operators
and by expanding its engine and airframe component and spare part leasing
programs. The Company believes it can enhance its customer relationships by
offering a broad range of leasing services and, as aircraft or engines come
off-lease at the expiration of the lease term, the Company will have a
range of options for utilization of the asset, including the re-lease, sale
or disassembly of the aircraft or engines for components and spare parts.
The Company also believes that, through its participation in the components
and spare parts leasing market, the Company will be able to more
effectively utilize portions of its components and spare parts inventory
and capitalize on its experience and knowledge of the market to maximize
the residual value of such inventory upon the expiration of leases. In
addition to leasing, aircraft operators have attempted to reduce overhead
by outsourcing inventory management through consignment and other
arrangements. The Company has entered into consignment arrangements in the
past with selected aircraft operators and expects to offer consignment
services in the future to enhance its customer relationships.
Increase Business Through Inventory Expansion and Addition of Sales
Agents. The Company intends to expand its business with existing customers
and to secure new customers by continuing to increase the size and depth of
its inventory and by continuing to expand its marketing efforts to its
international customer base. Following completion of this offering, the
Company will attempt to increase inventory of high turnover engine and
airframe components and spare parts, undertake a targeted expansion of
inventory in additional product lines, and purchase complete aircraft and
engines for leasing
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<PAGE> 29
that at lease termination will be available for disassembly or sale.
Additionally, the Company is currently seeking to add sales agents in
Central and South America and will seek to selectively increase its base of
international sales agents following this offering through recruiting of
qualified agents principally in Europe, the Middle East and select Asian
markets. The Company believes that the addition of more sales agents not
only offers the opportunity to increase customer sales, but also will
assist in the identification of available purchase opportunities for
aircraft, engines and aircraft components and spare parts on a worldwide
basis.
AIRCRAFT COMPONENTS AND SPARE PARTS
Aircraft components and spare parts can be categorized by their ongoing
ability to be repaired and returned to service. The general categories are as
follows: (i) rotable; (ii) repairable; and (iii) expendable. A rotable is a part
which is removed periodically as dictated by the FAA, an original equipment
manufacturer ("OEM") or an operator's maintenance procedures or on an as-needed
basis and is typically repaired or overhauled and re-used an indefinite number
of times. An important subset of rotables is life-limited parts. A life-limited
rotable has a designated number of allowable flight hours and/or cycles (one
take-off and landing generally constitutes one cycle) after which it is rendered
unusable. A repairable is similar to a rotable except that it can only be
repaired a limited number of times before it must be discarded. An expendable is
generally a part which is used and not thereafter repaired for further use.
Aircraft components and spare parts' conditions are classified within the
industry as (i) factory new, (ii) new surplus, (iii) overhauled, (iv)
serviceable, and (v) "as removed". A factory new or new surplus part is one that
has never been installed or used. Factory new parts are purchased from OEMs or
their authorized distributors. New surplus parts are purchased from excess stock
of airlines, repair facilities or other redistributors. An overhauled part has
been completely disassembled, inspected, repaired, reassembled and tested by a
licensed repair facility. A part is classified serviceable if it is repaired by
a licensed repair facility but not completely disassembled as in an overhaul. A
part may also be classified serviceable if it is removed by the operator from an
aircraft or engine while operating under an approved maintenance program and is
functional and meets any manufacturer or time and cycle restrictions applicable
to the part. A factory new, new surplus, overhauled or serviceable part
designation indicates that the part can be immediately utilized on an aircraft.
A part in "as removed" condition requires functional testing, repair or overhaul
by a licensed repair facility prior to being returned to service on an aircraft.
The aircraft components and spare parts sold by the Company include rotable,
repairable and expendable airframe and engine components and spare parts for
commercial aircraft. The Company estimates that sales of rotable, repairable and
expendable components and spare parts accounted for approximately 80%, 19% and
1%, respectively, of the Company's 1997 net sales.
PRODUCTS
The Company's inventory of aircraft components and spare parts is comprised
primarily of JT8 series engines and engine components and spare parts and
airframe components and spare parts for all series of Boeing 737 aircraft. The
JT8D engine, certain models of which have not been in production since 1987, is
estimated to power approximately 40% of commercial aircraft worldwide,
consisting almost exclusively of narrow-body aircraft. The Company estimates,
based on publicly available information, that there are in excess of 10,000 JT8D
engines currently in service on Boeing 737-100 and -200 aircraft, 727 aircraft
and McDonnell-Douglas DC-9 aircraft. The Company expanded its components and
spare parts inventory in 1995 to include CFM56 engines and engine components and
spare parts. The CFM56 is a higher thrust engine that, in its three primary
configurations, is used to power the 737-300, -400 and -500 aircraft, the
McDonnell-Douglas DC-8 and a variety of Airbus aircraft.
Engine Components and Spare Parts. The Company's inventory of engine
components and spare parts consists primarily of components and spare parts for
the JT8D series of engines and, to a lesser degree, CFM56 series engines. At
December 31, 1997, the Company's inventory of engine components and spare parts
consisted of over 47,000 items, most of which were obtained by the purchase and
disassembly of complete engines. Generally, the Company's inventory of engine
components and spare parts is purchased in "as removed" condition and therefore
requires repair by a licensed repair facility. Similarly, the Company
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<PAGE> 30
generally purchases most of its engines in non-serviceable condition,
commissions necessary repairs by a licensed repair facility, and then resells or
leases the complete overhauled engines to its customers. Where possible, the
Company uses engine components and spare parts from its inventory in order to
minimize out-of-pocket repair cost and maximize inventory turnover. Due to the
Company's repeated use of licensed repair facilities, the Company believes it
has identified certain repair facilities that have developed specific areas of
expertise within the repair industry and that are capable of meeting the
Company's quality standards and scheduling requirements for repairs.
The Company generally begins marketing efforts related to the sale of an
engine as soon as the engine is purchased, and the Company has frequently been
successful in concluding engine sales, subject to repair completion, either
prior to or while repairs are ongoing. Prices for engines depend on the level of
thrust, the availability of the engine type at the time of repair, the
availability of alternative engine types that can be used in a customer's
application and whether an aircraft is "on the ground" awaiting installation of
an engine. The Company's results of operations have in the past, and will in the
future, be significantly impacted by the frequency of complete engine sales.
During 1996 and 1997, the Company completed three and seven complete engine
sales, respectively. The identity of the Company's largest customers will also
vary from period to period as the completion of an engine sale will frequently
place a customer among the largest customers in terms of dollar volume.
Airframe Components and Spare Parts. The Company's inventory of airframe
components and spare parts consists primarily of rotables for Boeing,
McDonnell-Douglas and Airbus aircraft. Airframe components and spare parts are
generally obtained from disassembly of aircraft and purchase of bulk inventory.
The Company's management personnel have considerable experience in the
disassembly of aircraft, having supervised or participated in the disassembly of
aircraft since the Company began active operations in 1990. The Company
typically disassembles aircraft at the aircraft's location when purchased, and
hires local crews to assist in the disassembly process. Components and spare
parts are then returned to the Company's facilities where evaluations are
undertaken and repairs are commissioned as required. The Company currently
maintains a broad selection of over 66,000 individual airframe components and
spare parts and anticipates expanding this inventory following completion of
this offering.
OPERATIONS OF THE COMPANY
The Company's core business is the buying and selling of engines, engine
components and spare parts and airframe components and spare parts. The Company
intends to expand its business following completion of this offering to include
the purchase and sale of engines and components and spare parts for a variety of
wide-body aircraft, and the leasing of aircraft, engines and components and
spare parts, as well as to increase its focus on sales of avionics and
instrumentation. The Company believes that the leasing of aircraft and complete
engines will become a more significant part of the Company's business in the
future and provide significant opportunities for expansion.
Inventory Acquisition. The Company obtains most of its components and spare
parts inventory by purchasing individual components and spare parts from
airlines, repair facilities or other redistributors, by purchasing excess
inventory from aircraft operators ("bulk inventory purchases") or by purchasing
aircraft and engines for disassembly. The Company may also fill a customer order
for a part not held in the Company's inventory by locating the part for the
customer from another vendor, purchasing the part and then reselling the part to
the customer. The Company makes bulk inventory purchases by bidding on the
inventory of companies that are eliminating certain portions of their components
and spare parts inventory due to the retirement of an aircraft type from their
fleets, inventory reduction programs to reduce costs, the downsizing of
operations or the dissolution of their businesses as a whole.
The Company acquires aircraft for disassembly if its initial estimate of
the timing and value of component and spare part sales from such aircraft would
allow the Company to recover the purchase price within one year through the sale
of a portion of the components and spare parts, and to sell the remaining
components and spare parts for amounts in excess of the previously recovered
purchase price over the subsequent five years. The Boeing Report notes that
approximately 1,900 aircraft will be removed from active commercial service
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<PAGE> 31
between 1996 and 2006. Many of these aircraft will be disassembled in order to
sell their components and spare parts. The seller of the aircraft will often
provide the Company with a computerized data base listing all the components and
spare parts on the aircraft which is verified by the Company. If a computerized
listing of components and spare parts is not available, the Company will conduct
its own inventory of the aircraft to be disassembled. The components and spare
parts are catalogued and all the relevant information regarding the components
and spare parts, including each part's repair history, is entered into the
Company's computer data base. Management believes that it is essential that such
information be immediately available in order to facilitate sales by the
Company's sales personnel. In certain instances, components and spare parts that
are in high demand are pre-sold prior to the delivery of the disassembled
aircraft to the Company. High value components and spare parts such as engines
and engine components and spare parts are also often pre-sold. Pre-selling
allows the Company to recover a significant amount of its investment within a
short time from the date of the aircraft purchase.
An aircraft purchased for disassembly is often in the same condition as the
aircraft that will utilize the components and spare parts. Sellers are usually
motivated to dispose of their aircraft at prices that justify disassembly for a
variety of reasons, including the seller's need for immediate liquidity or
inability to economically operate or lease the aircraft to a third party.
Additionally, such aircraft may require extensive maintenance or overhaul or may
require government-mandated improvements which are uneconomical for the seller
to perform. The Company has in the past occasionally been involved in the
salvage of aircraft and may engage in salvage operations in the future as
another means of inventory acquisition. The Company's sale of salvaged
components and spare parts is performed in accordance with its normal quality
control procedures and the Company does not provide non-incident certification
on components and spare parts removed from an incident-related aircraft. The
availability of aircraft for disassembly varies based on a number of factors,
including demand for older aircraft, the rate at which aircraft operators retire
older aircraft from their fleet, availability of new aircraft and decisions by
cargo carriers to standardize fleets of cargo aircraft that may formerly have
served as passenger aircraft.
Aircraft and Engine Sales and Leasing. The Company has determined that its
component and spare part sales opportunities will be enhanced by providing
existing and new customers with complete aircraft and engines through lease
transactions. Such transactions will allow the Company to expand its customer
base for components and spare parts and, through leasing, reduce the cost basis
in its aircraft and engines. Once leased, the Company will derive revenue from
lease payments and will seek to sell components and spare parts to the lessee
from inventory both for the leased aircraft or engines as well as other aircraft
or engines in the lessee's fleet. Upon return of the aircraft or engines at the
expiration of the lease term, the Company will either re-lease, sell or
disassemble the aircraft or engines for components and spare parts in order to
achieve the highest utilization of the asset.
The Company's anticipated leasing activities are expected to be based on
operating leases with its customers. Under an operating lease, the Company will
retain title to the aircraft or engine, thereby retaining the potential benefits
and assuming the risk of the residual value of the aircraft or engine. Operating
leases allow aircraft operators greater fleet and financial flexibility due to
their shorter-term nature, the relatively small initial capital outlay necessary
to obtain use of the aircraft or engine and off-balance sheet accounting
treatment. The Company expects to focus on leasing to its customers older,
narrow-body aircraft and the engines they use and older, wide-body aircraft with
engines they use for periods between six months to three years. The Company
believes that there is an increasing demand by customers for operating leases,
which are being used as an alternative to traditional financing arrangements.
In January 1998, the Company entered into a joint venture that then
executed an operating lease for an engine with a cargo carrier. The lease
extends for a period calculated based upon flight cycles and/or 11,000 flight
hours. The joint venture also relates to two other engines that the Company and
its co-venturer intend to lease to customers following completion of overhaul.
Exchange Transactions. An "exchange transaction" generally involves a high
value/high turnover rotable component or spare part which an operator frequently
replaces when performing aircraft maintenance. In an exchange transaction, a
customer pays an exchange fee and returns a "core" unit to the Company within
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14 days. A "core" unit is the same part which is being delivered to the customer
by the Company, but in need of overhaul. The Company has the customer's core
unit overhauled and bills the customer for the overhaul charges and retains the
overhauled core unit in its inventory for re-sale. If the "core" unit cannot be
repaired, it is returned to the customer and the exchange transaction is
converted to an outright sale of the component or spare part that was previously
delivered or installed, at a sales price agreed upon at the time the exchange
transaction was negotiated. The Company estimates that exchanges accounted for
less than 2% of 1997 net sales. Because exchanges tend to be more labor
intensive than outright sale transactions, the Company does not expect to target
exchanges as a transaction type for future expansion.
SALES AND MARKETING; CUSTOMERS
The Company has developed a sales and marketing program which includes
well-trained and knowledgeable in-house sales personnel and commissioned
independent sales agents, computerized inventory management, listing of its
aircraft components and spare parts in two electronic industry data bank
catalogues and a home page on the Internet. The Company's Chief Executive
Officer, two key employees and a customer service specialist are currently
engaged in sales and marketing activities. The Company expects to hire two
additional in-house sales personnel prior to completion of this offering.
Crucial to the successful marketing of the Company's inventory is the Company's
ability to make timely delivery of components and spare parts in reliable
condition. The Company believes aircraft operators are more sensitive to
reliability and timely delivery than price.
In addition to directly marketing its inventory, the Company utilizes the
services of three independent sales agents, two of whom specialize in
international sales and one of whom specializes in domestic sales. Each of the
Company's sales agents has extensive experience with the requirements of
aircraft operators and other customers and, in addition to performing sales
activities, assist the Company in identifying opportunities to purchase
aircraft, engines and bulk components and spare parts inventories. The Company's
sales agents are paid on a commission basis and are retained under agency
agreements terminable at will by either party. The Company is currently seeking
to add two additional sales agents for Central and South America. The Company
expects to further expand its network of sales agents following this offering
and anticipates that most, if not all, of such expansion will be in the
international market.
As a means of generating exposure to existing and potential customers, the
Company lists its inventory in the Inventory Locator Service ("ILS") and the Air
Transport Association's ("AIRS") computerized data banks. Buyers of aircraft
components and spare parts can access the ILS or AIRS, as well as other spare
parts data bases, to determine the companies which have the desired inventory
available. Neither the ILS nor AIRS lists price information relating to
particular components and spare parts. In addition, the Company places
advertisements in select industry catalogues and attends a number of industry
conferences and tradeshows in order to acquaint potential customers with the
Company's redistribution capabilities.
Market forces establish the price for aircraft components and spare parts.
No pricing service or price catalogue exists for aftermarket components and
spare parts. Rather, aftermarket aircraft components and spare parts prices are
determined by referencing new parts catalogues with consideration given to
existing supply and demand conditions. Often, aircraft operators will opt for
quality aftermarket components and spare parts even when new components and
spare parts are still in production. Aftermarket aircraft components and spare
parts must meet the same FAA quality standards as new parts, but cost less than
the same new components and spare parts, and are often more readily available
than new components and spare parts.
The Company's customer base is comprised of approximately 70% domestic and
30% international customers. The Company's customers include a number of
domestic and international commercial passenger airlines, maintenance and repair
facilities and other redistributors. Management believes that its customer
relationships are critical to the Company's operational success. The Company
maintains an adequate level of inventory in order to service its customers in a
timely manner. Management believes that availability and timely delivery of
quality components and spare parts are the primary factors considered by
customers when making a purchase decision. In 1997, none of the Company's
customers accounted for in excess of 10% of the Company's net sales, although
three customers each accounted for between 5% and 10% of the Company's
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1997 net sales. Sales to each of these three customers exceeded 5% of the
Company's 1997 net sales as a result of each customer purchasing an engine from
the Company. In a given period, a substantial portion of the Company's net sales
may be attributable to the sale of one or more engines. Sales of engines, the
timing of aircraft component and spare part sales or a lease transaction during
a given period may result in a customer being considered a significant customer
of the Company for that period. Currently, the Company believes that it has no
customer, the loss of which would have a material adverse effect on the
Company's results of operations.
QUALITY ASSURANCE
The Company adheres to stringent quality control standards and procedures
in the purchase and sale of its products. The Company is a member of the Airline
Suppliers Association ("ASA") and is periodically audited by certain of its
customers to ensure compliance with such customer's quality standards. The
Company has applied for accreditation as an aftermarket aircraft components and
spare parts supplier by the ASA and is currently awaiting completion of an
on-site audit by the ASA. Components and spare parts procured from an accredited
supplier convey assurance to the purchaser that the quality is as stated and the
appropriate documentation is on file at the supplier's place of business.
Accreditation also provides assurance that the supplier has implemented an
appropriate quality assurance system and has demonstrated the ability to
maintain such system. Although the Company believes that accreditation is not
required in order to conduct its operations, the Company believes that
accreditation is consistent with the Company's long-term objectives as a
redistributor of aircraft components and spare parts.
Because aircraft operators require a readily available and identifiable
source of inventory meeting regulatory requirements, the Company has implemented
a total quality assurance program. This program consists of numerous quality
procedures, including (i) inspection procedures mandating that procured
aircraft, engines and components and spare parts be traceable to a source
approved by the Company, (ii) training and supervision of personnel to properly
carry out the total quality assurance program, and (iii) ongoing quality review
board meetings conducted by senior management to oversee the total quality
assurance program.
An important factor in the aircraft components and spare parts
redistribution market relates to the documentation and traceability of aircraft
components and spare parts. The Company requires all of its suppliers to provide
adequate documentation as dictated by the Company's customers. The Company
utilizes electronic data scanning and storage techniques to maintain complete
copies of all documentation. Documentation required includes, where applicable,
(i) a maintenance release from a licensed repair facility signed and dated by
the licensed airframe and/or power plant mechanic who repaired the aircraft
components and spare parts and an inspection to certify that the proper methods,
materials and workmanship were used, (ii) a "tear-down" report detailing the
discrepancies and corrective actions taken during the last shop repair, and
(iii) an invoice or purchase order from an approved source.
The Company provides no warranties with respect to the aircraft components
and spare parts it sells. Engine repairs are customarily warranted by
maintenance and repair facilities for a period of six months or 1,000 flying
hours and, upon resale of engines, the Company provides a pass-through to its
customers of all warranty rights it received from the maintenance and repair
facility. The Company generally accepts returns of aircraft components and spare
parts by its customers within a period of 45 days from the date of shipment.
REGULATION
The aviation industry is highly regulated in the United States by the FAA
and in other countries by similar regulatory agencies. These regulations are
designed to ensure that all aircraft, engines and aircraft components and spare
parts are continuously maintained in proper condition for the safe operation of
aircraft. While the Company's operations are not currently regulated directly by
the FAA, the independent facilities that repair and overhaul the Company's
products and the aircraft operators that ultimately utilize the Company's
products are subject to extensive regulation. Accordingly, the Company must
consider the regulatory requirements of its customers and provide them with
aircraft components and spare parts that comply with airworthiness standards
established by the FAA and OEMs, together with required documenta-
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tion that will enable these customers to comply with other applicable regulatory
requirements. The inspection, maintenance and repair procedures and schedules
for the various types of aircraft, engines and aircraft components and spare
parts are prescribed by regulatory authorities and can be performed only by
licensed repair facilities utilizing licensed technicians. Compliance with
applicable FAA and OEM standards are required prior to installation of a
component or spare part on an aircraft. The Company only utilizes licensed
repair facilities to repair and certify the aircraft, engines and aircraft
components and spare parts it sells.
In June 1996, the FAA adopted a series of changes in the FAA's inspection
policies to enhance its oversight of aircraft operators that rely on third-party
repair and overhaul facilities. The effect on the Company of such changes to the
FAA's inspection policies may be to reduce the number of third-party maintenance
facilities that provide services to the Company. To date, the Company's
operations have not been materially adversely affected as a result of such
regulations.
In September 1996, the FAA issued an advisory circular to support the
implementation of a voluntary accreditation program for civil aircraft parts
suppliers. This accreditation program establishes quality standards applicable
to aftermarket suppliers, such as the Company, and designates FAA approved
organizations such as the ASA to perform quality assurance audits for initial
accreditation of aftermarket suppliers. The Company has an application pending
to become accredited by the ASA as an aircraft components and spare parts
supplier.
Because the Company's sales consist largely of engines, components and
spare parts for older aircraft, regulations promulgated by the FAA governing
noise emission standards for older aircraft and the FAA's Aging Aircraft Program
Plan (the "Aging Aircraft Program") have a material impact on the market for the
Company's products. All stage 2 aircraft must install hush-kits pursuant to such
noise emission standards or be phased out of operation in the United States by
December 31, 1999 and in the European Union by April 1, 2002. The Aging Aircraft
Program requires aircraft operators to perform structural modifications and
inspections to address airframe fatigue and to implement corrosion prevention
and control programs, which increase the operating and maintenance costs of
older aircraft. Furthermore, the U.S. Environmental Protection Agency and the
various environmental agencies of the European Union have sought the adoption of
stricter standards limiting the emission of nitrous oxide from aircraft engines.
The Company believes that notwithstanding the substantial costs imposed by noise
emission standards and the Aging Aircraft Program on older aircraft, estimated
by the Company to average less than $4 million per aircraft on aircraft such as
the DC-9, certain aircraft operators will continue to utilize older aircraft due
to the substantially greater cost of acquiring new replacement aircraft.
The core operations of the Company may in the future be subject to FAA or
other regulatory requirements. The Company closely monitors the FAA and industry
trade groups in an attempt to understand how possible future regulations might
impact the Company.
PRODUCT LIABILITY
The commercial aviation industry periodically experiences catastrophic
losses. As a redistributor, the Company may be named as a defendant in a lawsuit
as a result of a catastrophic loss if a part sold by the Company were installed
in an incident-related aircraft. In this regard, the Company maintains product
liability insurance in the amount of $25 million. While the Company believes
this amount to be adequate liability insurance to protect it from such claims,
and while no lawsuit has ever been filed against the Company based upon a
product liability theory, no assurance can be given that claims will not arise
in the future or that such insurance coverage will be adequate. Additionally,
there can be no assurance that insurance coverages can be maintained in the
future at an acceptable cost, if at all. Any such liability not covered by
insurance could have a material adverse effect on the financial condition of the
Company.
COMPETITION
The aircraft component and spare part redistribution market is highly
competitive. The market consists of a limited number of well-capitalized
companies selling a broad range of products and numerous small competitors
serving distinct market niches. Certain of these competitors have substantially
greater financial,
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marketing and other resources than does the Company. The Company believes that
current industry trends will benefit larger, well-capitalized companies. The
Company believes that range and depth of inventories, timeliness of parts
delivery, quality and traceability of products, service and price are the key
competitive factors in the industry. The principal companies with which the
Company currently competes are AAR Corp., The AGES Group, Aviation Sales
Company, AVTEAM, Inc., Banner Aerospace and The Memphis Group, all of which are
significantly larger than the Company. Customers in need of aircraft parts have
access, through computer-generated inventory catalogues, to a broad array of
suppliers, including aircraft manufacturers, OEMs of components and spare parts,
airlines and aircraft services companies, which may have the effect of
increasing competition for, and lowering prices on, parts sales.
EMPLOYEES
At January 31, 1998, the Company had 18 full-time employees and one
part-time employee. Of these, four are principally engaged in management, four
are engaged in sales and marketing and the remainder are engaged in operations,
accounting and administration. None of the Company's employees are subject to
collective bargaining agreements. The Company believes its employee relations
are excellent.
FACILITIES
The Company's offices are located in Fort Mill, South Carolina and consist
of approximately 25,000 square feet, of which approximately 6,000 square feet
are used for offices and approximately 19,000 square feet are used for shipping,
receiving and inventory storage. The offices are leased for an annual base rent
of $87,000 through July 31, 2002, subject to extension for an additional five
years at a rental rate that increases in accordance with the Consumer Price
Index. The Company also leases a 15,000 square foot warehouse facility located
in Fort Mill, South Carolina for an annual rental of approximately $50,000
through December 2002. The Company is also obligated to pay its pro rata share
of taxes, assessments and maintenance expenses attributable to each of its
facilities. The Company leases both of its facilities from two partnerships in
which Herman O. Brown, Jr., one of the Existing Common Stockholders and father
of Karl F. Brown, is a partner, and in one of which Karl F. Brown, an officer
and director of the Company, is a partner. See "Management -- Certain
Transactions."
LITIGATION
The Company is not a party to any litigation and is not aware of any
threatened or pending legal proceeding which would have a material adverse
effect on the Company's business, operations or financial condition.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME(1) AGE POSITION
------- --- --------
<S> <C> <C>
Karl F. Brown(1)..................... 34 Chairman of the Board, Chief Executive Officer
and President
Elaine T. Rudisill................... 42 Chief Financial Officer
David M. Furr(1)(2).................. 40 Director
Pamela K. Clement(1)(2).............. 43 Director
James T. Comer, III.................. 49 Director
</TABLE>
- ---------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Officers are appointed by and serve at the discretion of the Board of
Directors. Each director holds office until the next annual meeting of
stockholders or until a successor has been duly elected and qualified. All of
the Company's officers devote full-time to the Company's business and affairs.
Karl F. Brown has served as President of the Company since 1990. Mr. Brown
has served as Chairman of the Board and Chief Executive Officer of the Company
since January 1, 1998. From 1986 to 1990, Mr. Brown served as a salesman for
U.S. Aviation, Inc., an aircraft components and spare parts redistributor
partially owned by Herman O. Brown, Jr., Mr. Brown's father. Mr. Brown attended
the University of North Carolina at Charlotte and received a Bachelor of Arts
degree in Business in 1986.
Elaine T. Rudisill has served as Chief Financial Officer of the Company
since December 1997. From 1987 through 1996, Ms. Rudisill served as assistant
controller and controller of IGI, Inc., Buena, New Jersey, a publicly-traded
diversified animal healthcare and human cosmetics manufacturer. In 1996, Ms.
Rudisill became chief financial officer and vice president of finance of
Novavax, Inc., Columbus, Maryland, which until late 1995 was a subsidiary of
IGI, Inc. Novavax, Inc. is engaged in the development of biopharmaceutical
products and, since its spin-off from IGI, Inc., has been publicly traded. In
her capacity as chief financial officer of Novavax, Inc., Ms. Rudisill was
responsible for financial reporting, human resources and management information
systems and was involved significantly in the spin-off from IGI, Inc. Ms.
Rudisill received a Bachelor of Science degree in Accounting from the University
of North Carolina in 1977.
David M. Furr has served as a director of the Company since January 1998.
Mr. Furr has been a partner in the law firm of Gray, Layton, Drum, Solomon,
Sigmon, Furr & Smith, P.A., Gastonia, North Carolina, and a partner of a
predecessor firm for in excess of five years. Mr. Furr has practiced corporate
and tax law since 1983 and has represented the Company with respect to corporate
and tax matters since 1990. Mr. Furr served as a director of Swisher
International, Inc., a publicly-traded hygiene service company, from 1991
through September 1995. Mr. Furr is also a member of Seaside Advisors, LLC, the
general partner of Seaside Partners, L.P., a privately-held limited partnership
formed primarily to invest in securities of publicly-traded companies with stock
market capitalizations of $100 million or less. Mr. Furr received a Bachelor of
Arts degree and his Juris Doctor degree from Wake Forest University in 1980 and
1982, respectively, and a Master of Taxation degree from the University of
Florida in 1983. Mr. Furr is admitted to practice before the United States Tax
Court.
Pamela K. Clement has been a director of the Company since February 1998.
She is currently employed as a managing director of Piedmont Venture Partners, a
Charlotte, North Carolina-based venture capital fund which she cofounded in May
1996. Piedmont Venture Partners invests primarily in technology related private
concerns located in the southeastern United States. From April 1995 to May 1996,
Ms. Clement was engaged in investing for her own account. From September 1992 to
March 1995, she served as president, chief operating officer and a director of
Sovereign Advisers, Inc., a Charlotte, North Carolina-based investment advisory
firm. Ms. Clement sold her interest in Sovereign Advisers, Inc. to
Interstate/Johnson Lane
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<PAGE> 37
Corporation in 1995. From 1976 through 1992, Ms. Clement was employed in a
variety of positions with a number of investment banking and money management
firms. Ms. Clement received a Bachelor of Arts degree in Economics from Cornell
University in 1976.
James T. Comer, III has been a director of the Company since March 1998.
Since 1991, Mr. Comer has been the president of J.T. Comer Consulting, Inc. and
chairman of Southern Pension Services, Inc., both of which are wholly-owned by
Mr. Comer. J.T. Comer Consulting, Inc. provides employee benefit consulting
services and Southern Pension Services, Inc. provides pension administration
services. From 1979 to 1986, Mr. Comer served as president of J.T. Comer &
Associates, Inc., a pension administration and benefit consulting firm that was
sold to the D & B Plan Services Division of the Dunn & Bradstreet Corporation in
1986. Mr. Comer was employed as the president of the D & B Plan Services
Division from 1986 to 1991. Mr. Comer received a Bachelor of Arts degree in
Economics from the University of North Carolina at Charlotte in 1971.
KEY EMPLOYEES
William E. Werts has been employed by the Company since 1990 as Director of
Sales. Mr. Werts has been employed in the aircraft components and spare parts
redistribution industry for over 35 years, including five years at U.S.
Aviation, Inc. and 22 years at Charlotte Aircraft Corporation.
James E. Cauble has been the Company's Director of Quality Control since
1990. Mr. Cauble has been employed in the aircraft components and spare parts
redistribution industry for over 35 years, including eight years at U.S.
Aviation, Inc. and 22 years at Charlotte Aircraft Corporation. Mr. Cauble has
held an Airframe and Powerplant License since 1970 and an FAA Inspection
Authorization since 1975.
David B. Abbott has served as the Company's Director of Marketing since
1990. Prior to joining the Company, Mr. Abbott was employed in various sales and
marketing positions for over 14 years in the aviation industry.
BOARD COMMITTEES
The Board of Directors maintains a Compensation Committee and an Audit
Committee. The Compensation Committee is composed of Mr. Furr and Ms. Clement,
both non-management directors. The Audit Committee is composed of Messrs. Brown
and Furr and Ms. Clement. The primary function of the Compensation Committee is
to review and make recommendations to the Board with respect to the
compensation, including bonuses, of the Company's officers and to administer the
Option Plan. The function of the Audit Committee is to review and approve the
scope of audit procedures employed by the Company's independent auditors, review
and approve the audit reports rendered by the Company's independent auditors and
approve the audit fee charged by the independent auditors. The Audit Committee
reports to the Board of Directors with respect to such matters and recommends
the selection of the independent auditors.
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth the annual and
long-term compensation for services in all capacities to the Company in the
fiscal years ended December 31, 1995, 1996 and 1997 of Karl F. Brown, the only
executive officer of the Company whose total annual salary and bonus exceeded
$100,000 during the relevant periods (the "Named Officer").
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL ------------
FISCAL COMPENSATION(1)
YEAR ENDED --------------- OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION DECEMBER 31, SALARY BONUS (SHARES) COMPENSATION(2)
--------------------------- ------------ -------- ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Karl F. Brown, 1997 $150,000 $-0- -- $17,788
Chairman of the Board, Chief 1996 150,000 -0- -- 17,972
Executive Officer and
President 1995 95,000 -0- -- 17,994
</TABLE>
36
<PAGE> 38
- ---------------
(1) Excludes S Corporation distributions.
(2) Represents costs attributable to two Company automobiles provided for use by
the Named Officer and his spouse and cash advances made in connection with a
split-dollar life insurance plan maintained by the Company on behalf of the
Named Officer.
No employee of the Company receives any additional compensation for his
services as a director. Non-management directors receive no salary for their
services as such, but receive a fee of $250 per meeting or committee meeting
attended. The Board of Directors has also authorized payment of reasonable
travel or other out-of-pocket expenses incurred by non-management directors in
attending meetings of the Board of Directors or committees thereof.
Employment and Other Agreements. In January 1998, the Company entered into
an employment agreement with Karl F. Brown. The employment agreement requires
that he devote his full business time to the Company, may be terminated by the
Company for "cause" (as defined in the employment agreement) and, as currently
in effect, calls for Mr. Brown to receive an annual salary of $200,000 and a
discretionary bonus determined by the Compensation Committee. The employment
agreement extends for a three-year term. Mr. Brown is also entitled to receive
lump sum compensation equal to approximately three times his annual salary and
bonus in the event of a change in control of the Company and upon Mr. Brown's
services being terminated or his status, authority or responsibilities being
substantially diminished.
In February 1998, the Company has also entered into an employment agreement
with Elaine T. Rudisill, the Chief Financial Officer of the Company. This
agreement extends for a one-year term, is subject to successive one-year
automatic renewals unless either party provides notice of non-renewal, and
provides for Ms. Rudisill to receive an annual salary of $65,000 and a
discretionary bonus.
The Company has also entered into confidentiality and non-compete
agreements with its officers and key employees.
The Company maintains a 401(k) profit sharing plan and a medical
reimbursement plan covering substantially all of its employees.
STOCK OPTION PLAN
The Company adopted its 1998 Omnibus Stock Option Plan in February 1998
(the "Option Plan"). An aggregate of 350,000 shares of Common Stock are
currently reserved for issuance under the Option Plan.
The Option Plan provides for the granting of incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Code and
non-qualified stock options. Non-qualified stock options may be granted to
employees, directors and consultants of the Company, while Incentive Stock
Options may be granted only to employees. The Option Plan is currently
administered by the Compensation Committee of the Board of Directors, which
determines the terms and conditions of the options granted under the Option
Plan, including the exercise price, the number of shares subject to a particular
option and the exercisability thereof.
The exercise price of all Incentive Stock Options granted under the Option
Plan must be at least equal to the fair market value of the Common Stock of the
Company on the date of grant, and must be 110% of fair market value when granted
to a 10% or more stockholder. The exercise price of all non-qualified stock
options granted under the Option Plan shall be not less than 85% of the fair
market value of the Common Stock on the date of grant. The term of all options
granted under the Option Plan may not exceed ten years, except the term of
Incentive Stock Options granted to a 10% or more stockholder may not exceed five
years. The Option Plan may be amended or terminated by the Board of Directors,
but no such action may impair the rights of a participant under a previously
granted option.
The Option Plan provides the Board of Directors or the Compensation
Committee with the discretion to determine when options granted thereunder shall
become exercisable and the vesting period of such options. Upon termination of a
participant's employment or consulting relationship with the Company, all
unvested options terminate and are no longer exercisable. Vested non-qualified
options remain exercisable for a period not to exceed three months following the
termination date.
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<PAGE> 39
The Option Plan provides that, in the event the Company enters into an
agreement providing for the merger of the Company into another corporation or
the sale of substantially all of the Company's assets, any outstanding
unexercised option shall become immediately exercisable as of the date of such
agreement. Upon the consummation of the merger or sale of assets such options
shall terminate unless they are assumed or another option is substituted
therefor by the successor corporation.
As of March 15, 1998, a total of 258,600 non-qualified and Incentive Stock
Options were outstanding, each of which has an exercise price of $6.00 per
share. The Option Plan was approved by Karl F. Brown, the sole stockholder of
American Aircarriers Support, Incorporated, a Delaware corporation, as of
February 9, 1998. All of the options granted by the Company to date are eligible
to purchase Common Stock of American Aircarriers Support, Incorporated, a
Delaware corporation. Accordingly, such options are ineligible to purchase
shares of Common Stock of American Aircarriers Support, Inc., a South Carolina
corporation. None of the options granted under the Option Plan are exercisable
prior to September 1998. Pursuant to the terms of the Underwriting Agreement,
the Representative has required that the Company not file a registration
statement covering shares issuable upon exercise of outstanding options until 12
months from the date of this Prospectus.
CERTAIN TRANSACTIONS
In June 1995, the Company obtained the Credit Facility that, following
successive annual renewals, is now due in May 1998. Repayment of advances under
the Credit Facility are personally guaranteed by the Existing Common
Stockholders, who received no additional compensation in connection with
providing such guarantees. The Company expects to repay outstanding indebtedness
under the Credit Facility of approximately $1.5 million using a portion of the
proceeds of this offering. See "Use of Proceeds."
Herman O. Brown, Jr., a principal stockholder of the Company and the father
of Karl F. Brown, is a co-founder, officer and director of U.S. Aviation, Inc.
In 1993, the Company borrowed $525,000 from the unaffiliated co-founder of U.S.
Aviation, Inc. The repayment of amounts due under the promissory note that
evidences this borrowing was personally guaranteed by the Existing Common
Stockholders. Neither of the Existing Common Stockholders received any
compensation for providing the guarantees. At December 31, 1997, the principal
amount outstanding under this promissory note totalled $121,000, which is
payable December 31, 1998. The Company anticipates that the remaining amount due
under this promissory note will be repaid in 1998 using cash generated from
operations. The Company was also indebted to U.S. Aviation, Inc. in the
principal amount of $46,000 at December 31, 1997, which amount was repaid in
February 1998.
U.S. Aviation, Inc. has in the past consigned aircraft components and spare
parts to the Company. Under the consignment arrangement, the Company remits to
U.S. Aviation, Inc. 60% of the sales price of the components and spare parts,
less any overhaul and repair costs incurred by the Company. Consignment sales on
behalf of U.S. Aviation, Inc. totalled $97,000 and $77,000 in 1996 and 1997,
respectively. The Company anticipates that consignment sales of behalf of U.S.
Aviation, Inc. will be immaterial in future periods.
At various times from 1993 through December 31, 1997, the Existing Common
Stockholders made unsecured advances to the Company. The proceeds of such
advances were used for working capital purposes. The advances outstanding at
December 31, 1997 bear interest at rates between 6% and 8% per annum and mature
between April 15, 1998 and June 30, 1998. At December 31, 1997, the Company was
indebted to Messrs. Karl F. Brown and Herman O. Brown, Jr. in the amounts of
$711,000 and $746,000, respectively. The Company expects to repay such advances
using a portion of the proceeds of this offering. See "Use of Proceeds" and Note
8 to the Financial Statements.
The Company currently leases a 15,000 square foot facility, consisting
primarily of warehouse storage, from B & C Enterprises, a partnership in which
Herman O. Brown, Jr. is a 50% partner. The facility is leased to the Company
through December 2002 for an annual rental of $50,000. The Company leases its
headquarters facility from Brown Enterprises, a partnership of the Existing
Common Stockholders, for an annual rental of $87,000. The lease extends through
July 30, 2002, with a right on the part of the Company to extend the lease for
an additional five-year period. Each of the foregoing leases requires the
Company to pay taxes, insurance and maintenance expenses for the facility in
question. The Company believes that such
38
<PAGE> 40
facilities were leased to it on terms at least as favorable as could have been
obtained from unaffiliated third parties. See "Business -- Facilities."
In January 1998, the Company entered into an employment agreement with Karl
F. Brown. See "-- Executive Compensation."
In connection with this offering, the Company will terminate its S
Corporation election and anticipates distributing approximately $2.4 million to
the Existing Common Stockholders to provide such persons with funds sufficient
to pay personal tax liabilities related to 1998 taxable income earned prior to
the date of termination of the Company's S Corporation election, together with
an amount equal to approximately 50% of the previously undistributed accumulated
taxable income. See "S Corporation Distributions."
Prior to the date of this offering, the Existing Common Stockholders were
parties to agreements providing that, in the event of the death of Karl F.
Brown, the shares of Common Stock owned by him would be placed in a family trust
under which Herman O. Brown, Jr., as trustee, would retain all voting rights
with respect to such Common Stock. Additionally, the agreements provided that in
the event of the death of Herman O. Brown, Jr., Karl F. Brown would retain the
right to purchase the Common Stock owned by Herman O. Brown, Jr. at a price
equal to the book value of such Common Stock at the time of Herman O. Brown,
Jr.'s death. Pursuant to an agreement between the Existing Common Stockholders,
upon consummation of this offering, such prior agreements shall be terminated
and be of no further force or effect. In February 1998, Herman O. Brown, Jr.
entered into a voting trust agreement (the "Voting Trust") pursuant to which
David M. Furr, a director of the Company, has been vested with all voting rights
relating to the Common Stock currently owned or hereafter acquired by Herman O.
Brown, Jr. See "Principal Stockholders."
The Company has adopted a policy that future transactions between the
Company and its officers, directors and 5% or more stockholders are subject to
approval by a majority of the disinterested directors of the Company. Any such
transactions will be on terms believed to be no less favorable to the Company
than could be obtained from unaffiliated parties.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Pursuant to the provisions of the Delaware General Corporation Law, the
Company has adopted provisions in its Certificate of Incorporation which provide
that directors of the Company shall not be personally liable for monetary
damages to the Company or its stockholders for a breach of fiduciary duty as a
director, except for liability as a result of (i) a breach of the director's
duty of loyalty to the Company or its stockholders; (ii) acts or omissions not
in good faith or which involve intentional misconduct or knowing violation of
law; (iii) an act related to the unlawful stock repurchase or payment of a
dividend under Section 174 of Delaware General Corporation Law; and (iv)
transactions from which the director derived an improper personal benefit. Such
limitation of liability does not affect the availability of equitable remedies
such as injunctive relief or rescission.
The Company's Certificate of Incorporation also authorizes the Company to
indemnify its officers, directors and other agents, through its Bylaws,
agreements or otherwise, to the fullest extent permitted under Delaware law. The
Company intends to enter into separate indemnification agreements with its
directors and officers which may, in some cases, be broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require the Company, among other things, to
indemnify such officers and directors against certain liabilities that may arise
by reason of their status or service as directors or officers (other than
liabilities arising from willful misconduct of a culpable nature), to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified, and to obtain directors' and officers' insurance if
available on reasonable terms.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or agent of the Company where indemnification will
be required or permitted. The Company is not aware of any threatened litigation
or proceeding which may result in a claim for such indemnification.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers and control persons of the Company pursuant
to the foregoing provisions, or otherwise, the Company has been advised that in
the opinion of the Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable.
39
<PAGE> 41
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 15, 1998 and as adjusted to
reflect the sale of the Common Stock offered by this Prospectus, by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's outstanding Common Stock, (ii) each of the Company's executive
officers and directors, and (iii) all executive officers and directors as a
group. Common Stock not outstanding but deemed beneficially owned by virtue of
the right of an individual to acquire shares within 60 days are treated as
outstanding only when determining the amount and percentage of Common Stock
owned by such individual. Except as noted, each person has sole voting and
investment power with respect to the shares shown. The address of each person
listed is 3516 Centre Circle Drive, Fort Mill, South Carolina 29715, except as
otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED PRIOR TO OFFERING PERCENTAGE
------------------------ OWNED
NAME NUMBER PERCENT AFTER OFFERING
---- ----------- --------- --------------
<S> <C> <C> <C>
Karl F. Brown(1).................................... 3,075,000 75.0% 50.4%
Elaine T. Rudisill(2)............................... -- -- --
Herman O. Brown, Jr.(3)............................. 1,025,000 25.0 16.8
David M. Furr(2)(3)................................. 1,025,000 25.0 16.8
516 South New Hope Road
Gastonia, North Carolina 28053
Pamela K. Clement(4)................................ -- -- --
1 Morrocroft Centre
Suite 380
6805 Morrison Boulevard
Charlotte, North Carolina 28211
James T. Comer, III(5).............................. -- -- --
4731 Hedgemore Drive
Charlotte, North Carolina 28209
All directors and officers as a group (five
persons).......................................... 4,100,000 100.0% 67.2%
</TABLE>
- ---------------
(1) Excludes 60,000 shares of Common Stock subject to options exercisable
commencing September 1998.
(2) Excludes 20,000 shares of Common Stock subject to options exercisable by
each individual noted commencing September 1998.
(3) In February 1998, Herman O. Brown, Jr., David M. Furr and the Company
entered into the Voting Trust pursuant to which David M. Furr has been
vested with all voting rights relating to the Common Stock currently owned
or hereafter acquired by Herman O. Brown, Jr. for the term of the Voting
Trust. See below for further information concerning the Voting Trust.
(4) Excludes 5,000 shares of Common Stock subject to options exercisable
commencing September 1998.
(5) Excludes 5,000 shares of Common Stock subject to options exercisable
commencing September 1998.
The Company and Messrs. David M. Furr and Herman O. Brown, Jr. entered into
the Voting Trust in February 1998. During the term of the Voting Trust, Mr. Furr
has the exclusive right to exercise all of the voting rights and powers with
respect to the Common Stock subject to the Voting Trust. The Voting Trust will
terminate on the earlier to occur of (i) sale of all of the Common Stock subject
to the Voting Trust, (ii) the death of Herman O. Brown, Jr., or (iii) expiration
of the ten-year term of the Voting Trust, subject to the automatic renewal of
the Voting Trust for an additional period of ten years in the event Herman O.
Brown, Jr. continues to own Common Stock of the Company upon expiration of the
initial ten-year term of the Voting Trust. Under the Voting Trust, Herman O.
Brown, Jr. retains the power to receive dividends and to instruct the trustee to
dispose of shares of Common Stock within the Voting Trust, subject to compliance
with applicable federal and state securities laws and the lock-up agreement
entered into with the Representative.
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<PAGE> 42
DESCRIPTION OF SECURITIES
The authorized capital stock of the Company consists of 20,000,000 shares
of Common Stock, par value $.001 per share, and 2,000,000 shares of Preferred
Stock, par value $.01 per share.
COMMON STOCK
Upon consummation of this offering, 6,100,000 shares of Common Stock will
be issued and outstanding (assuming no options are exercised after December 31,
1997, and assuming the Underwriters' over-allotment option is not exercised). If
the over-allotment option is exercised in full, 6,400,000 shares of Common Stock
will be issued and outstanding.
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. The Company's
Certificate of Incorporation denies cumulative voting rights in the election of
directors. Accordingly, holders of a majority of the shares of Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences that may be applicable to any
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Board of Directors out of funds
legally available therefor. See "Dividend Policy." In the event of a
liquidation, dissolution or winding up of the Company, holders of Common Stock
are entitled to share ratably in the assets remaining after payment of
liabilities and the liquidation preference of any outstanding Preferred Stock.
Holders of Common Stock have no preemptive, conversion or redemption rights. All
of the outstanding shares of Common Stock are, and the shares to be sold in this
offering when issued and paid for will be, fully paid and non-assessable.
PREFERRED STOCK
The Board of Directors has the authority, without further stockholder
approval, to issue up to 2,000,000 shares of Preferred Stock from time to time
in one or more series, to establish the number of shares to be included in each
such series, and to fix the designation, powers, preferences and rights of the
shares of each such series and the qualifications, limitations or restrictions
thereof. The issuance of Preferred Stock may have the effect of delaying or
preventing a change in control of the Company. The issuance of Preferred Stock
could decrease the amount of earnings and assets available for distribution to
the holders of Common Stock or could adversely affect the rights and powers,
including voting rights, of the holders of the Common Stock. In certain
circumstances, such issuances could have the effect of decreasing the market
price of the Common Stock. As of the closing of this offering, no shares of
Preferred Stock will be outstanding and the Company currently has no plans to
issue any shares of Preferred Stock.
DELAWARE BUSINESS COMBINATION PROVISIONS
As a Delaware corporation, the Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203"), which regulates large
accumulations of shares, including those made by tender offers. Section 203 may
have the effect of significantly delaying a purchaser's ability to acquire the
entire interest in the Company if such acquisition is not approved by the
Company's Board of Directors. In general, Section 203 prevents an "Interested
Stockholder" (defined in Section 203 generally as a person with 15% or more of a
corporation's outstanding voting stock) from engaging in a "Business
Combination" (defined below) with a Delaware corporation for three years
following the date such person became an Interested Stockholder, except as
described below. For purposes of Section 203, the term "Business Combination" is
defined broadly to include mergers and certain other transactions with or caused
by the Interested Stockholder; sales or other dispositions to the Interested
Stockholder (except proportionately with the corporation's other stockholders)
of assets of the corporation or a subsidiary equal to 10% or more of the
aggregate market value of the corporation's consolidated assets or outstanding
stock; the issuance or transfer by the corporation or a subsidiary of stock of
the corporation or such subsidiary to the Interested Stockholder (except for
transfers in a conversion or exchange or a pro-rata distribution, or certain
other transactions, none of which increase the Interested Stockholder's
proportionate ownership of any class or series of the corporation's or such
subsidiary's stock); or the receipt by the Interested Stockholder (except
proportionately as a stockholder), directly or
41
<PAGE> 43
indirectly, of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on Business Combinations by Section 203
does not apply if: (a) prior to the date on which a stockholder becomes an
Interested Stockholder, the Board approves either the Business Combination or
the transaction that resulted in the person becoming an Interested Stockholder;
(b) the Interested Stockholder owns 85% of the corporation's voting stock upon
consummation of the transaction that made such stockholder an Interested
Stockholder (excluding from the 85% calculation shares owned by directors who
are also officers of the corporation and shares held by employee stock plans
which do not permit employees to decide confidentially whether to accept a
tender or exchange offer); or (c) on or after the date a stockholder becomes an
Interested Stockholder, the Board approves the Business Combination, and the
Business Combination is also approved at a stockholder meeting by 66 2/3% of the
voting stock not owned by the Interested Stockholder.
Under Section 203, the restrictions described above do not apply if, among
other things, the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by Section 203. The Company's
Certificate of Incorporation does not contain such a provision. The restrictions
described above also do not apply to certain Business Combinations proposed by
an Interested Stockholder following the announcement or notification of one of
certain extraordinary transactions involving the corporation and a stockholder
who had not been an Interested Stockholder during the previous three years or
who became an Interested Stockholder with the approval of a majority of the
corporation's directors.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Securities Transfer & Trust, Inc.
42
<PAGE> 44
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 6,100,000 shares of
Common Stock outstanding, assuming no options are exercised after December 31,
1997 and assuming the Underwriters' over-allotment option is not exercised. If
the Underwriters' over-allotment option is exercised in full, 6,400,000 shares
of Common Stock will be outstanding. Of these shares, the 2,000,000 shares sold
in this offering (and any shares sold by the Company upon exercise of the
Underwriters' over-allotment option) will be freely transferable by persons
other than "affiliates" of the Company (as that term is defined under the 1933
Act) without restriction or further registration under the 1933 Act.
The remaining 4,100,000 outstanding shares of Common Stock are "restricted
securities" within the meaning of Rule 144 under the Act and may not be sold in
the absence of registration under the 1933 Act unless an exemption from
registration is available, including the exemption contained in Rule 144. All of
such shares are eligible for sale under Rule 144 commencing 90 days from the
date of this Prospectus. Pursuant to the terms of the Underwriting Agreement,
the Representative has required that the Common Stock owned by officers,
directors and the Existing Common Stockholders may not be sold until 12 months
from the date of this Prospectus without the prior written consent of the
Representative.
In general, under Rule 144 as currently in effect, a stockholder who has
beneficially owned shares for at least one year is entitled to sell, within any
three-month period, a number of "restricted" shares that does not exceed the
greater of 1% of the then outstanding shares of Common Stock or the average
weekly trading volume during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner of sale limitations, notice
requirements and the availability of current public information about the
Company. Rule 144(k) provides that a stockholder who is not deemed to be an
"affiliate" and who has beneficially owned shares for at least two years is
entitled to sell such shares at any time under Rule 144(k) without regard to the
limitations described above.
In addition to the shares of Common Stock that are currently outstanding, a
total of 350,000 shares of Common Stock have been reserved for issuance upon
exercise of options granted under the Option Plan, under which options to
acquire 258,600 shares of Common Stock at an exercise price of $6.00 per share
have been granted and are exercisable commencing in September 1998. Shares
purchased pursuant to options will be freely tradeable without restriction under
the 1933 Act, except for shares held by an "affiliate" of the Company, which
shares will remain subject to certain restrictions. See "Management -- Stock
Option Plan."
The Company is unable to estimate the number of shares that may be sold in
the future by the Existing Common Stockholders or holders of options or the
effect, if any, that sales of shares by the Existing Common Stockholders or
option holders will have on the market price of the Common Stock prevailing from
time to time. Sales of substantial amounts of Common Stock by the Existing
Common Stockholders or holders of options could adversely affect then prevailing
market prices.
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<PAGE> 45
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, for which Cruttenden Roth Incorporated is acting as
the representative (the "Representative"), have severally agreed to purchase
from the Company the shares of Common Stock offered hereby. Each Underwriter
will purchase the number of shares set forth opposite its name below, and will
purchase the shares at the price to public less underwriting discounts and
commissions set forth on the cover page of this Prospectus.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Cruttenden Roth Incorporated................................
---------
Total............................................. 2,000,000
=========
</TABLE>
The Underwriting Agreement provides that the Underwriters' obligations are
subject to certain conditions precedent and that the Underwriters are committed
to purchase all shares of Common Stock offered hereby (other than those covered
by the over-allotment option described below) if the Underwriters purchase any
shares.
The Representative has advised the Company that the several Underwriters
propose to offer the shares of Common Stock in part directly to the public at
the price to public set forth on the cover page of this Prospectus, and in part
to certain dealers at the price to public less a concession not exceeding
$ per share. The Underwriters may allow, and such dealers may reallow,
a concession not exceeding $ per share to other dealers. After the
shares of Common Stock are released for sale to the public, the Representative
may change the initial price to public and other selling terms. No change in
such terms shall change the amount of proceeds to be received by the Company as
set forth on the cover page of this Prospectus. The Representative will also
receive a nonaccountable expense allowance equal to 3% of the gross proceeds of
the offering including the over-allotment option, if exercised, of which $30,000
has been paid.
The Company has granted the Underwriters an option, exercisable for 45 days
after the date of this Prospectus, to purchase up to 300,000 additional shares
of Common Stock at the initial price to public. The Underwriters may purchase
these shares solely to cover over-allotments, if any, in connection with the
sale of the shares of Common Stock offered hereby. If the Underwriters exercise
the over-allotment option, the Underwriters will purchase additional shares in
approximately the same proportions as those in the above table.
The Representative has informed the Company that it does not expect any
sales of the shares of Common Stock offered hereby to be made to discretionary
accounts by the Underwriters.
The Underwriting Agreement provides that the Company and the Underwriters
will indemnify each other against certain liabilities under the 1933 Act.
The Underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the 1934 Act. Over-allotment involves syndicate sales in excess of the
offering size, which creates a syndicate short position. Stabilizing
transactions permit
44
<PAGE> 46
bids to purchase the underlying security so long as the stabilizing bids do not
exceed a specified maximum. Syndicate covering transactions involve purchases of
the securities in the open market after the distribution has been completed in
order to cover syndicate short positions. Penalty bids permit the Underwriters
to reclaim a selling concession from a syndicate member when the securities
originally sold by such syndicate member are purchased in a syndicate covering
transaction to cover syndicate short positions. Such stabilizing transactions,
syndicate covering transactions and penalty bids may cause the price of the
Common Stock to be higher than it would otherwise be in the absence of such
transactions.
Neither the Company nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Underwriters will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.
The Company's officers and directors, holding in the aggregate 4,100,000
shares of Common Stock, have agreed not to offer, sell or otherwise dispose of
any shares of Common Stock for a period of 12 months after the date of this
Prospectus without the prior written consent of the Representative.
The Company has also agreed to sell to the Representative, for nominal
consideration, warrants (the "Representative's Warrants") to purchase 200,000
shares of Common Stock. The Representative's Warrants will be exercisable, at a
price per share equal to 120% of the initial price to public, commencing one
year from the date hereof and for a period of four years thereafter. During the
exercise period, holders of the Representative's Warrants are entitled to
certain demand and incidental registration rights with respect to the securities
issuable upon exercise of the Representative's Warrants. The Common Stock
issuable upon exercise of the Representative's Warrants are subject to
adjustment in certain events to prevent dilution. The Representative's Warrants
cannot be transferred, assigned or hypothecated for a period of one year from
the date of issuance except to Underwriters, selling group members and their
officers or partners.
Prior to this offering, there has not been a public market for the Common
Stock. The public offering price of the Common Stock has been determined by
arms-length negotiation between the Company and the Representative. There is no
direct relation between the offering price of the Common Stock and the assets,
book value or net worth of the Company. Among the factors considered by the
Company and the Representative in pricing the Common Stock were the results of
operations, the current financial condition and future prospects of the Company,
the experience of management, the amount of ownership to be retained by the
Existing Common Stockholders, the general condition of the economy and the
securities markets, and the demand for securities of companies considered
comparable to the Company.
45
<PAGE> 47
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon by
Berliner Zisser Walter & Gallegos, P.C., Denver, Colorado. A partner of such
firm holds options to acquire 20,000 shares of Common Stock. Berliner Zisser
Walter & Gallegos, P.C. has represented the Representative from time to time in
other matters. Certain legal matters will be passed upon for the Underwriters by
LeBoeuf, Lamb, Greene & MacRae, L.L.P., a limited liability partnership
including professional corporations, Salt Lake City, Utah.
EXPERTS
The balance sheets of the Company as of December 31, 1996 and 1997 and the
statements of operations, stockholders' equity and cash flows for the years then
ended, have been included herein in reliance on the report of Cherry, Bekaert &
Holland, L.L.P., independent accountants, given on their authority of that firm
as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Commission, a registration statement
(together with all amendments thereto, the "Registration Statement") under the
1933 Act with respect to the Common Stock of the Company offered hereby. This
Prospectus, filed as part of the Registration Statement, omits certain
information contained in the Registration Statement in accordance with the rules
and regulations of the Commission. For further information, reference is hereby
made to the Registration Statement and to the exhibits filed therewith, which
may be inspected without charge at the principal office of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, and copies of the material contained
therein may be obtained from the Commission upon payment of applicable copying
charges. Statements contained in this Prospectus as to the contents of any
contract or other document referred to herein are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement.
Upon completion of this offering, the Company will be subject to the
reporting and other informational requirements of the 1934 Act and, in
accordance therewith, will file reports and other information with the
Commission. Such reports, proxy statements and other information, once filed by
the Company, can be inspected and copied at the public reference facilities
maintained by the Commission at the offices of the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's regional offices at Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, New
York, New York 10048. The Commission also maintains a Web site on the Internet
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
such site is http://www.sec.gov. Copies of such materials can also be obtained
by written request to the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates.
46
<PAGE> 48
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Balance Sheets -- December 31, 1996 and 1997................ F-3
Statements of Operations -- For the years ended December 31,
1996 and 1997............................................. F-4
Statements of Stockholders' Equity -- For the years ended
December 31, 1996 and 1997................................ F-5
Statements of Cash Flows -- For the years ended December 31,
1996 and 1997............................................. F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 49
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
American Aircarriers Support, Inc.
We have audited the accompanying balance sheets of American Aircarriers
Support, Inc. as of December 31, 1996 and 1997 and the related statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Aircarriers
Support, Inc. at December 31, 1996 and 1997, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.
Cherry, Bekaert & Holland, L.L.P.
Charlotte, North Carolina
February 18, 1998, except for Notes 7., 12., and 13.,
as to which the date is March 12, 1998
F-2
<PAGE> 50
AMERICAN AIRCARRIERS SUPPORT, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
ASSETS
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $1,773,294 $ 750,448
Receivables:
Trade and other, net of allowances of $115,000 and
$130,000 in 1996 and 1997, respectively............... 708,951 1,958,798
Affiliate.............................................. 16,200 13,589
Inventory................................................. 1,803,695 5,625,107
Prepaid expenses and other assets......................... 6,393 30,725
---------- ----------
Total current assets.............................. 4,308,533 8,378,667
Property and equipment, net................................. 127,117 335,795
Investments................................................. 50,000 335,000
---------- ----------
TOTAL ASSETS...................................... $4,485,650 $9,049,462
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit....................................... $ -- $1,500,000
Current maturities of long-term debt...................... 112,287 120,708
Current maturities of notes payable to related parties.... 42,607 1,501,846
Accounts payable and accrued expenses..................... 722,349 1,057,700
---------- ----------
Total current liabilities......................... 877,243 4,180,254
Long-term debt, less current maturities..................... 120,708 --
Notes payable to related parties, less current maturities... 691,846 --
---------- ----------
Total liabilities................................. 1,689,797 4,180,254
Commitments and contingencies
Stockholders' equity:
Common stock, $1.00 par value. Authorized 100,000 shares,
outstanding 100 shares................................. 100 100
Retained earnings......................................... 2,795,753 4,869,108
---------- ----------
Total stockholders' equity........................ 2,795,853 4,869,208
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY........ $4,485,650 $9,049,462
========== ==========
</TABLE>
See notes to financial statements.
F-3
<PAGE> 51
AMERICAN AIRCARRIERS SUPPORT, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
------------ ------------
<S> <C> <C>
Net sales................................................... $ 8,352,095 $ 13,250,328
Cost of sales............................................... 5,479,380 7,946,467
------------ ------------
GROSS PROFIT...................................... 2,872,715 5,303,861
Operating expenses:
Selling and marketing..................................... 550,656 702,809
General and administrative................................ 377,499 563,981
------------ ------------
Total operating expenses.......................... 928,155 1,266,790
------------ ------------
INCOME FROM OPERATIONS............................ 1,944,560 4,037,071
Other income (expense):
Interest income........................................... 70,898 80,978
Interest expense.......................................... (73,588) (79,435)
Other income (expense).................................... 1,440 34,741
------------ ------------
Total other income (expense)...................... (1,250) 36,284
------------ ------------
NET INCOME........................................ $ 1,943,310 $ 4,073,355
============ ============
Pro forma data (unaudited):
Net income as reported.................................... $ 1,943,310 $ 4,073,355
Pro forma income tax expense.............................. 777,300 1,629,300
------------ ------------
Pro forma net income...................................... $ 1,166,010 $ 2,444,055
============ ============
Pro forma basic earnings per share........................ $ 0.28 $ 0.60
============ ============
Pro forma diluted earnings per share...................... $ 0.28 $ 0.59
============ ============
Pro forma weighted average shares outstanding:
Basic.................................................. 4,100,000 4,100,000
============ ============
Diluted................................................ 4,164,650 4,164,650
============ ============
</TABLE>
See notes to financial statements.
F-4
<PAGE> 52
AMERICAN AIRCARRIERS SUPPORT, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
---------------- RETAINED STOCKHOLDERS'
SHARES DOLLARS EARNINGS EQUITY
------ ------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996............................ 100 $100 $ 2,052,843 $ 2,052,943
Net income.......................................... 1,943,310 1,943,310
Stockholder distributions........................... (1,200,400) (1,200,400)
--- ---- ----------- -----------
BALANCE, DECEMBER 31, 1996.......................... 100 100 2,795,753 2,795,853
Net income.......................................... 4,073,355 4,073,355
Stockholder distributions........................... (2,000,000) (2,000,000)
--- ---- ----------- -----------
BALANCE, DECEMBER 31, 1997.......................... 100 $100 $ 4,869,108 $ 4,869,208
=== ==== =========== ===========
</TABLE>
See notes to financial statements.
F-5
<PAGE> 53
AMERICAN AIRCARRIERS SUPPORT, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 1,943,310 $ 4,073,355
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization.......................... 22,769 54,557
(Increase) decrease in trade and other receivables..... 8,421 (1,249,847)
Decrease in receivables from affiliate................. 330 2,611
Increase in inventory.................................. (971,542) (3,821,412)
Increase in prepaid expenses and other assets.......... (5,393) (24,332)
Increase in accounts payable and accrued expenses...... 204,337 335,351
----------- -----------
Net cash provided by (used in) operating
activities..................................... 1,202,232 (629,717)
INVESTING ACTIVITIES
Investments............................................... (50,000) (285,000)
Capital expenditures...................................... (39,902) (263,235)
----------- -----------
Net cash used in investing activities............. (89,902) (548,235)
FINANCING ACTIVITIES
Proceeds from bank line of credit......................... -- 1,500,000
Proceeds from notes payable to related parties............ -- 810,000
Principal repayments on long-term debt.................... (104,453) (112,287)
Principal repayments on notes payable to related
parties................................................ (187,772) (42,607)
Distributions to stockholders............................. (1,200,400) (2,000,000)
----------- -----------
Net cash provided by (used in) financing
activities..................................... (1,492,625) 155,106
----------- -----------
Net decrease in cash and cash equivalents......... (380,295) (1,022,846)
Cash and cash equivalents, beginning of year................ 2,153,589 1,773,294
----------- -----------
Cash and cash equivalents, end of year...................... $ 1,773,294 $ 750,448
=========== ===========
</TABLE>
See notes to financial statements.
F-6
<PAGE> 54
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
DESCRIPTION OF BUSINESS
American Aircarriers Support, Inc. is an international supplier of aircraft
parts primarily to maintenance and repair facilities, major commercial passenger
and cargo airlines and other redistributors located throughout the world. The
Company's offices and inventory storage locations are in Fort Mill, South
Carolina.
BASIS OF PRESENTATION
The financial statements include the accounts of American Aircarriers
Support, Inc., a South Carolina corporation (the "Company"). Certain pro forma
information has been provided in connection with the Agreement and Plan of
Exchange and initial public offering of securities (Notes 12 and 13).
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company considers all liquid investments purchased with a maturity of
90 days or less to be cash equivalents. Included in cash equivalents are
investments in overnight repurchase agreements and a tax-exempt money market
mutual fund. These investments are recorded at cost, which approximates market.
TRADE RECEIVABLES
The Company's allowance for doubtful accounts is based on management's
estimates of the creditworthiness of its customers, and, in the opinion of
management is believed to be set in an amount sufficient to respond to normal
business conditions.
INVENTORIES
Inventories are valued at lower of cost or market. The cost of aircraft
parts purchased individually is determined on a specific identification basis,
which includes the cost associated with the overhaul and repair necessary for
resale. For parts acquired through bulk purchases or through whole aircraft
purchases, the costs are assigned to pools, which are amortized as part sales
are recognized. The amount of cost amortized is based upon the gross profit
percentage as determined from the estimated sales value of the parts. The sales
value estimates and gross profit percentages are based on historical experience,
are monitored by management, and are adjusted periodically as necessary.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Depreciation of furniture,
fixtures and equipment is provided under the straight-line method over the
estimated useful lives, generally five and seven years. Amortization of
leasehold improvements is provided on the straight-line method over the
estimated useful lives of leased assets or the term of the lease, whichever is
shorter.
Repair and maintenance costs are charged to operations as incurred while
major improvements are capitalized. When assets are retired or disposed of, the
cost and accumulated depreciation thereon are removed from the accounts and any
gains or losses are included in operations.
REVENUE RECOGNITION
Revenue from the sales of parts and related costs is recognized when
products are shipped to the customer. Revenue from engine sales is recognized
when the Company has received all consideration and title and risk of ownership
are transferred to the customer, which is generally upon delivery of the engine.
The
F-7
<PAGE> 55
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
REVENUE RECOGNITION -- (CONTINUED)
Company provides its customers the right to return products within 45 days of
shipment. The effect of this program is estimated and a provision for sales
returns and allowances is established.
PRO FORMA EARNINGS PER SHARE (UNAUDITED)
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", which is required to be adopted for the fiscal years ending after
December 15, 1997. SFAS No. 128 supercedes APB Opinion No. 15, "Earnings Per
Share" and specifies the computation, presentation and disclosure requirements
for earnings per share ("EPS") for entities with publicly held common stock or
potential common stock. Essentially, this Statement replaces the primary EPS and
fully diluted EPS presentations under APB Opinion No. 15 with a basic EPS and a
diluted EPS. Pro forma earnings per share for 1996 and 1997 have been determined
under the provisions of SFAS No. 128, and include certain pro forma adjustments
to income and shares as discussed in Note 13.
INCOME TAXES
The Company, with the consent of its stockholders, elected to be taxed as
an S Corporation for federal and state income tax purposes as defined in Section
1361 of the Internal Revenue Code of 1986. Therefore, the Company is generally
exempt from all federal and state income taxes as stockholders of the Company
are taxed on corporate income. Pro forma income and earnings per share have been
determined using estimated effective federal and state income tax rates as
discussed in Note 13.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value approximates book value for the following financial instruments
due to their short-term nature: cash and cash equivalents, accounts receivable,
and accounts payable. Fair values of notes payable and long-term debt are based
on estimates using present value techniques. Fair values of investments
accounted for at cost were based on prices of recently-made investments in the
companies, and at December 31, 1996 and 1997 approximated carrying values.
At December 31, 1996 and 1997, the carrying values of the Company's notes
payable and long-term debt approximated their fair values as the interest rates
on such financial instruments are comparable to market rates and/or remaining
principal is due in a relatively short period of time. Fair value of unused line
of credit arrangements approximate carrying value as the terms are at current
market for similar agreements.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist of cash and cash equivalents, accounts
receivable and investments.
Cash balances in financial institutions periodically exceed amounts insured
by the FDIC. These balances and investments in overnight repurchase agreements
are held by a national financial institution and management believes risk of
loss related to these amounts is remote.
Accounts receivable subject the Company to a potential concentration of
credit risk. Receivables are usually due within 30 days and the Company performs
periodic credit evaluations of its customer's financial condition. Substantially
all of the Company's customers are in the aviation industry and sales are
usually affected by the current economic condition of the industry. The Company
estimates that sales to international customers accounted for approximately 12%
of net sales in 1996 and approximately 30% of net sales in 1997. The Company
anticipates that international sales will continue to represent a material
portion of the
F-8
<PAGE> 56
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
CONCENTRATIONS OF CREDIT RISK -- (CONTINUED)
Company's net sales in future periods. Sales to international customers may be
subject to greater risks, including variations in local economies, fluctuating
exchange rates and greater difficulty in accounts receivable collection.
In a given period, a substantial portion of the Company's net sales may be
attributable to the sale of one or more engines. Sales of engines, the timing of
aircraft spare parts sales or a lease transaction during a given period may
result in a customer being considered a major customer of the Company for that
period. In 1996 and 1997, none of the Company's customers accounted for in
excess of 10% of net sales. Currently, the Company believes that it has no
customer, the loss of which would have a material adverse effect on the
Company's results of operations.
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 reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
ADVERTISING COSTS
The Company expenses advertising costs as they are incurred. For the years
ended December 31, 1996 and 1997, advertising costs were $14,251 and $17,437,
respectively.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," which establishes standards for reporting and display of comprehensive
income and its components in a full set of general-purpose financial statements.
There currently are no additional disclosures in the financial statements of the
Company that are expected to be required by the provisions of this Statement.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which changes the way public companies
report information about segments of their business in annual financial
statements and requires segment information in quarterly reports to
shareholders. It also requires that public business enterprises report certain
information about their products and services, the geographic areas in which
they operate, and their major customers. This Statement is effective for fiscal
years beginning after December 15, 1997. The Company has not determined what
additional disclosures may be required by the provisions of this Statement.
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which revises employers'
disclosures about pension and other postretirement benefit plans. The Statement
does not change the measurement or recognition of those plans, but requires
additional information on changes in benefit obligations and fair values of plan
assets, and eliminates certain disclosures previously required by SFAS Nos. 87,
88 and 106. This Statement is effective for fiscal years beginning after
December 15, 1997. The Company has not determined what additional disclosures
may be required by the provisions of this Statement.
F-9
<PAGE> 57
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. TRADE RECEIVABLES
Trade receivables are shown net of the following allowances at December 31:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Allowance for doubtful accounts............................. $ 25,000 $100,000
Reserve for sales returns and allowances.................... 90,000 30,000
-------- --------
Total accounts receivable allowances........................ $115,000 $130,000
======== ========
</TABLE>
NOTE 4. INVENTORY
Inventory, stated at lower of cost or market, is comprised of the
following:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Aircraft parts.............................................. $1,372,695 $3,186,364
Complete engines............................................ 365,000 2,438,743
Deposits on inventory....................................... 66,000 --
---------- ----------
Total............................................. $1,803,695 $5,625,107
========== ==========
</TABLE>
NOTE 5. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is comprised of the following:
<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Leasehold improvements...................................... $ -- $ 154,353
Office furniture and equipment.............................. 78,247 155,866
Vehicles.................................................... 114,273 115,657
Shop equipment.............................................. 20,169 36,283
-------- ---------
212,689 462,159
Less accumulated depreciation............................... (85,572) (126,364)
-------- ---------
Property and Equipment, net................................. $127,117 $ 335,795
======== =========
</TABLE>
NOTE 6. INVESTMENTS
During 1997, the Company invested $235,000 for a 50% interest in a joint
venture arrangement with Global Turbine Services, Inc. to purchase and lease
three aircraft engines. The Company and the other venturer share equally in the
profits and losses of the joint venture. The investment is accounted for on the
equity method. Income recognized from the joint venture in 1997 was
insignificant.
The Company made investments of $50,000 in 1996 and $50,000 in 1997 in
nonpublic companies, which are accounted for at cost. The investment made in
1997 was in a company in which a director is a principal (see Note 11). No
income was recognized from these investments in 1996 or 1997.
NOTE 7. LINE OF CREDIT
In June 1995, the Company entered into a revolving line of credit ("the
facility") with a bank under which the Company could borrow up to $1,000,000 at
the bank's prime rate (8.25% at December 31, 1996). No amounts were borrowed
under the facility during 1996. On December 10, 1997, the Company renewed and
amended the facility to increase the borrowing limit to $2,000,000. Upon
renewal, the facility bore interest at the bank's prime rate (8.50% at December
31, 1997) and matured May 31, 1998. On December 31, 1997, $1,500,000 was
outstanding under the facility. On March 4, 1998, the facility was modified to
increase the borrowing limit to $4,000,000, and reduce the interest rate to the
three-month London Interbank Offered Rate (LIBOR) plus 2%. The facility is
collateralized by the Company's accounts receivable and inventory, and
guaranteed by one of the existing stockholders.
F-10
<PAGE> 58
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. LINE OF CREDIT -- (CONTINUED)
In February 1998, the Company received a commitment from the bank for a $10
million line of credit, at an annual interest rate of LIBOR plus an amount
between 1.75% to 2.25%. The line of credit matures September 30, 1998, is
collateralized by the Company's accounts receivable and inventory, and is
guaranteed by one of the existing stockholders.
NOTE 8. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt as of December 31, 1996 and 1997 are
summarized as follows:
<TABLE>
<CAPTION>
1996 1997
--------- -----------
<S> <C> <C>
Long-term debt
Note payable to unaffiliated co-founder of U.S. Aviation
originated July 1993, bearing interest at 7.75% on
$525,000, guaranteed by the existing stockholders, payable
in five (5) equal annual installments of principal and
interest, maturity June 30, 1998.......................... $ 232,995 $ 120,708
Less current maturities................................... (112,287) (120,708)
--------- -----------
Long-term debt, less current maturities................... $ 120,708 $ --
========= ===========
Notes payable to related parties
Note payable to stockholder dated July 1993, bearing
interest at 6% on $525,000 principal amount, guaranteed by
one of the existing stockholders, interest only payable
for five (5) years, principal and any unpaid interest due
at maturity on June 30, 1998.............................. $ 525,000 $ 525,000
Note payable to U.S. Aviation originated October 1993,
bearing interest at 7% on $200,000, secured by inventory
and guaranteed by one existing stockholder, payable in
five (5) equal annual installments of principal and
interest, maturity October 1998, paid in full February
1998...................................................... 88,186 45,579
Notes payable to existing stockholders, $121,267 originated
December 1996, bearing interest at 8%, principal and
accrued interest payable at maturity on June 30, 1998.
Notes payable for an additional $810,000 originated in
December 1997, bearing interest at 8%, principal and
accrued interest payable at maturity on April 15, 1998.... 121,267 931,267
--------- -----------
Total notes payable to related parties.................... 734,453 1,501,846
Less current maturities................................ (42,607) (1,501,846)
--------- -----------
Notes payable to related parties, less current
maturities............................................. $ 691,846 $ --
========= ===========
</TABLE>
Interest paid during 1996 and 1997 was $62,227 and $83,248, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
The Company neither manufacturers nor repairs aircraft parts and requires that
all of the parts it sells are properly documented and traceable to an approved
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 liability insurance with coverage it believes to be in
sufficient amounts and on terms that are generally consistent with industry
practice, but there can be no assurance that such coverage will be adequate to
fully protect the Company from any liabilities it might incur. An uninsured or
partially insured loss could have a material adverse effect upon the Company's
financial condition.
F-11
<PAGE> 59
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
OPERATING LEASES
The Company leases its office and warehouse facilities from partnerships
owned in whole or in part by the Company's existing stockholders. Terms of the
lease agreements are described in Note 11. Rental expense under all cancelable
and noncancelable operating leases, and commitments for future minimum lease
payments under noncancelable operating leases with remaining terms of more than
one year are as follows:
<TABLE>
<CAPTION>
1996 1997
------- --------
<S> <C> <C>
Operating lease rental expense.................. $41,268 $ 83,750
======= ========
Future minimum lease payments at December 1997
(all to related parties):
1998.......................................... $137,400
1999.......................................... 137,400
2000.......................................... 137,400
2001.......................................... 137,400
2002.......................................... 101,150
--------
$650,750
========
</TABLE>
NOTE 10. EMPLOYEE BENEFIT PLANS
For the year ended December 31, 1996, the Company had a profit sharing plan
for employees who met certain eligibility requirements. Contributions to the
plan were discretionary. The Company's contribution to the plan was $53,827
(approximately 10% of eligible salaries) in 1996.
In January 1997, the Company amended the plan and adopted a 401(k) profit
sharing plan that covers substantially all of its employees. Employees who have
completed more than one year of service and are over the age of 21 may
contribute from 1% to 15% of their base pay. The Company match on the 401(k)
portion is discretionary up to 100% of contributions up to 6% of eligible
salaries. The profit sharing contribution by the Company is also discretionary.
The Company made no contribution to the plan for the 401(k) portion and
contributed $63,261 for the profit sharing portion (approximately 10% of
eligible salaries) for the year ended December 31, 1997.
The Company has a medical reimbursement plan covering substantially all of
its employees that pays up to $500 per quarter per employee for all medical
bills not covered by another group plan. Reimbursement to employees under this
plan for the years ended December 31, 1996 and 1997 were $17,281 and $16,266,
respectively.
The Company has a security interest in a certain life insurance policy for
cash advances made in connection with a collateral assignment split-dollar life
insurance plan provided to a key employee of the Company. An assignment of the
Company's security interest in the policy has been made for the purpose of
providing security for indebtedness incurred by the Company to facilitate
implementation of the split-dollar plan without utilizing working capital needed
for other business purposes. Expense for the plan was $12,209 for each of the
years ended December 31, 1996 and 1997.
NOTE 11. RELATED PARTY TRANSACTIONS
The Company leases a 15,000 square foot warehouse facility from B & C
Enterprises, a partnership in which an existing stockholder is a 50% partner.
The lease is for an initial term of five years effective January 1, 1993, with a
five-year renewal option. Rent expense under this lease in each of the periods
ended December 31, 1996 and 1997 was $45,000. Effective January 1, 1998, the
Company exercised its option to renew at an annual rental of $50,400 through
December 31, 2002.
F-12
<PAGE> 60
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11. RELATED PARTY TRANSACTIONS -- (CONTINUED)
The Company leases approximately 25,000 square feet of warehouse storage
and administrative and sales offices from Brown Enterprises, a partnership owned
by the Company's existing stockholders. The lease is for an initial term of five
years beginning August 1, 1997, with a five year renewal option. The annual rent
is $87,000. Rent expense pertaining to this lease for the period ended December
31, 1997 was $36,250.
In October 1993, the Company borrowed $200,000 from U.S. Aviation, Inc. ("USAC")
related to the balance of the purchase price of aircraft parts acquired in
December 1989. An existing stockholder is a co-founder, officer and director of
USAC. The note bears an interest rate of 7%, payable in five equal annual
installments of principal and interest, with a maturity of October 1, 1998. The
note is secured by inventory and guaranteed by one existing stockholder.
Principal and interest paid on this note during the periods ended December 31,
1996 and 1997 was $48,780. Subsequent to year end, the note was paid in full.
The Company presently sells inventory owned by USAC on consignment and
remits payments quarterly to USAC for 60% of the sales price, less any overhaul
and repair costs incurred by the Company necessary to facilitate the sale of the
inventory. Sales on consignment for USAC were $97,160 and $76,959 in 1996 and
1997, respectively. The Company also pays monthly insurance premiums for three
employees of USAC and is reimbursed annually by USAC for the premiums incurred.
Such premiums were $16,200 and $13,589 for 1996 and 1997, respectively.
In July 1993, the Company borrowed $525,000 from an existing stockholder.
The note bears an interest rate of 6%, with interest only payable at each
anniversary date and the note balance payable in full on June 30, 1998. The note
is guaranteed by the other existing stockholder. Interest expense recognized was
$31,500 in 1996 and 1997.
The Company has historically made distributions to stockholders in amounts
estimated to cover individual tax liabilities on income from the Company in
connection with its S Corporation election. In 1996, the stockholders loaned
back to the Company funds in excess of their tax liabilities. The notes payable
totaling $121,267 bear interest at an annual rate of 8% and are due and payable
at maturity on June 30, 1998. In December 1997, the Company made distributions
to the stockholders the amount necessary to fund their anticipated 1997 tax
liabilities. The stockholders loaned back to the Company funds in excess of 110%
of their 1996 tax liabilities. The notes payable totaling $810,000 bear interest
at an annual rate of 8%. Principal and interest are due and payable at maturity
on April 15, 1998.
In 1997, the Company invested $50,000 in a company in which a director is a
principal. The investment, an equity interest of less than 2% of the investee,
is accounted for at cost, and no income has been received or recognized in 1997
in connection with the investment.
The Company incurred legal expenses of $2,200 in 1996 and $15,985 in 1997
from a law firm in which a director is a partner.
NOTE 12. SUBSEQUENT EVENT -- ADOPTION OF AGREEMENT AND PLAN OF EXCHANGE AND
RELATED CONTRACTS
Effective February 10, 1998, an Agreement and Plan of Exchange
("Agreement") was adopted by and among the Company, American Aircarriers
Support, Incorporated, a Delaware corporation ("AASI"), Karl F. Brown and Herman
O. Brown, Jr. The Agreement provides that, one day prior to the effective date
of a registration statement related to the initial public offering of stock,
existing stockholders of the Company will exchange all outstanding shares of the
Company for 4.1 million shares of common stock of AASI, and the Company will
merge with and into AASI (together, the "Reincorporation"). Contemporaneously
with the merger, the Company will terminate its S Corporation income tax
election. AASI was formed for the purpose
F-13
<PAGE> 61
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 12. SUBSEQUENT EVENT -- ADOPTION OF AGREEMENT AND PLAN OF EXCHANGE AND
RELATED CONTRACTS -- (CONTINUED)
of merging with the Company and otherwise has no operations. The authorized
capital stock of AASI consists of 20,000,000 shares of common stock and
2,000,000 shares of preferred stock.
In February 1998, the Company entered into employment agreements with
certain key executives. The employment agreements require the executives to
devote their full business time to the Company, specify annual salaries and
provide for payments to the executives in the event their responsibilities are
substantively changed as a result of a change in control of the Company.
In February 1998, AASI adopted the 1998 Omnibus Stock Option Plan. An
aggregate of 350,000 shares of common stock are reserved for issuance under the
Option Plan. Subsequent to its adoption, AASI granted stock options to
individuals who are employees, directors or consultants of the Company, totaling
258,600 shares. The options have an exercise price of $6.00 per share, vest over
four years from the date of grant and have terms of five to ten years. AASI
intends to measure compensation expense using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees."
In connection with the Offering, the Company has agreed to sell to the
representative of the underwriters, for nominal consideration, warrants to
purchase 200,000 shares of common stock. The warrants will be exercisable, at a
price of 120% of the initial price to public, commencing one year from the
effective date of the offering and for a period of four years thereafter.
NOTE 13. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The Company intends to file a Registration Statement with the Securities
and Exchange Commission covering a proposed initial public offering of common
stock (the "Offering") at an estimated offering price of $8.00 per share.
Prior to the Offering, the Company anticipates distributing to the existing
stockholders, funds sufficient to pay personal tax liabilities related to 1998
taxable income earned prior to the termination of the S Corporation election
together with an amount equal to approximately 50% of the previously
undistributed accumulated taxable income. At February 10, 1998, the date of the
Agreement and Plan of Exchange, this distribution was estimated to be $2.4
million.
As described in Note 2, the Company has elected to be taxed as an S
Corporation under the provisions of the Internal Revenue Code. Assuming the
completion of the Offering, the Company will terminate its S Corporation
election and will accordingly become subject to federal and state income taxes.
Upon termination of the S Corporation election, deferred income taxes reflecting
the tax effect of temporary differences between the Company's financial
statement and tax bases of certain assets and liabilities will become a net
liability or asset of the Company and will be reflected on the balance sheet
with a corresponding nonrecurring tax expense or benefit in the statement of
operations for the first calendar quarter following the Offering. Deferred taxes
relate primarily to accounts receivable allowances, accrued expenses and
property and equipment. The amount of such net deferred tax asset approximates
$45,000 at December 31, 1997.
The Company and the existing stockholders are parties to an S Corporation
Tax Allocation and Indemnification Agreement (the "Tax Agreement") relating to
their respective income tax liabilities. The Tax Agreement indemnifies the
existing stockholders for any adjustments causing an increase in their federal
and state income tax liability (including interest and penalties) related to the
Company's tax years prior to revocation of the S Corporation election. Subject
to certain limitations, the Tax Agreement also provides that the Company will be
indemnified by the existing stockholders with respect to federal and state
income taxes (plus interest and penalties) shifted from an S Corporation taxable
year to a Company taxable year
F-14
<PAGE> 62
AMERICAN AIRCARRIERS SUPPORT, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 13. PRO FORMA FINANCIAL INFORMATION (UNAUDITED) -- (CONTINUED)
subsequent to revocation of the S Corporation election. The Company is not aware
of any tax adjustments that may arise under the Tax Agreement. Any payment made
by the Company pursuant to the tax agreement may be non-deductible by the
Company for income tax purposes.
The pro forma data in the statement of operations provides information as
if the Company had been treated as a C Corporation for income tax purposes for
all periods presented. The following unaudited pro forma information reflects
the reconciliation between the statutory provision for income taxes and the
actual provision relating to the incremental income tax expense that the Company
would have incurred if it had been subject to federal and state income taxes.
<TABLE>
<CAPTION>
1996 1997
-------- ----------
<S> <C> <C>
Income taxes at federal statutory rate...................... $660,700 $1,384,900
State taxes, net of federal benefit......................... 97,200 203,700
Other....................................................... 19,400 40,700
-------- ----------
Pro forma income taxes.................................... $777,300 $1,629,300
======== ==========
</TABLE>
The provisions of SFAS No. 128 have been adopted in determining pro forma
basic and diluted EPS for 1996 and 1997. The weighted average number of shares
outstanding have been retroactively restated to give effect to the shares to be
issued in the Reincorporation (Note 12).
Determination of pro forma diluted shares gives effect to the options for
258,600 shares of Common Stock issued by AASI pursuant to the 1998 Omnibus Stock
Option Plan prior to the Reincorporation (Note 12). Pro forma net income
includes a provision for income taxes as if the Company were subject to federal
and state income taxes as described above.
<TABLE>
<CAPTION>
1996
-----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNTS
----------- ------------- ---------
<S> <C> <C> <C>
Net income..................................... $ 1,943,310
Pro forma income taxes......................... (777,300)
-----------
Pro forma basic earnings per share........ 1,166,010 4,100,000 $0.28
=====
Effect of dilutive securities
Options...................................... 64,650
----------- ---------
Pro forma diluted earnings per share...... $ 1,666,010 4,164,650 $0.28
=========== ========= =====
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNTS
----------- ------------- ---------
<S> <C> <C> <C>
Net income..................................... $ 4,073,355
Pro forma income taxes......................... (1,629,300)
-----------
Pro forma basic earnings per share........ 2,444,055 4,100,000 $0.60
=====
Effect of dilutive securities
Options...................................... 64,650
----------- --------- =====
Pro forma diluted earnings per share...... $ 2,444,055 4,164,650 $0.59
=========== ========= =====
</TABLE>
Warrants to purchase 200,000 shares of common stock at 120% of the initial
per share price to public were not included in the computation of pro forma
diluted earnings per share because the warrants' exercise price is greater than
the estimated offering price of the common stock.
F-15
<PAGE> 63
==============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS, AND
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY OF
THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE SUCH DATE.
---------------------------
TABLE OF CONTENTS
---------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................
Risk Factors..........................
Use of Proceeds.......................
S Corporation Distributions...........
Dividend Policy.......................
Dilution..............................
Capitalization........................
Selected Financial Data...............
Management's Discussion and Analysis
of Financial Condition and Results
of Operations.......................
Business..............................
Management............................
Principal Stockholders................
Description of Securities.............
Shares Eligible for Future Sale.......
Underwriting..........................
Legal Matters.........................
Experts...............................
Additional Information................
Index to Financial Statements......... F-1
</TABLE>
UNTIL , 1998, 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 OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
==============================================================================
==============================================================================
2,000,000 SHARES
[AMERICAN AIRCARRIERS SUPPORT, INCORPORATED LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
[CRUTTENDEN ROTH LOGO]
, 1998
==============================================================================
<PAGE> 64
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Delaware General Corporation Law permits a corporation organized
thereunder to indemnify its directors and officers for certain of their acts.
The Certificate of Incorporation of the Company has been framed so as to conform
to the Delaware General Corporation Law. (Reference is made to the Certificate
of Incorporation filed as Exhibit 3.1.2 to this Registration Statement.)
In general, any officer, director, employee or agent may be indemnified
against expenses, fines, settlements or judgments arising in connection with a
legal proceeding to which such person is a party, if that person's actions were
in good faith, were believed to be in the Company's best interest and were not
unlawful. Unless such person is successful upon the merits in such an action,
indemnification may be awarded only after a determination by independent
decision of the Board of Directors, by legal counsel or by a vote of the
stockholders that the applicable standard of conduct was met by the person to be
indemnified.
The circumstances under which indemnification is granted in connection with
an action brought on behalf of the Company are generally the same as those set
forth above; however, with respect to such actions, indemnification is granted
only with respect to expenses actually incurred in connection with the defense
or settlement of the action. In such actions, the person to be indemnified must
have acted in good faith, in a manner believed to have been in the Company's
best interest and with respect to which such person was not adjudged liable for
negligence or misconduct.
Indemnification may also be granted pursuant to the terms of agreements
which may be entered into in the future pursuant to a vote of stockholders or
directors. The statutory provision cited above and the referenced portion of the
Certificate of Incorporation also grant the power to the Company to purchase and
maintain insurance which protects its officers and directors against any
liabilities incurred in connection with their services in such a position, and
such a policy may be obtained by the Company in the future.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Other expenses in connection with this offering which will be paid by
American Aircarriers Support, Incorporated (hereinafter in this Part II, the
"Company") are estimated to be substantially as follows:
<TABLE>
<CAPTION>
AMOUNT
PAYABLE
BY THE
ITEM COMPANY*
---- -----------
<S> <C>
S.E.C. Registration Fees.................................... $ 6,369.08
N.A.S.D. Filing Fees........................................ 2,659.01
State Securities Laws (Blue Sky) Legal Fees................. 10,000.00*
Printing and Engraving...................................... 120,000.00*
Legal Fees.................................................. 250,000.00*
Representative's Non-Accountable Expense Allowance.......... 480,000.00
Accounting Fees and Expenses................................ 80,000.00*
Transfer Agent's Fees and Cost of Certificates.............. 5,000.00*
Miscellaneous Expenses...................................... 25,971.91*
-----------
Total............................................. $980,000.00*
===========
</TABLE>
- ---------------
* Estimated for the purpose of this filing.
II-1
<PAGE> 65
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
(a) The Company has made no sales of its Common Stock within the past three
years. The Company relied on Section 3(a)(9) of the Securities Act of 1933, as
amended (the "1933 Act"), for the exemption from the registration requirements
with respect to the plan of reorganization effecting a change of corporate
domicile from the State of South Carolina to the State of Delaware. American
Aircarriers Support, Incorporated, a Delaware corporation, issued ten shares of
its Common Stock to Karl F. Brown upon the formation of such corporation in
February 1998. The consideration paid for such Common Stock was $1.00. Mr. Brown
will donate such ten shares of Common Stock to the capital of American
Aircarriers Support, Incorporated, a Delaware corporation, upon the
reincorporation of the Company.
In February 1998, American Aircarriers Support, Incorporated, a Delaware
corporation, granted options to certain employees and consultants pursuant to
its 1998 Omnibus Stock Option Plan. The issuance of such options was exempt
pursuant to Rule 701 and Section 4(2) of the 1933 Act. None of such options are
exercisable prior to September 1, 1998.
ITEM 27. EXHIBITS.
The following is a complete list of Exhibits filed as part of this
Registration Statement and which are incorporated herein.
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
*1.1 -- Form of Underwriting Agreement by and between American
Aircarriers Support, Incorporated (the "Company") and
Cruttenden Roth Incorporated (the "Representative").
*1.2 -- Form of Master Selected Dealers Agreement by and between
the Representative and selected dealers.
*2.1 -- Form of Agreement and Plan of Exchange, dated April ,
1998, by and among American Aircarriers Support, Inc., a
South Carolina corporation, American Aircarriers Support
Incorporated, a Delaware corporation, and Messrs. Karl F.
Brown and Herman O. Brown, Jr.
*3.1.1 -- Articles of Incorporation, as amended, of American
Aircarriers Support, Inc. as filed on June 27, 1985, and
as amended January 8, 1990, with the Secretary of State
of the State of South Carolina.
*3.1.2 -- Certificate of Incorporation of the Company as filed on
February 9, 1998 with the Secretary of State of the State
of Delaware.
*3.2 -- Bylaws of the Company.
+4.1.1 -- Form of specimen certificate for Common Stock of the
Company.
*4.1.2 -- Form of Representative's Warrant Agreement to be issued
by the Company to the Representative.
+5. -- Opinion of Berliner Zisser Walter & Gallegos, P.C.,
regarding legality of the securities covered by this
Registration Statement.
*10.1.1 -- Employment Agreement, dated January 31, 1998, by and
between Karl F. Brown and the Company.
*10.1.2 -- Employment Agreement, effective January 1, 1998, by and
between Elaine T. Rudisill and the Company.
*10.2 -- Form of Indemnification Agreement to be entered into
between the Company and each officer and director of the
Company.
*10.3 -- 1998 Omnibus Stock Option Plan, effective February 9,
1998, authorizing 350,000 shares of Common Stock for
issuance pursuant to the Plan.
</TABLE>
II-2
<PAGE> 66
<TABLE>
<CAPTION>
EXHIBIT NO.
-----------
<C> <S>
*10.4.1 -- Promissory Note, dated June 29, 1995, issued to
NationsBank, N.A. by the Company.
*10.4.2 -- Security Agreement, dated June 29, 1995, between
NationsBank, N.A. and the Company.
*10.4.3 -- Continuing and Unconditional Guaranty, dated June 29,
1995, from Karl F. Brown to NationsBank, N.A.
*10.4.4 -- Promissory Note Renewal, increasing principal amount
borrowable to $2 million, issued to NationsBank, N.A. by
the Company.
*10.4.5 -- Promissory Note, increasing principal amount borrowable
to $4 million, issued to NationsBank, N.A. by the
Company.
*10.4.6 -- Commitment Letter, dated February 19, 1998, from
NationsBank, N.A. to the Company.
*10.5.1 -- Lease Agreement, dated June 30, 1993, by and between B &
C Enterprises and the Company.
*10.5.2 -- Lease Agreement, dated July 30, 1997, by and between
Brown Enterprises and the Company.
*10.6 -- Form of S Corporation Tax Allocation and Indemnification
Agreement, dated April , 1998, by and among the
Company, Karl F. Brown and Herman O. Brown, Jr.
*10.7 -- Joint Venture Agreement, dated January 26, 1998, by and
between Global Turbine Services, Inc. and the Company.
*10.8 -- Voting Trust Agreement, dated February 23, 1998, by and
among Herman O. Brown, Jr., David M. Furr, as Trustee,
and the Company.
11. -- Not applicable.
13. -- Not applicable.
14. -- Not applicable.
15. -- Not applicable.
16. -- Not applicable.
21. -- Not applicable.
22. -- Not applicable.
+23.1 -- The consent of Berliner Zisser Walter & Gallegos, P.C.,
to the use of its opinion with respect to the legality of
the securities covered by this Registration Statement and
to the references to such firm in the Prospectus filed as
part of this Registration Statement will be included in
Exhibit 5.
*23.2 -- Consent of Cherry, Bekaert & Holland, L.L.P., independent
certified public accountants for the Company.
*24. -- The Power of Attorney is included in the signature page
of this Registration Statement.
*27. -- Financial Data Schedule.
</TABLE>
- ---------------
* Filed herewith.
+ To be filed by amendment.
II-3
<PAGE> 67
ITEM 28. UNDERTAKINGS.
(a) Rule 415 Offering.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the Registration Statement; and
(iii) Include any additional material information on the plan of
distribution.
(2) For determining any liability under the Securities Act, treat each
such post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(d) Prompt Delivery.
The undersigned Registrant undertakes to provide the Underwriters at the
closing as specified in the Underwriting Agreement certificates for Common Stock
in such denominations and registered in such names as required by the
Underwriters to permit prompt delivery to each purchaser.
(e) Indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act, and is
therefore unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant 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 Registrant 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 Act and will be governed by the final adjudication of
such issue.
(f) Rule 430A.
The undersigned Registrant hereby undertakes that:
(i) For the purposes of determining any liability under the Securities
Act of 1933, 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 Registrant under Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time the Commission declared
it effective.
(ii) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 68
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement or Amendment to be signed on its behalf by the undersigned in the City
of Fort Mill, State of South Carolina on March 23, 1998.
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
By: /s/ KARL F. BROWN
----------------------------------
Karl F. Brown
Chief Executive Officer
Each person whose signature appears below constitutes and appoints Karl F.
Brown or David M. Furr, his or her attorneys-in-fact, with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Registration Statement, and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact, or
his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement or Amendment was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ KARL F. BROWN Chairman of the Board, Chief March 23, 1998
- ----------------------------------------------------- Executive Officer and
Karl F. Brown President (Principal
Executive Officer)
/s/ ELAINE T. RUDISILL Chief Financial Officer March 23, 1998
- ----------------------------------------------------- (Principal Financial and
Elaine T. Rudisill Accounting Officer)
/s/ DAVID M. FURR Director March 23, 1998
- -----------------------------------------------------
David M. Furr
/s/ PAMELA K. CLEMENT Director March 23, 1998
- -----------------------------------------------------
Pamela K. Clement
/s/ JAMES T. COMER, III Director March 23, 1998
- -----------------------------------------------------
James T. Comer, III
</TABLE>
II-5
<PAGE> 69
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
*1.1 -- Form of Underwriting Agreement by and between American
Aircarriers Support, Incorporated (the "Company") and
Cruttenden Roth Incorporated (the "Representative").
*1.2 -- Form of Master Selected Dealers Agreement by and between
the Representative and selected dealers.
*2.1 -- Form of Agreement and Plan of Exchange, dated April ,
1998, by and among American Aircarriers Support, Inc., a
South Carolina corporation, American Aircarriers Support
Incorporated, a Delaware corporation, and Messrs. Karl F.
Brown and Herman O. Brown, Jr.
*3.1.1 -- Articles of Incorporation, as amended, of American
Aircarriers Support, Inc. as filed on June 27, 1985, and
as amended January 8, 1990, with the Secretary of State
of the State of South Carolina.
*3.1.2 -- Certificate of Incorporation of the Company as filed on
February 9, 1998 with the Secretary of State of the State
of Delaware.
*3.2 -- Bylaws of the Company.
+4.1.1 -- Form of specimen certificate for Common Stock of the
Company.
*4.1.2 -- Form of Representative's Warrant Agreement to be issued
by the Company to the Representative.
+5. -- Opinion of Berliner Zisser Walter & Gallegos, P.C.,
regarding legality of the securities covered by this
Registration Statement.
*10.1.1 -- Employment Agreement, dated January 31, 1998, by and
between Karl F. Brown and the Company.
*10.1.2 -- Employment Agreement, effective January 1, 1998, by and
between Elaine T. Rudisill and the Company.
*10.2 -- Form of Indemnification Agreement to be entered into
between the Company and each officer and director of the
Company.
*10.3 -- 1998 Omnibus Stock Option Plan, effective February 9,
1998, authorizing 350,000 shares of Common Stock for
issuance pursuant to the Plan.
*10.4.1 -- Promissory Note, dated June 29, 1995, issued to
NationsBank, N.A. by the Company.
*10.4.2 -- Security Agreement, dated June 29, 1995, between
NationsBank, N.A. and the Company.
*10.4.3 -- Continuing and Unconditional Guaranty, dated June 29,
1995, from Karl F. Brown to NationsBank, N.A.
*10.4.4 -- Promissory Note Renewal, increasing principal amount
borrowable to $2 million, issued to NationsBank, N.A. by
the Company.
*10.4.5 -- Promissory Note, increasing principal amount borrowable
to $4 million, issued to NationsBank, N.A. by the
Company.
*10.4.6 -- Commitment Letter, dated February 19, 1998, from
NationsBank, N.A. to the Company.
*10.5.1 -- Lease Agreement, dated June 30, 1993, by and between B &
C Enterprises and the Company.
*10.5.2 -- Lease Agreement, dated July 30, 1997, by and between
Brown Enterprises and the Company.
</TABLE>
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
*10.6 -- Form of S Corporation Tax Allocation and Indemnification
Agreement, dated April , 1998, by and among the
Company, Karl F. Brown and Herman O. Brown, Jr.
*10.7 -- Joint Venture Agreement, dated January 26, 1998, by and
between Global Turbine Services, Inc. and the Company.
*10.8 -- Voting Trust Agreement, dated February 23, 1998, by and
among Herman O. Brown, Jr., David M. Furr, as Trustee,
and the Company.
11. -- Not applicable.
13. -- Not applicable.
14. -- Not applicable.
15. -- Not applicable.
16. -- Not applicable.
21. -- Not applicable.
22. -- Not applicable.
+23.1 -- The consent of Berliner Zisser Walter & Gallegos, P.C.,
to the use of its opinion with respect to the legality of
the securities covered by this Registration Statement and
to the references to such firm in the Prospectus filed as
part of this Registration Statement will be included in
Exhibit 5.
*23.2 -- Consent of Cherry, Bekaert & Holland, L.L.P., independent
certified public accountants for the Company.
*24. -- The Power of Attorney is included in the signature page
of this Registration Statement.
*27. -- Financial Data Schedule.
</TABLE>
- ---------------
* Filed herewith.
+ To be filed by amendment.
<PAGE> 1
EXHIBIT 1.1
LLG&M DRAFT 3/ /98
UNDERWRITING AGREEMENT
March ___, 1998
CRUTTENDEN ROTH INCORPORATED
As Representative of the several Underwriters
18301 Von Karman, Suite 100
Irvine, California 92715
Re: American Aircarriers Support, Incorporated
Ladies and Gentlemen:
American Aircarriers Support, Incorporated, a Delaware corporation
(the "Company"), addresses you as the Representative of each of the persons,
firms and corporations listed on Schedule "A" attached hereto (herein
collectively called the "Underwriters") and hereby confirms its agreement with
the several Underwriters as follows:
1. DESCRIPTION OF SHARES. The Company proposes to issue and sell
two million (2,000,000) shares of its authorized and unissued Common Stock,
$0.001 par value per share (the "Firm Shares"), to the several Underwriters.
The Company also proposes to grant to the Underwriters an option to purchase up
to three hundred thousand (300,000) additional shares of the Company's Common
Stock, $0.001 par value per share (the "Option Shares"), as provided in Section
7 hereof. In addition, the Company proposes to sell to you, individually and
not in your capacity as Representative, five (5) year warrants exercisable
commencing one (1) year from the effective date of the Company's Registration
Statement (as hereinafter defined) (the "Representative's Warrants") to
purchase up to two hundred thousand (200,000) shares of Common Stock, $0.001
par value per share, of the Company (the "Representative's Warrant Stock"),
which sale will be consummated in accordance with the terms and conditions of
the Representative's Warrant Agreement (the "Representative's Warrant
Agreement"), the form of which is filed as an exhibit to the Registration
Statement. As used in this Underwriting Agreement (the "Agreement"), the term
"Shares" shall include the Firm Shares and the Option Shares. All shares of
Common Stock, $0.001 par value per share, of the Company to be outstanding
after giving effect to the sales contemplated hereby, including the sale of the
Shares, are hereinafter referred to as the "Common Stock". Unless the context
otherwise requires, references herein to the "Company" include American
Aircarriers Support, Incorporated, a Delaware corporation, together with its
subsidiaries described in the Prospectus, if any, and includes American
Aircarriers Support, Incorporated, a South Carolina corporation, the
predecessor thereto.
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to and agrees with each
Underwriter that:
<PAGE> 2
(a) The Registration Statement on Form SB-2 (File No.
333-_______) with respect to the Shares, the Representative's Warrants and the
Representative's Warrant Stock, including a prospectus subject to completion,
has been prepared by the Company in conformity with the requirements of the
Securities Act of 1933, as amended (the "1933 Act"), and the applicable rules
and regulations (the "Rules and Regulations") of the United States Securities
and Exchange Commission (the "Commission") under the 1933 Act and have been
filed with the Commission; such amendments to the Registration Statement and
such amended prospectuses subject to completion as may have been required prior
to the date hereof have been similarly prepared and filed with the Commission;
and the Company will file such additional amendments to the Registration
Statement and such amended prospectuses subject to completion as may hereafter
be required. Copies of the Registration Statement and all amendments and of
each related prospectus subject to completion (collectively, the "Preliminary
Prospectuses") have been delivered to you.
If the Registration Statement relating to the Shares
has been declared effective under the 1933 Act by the Commission, the Company
will prepare and promptly file with the Commission the information previously
omitted from the Registration Statement, as applicable, pursuant to Rule
430A(a) of the Rules and Regulations pursuant to subparagraph (1) or (4) of
Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to the Registration Statement (including a final form of prospectus).
If the Registration Statement relating to the Shares has not been declared
effective under the 1933 Act by the Commission, the Company will prepare and
promptly file amendments to the Registration Statement, including a final form
of prospectus, as applicable. The term "Registration Statement" as used in
this Agreement shall mean such registration statement, including financial
statements (and the notes thereto), and all schedules and exhibits thereto, in
the form in which it became or becomes, as the case may be, effective
(including, if the Company omitted information from the registration statement
pursuant to Rule 430A(a) of the Rules and Regulations, the information deemed
to be a part of the registration statement at the time it became effective
pursuant to Rule 430A(b) of the Rules and Regulations) and, in the event of any
amendment thereto after the effective date of such registration statement,
shall also mean (from and after the effectiveness of such amendment) such
registration statement as so amended. The term "Prospectus" as used in this
Agreement shall mean the prospectus relating to the Shares as included in the
Registration Statement at the time it becomes effective (including, if the
Company omitted information from the Registration Statement pursuant to Rule
430A(a) of the Rules and Regulations, the information deemed to be a part of
the Registration Statement at the time it became effective pursuant to Rule
430A(b) of the Rules and Regulations), except that if any revised prospectus
shall be provided to the Underwriters by the Company for use in connection with
the offering of the Shares that differs from the prospectus on file with the
Commission at the time the Registration Statement became or becomes, as the
case may be, effective (whether or not such revised prospectus is required to
be filed with the Commission pursuant to Rule 424(b)(3) of the Rules and
Regulations), the term "Prospectus" shall refer to such revised prospectus from
and after the time it is first provided to the Underwriters for such use.
-2-
<PAGE> 3
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus or instituted proceedings for
that purpose, and each such Preliminary Prospectus, at the time of the filing
thereof, has conformed in all material respects to the requirements of the 1933
Act and the Rules and Regulations, and, as of its date, has not included any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; and at the time the Registration
Statement became or becomes, as the case may be, effective and at all times
subsequent thereto up to and on the Closing Date (as hereinafter defined) and
on any later date on which Option Shares are to be purchased, (i) the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the 1933 Act and the Rules and Regulations and will in all
material respects conform to the requirements of the 1933 Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that none of the representations and
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or the Prospectus, or
any amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by
such Underwriter specifically for use in the preparation thereof.
(c) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the jurisdiction
of its incorporation with full power and authority (corporate and otherwise) to
own, lease and operate its properties and conduct its business as described in
the Prospectus; the Company is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a material adverse effect on the condition (financial
or otherwise), earnings, operations, business or business prospects of the
Company taken as a whole; no proceeding has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or
curtail, such power and authority or qualification; the Company is in
possession of and operating in compliance with all authorizations, licenses,
certificates, consents, orders and permits from all state, federal and other
regulatory authorities that are material to the conduct of its business, all of
which are valid and in full force and effect; the Company is not in material
violation of its Certificate of Incorporation or Bylaws or in default in the
performance or observance of any material obligation, agreement, covenant or
condition contained in any bond, debenture, note or other evidence of
indebtedness, or in any lease, contract, indenture, mortgage, deed of trust,
loan agreement, joint venture or partnership agreement, or any other agreement
or instrument to which the Company is a party or by which it or its properties
or assets may be bound; and the Company is not in material violation of any
-3-
<PAGE> 4
known law, order, rule, regulation, writ, injunction, judgment or decree of any
court, government, or regulatory or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or over its properties, assets or
operations. The Prospectus accurately describes any corporation, company,
partnership, association or other entity owned or controlled, directly or
indirectly, by the Company.
(d) The Company has full legal right, power and authority
to enter into this Agreement and the Representative's Warrant Agreement and to
perform the transactions contemplated hereby and thereby. Each of this
Agreement and the Representative's Warrant Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement on
the part of the Company, enforceable in accordance with its terms, except as
rights to indemnification under this Agreement or the Representative's Warrant
Agreement may be limited by applicable law and except as the enforcement
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws or rules relating to or affecting creditors'
rights generally or by general equitable principles; the performance of this
Agreement and the Representative's Warrant Agreement and the consummation of
the transactions herein or therein contemplated will not result in a material
breach or violation of any of the terms and provisions of, or constitute a
default under, (i) any bond, debenture, note or other evidence of indebtedness,
or under any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or partnership agreement, or other agreement or
instrument to which the Company is a party or by which it or its properties or
assets may be bound, (ii) the Certificate of Incorporation or Bylaws of the
Company, or (iii) any law, order, rule, regulation, writ, injunction, judgment
or decree of any court, government, or regulatory or governmental agency or
body, domestic or foreign, having jurisdiction over the Company or its
properties, assets or operations. No consent, approval, authorization or order
of or qualification with any court, government, or regulatory or governmental
agency or body, domestic or foreign, having jurisdiction over the Company or
its properties, assets or operations is required for the execution and delivery
of this Agreement or the Representative's Warrant Agreement and the
consummation by the Company of the transactions herein and therein
contemplated, except such as may be required under the 1933 Act or the Rules
and Regulations, or under state or other securities or "blue sky" laws, rules
or regulations, all of which requirements have been satisfied in all material
respects.
(e) There is not any pending or, to the best of the
Company's knowledge, threatened action, suit, claim or proceeding against the
Company, or any of its officers or any of its properties, assets or rights
before any court, government, or regulatory or governmental agency or body,
domestic or foreign, having jurisdiction over the Company or its officers,
properties or assets or otherwise that (i) is reasonably likely to result in
any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company or that
might materially and adversely affect its officers, properties, assets or
rights, (ii) might prevent consummation of the transactions contemplated
hereby, or (iii) is required to be disclosed in the Registration Statement or
the Prospectus and is not so disclosed; and there are no agreements, contracts,
leases or documents of the Company of a character required to be described or
referred to in the Registration Statement or the Prospectus or to be filed as
an exhibit
-4-
<PAGE> 5
to the Registration Statement by the 1933 Act or the Rules and Regulations or
by the Securities Exchange Act of 1934, as amended (the "1934 Act"), or the
rules and regulations of the Commission thereunder that have not been
accurately described in all material respects in the Registration Statement or
the Prospectus or filed as exhibits to the Registration Statement.
(f) All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with all federal and state
securities laws, rules and regulations, were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities, and the authorized and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" and conforms
in all material respects to the statements relating thereto contained in the
Registration Statement and the Prospectus (and such statements correctly state
the substance of the documents and instruments defining the capitalization of
the Company); the Firm Shares and the Option Shares have been duly authorized
for issuance and sale to the Underwriters pursuant to this Agreement and, when
issued and delivered by the Company against payment therefor in accordance with
the terms of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest; and no preemptive right,
co-sale right, registration right, right of first refusal or other similar
right exists with respect to any of the Firm Shares or Option Shares or the
issuance and sale thereof other than those that will automatically expire upon
the consummation of the transactions contemplated on the Closing Date. No
further approval or authorization of any stockholder, the Board of Directors of
the Company or others is required for the issuance and the sale or transfer of
the Shares except as may be required under the 1933 Act, the Rules and
Regulations, or under state or other securities or "blue sky" laws, rules or
regulations. Except as disclosed in or contemplated by the Prospectus and the
financial statements of the Company (and the notes thereto) included in the
Prospectus, the Company has no outstanding options to purchase, or any
preemptive rights or other rights to subscribe for or purchase, any securities
or obligations convertible into, or any contracts or commitments to issue or
sell, shares of its capital stock or any such options, rights, convertible
securities or obligations. The description of the Company's stock option,
stock bonus and other stock plans or arrangements, and the options or other
rights granted and exercised thereunder, set forth in the Prospectus accurately
and fairly presents the information required to be shown with respect to such
plans, arrangements, options and rights under the 1933 Act and the Rules and
Regulations.
(g) Cherry, Bekaert & Holland, L.L.P., which has examined
the financial statements of the Company, together with the related schedules
and notes thereto, as of December 31, 1996 and 1997 filed with the Commission
as a part of the Registration Statement, which are included in the Prospectus,
are independent accountants within the meaning of the 1933 Act and the Rules
and Regulations; the audited financial statements of the Company, together with
the related schedules and notes thereto, and the unaudited financial
information, forming part of the Registration Statement and the Prospectus,
fairly present the financial position and results of operations of the Company
at the respective dates and for the respective periods to which they apply; and
all audited financial statements of the Company, together with the related
schedules and
-5-
<PAGE> 6
notes thereto, and the unaudited financial information, filed with the
Commission as part of the Registration Statement, have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as may be otherwise stated therein.
The selected and summary financial and statistical data included in the
Registration Statement presents fairly the information shown therein and have
been compiled on a basis consistent with the audited financial statements
presented therein. No other financial statements or schedules or notes are
required to be included in the Registration Statement.
(h) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, there
has not been (i) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company, (ii) any transaction that is material to the Company outside the
ordinary course of business, (iii) any material obligation, direct or
contingent, incurred by the Company, except obligations incurred in the
ordinary course of business, (iv) any material change in the capital stock or
outstanding indebtedness of the Company, (v) any dividend or distribution of
any kind or nature declared, paid or made on the capital stock of the Company
(other than the distributions made to the Existing Common Stockholders (as that
term is defined in the Prospectus), as disclosed under "S Corporation
Distributions" therein), or (vi) any loss or damage (whether or not insured) to
the property or assets of the Company that has had or may have a material
adverse effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company.
(i) Except as set forth in the Registration Statement and
the Prospectus, (i) the Company has good and marketable title to all properties
and assets described in the Registration Statement and the Prospectus as being
owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than such as would not have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company, and (ii) the
agreements to which the Company is a party described in the Registration
Statement and the Prospectus are valid agreements, enforceable by the Company,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable principles and,
to the best of the Company's knowledge, the other contracting party or parties
thereto are not in material breach or material default under any of such
agreements. Except as set forth in the Registration Statement and the
Prospectus, the Company owns or leases all such properties as are necessary to
its operations as now conducted and as described in the Registration Statement
and the Prospectus.
(j) The Company has timely filed all federal, state,
local and foreign tax returns required to be filed by it and has paid all taxes
shown thereon as being due, and there is no tax deficiency that has been or, to
the best of the Company's knowledge, is reasonably likely to be asserted
against the Company or any of its properties or assets that might have a
material adverse effect on the condition (financial or otherwise), earnings,
operations, business or business
-6-
<PAGE> 7
prospects of the Company, and all tax liabilities are adequately provided for
on the books of the Company.
(k) The Company maintains insurance with insurers of
recognized financial responsibility of the types and in the amounts generally
deemed adequate for its business, including, but not limited to, (i) insurance
covering real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, and (ii) product liability insurance concerning the products
sold and leased by the Company and the services provided by the Company in
connection therewith, all of which insurance is in full force and effect; the
Company has not been refused any insurance coverage sought or applied for; and
the Company does not have any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business, at a cost that would not materially and adversely affect the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company.
(l) To the best of Company's knowledge, no labor
disturbance by the employees of the Company exists or is imminent. No
collective bargaining agreement exists with any of the Company's employees and,
to the best of the Company's knowledge, no such agreement is imminent.
(m) The Company owns or possesses adequate rights to use
all trade secrets, know-how, trademarks, service marks and trade names that are
necessary to conduct its businesses as described in the Registration Statement
and the Prospectus; the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any trade secrets, know-how, trademarks,
service marks or trade names; and the Company has not received any notice of,
and has no knowledge of, any infringement of or conflict with asserted rights
of others with respect to any trade secrets, know-how, trademarks, service
marks or trade names that, singly or in the aggregate, in the event of an
unfavorable decision, ruling or finding, would have a material adverse effect
on the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company.
(n) The Common Stock is registered pursuant to Section
12(g) of the 1934 Act and is approved for quotation on the Nasdaq National
Market, and the Company has taken no action designed to, or likely to have the
effect of, terminating the registration of the Common Stock under the 1934 Act
or delisting the Common Stock from the Nasdaq National Market, nor has the
Company received any notification that the Commission or the National
Association of Securities Dealers, Inc. (the "NASD") is contemplating
terminating such registration or listing.
(o) The Company has been advised concerning the
Investment Company Act of 1940, as amended (the "1940 Act"), and the rules and
regulations thereunder, and has in the past conducted, and intends in the
future to conduct, its business and affairs in such a manner as
-7-
<PAGE> 8
to ensure that it will not become an "investment company" or a company
"controlled" by an "investment company" within the meaning of the 1940 Act and
such rules and regulations.
(p) The Company has not distributed and will not
distribute prior to the later of (i) the Closing Date, or any date on which
Option Shares are to be purchased, as the case may be, and (ii) the completion
of the distribution of the Shares, any offering material in connection with the
offer and sale of the Shares other than any Preliminary Prospectuses, the
Prospectus, the Registration Statement and other materials, if any, permitted
by the 1933 Act.
(q) The Company has not at any time since its inception
(i) made any unlawful contribution to any candidate for foreign office or
failed to disclose fully any contribution in violation of law, or (ii) made any
payment to any federal or state regulatory or governmental officer or official,
or any other person charged with similar public or quasi-public duties, other
than payments required or permitted by the laws of the United States or any
jurisdiction thereof.
(r) The Company has not taken and will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization in violation of law or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares.
(s) Each officer and director of the Company and each
beneficial owner of five percent (5%) or more of the Company's Common Stock has
agreed in writing that such person will not, for a period of twelve (12) months
following the date of the Prospectus relating to the public offering of the
Shares (the "Lock-up Period"), offer to sell, contract to sell, or otherwise
sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") any shares of Common Stock, any options or
warrants to purchase any shares of Common Stock, or any securities convertible
into or exchangeable for shares of Common Stock (collectively, "Securities")
owned directly by such person or entity or with respect to which such person or
entity has the power to dispose of as of the date of this Agreement, other than
(i) as a bona fide gift or gifts, provided the donee or donees thereof agree in
writing to be bound by this restriction, (ii) as a distribution to limited
partners or stockholders of such person or entity, provided that the
distributees thereof agree in writing to be bound by the terms of this
restriction, (iii) in a transfer to any other officer, director or beneficial
owner of five percent (5%) or more of the Company's Common Stock, provided that
the transferee agrees in writing to be bound by this restriction, or (iv) with
the prior written consent of Cruttenden Roth Incorporated. The foregoing
restriction is expressly agreed to preclude the holder of the Securities from
engaging in any hedging or other transaction that is designed to or reasonably
expected to lead to or result in a Disposition of Securities during the Lock-up
Period, even if such Securities would be disposed of by someone other than such
holder. Such prohibited hedging or other transactions would include, without
limitation, any short sale (whether or not against the box) or any purchase,
sale or grant of any right (including, without limitation, any put or call
option) with respect to any Securities or with respect to any security (other
than a broad-based market basket or index) that includes, relates to or derives
any significant part of its value from the Securities. Furthermore, such
person or entity
-8-
<PAGE> 9
will also agree and consent to the entry of stop transfer instructions with the
Company's transfer agent against the transfer of the Securities held by such
person or entity except in compliance with this restriction. The Company has
provided to counsel for the Underwriters a complete and accurate list of all
security holders of the Company and the number and type of securities held by
each security holder. The Company has provided to counsel for the Underwriters
true, accurate and complete copies of all of the agreements pursuant to which
its officers, directors and stockholders have agreed to such restrictions (the
"Lock-up Agreements").
(t) Except as set forth in the Registration Statement and
the Prospectus, (i) the Company is in material compliance with all laws, rules
and regulations relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
that are applicable to its business, (ii) the Company has received no notice
from any regulatory or governmental authority or third party of an asserted
claim under any Environmental Laws, which claim is required to be disclosed in
the Registration Statement or the Prospectus, (iii) to its best knowledge, the
Company is not likely to be required to make future material capital
expenditures to comply with any Environmental Laws, and (iv) no property that
is owned and, to the Company's knowledge, no property that is leased or
occupied by the Company, has been designated as a Superfund site pursuant to
the Comprehensive Response, Compensation and Liability Act of 1980, as amended
(42 U.S.C. Section 9601, et seq.), or otherwise designated as a contaminated
site under applicable state or local law.
(u) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management's general or specific authorizations,
(ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for property and assets, including, without limitation,
cash receipts, (iii) access to inventory and assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for property and assets is compared with existing
inventory and assets at reasonable intervals and appropriate action is taken
with respect to any differences.
(v) There are no outstanding loans, advances (except
normal advances for business expenses in the ordinary course of business) or
guarantees of indebtedness by the Company to or for the benefit of any of the
officers or directors of the Company or any of the members of the families of
any of them, except as disclosed in the Registration Statement and the
Prospectus.
(w) The Representative's Warrants have been duly and
validly authorized by the Company and upon delivery to you in accordance with
the Representative's Warrant Agreement, will be duly issued and legal, valid
and binding obligations of the Company.
(x) The Representative's Warrant Stock has been duly
authorized and reserved for issuance upon the exercise of the Representative's
Warrants and, when issued upon payment
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of the exercise price therefor, will be validly issued, fully paid and
nonassessable shares of Common Stock of the Company.
(y) All relationships involving control persons within
the meaning of the 1933 Act are accurately and fully described in the
Registration Statement, and there are no relationships between the Company and
any control person that are not fully described in the Registration Statement.
3. PURCHASE, SALE AND DELIVERY OF SHARES. On the basis of the
representations, warranties and agreements herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to sell to the
Underwriters, and each Underwriter agrees, severally and not jointly, to
purchase from the Company, at a purchase price of $_____________ per share, the
respective number of Firm Shares as set forth in Schedule "A" attached hereto.
The obligation of each Underwriter to the Company shall be to purchase from the
Company that number of Firm Shares set forth opposite the name of such
Underwriter in Schedule "A" attached hereto (subject to adjustment as provided
in Section 10 hereof).
Delivery of definitive certificates evidencing the Firm Shares
to be purchased by the Underwriters pursuant to this Section 3 shall be made
against payment of the purchase price therefor by the several Underwriters by
certified or official bank check or checks drawn in next-day funds, payable to
the order of the Company (and the Company agrees not to deposit any such check
in the bank on which it is drawn until the day following the date of its
delivery to the Company) at the offices of the Representative or such other
place as may be agreed upon by the Representative and the Company, at 8:00
a.m., Los Angeles, California time, on the third (3rd) full business day
following the first day that the Shares begin trading (or at such time and date
to which payment and delivery shall have been postponed pursuant to Section 10
hereof), such time and date of payment and delivery being herein called the
"Closing Date." The Shares will begin trading on the day the Registration
Statement is declared effective by the Commission, or if the Registration
Statement is declared effective after the close of trading, then on the next
trading day. The certificates evidencing the Firm Shares to be so delivered
will be made available to you at such office or such other location as you may
reasonably request for checking at least one (1) full business day prior to the
Closing Date and will be in such names and denominations as you may request,
such request to be made at least two (2) full business days prior to the
Closing Date. If the Representative so elects, delivery of the Firm Shares may
be made by credit through full fast transfer to the accounts at The Depository
Trust Company designated by the Representative.
It is understood that you, individually, and not as the
Representative of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the Closing
Date for the Firm Shares to be purchased by such Underwriter or Underwriters.
Any such payment by you shall not relieve any such Underwriter or Underwriters
of any of its or their obligations hereunder.
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<PAGE> 11
After the Registration Statement becomes effective, the
several Underwriters intend to make an initial public offering (as such term is
described in Section 11 hereof) of the Firm Shares at an initial public
offering price of $___________ per share.
The information set forth in the last paragraph on the front
cover page (insofar as such information relates to the Underwriters), in the
first paragraph on page 2 (concerning stabilization, penalty bids, purchases to
cover short positions and over-allotment by the Underwriters), and in the third
and seventh paragraphs under the caption "Underwriting", in any Preliminary
Prospectus and in the final form of the Prospectus filed pursuant to Rule
424(b), constitutes the only information furnished by the Underwriters to the
Company for inclusion in any Preliminary Prospectus, the Prospectus or the
Registration Statement, and you, on behalf of the respective Underwriters,
represent and warrant to the Company that the statements made therein do not
include any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company further agrees
with the several Underwriters that:
(a) The Company will use reasonable efforts to cause the
Registration Statement and any amendments thereto, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto,
to become effective as promptly as possible; it will notify you, promptly after
it shall receive notice thereof, of the times when the Registration Statement
or any subsequent amendments to the Registration Statement have become
effective or any supplement to the Prospectus has been filed; if the Company
omitted information from the Registration Statement at the time it was
originally declared effective in reliance upon Rule 430A(a) of the Rules and
Regulations, the Company will provide evidence satisfactory to you that the
Prospectus contains such information and has been filed, within the time period
prescribed, with the Commission pursuant to subparagraph (1) or (4) of Rule
424(b) of the Rules and Regulations or as part of a post-effective amendment
to the Registration Statement as originally declared effective by the
Commission; if for any reason the filing of the final form of Prospectus is
required under Rule 424(b)(3) of the Rules and Regulations, it will provide
evidence satisfactory to you that the Prospectus contains such information and
has been filed with the Commission within the time period prescribed; it will
notify you promptly of any request by the Commission for the amendment or
supplementation of the Registration Statement or the Prospectus or for
additional information; promptly upon your request, it will prepare and file
with the Commission any amendments or supplements to the Registration Statement
or the Prospectus that, in the opinion of counsel for the several Underwriters
("Underwriters' Counsel"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters; it will promptly prepare and
file with the Commission, and promptly notify you of the filing of, any
amendments or supplements to the Registration Statement or the Prospectus that
may be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the 1933
Act, any event shall have occurred as a result of which the Prospectus
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<PAGE> 12
or any other prospectus relating to the Shares as then in effect would include
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; in case any Underwriter is required to
deliver a prospectus nine (9) months or more after the applicable effective
date of the Registration Statement in connection with the sale of the Shares,
it will prepare promptly upon request, but at the expense of such Underwriter,
such amendment or amendments to the Registration Statement and such prospectus
or prospectuses as may be necessary to permit compliance with the requirements
of Section 10(a)(3) of the 1933 Act; and it will file no amendment or
supplement to the Registration Statement or the Prospectus that shall not
previously have been submitted to you a reasonable time prior to the proposed
filing thereof or to which you shall reasonably object in writing, subject,
however, to compliance with the 1933 Act and the Rules and Regulations of the
Commission thereunder and the provisions of this Agreement.
(b) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its best efforts to prevent the issuance of any stop order or to obtain its
withdrawal at the earliest possible moment if any such stop order should be
issued.
(c) The Company will use reasonable efforts to qualify
the Shares for offer and sale under the securities laws of such states and
jurisdictions as you may designate and to continue such qualifications in
effect for so long as may be required for purposes of the distribution of the
Shares, except that the Company shall not be required in connection therewith
or as a condition thereof to qualify as a foreign corporation or to execute a
general consent to service of process in any state or jurisdiction in which it
is not otherwise required to be so qualified or to so execute a general consent
to service of process. In each state or jurisdiction in which the Shares shall
have been qualified as above provided, the Company will make and file such
statements and reports in each year as are or may be reasonably required by the
laws of such state or jurisdiction.
(d) The Company will furnish to you, as soon as
available, copies of the Registration Statement (three (3) of which will be
signed and will include all exhibits thereto), each Preliminary Prospectus, the
Prospectus and any amendments or supplements to such documents, including any
prospectus prepared to permit compliance with Section 10(a)(3) of the 1933 Act
(three (3) of which will include all exhibits thereto) all in such quantities
as you may from time to time reasonably request.
(e) The Company will make generally available to its
security holders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration
Statement, an earnings statement (which will be in reasonable detail but need
not be audited) complying with the provisions of Section 11(a) of the 1933 Act
and covering a twelve (12) month period beginning after the effective date of
the Registration Statement.
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<PAGE> 13
(f) During a period of five (5) years after the date
hereof and for so long as the Company is subject to Section 13 or Section 15 of
the 1934 Act, the Company will furnish to its stockholders as soon as
practicable after the end of each respective fiscal year, annual reports
(including financial statements audited by an independent certified public
accountant) and unaudited quarterly reports of operations for each of the first
three (3) quarters of the fiscal year, and will furnish to you and the other
several Underwriters hereunder, upon request (i) concurrently with furnishing
such reports to its stockholders, statements of operations of the Company for
each of the first three (3) quarters of the fiscal year in the form furnished
to the Company's stockholders, (ii) concurrently with furnishing to its
stockholders, a balance sheet of the Company as of the end of such fiscal year,
together with statements of operations, stockholders' equity, and cash flows of
the Company for such fiscal year, accompanied by a copy of the certificate or
report thereon of the independent certified public accountant, (iii) as soon as
they are available, copies of all reports (financial or otherwise) mailed to
stockholders, (iv) as soon as they are available, copies of all reports and
financial statements furnished to or filed with the Commission, any securities
exchange or the NASD, (v) every material press release and every material news
item or article related to the Company or its affairs that was generally
released to stockholders or prepared by the Company, and (vi) any additional
information of a public nature concerning the Company or its business that you
may reasonably request. During such five (5) year period, if the Company shall
have active subsidiaries, the foregoing financial statements shall be on a
consolidated basis to the extent that the accounts of the Company and its
subsidiaries are consolidated, and shall be accompanied by similar financial
statements for any significant subsidiary that is not so consolidated.
(g) The Company will apply the net proceeds from the sale
of the Shares being sold by it in the manner set forth under the caption "Use
of Proceeds" in the Prospectus.
(h) The Company will maintain a transfer agent and, if
necessary under the state or jurisdiction of incorporation of the Company, a
registrar (which may be the same entity as the transfer agent) for its Common
Stock.
(i) If the transactions contemplated hereby are not
consummated by reason of any failure, refusal or inability on the part of the
Company to perform any agreement on its part to be performed hereunder or to
fulfill any condition of the Underwriters' obligations hereunder, or if the
Company shall terminate this Agreement pursuant to Section 11(a) hereof, or if
the Underwriters shall terminate this Agreement pursuant to Section 11(b)(i)
hereof, the Company will reimburse the several Underwriters for all
out-of-pocket expenses (including fees and disbursements of Underwriters'
Counsel), but not to exceed an aggregate of $30,000, incurred by the
Underwriters in investigating or preparing to market or marketing the Shares
and shall pay all state securities or "blue sky" filing fees and expenses
(including "blue sky" legal fees) not to exceed an aggregate of $15,000 and, to
the extent any advances to the Underwriters exceed such expenses, the
Underwriter shall return such excess to the Company.
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<PAGE> 14
(j) If at any time during the sixty (60) day period after
the Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
if reasonably requested by you, forthwith prepare, and, if permitted by law,
disseminate a press release or other public statement, reasonably satisfactory
to you, responding to or commenting on such rumor, publication or event.
(k) During the Lock-up Period, the Company will not,
without the prior written consent of Cruttenden Roth Incorporated, effect the
Disposition of, directly or indirectly, any Securities other than (i) the sale
of the Firm Shares and the Option Shares hereunder, (ii) the Company's issuance
of options or Common Stock under the Company's presently authorized stock
option plans or restricted stock plans (collectively, the "Option Plans"), and
(iii) any securities issued in connection with acquisitions.
5. EXPENSES.
(a) The Company agrees with each Underwriter that:
(i) The Company will pay and bear all costs and
expenses in connection with the preparation, printing and filing of the
Registration Statement (including financial statements, schedules and exhibits
thereto), Preliminary Prospectuses and the Prospectus and any amendments or
supplements thereto; the printing of this Agreement, the Agreement Among
Underwriters, the Selected Dealer Agreement, the Preliminary "Blue Sky" Survey
and any Supplemental "Blue Sky" Survey, the Underwriters' Questionnaire and
Power of Attorney, and any instruments related to any of the foregoing; the
issuance and delivery of the Shares hereunder to the several Underwriters,
including transfer taxes, if any, the cost of all certificates evidencing the
Shares and transfer agents' and registrars' fees; the fees and disbursements of
counsel and accountants for the Company; all fees and other charges of the
Company's independent certified public accountant; the cost of furnishing to
the several Underwriters copies of the Registration Statement (including
financial statements and appropriate schedules and exhibits thereto),
Preliminary Prospectus and the Prospectus, and any amendments or supplements to
any of the foregoing; NASD filing fees and the cost of qualifying the Shares
under the laws of such states and jurisdictions as you may designate; all state
securities or "blue sky" filing fees and fees and disbursements of
Underwriters' Counsel related to such "blue sky" matters up to a maximum of
$15,000; the Company's road show costs and expenses, the cost of preparing
bound volumes of the documents relating to the public offering of Common Stock
contemplated hereby; and all other expenses directly incurred by the Company in
connection with the performance of its obligations hereunder.
(ii) In addition to its other obligations under
Section 5(a)(i) hereof, the Company will pay to you a non-accountable expense
allowance equal to three percent (3%) of the
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<PAGE> 15
gross sales price of the Shares to the public. This non-accountable expense
allowance with respect to the Firm Shares shall be paid to you on the Closing
Date and the non-accountable expenses with respect to the Option Shares shall
be paid to you on the closing of the sale to you of the Option Shares. The
Company has previously paid to you a fee of $30,000, which shall be credited to
said non-accountable expense allowance.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of
the several Underwriters to purchase and pay for the Shares as provided herein
shall be subject to the accuracy, as of the date hereof and the Closing Date
and any later date on which Option Shares are to be purchased, as the case may
be, of the representations and warranties of the Company and the performance by
the Company of its obligations hereunder and to the following additional
conditions:
(a) The Registration Statement shall have become
effective not later than 2:00 p.m., Los Angeles, California time, on the day
following the date of this Agreement, or such later date as shall be consented
to in writing by you; and no stop order suspending the effectiveness thereof
shall have been issued and no proceedings for that purpose shall have been
initiated or, to the knowledge of the Company or any Underwriter, threatened by
the Commission, and any request by the Commission for additional information
(to be included in the Registration Statement or the Prospectus or otherwise)
shall have been complied with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in
connection with this Agreement, the form of the Registration Statement and the
Prospectus, and the registration, authorization, issuance, sale and delivery of
the Shares, shall have been reasonably satisfactory to Underwriters' Counsel,
and Underwriters' Counsel shall have been furnished with such documents and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section 6.
(c) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date there shall not have been any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company from that set forth in the Registration
Statement or the Prospectus, which, in your sole judgment, is material and
adverse and that makes it, in your sole judgment, impracticable or inadvisable
to proceed with the public offering of the Shares as contemplated by the
Prospectus.
(d) You shall have received on the Closing Date and on
any later date on which Option Shares are purchased, as the case may be, the
following opinion of Berliner Zisser Walter & Gallegos, P.C., counsel for the
Company, dated the Closing Date or such later date on which Option Shares are
purchased, addressed to the Underwriters (and stating that it may be relied
upon by LeBoeuf, Lamb, Greene & MacRae, L.L.P., Underwriters' Counsel, in
rendering its opinion pursuant to Section 6(e) of this Agreement) and with
reproduced copies or signed counterparts thereof for each of the Underwriters,
to the effect that:
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<PAGE> 16
(i) The Company is a corporation in good standing
under the laws of the jurisdiction of its incorporation;
(ii) The Company has the corporate power and
authority to own, lease and operate its properties and to
conduct its business as described in the Prospectus;
(iii) The Company is duly qualified to do business
as a foreign corporation and is in good standing in each
jurisdiction, if any, in which the ownership or leasing of its
properties and assets or the conduct of its business requires
such qualification, except where the failure to be so
qualified or be in good standing would not have a material
adverse effect on the condition (financial or otherwise),
earnings, operations, business or business prospects of the
Company taken as a whole. To such counsel's knowledge, the
Prospectus accurately describes any corporation, association
or other entity owned or controlled, directly or indirectly,
by the Company;
(iv) The authorized, issued and outstanding
capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" as of the dates stated
therein, the issued and outstanding shares of capital stock of
the Company have been duly and validly issued and are fully
paid and nonassessable, and, to such counsel's knowledge, have
not been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first
refusal or other similar right;
(v) The Firm Shares and the Option Shares, as the
case may be, to be issued by the Company pursuant to the terms
of this Agreement each have been duly authorized and, upon
issuance and delivery against payment therefor in accordance
with the terms hereof, will be duly and validly issued and
fully paid and nonassessable, and, to such counsel's
knowledge, will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right of the
stockholders;
(vi) The Company has the corporate power and
authority to enter into this Agreement and to issue, sell and
deliver to the Underwriters the Shares to be issued and sold
by it hereunder;
(vii) The Company has the corporate power and
authority to enter into the Representative's Warrant Agreement
and to issue, sell and deliver to the Representative the
Representative's Warrants to be issued and sold by it
thereunder;
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<PAGE> 17
(viii) Each of this Agreement and the
Representative's Warrant Agreement has been duly authorized by
all necessary corporate action on the part of the Company and
has been duly executed and delivered by the Company and,
assuming due authorization, execution and delivery by you, is
a valid and binding agreement of the Company, enforceable in
accordance with its terms, except insofar as indemnification
provisions may be limited by applicable law and to which
counsel need not express any opinion and except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally or by general equitable
principles;
(ix) The Registration Statement has become
effective under the 1933 Act and, to such counsel's knowledge,
no stop orders suspending the effectiveness of the
Registration Statement have been issued and no proceedings for
that purpose have been instituted or are pending or threatened
under the 1933 Act;
(x) The Registration Statement and the Prospectus
and each amendment or supplement thereto (other than the
financial statements (including supporting schedules) and
financial and statistical data included in the Registration
Statement, as to which such counsel need express no opinion),
as of its effective date, and with respect to the Prospectus
as of April ______, 1998, complied as to form in all material
respects with the requirements of the 1933 Act and the
applicable Rules and Regulations;
(xi) The information in the Prospectus under the
captions (a) "Description of Securities" and "Shares Eligible
For Future Sale," to the extent that the same constitutes a
matter of law or a legal conclusion, has been reviewed by such
counsel and is a fair summary of such matters and conclusions,
and (b) "Business," to the extent that it reflects matters of
law or summaries of laws or regulations, is correct in all
material respects (provided that such counsel need not express
any opinion as to its completeness);
(xii) The form of certificate evidencing the Common
Stock and filed as an exhibit to the Registration Statement
complies with Delaware law;
(xiii) The descriptions in the Registration
Statement and the Prospectus of the Certificate of
Incorporation and Bylaws of the Company and of any applicable
statutes are accurate and fairly present the information
required to be presented by the 1933 Act and the applicable
Rules and Regulations (provided that such counsel need not
express any opinion as to its completeness);
(xiv) To such counsel's knowledge, there are no
agreements, contracts, leases or documents to which the
Company is a party of a character required to be described or
referred to in the Registration Statement or the Prospectus or
to be
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<PAGE> 18
filed as an exhibit to the Registration Statement that are not
described or referred to in this Agreement or filed as
required;
(xv) The performance of this Agreement and the
Representative's Warrant Agreement and the consummation of the
transactions herein and therein contemplated (other than
performance of the Company's indemnification obligations
hereunder or under the Representative's Warrant Agreement,
concerning which no opinion need be expressed) will not (a)
result in any violation of the Company's Certificate of
Incorporation or Bylaws or (b) to such counsel's knowledge,
result in a material breach or violation of any of the terms
and provisions of, or constitute a default under, any bond,
debenture, note or other evidence of indebtedness, or under
any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture agreement, or other agreement or
instrument known to such counsel to which the Company is a
party or by which its properties or assets are bound, or any
applicable statute, law, rule or regulation known to such
counsel or, to such counsel's knowledge, any order, writ or
decree of any court, government or governmental agency or body
having jurisdiction over the Company or over any of its
properties, assets or operations;
(xvi) To such counsel's knowledge, no consent,
approval, authorization or order of or qualification with any
court, government, or regulatory or governmental agency or
body having jurisdiction over the Company or over any of its
properties, assets or operations is necessary in connection
with the consummation by the Company of the transactions
contemplated by the Agreement, except such as have been
obtained under the 1933 Act or as may be required by the NASD,
the National Market System or under any state or other
securities or "blue sky" laws, rules or regulations in
connection with the purchase and distribution of the Shares by
the Underwriters;
(xvii) To such counsel's knowledge, there are no
legal, regulatory or governmental proceedings pending or
threatened against the Company of a character required to be
disclosed in the Registration Statement or the Prospectus by
the 1933 Act or the Rules and Regulations or by the 1934 Act
or the applicable rules and regulations of the Commission
thereunder, other than those described therein;
(xviii) The Representative's Warrants have been duly
and validly authorized by the Company and, upon delivery to
you in accordance with the Representative's Warrant Agreement,
will be duly issued and legal, valid and binding obligations
of the Company;
(xix) The Representative's Warrant Stock to be
issued by the Company pursuant to the terms of the
Representative's Warrant has been duly authorized
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<PAGE> 19
and, upon issuance and delivery against payment therefor in
accordance with the terms of the Representative's Warrant
Agreement, will be duly and validly issued and fully paid and
nonassessable, and, to such counsel's knowledge, will not have
been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first
refusal or other similar right of the stockholders;
(xx) To such counsel's knowledge, no holders of
Common Stock or other securities of the Company have
registration rights with respect to any securities of the
Company; and
(xxi) The offer and sale of all outstanding
securities of the Company made since its inception as set
forth in the Registration Statement were exempt from the
registration requirements of the 1933 Act and from the
registration or qualification requirements of all relevant
state securities or "blue sky" laws, rules and regulations.
In addition, such counsel shall state that such
counsel has participated in conferences with officials and other
representatives of the Company, the Representative, Underwriters' Counsel and
the independent certified public accountant for the Company, at which the
contents of the Registration Statement and the Prospectus and related matters
were discussed, and although (except as specifically set forth in paragraphs
(xi) and (xiii) above) they have not verified the accuracy or completeness of
the statements contained in the Registration Statement or the Prospectus,
nothing has come to the attention of such counsel that leads such counsel to
believe that, at the time the Registration Statement became effective and at
all times subsequent thereto up to and on the Closing Date and on any later
date on which Option Shares are to be purchased, the Registration Statement and
any amendments or supplements thereto, when such documents became effective or
were filed with the Commission (other than the financial statements, including
supporting schedules and other financial and statistical data included in the
Registration Statement, as to which such counsel need express no comment)
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or on the Closing Date or any later date on which the
Option Shares are to be purchased, as the case may be, the Registration
Statement, the Prospectus and any amendment or supplement thereto contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Counsel rendering the foregoing opinion may rely as
to questions of law not involving the laws of the United States or the State of
Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, and of government
officials, in which case such counsel's opinion is to state that they are so
relying and that they have no knowledge of any material misstatement or
inaccuracy in any such opinion, representation or certificate. Copies of any
opinion, representation or certificate so relied upon shall be delivered to
you, as Representative of the Underwriters, and to Underwriters' Counsel.
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<PAGE> 20
(e) You shall have received on the Closing Date and on
any later date on which Option Shares are to be purchased, as the case may be,
an opinion of LeBoeuf, Lamb, Greene & MacRae, L.L.P. in form and substance
reasonably satisfactory to you, with respect to the sufficiency of all such
corporate proceedings and other legal matters relating to this Agreement and
the transactions contemplated hereby as you may reasonably require, and the
Company shall have furnished to such counsel such documents as they may have
requested for the purpose of enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on
any later date on which Option Shares are to be purchased, as the case may be,
a letter from Cherry, Bekaert & Holland, L.L.P., addressed to the Company and
the Underwriters, dated the Closing Date or such later date on which Option
Shares are to be purchased, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the 1933 Act and the applicable Rules and Regulations and based upon
the procedures described in such letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), but carried
out to a date not more than five (5) business days prior to the Closing Date or
such later date on which Option Shares are to be purchased, as the case may be,
(i) confirming, to the extent true, that the statements and conclusions set
forth in the Original Letter are accurate as of the Closing Date or such later
date on which Option Shares are to be purchased, as the case may be, and (ii)
setting forth any revisions and additions to the statements and conclusions set
forth in the Original Letter that are necessary to reflect any changes in the
facts described in the Original Letter since the date of the Original Letter,
or to reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the Registration Statement or the
Prospectus, which, in your sole judgment, is material and adverse and that
makes it, in your sole judgment, impracticable or inadvisable to proceed with
the public offering of the Shares as contemplated by the Prospectus. The
Original Letter from Cherry, Bekaert & Holland, L.L.P. shall be addressed to or
for the use of the Underwriters in form and substance satisfactory to the
Underwriters and shall (i) represent, to the extent true, that they are
independent certified public accountants with respect to the Company within the
meaning of the 1933 Act and the applicable Rules and Regulations, (ii) set
forth its opinion with respect to its examination of the balance sheets of the
Company as of December 31, 1996 and 1997, and the related statements of
operations, stockholders' equity, and cash flows for the years then ended, and
(iii) address other matters agreed upon by Cherry, Bekaert & Holland, L.L.P.
and you. In addition, you shall have received from Cherry, Bekaert & Holland,
L.L.P. a letter addressed to the Company and made available to you for the use
of the Underwriters stating that its review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of its examination of the Company's financial statements as of December
31, 1997, did not disclose any weaknesses in internal controls that they
considered to be material weaknesses.
(g) You shall have received on the Closing Date and on
any later date on which Option Shares are to be purchased, as the case may be,
a certificate from the Company, dated the
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Closing Date or such later date on which Option Shares are to be purchased, as
the case may be, signed by the President and the Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the
Company in this Agreement are true and correct, as if made on
and as of the Closing Date or any later date on which Option
Shares are to be purchased, as the case may be, and the
Company has complied, in all material aspects, with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied, in all material respects, at or prior
to the Closing Date or any later date on which Option Shares
are to be purchased, as the case may be;
(ii) No stop order suspending the effectiveness of
the Registration Statement has been issued and no proceedings
for that purpose have been instituted or, to their knowledge,
are pending or threatened under the 1933 Act;
(iii) When the Registration Statement became
effective and at all times subsequent thereto up to the
delivery of such officer's certificate, the Registration
Statement and the Prospectus, and any amendments or
supplements thereto, contained all material information
required to be included therein by the 1933 Act and the Rules
and Regulations or the 1934 Act and the applicable rules and
regulations of the Commission thereunder, as the case may be,
and in all material respects conformed to the requirements of
the 1933 Act and the Rules and Regulations or the 1934 Act and
the applicable rules and regulations of the Commission
thereunder, as the case may be, the Registration Statement,
and any amendment or supplement thereto, did not and does not
include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, the
Prospectus, and any amendment or supplement thereto, did not
and does not include any untrue statement of a material fact
or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading, and, since the effective date
of the Registration Statement, there has occurred no event
that is required to be set forth in an amended or supplemented
Prospectus that has not been so set forth; and
(iv) Subsequent to the respective dates as of
which information is given in the Registration Statement and
the Prospectus, there has not been (a) any material adverse
change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company, (b)
any transaction that is material to the Company, except
transactions entered into in the ordinary course of its
business, (c) any obligation, direct or contingent, that is
material to the Company, incurred by the Company, except
obligations incurred in the ordinary course of its business,
(d) any change in the capital stock or outstanding
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<PAGE> 22
indebtedness of the Company that is material to the Company,
(e) any dividend or distribution of any kind or nature
declared, paid or made on the capital stock of the Company
(other than the distributions made to the Existing Common
Stockholders (as that term is defined in the Prospectus), as
disclosed under "S Corporation Distributions" therein), or (f)
any loss or damage (whether or not insured) to the property or
assets of the Company that had a material adverse effect on
the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company.
(h) The Company shall have obtained and delivered
to you a written agreement from each officer and director of
the Company, and each beneficial owner of five percent (5%) or
more of the Common Stock immediately after the offering
contemplated hereby, prior to the date hereof that such person
or entity will not, during the Lock-up Period, effect the
Disposition of any Securities owned directly by such person or
entity or with respect to which such person or entity has the
power of disposition as of the date of this Agreement,
otherwise than (i) as a bona fide gift or gifts, provided the
donee or donees thereof agrees in writing to be bound by this
restriction, (ii) as a distribution to limited partners or
stockholders of such person or entity, provided that the
distributees thereof agree in writing to be bound by the terms
of this restriction, (iii) in a transfer to any other officer,
director or beneficial owner of five percent (5%) or more of
the Company's Common Stock, provided that the transferees
thereof agree in writing to be bound by this restriction, or
(iv) with the prior written consent of Cruttenden Roth
Incorporated. The foregoing restriction is expressly agreed to
preclude the holder of the Securities from engaging in any
hedging or other transaction that is designed to or reasonably
expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be
disposed of by someone other than the such holder. Such
prohibited hedging or other transactions would include,
without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including,
without limitation, any put or call option) with respect to
any Securities or with respect to any security (other than a
broad-based market basket or index) that includes, relates to
or derives any significant part of its value from the
Securities. Furthermore, such person or entity will have also
agreed and consented to the entry of stop transfer
instructions with the Company's transfer agent against the
transfer of the Securities held by such person or entity
except in compliance with this restriction.
(i) The Company shall have furnished to you such
further certificates and documents as you shall request,
including, without limitation, certificates of officers of the
Company as to the accuracy of the representations and
warranties of the Company herein, the performance by the
Company of its obligations hereunder, and as to the other
conditions concurrent and precedent to the obligations of the
Underwriters hereunder.
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<PAGE> 23
(j) The Representative's Warrant Agreement shall
have been entered into by the Company and you, and the
Representative's Warrants shall have been issued and sold to
you pursuant thereto.
All such opinions, certificates, letters and documents will be
in compliance with the provisions hereof only if they are satisfactory to
Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Company hereby grants to the several Underwriters, for the purpose
of covering over-allotments in connection with the distribution and sale of the
Firm Shares only, a nontransferable option to purchase up to an aggregate of
three hundred thousand (300,000) Option Shares at the purchase price per share
for the Firm Shares set forth in Section 3 hereof. Such option may be
exercised by the Representative on behalf of the several Underwriters on one
(1) or more occasions in whole or in part during the period of forty-five (45)
days after the date on which the Firm Shares are initially offered to the
public, by giving written notice to the Company. The number of Option Shares
to be purchased by each Underwriter upon the exercise of such option shall be
the same proportion of the total number of Option Shares to be purchased by the
several Underwriters pursuant to the exercise of such option as the number of
Firm Shares purchased by such Underwriter (as set forth in Schedule "A"
attached hereto) bears to the total number of Firm Shares purchased by the
several Underwriters (as set forth in Schedule "A" attached hereto), adjusted
by the Representative in such manner as to avoid fractional shares.
Delivery of definitive certificates evidencing the
Option Shares to be purchased by the several Underwriters pursuant to the
exercise of the option granted by this Section 7 shall be made against payment
of the purchase price therefor by the several Underwriters by certified or
official bank check or checks drawn in next-day funds, payable to the order of
the Company (and the Company agrees not to deposit any such check in the bank
on which it is drawn until the day following the date of its delivery to the
Company). Such delivery and payment shall take place at the offices of the
Representative, or at such other place as may be agreed upon between the
Representative and the Company (i) on the Closing Date, if written notice of
the exercise of such option is received by the Company at least three (3) full
business days prior to the Closing Date, or (ii) on a date that shall not be
later than the fifth (5th) full business day following the date the Company
receives written notice of the exercise of such option, if such notice is
received by the Company less than three (3) full business days prior to the
Closing Date.
The certificates evidencing the Option Shares to be
so delivered will be made available to you at such office or such other
location as you may reasonably request for inspection at least two (2) full
business days prior to the date of payment and delivery and will be in such
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<PAGE> 24
names and denominations as you may request, such request to be made at least
three (3) full business days prior to such date of payment and delivery. If
the Representative so elects, delivery of the Option Shares may be made by
credit through full fast transfer to the accounts at The Depository Trust
Company designated by the Representative.
It is understood that you, individually, and not as
the Representative of the several Underwriters, may (but shall not be obligated
to) make payment of the purchase price on behalf of any Underwriter or
Underwriters whose check or checks shall not have been received by you prior to
the date of payment and delivery for the Option Shares to be purchased by such
Underwriter or Underwriters. Any such payment by you shall not relieve any
such Underwriter or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of the option provided for in Section
7(a) hereof, the obligations of the several Underwriters to purchase such
Option Shares will be subject (as of the date hereof and as of the date of
payment and delivery for such Option Shares) to the accuracy of and compliance
with the representations, warranties and agreements of the Company herein, to
the accuracy of the statements of the Company and officers of the Company made
pursuant to the provisions hereof, to the performance by the Company of its
obligations hereunder, and to the condition that all proceedings taken at or
prior to the payment date in connection with the sale and transfer of such
Option Shares shall be reasonably satisfactory in form and substance to you and
to Underwriters' Counsel, and you shall have been furnished with all such
documents, instruments, certificates and opinions as you may reasonably request
in order to evidence the accuracy and completeness of any of the
representations, warranties or statements, the performance of any of the
covenants or agreements of the Company, or the compliance with any of the
conditions herein contained in each case in all material respects.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless
each Underwriter against any losses, claims, damages or liabilities, joint or
several, to which such Underwriter may become subject (including, without
limitation, in its capacity as an Underwriter within the meaning of Rule 2720
of the Bylaws of the NASD (formerly Schedule E to the NASD Bylaws), under the
1933 Act, the 1934 Act or otherwise, specifically including, but not limited
to, losses, claims, damages or liabilities, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any breach of any representation, warranty, agreement or
covenant of the Company herein contained, (ii) any untrue statement or alleged
untrue statement of any material fact contained in the Registration Statement
or any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or in
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under
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<PAGE> 25
which they were made, not misleading, and further agrees to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
any Preliminary Prospectus or in the Prospectus, or any amendment or supplement
thereto, in reliance upon, and in conformity with, written information relating
to any Underwriter furnished to the Company by such Underwriter, directly or
through you, specifically for use in the preparation thereof; provided further,
however, that the indemnity agreement provided in this Section 8(a) with
respect to any Preliminary Prospectus shall not inure to the benefit of any
Underwriter from whom the person or entity asserting any losses, claims,
damages, liabilities or actions based upon any untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state
therein a material fact purchased Shares, if a copy of the Prospectus in which
such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person or entity
within the time required by the 1933 Act and the Rules and Regulations, unless
such failure is the result of noncompliance by the Company with Section 4(d)
hereof.
The indemnity agreement in this Section 8(a) shall
extend upon the same terms and conditions to, and shall inure to the benefit
of, each person or entity, if any, who controls any Underwriter within the
meaning of the 1933 Act or the 1934 Act. This indemnity agreement shall be in
addition to any liabilities that the Company may otherwise have.
(b) Each Underwriter, severally and not jointly, agrees
to indemnify and hold harmless the Company against any losses, claims, damages
or liabilities, joint or several, to which the Company may become subject under
the 1933 Act or otherwise, specifically including, but not limited to, losses,
claims, damages or liabilities, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
any breach of any representation, warranty, agreement or covenant of such
Underwriter contained herein, (ii) any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or in
any amendments or supplements thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or (iii) any untrue statement or alleged untrue
statement of any material fact contained in any Preliminary Prospectus or in
the Prospectus or any amendment or supplement thereto, or the omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, in the case of subparagraphs (ii) and (iii) of this Section
8(b) to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company by
such Underwriter, directly or through you, specifically for use in the
preparation thereof, and agrees to reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability or action.
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<PAGE> 26
The indemnity agreement in this Section 8(b) shall
extend upon the same terms and conditions to, and shall inure to the benefit
of, each officer of the Company who signed the Registration Statement and each
director of the Company and each person or entity, if any, who controls the
Company within the meaning of the 1933 Act or the 1934 Act. This indemnity
agreement shall be in addition to any liabilities each Underwriter may
otherwise have.
(c) Promptly after receipt by an indemnified party under
this Section 8 of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against any
indemnifying party under this Section 8, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve it from any liability that it may have to
any indemnified party otherwise than under this Section 8. In case any such
action is brought against any indemnified party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it shall elect by
written notice delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it and/or
other indemnified parties that are different from or in addition to those
available to the indemnifying party that pose a conflict of interest for such
counsel, the indemnified party or parties shall have the right to select
separate counsel to assume such legal defenses and to otherwise participate in
the defense of such action on behalf of such indemnified party or parties.
Upon receipt of notice from the indemnifying party to such indemnified party of
the indemnifying party's election so to assume the defense of such action and
approval by the indemnified party of such counsel, the indemnifying party will
not be liable to such indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that the indemnifying party shall not be liable
for the expenses of more than one (1) separate counsel (together with
appropriate local counsel) approved by the indemnifying party representing all
the indemnified parties under Section 8(a) or Section 8(b) hereof who are
parties to such action), (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party. In
no event shall any indemnifying party be liable in respect of any amounts paid
in settlement of any action unless the indemnifying party shall have approved
the terms of such settlement in writing in advance; provided, however, that
such consent shall not be unreasonably withheld. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding or action in respect of
which any indemnified party is or could have been a party and indemnification
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of
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<PAGE> 27
such indemnified party from all liability on claims that are the subject matter
of such indemnification.
(d) In order to provide for just and equitable
contribution in any action in which a claim for indemnification is made
pursuant to this Section 8 but in which it is judicially determined (by the
entry of a final judgment or decree by a court of competent jurisdiction and
the expiration of time to appeal or the denial of the last right of appeal)
that such indemnification may not be enforced in such case notwithstanding the
fact that this Section 8 provides for indemnification in such case, all the
parties hereto shall contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that the Underwriters severally and not jointly are
responsible pro rata for the portion represented by the percentage that the
underwriting discount bears to the initial public offering price, and the
Company is responsible for the remaining portion; provided, however, that (i)
no Underwriter shall be required to contribute any amount in excess of the
underwriting discount applicable to the Shares purchased by such Underwriter
and (ii) no person guilty of a fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. The
contribution agreement in this Section 8(d) shall extend upon the same terms
and conditions to, and shall inure to the benefit of, each person or entity, if
any, who controls each of the Underwriters or the Company within the meaning of
the 1933 Act or the 1934 Act and each officer of the Company who signed the
Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions hereof, including, without
limitation, the provisions of this Section 8, and are fully informed regarding
said provisions. They further acknowledge that the provisions of this Section 8
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is
made in the Registration Statement and the Prospectus as required by the 1933
Act and the 1934 Act. The parties are advised that federal or state public
policy, as interpreted by the courts in certain jurisdictions, may be contrary
to certain of the provisions of this Section 8, and the parties hereto hereby
expressly waive and relinquish any right or ability to assert such public
policy as a defense to a claim under this Section 8 and further agree not to
attempt to assert any such defense.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO
SURVIVE DELIVERY. All representations, warranties, covenants and agreements of
the Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution agreements contained in Section 8
hereof, shall remain operative and in full force and effect for a period of the
applicable federal and state statutes of limitations regardless of any
investigation made by or on behalf of any Underwriter or any control person
within the meaning of the 1933 Act or the 1934 Act, or by or on behalf of the
Company or any of its officers, directors or control persons within the meaning
of the 1933 Act or the 1934 Act, and shall survive the delivery of the Shares
to the several Underwriters hereunder and the termination of this Agreement.
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<PAGE> 28
10. SUBSTITUTION OF UNDERWRITERS. If any Underwriter or
Underwriters shall fail to take up and pay for the number of Firm Shares agreed
by such Underwriter or Underwriters to be purchased hereunder upon tender of
such Firm Shares in accordance with the terms hereof, and if the aggregate
number of Firm Shares that such defaulting Underwriter or Underwriters so
agreed but fails to purchase does not exceed ten percent (10%) of the Firm
Shares, the remaining Underwriters shall be obligated, severally in proportion
to their respective commitments hereunder, to take up and pay for the Firm
Shares of such defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the
aggregate number of Firm Shares that such defaulting Underwriter or
Underwriters agreed but fails to take up and pay for exceeds ten percent (10%)
of the Firm Shares, the remaining Underwriters shall have the right, but shall
not be obligated, to take up and pay for (in such proportions as may be agreed
upon among them) the Firm Shares that the defaulting Underwriter or
Underwriters so agreed but fail to purchase. If such remaining Underwriters do
not, on the Closing Date, take up and pay for the Firm Shares that the
defaulting Underwriter or Underwriters so agreed but fail to purchase, the
Closing Date shall be postponed for twenty-four (24) hours to allow the several
Underwriters the opportunity of substituting within said twenty-four (24) hours
(including non-business hours) another underwriter or underwriters (which may
include any non-defaulting Underwriter or Underwriters) reasonably satisfactory
to the Company. If no such underwriter or underwriters shall have been
substituted as aforesaid by such postponed Closing Date, the Closing Date may,
at the option of the Company, be postponed for an additional twenty-four (24)
hours, if necessary, to allow the Company the opportunity of finding another
underwriter or underwriters, satisfactory to you, to purchase the Firm Shares
that the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement or supplements to the
Prospectus that may thereby be made necessary, and (ii) the respective number
of Firm Shares to be purchased by the remaining Underwriters and substituted
underwriter or underwriters shall be taken as the basis of their underwriting
obligation. If the remaining Underwriters shall not take up and pay for all
such Firm Shares so agreed to be purchased by the defaulting Underwriter or
Underwriters or substitute another underwriter or underwriters as aforesaid and
the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of the termination of this Agreement pursuant to
the preceding paragraph of this Section 10, the Company shall not be liable to
any Underwriter (except as provided in Sections 5 and 8 hereof) nor shall any
Underwriter (other than an Underwriter who shall have failed, otherwise than
for some reason permitted under this Agreement, to purchase the number of Firm
Shares agreed by such Underwriter to be purchased hereunder, which
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<PAGE> 29
Underwriter shall remain liable to the Company and the other Underwriters for
damages, if any, resulting from such default) be liable to the Company (except
to the extent provided in Sections 5 and 8 hereof).
The term "Underwriter" as used in this Agreement shall include
any person or entity substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT; TERMINATION.
(a) This Agreement shall become effective at the earlier
of (i) 6:30 a.m., Los Angeles, California time, on the second (2nd) full
business day following the latest of the effective date of the Registration
Statement, or (ii) the time of the initial public offering of any of the Shares
by the Underwriters after the Registration Statement becomes effective. The
time of the initial public offering shall mean the time of the release by you,
for publication, of the first newspaper advertisement relating to the Shares,
or the time at which the Shares are first generally offered by the Underwriters
to the public by letter, telephone, telegram or telecopy, whichever shall first
occur. By giving notice as set forth in Section 12 hereof before the time this
Agreement becomes effective, you, as Representative of the several
Underwriters, or the Company, may prevent this Agreement from becoming
effective without liability of any party to any other party, except as provided
in Sections 4(i), 5 and 8 hereof.
(b) You, as Representative of the several Underwriters,
shall have the right to terminate this Agreement by giving notice as
hereinafter specified at any time on or prior to the Closing Date or on or
prior to any later date on which Option Shares are to be purchased, as the case
may be, (i) if the Company shall have failed, refused or been unable to perform
any agreement on its part to be performed, or because any other condition of
the Underwriters' obligations hereunder required to be fulfilled is not
fulfilled, including, without limitation, any change in the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company from that set forth in the Registration Statement or the
Prospectus, which, in your sole judgment, is material and adverse to the
Company, or (ii) if additional material regulatory or governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange, the American
Stock Exchange or in the over-the-counter market by the NASD, or trading in
securities generally shall have been suspended on either such exchange or in
the over-the- counter market by the NASD, or if a banking moratorium shall have
been declared by federal, New York or California authorities, or (iii) if the
Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as to interfere materially with
the conduct of the business and operations of the Company regardless of whether
or not such loss shall have been insured, or (iv) if there shall have been a
material adverse change in the general political, regulatory or economic
conditions or financial markets that affects the issuer and materially impairs
the investment quality of the Shares and that, in your reasonable judgment,
makes it inadvisable or impracticable to proceed with the offer, sale and
delivery of the Shares, or (v) if there shall have been an outbreak or
escalation of
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<PAGE> 30
hostilities or of any other insurrection or armed conflict or the declaration
by the United States of a national emergency that, in the opinion of the
Representative, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus. Any
termination pursuant to any of subparagraphs (ii) through (v) above shall be
without liability of any party to any other party, except as provided in
Sections 4(i), 5 and 8 hereof; provided, however, that the Company will
reimburse the Representative for a maximum of $30,000 for its out-of- pocket
expenses (which $30,000 was paid by the Company upon the execution of the
Letter of Intent with the Representative). In the event of termination
pursuant to subparagraph (i) above, the Company shall also remain obligated to
pay costs and expenses pursuant to Sections 4(i), 5 and 8 hereof (in addition
to the out-of-pocket expenses identified in Section 4(i) hereof).
If you elect to prevent this Agreement from becoming effective
or terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed
by letter. If the Company elects to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case promptly confirmed by letter.
12. NOTICES. All notices or communications hereunder, except as
herein otherwise specifically provided, shall be in writing and if sent to you
shall be mailed, hand-delivered, telegraphed (and confirmed by letter) or
telecopied (and confirmed by letter) to you c/o Cruttenden Roth Incorporated,
18301 Von Karman, Suite 100, Irvine, California 92715, telecopier number (714)
852-9603, Attention: Christopher D. Jennings and Aaron Gurewitz; and, if sent
to the Company, such notice shall be mailed, hand-delivered, telegraphed (and
confirmed by letter) or telecopied (and confirmed by letter) to 3516 Centre
Circle Drive, Fort Mill, South Carolina 29715, telecopier number (803)
548-2207, Attention: Karl F. Brown.
13. PARTIES. This Agreement shall inure to the benefit of and be
binding upon the several Underwriters and the Company and their respective
executors, administrators, successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any
person or entity, other than the parties hereto and their respective executors,
administrators, successors and assigns, and their control persons within the
meaning of the 1933 Act or the 1934 Act, and the officers and directors
referred to in Section 8 hereof, any legal or equitable right, remedy or claim
in respect of this Agreement or any provisions contained herein, this Agreement
and all conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of the parties hereto and their respective
executors, administrators, successors and assigns and said control persons and
said officers and directors, and for the benefit of no other person or entity.
No purchaser of any of the Shares from any Underwriter shall be construed as
being a successor or assign of such Underwriter by reason merely of such
purchase. This Agreement constitutes the entire agreement and understanding of
the parties with respect to the subject matter hereof.
In all dealings with the Company under this Agreement, you
shall act on behalf of each of the several Underwriters, and the Company shall
be entitled to act and rely upon any
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<PAGE> 31
statement, request, notice or agreement made or given by you on behalf of each
of the several Underwriters.
14. APPLICABLE LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
15. COUNTERPARTS. This Agreement may be signed in several
counterparts, each of which will constitute an original.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 32
If the foregoing correctly sets forth the understanding among
the Company and the several Underwriters, please so indicate in the space
provided below for that purpose, whereupon this Agreement shall constitute a
binding agreement among the Company and the several Underwriters as provided
herein.
Very truly yours,
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
By: ------------------------------------
Karl F. Brown
Its: President
ACCEPTED AS OF THE DATE FIRST ABOVE WRITTEN:
CRUTTENDEN ROTH INCORPORATED,
on its behalf and on behalf of each of the several
Underwriters named in Schedule "A" attached hereto.
CRUTTENDEN ROTH INCORPORATED
By:
---------------------------------------
Name:
----------------------------------
Its:
-----------------------------------
<PAGE> 33
SCHEDULE "A"
<TABLE>
<CAPTION>
NUMBER OF
FIRM
SHARES
TO BE
UNDERWRITERS PURCHASED
------------ ---------
<S> <C>
Cruttenden Roth Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ________
[SYNDICATE MEMBERS TO BE ADDED]
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000
=========
</TABLE>
<PAGE> 1
EXHIBIT 1.2
MASTER SELECTED DEALERS AGREEMENT
June 12, 1997
Cruttenden Roth Incorporated
18301 Von Karman
Irvine, California 92612
Ladies and Gentlemen:
We understand that you are entering into this Master Selected Dealers
Agreement in counterparts with us and other firms who may participate as dealers
in offerings of securities in which you are acting as the sole representative or
one of the representatives of the underwriters comprising the underwriting
syndicate. Whether or not we have executed this Agreement, this Agreement shall
apply to any offering of securities in which we act as a selected dealer.
SECTION 1. GENERAL.
At or prior to the time of an offering, you will advise us, to the
extent applicable, as to the expected offering date, the expected closing date,
the initial offering price, the interest or dividend rate (or the method by
which such rate is to be determined), the conversion price, if applicable, the
selling concession, the reallowance, the time of release of securities for sale
to the public, the time at which subscription books will be opened, the amount,
if any, of securities reserved for purchase by selected dealers, the period of
such reservation and the amount of securities to be allotted to us, and stating
that our participating as a selected dealer in the offering shall be subject to
the provisions of this Agreement. Such information shall be deemed to be a part
of this Agreement and this Agreement shall become binding with respect to our
participation as a selected dealer in an offering of securities following our
receipt of such information. If we have not previously executed this Agreement,
by our purchase of securities in an offering covered by this Agreement we shall
be deemed to be signatories hereof with respect to such offering.
The securities to be purchased in any offering of securities in which
we agree to participate as a selected dealer pursuant to this Agreement,
including any guarantees relating to such securities or any other securities
into which such securities are convertible or for which such securities are
exercisable or exchangeable and any securities that may be purchased upon
exercise of any over-allotment option, are hereinafter referred to as the
"Securities." The issuer or issuers of the Securities are hereinafter referred
to as the "Issuer." The parties on whose behalf the Representatives (as
hereinafter defined) execute the underwriting or purchase agreement or any
associated or similar agreement with the Issuer or any selling securityholders
or any amendment or supplement thereto (collectively, the "Underwriting
Agreement") with respect to an offering of Securities in which we agree to
participate as a selected dealer pursuant to this Agreement are hereinafter
referred to as the "Underwriters." All references herein to "you" or the
"Representatives" shall mean Cruttenden Roth Incorporated, and the other firms,
if any, who are serving as the representatives of the Underwriters in connection
with an offering of Securities. The parties who agree to participate in such
offering as selected dealers are hereinafter referred to as "Selected Dealers."
The following provisions of this Agreement shall apply separately to
each individual offering of Securities.
SECTION 2. ACCEPTANCE AND PURCHASE.
The offer to Selected Dealers will be made on the basis of a
reservation of Securities and an allotment against subscriptions. Any
application for additional Securities will be subject to rejection in whole or
in part. Subscription books may be closed by the Representatives at any time in
the Representatives' absolute discretion without notice and the right is
reserved to reject any subscription in whole or in part. We agree to purchase as
principal the amount of Securities allotted to us by the Representatives.
<PAGE> 2
SECTION 3. PROSPECTUSES.
(a) The Representatives will, at our request, make available to us, as
soon as practicable after sufficient quantities thereof are made available to
them by the Issuer, copies of the Prospectus (excluding any documents
incorporated by reference therein) to be used in connection with the offering of
Securities in such number as we may reasonably request. As used herein, the term
"Prospectus" means the form of prospectus (including any supplements and any
documents incorporated by referenced therein) authorized for use in connection
with such offering.
(b) We agree that, in purchasing Securities, we will rely upon no
statements whatsoever, written or oral, other than the statements in the
Prospectus delivered to us by the Representatives and any documents incorporated
by referenced therein. We understand that we are not authorized to give any
information or to make any representation not contained in the Prospectus or in
any document incorporated by reference therein, in connection with the offering
of Securities. Our purchase of Securities shall constitute our agreement that,
if requested by the Representatives, we will furnish a copy of any amendment or
supplement to any preliminary or final Prospectus to each person to whom we have
furnished a previous preliminary or final Prospectus. Our purchase of Securities
shall constitute our confirmation that we have delivered, and our agreement that
we will deliver, all preliminary and final Prospectuses required for compliance
with Rule l5c2-8 (or any successor provision) under the Securities Exchange Act
of 1934, as amended from time to time (the "1934 Act").
SECTION 4. OFFERING OF SECURITIES.
(a) The offering of Securities is made subject to the conditions
referred to in the Prospectus and to the terms and conditions set forth in this
Agreement. After the public offering of Securities has commenced, you may change
the public offering price, the selling concession and the reallowance to
dealers. Any Securities purchased by us pursuant to this Agreement are to be
reoffered by us, subject to their receipt and acceptance by the Representatives,
to the public at the initial offering price, subject to the terms of this
Agreement and the Prospectus. Except as otherwise provided herein, Securities
shall not be offered or sold by us below the initial offering price before the
termination of the effectiveness of this Agreement with respect to the offering
of such Securities, except that a reallowance from the initial offering price of
not more than the amount set forth in the invitation may be allowed to any
Selected Dealer that (i) agrees that such amount is to be retained and not
reallowed in whole or in part, and (ii) makes the representations contained in
Section 11.
(b) The Representatives, as such, and, with the Representatives'
consent, any Underwriter, may buy Securities from, or sell Securities to, any of
the Selected Dealers or any of the Underwriters, and any Selected Dealer may buy
Securities from, or sell Securities to, any other Selected Dealer or any
Underwriter, at the initial offering price less all or any part of the
concession to Selected Dealers.
(c) If we have received or have been credited with the Selected
Dealers' concession as to any Securities purchased by us pursuant to this
Agreement, which, prior to the later of (i) the termination of the effectiveness
of this Agreement with respect to the offering of such Securities, and (ii) the
covering by the Representatives of any short position created by the
Representatives in connection with the offering of such Securities, the
Representatives may have purchased or contracted to purchase for the account of
any Underwriter (whether such Securities have been sold or loaned by us), then
we agree to pay the Representatives on demand for the accounts of the several
Underwriters an amount equal to the Selected Dealers' concession and, in
addition, the Representatives may charge us with any broker's commission and
transfer tax paid in connection with such purchase or contract to purchase.
Securities delivered on any such repurchase need not be the identical Securities
originally purchased. With respect to any such repurchased Securities as to
which we have not yet received or been credited with the Selected Dealers'
concession, we shall be responsible for any broker's commission and transfer tax
and the Representatives shall not be obligated to pay any Selected Dealers'
concession as to such Securities.
(d) No expenses shall be charged to Selected Dealers. A single transfer
tax upon the sale of Securities by the respective Underwriters to us will be
paid by such Underwriters when such Securities are delivered to us. However, we
shall pay any transfer tax on sales of Securities by us and shall pay our
proportionate share of any
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<PAGE> 3
transfer tax or other tax (other than the single transfer tax described above)
in the event that any such tax shall, from time to time, be assessed against us
and other Selected Dealers as a group or otherwise.
SECTION 5. PAYMENT AND DELIVERY.
We agree that Securities purchased by us pursuant to this Agreement
shall be paid for in an amount equal to the initial offering price therefor or,
if the Representatives shall so advise us, at such initial offering price less
the Selected Dealers' concession with respect thereto, at 9:00 a.m. on the date
on which the Underwriters are required to purchase the Securities, by delivery
to the Representatives at the offices of Cruttenden Roth Incorporated, of
payment in the manner and type of funds specified in your payment instructions
wired to us, payable to the order of Cruttenden Roth Incorporated, unless
otherwise specified by you. If payment is made for Securities purchased by us at
the initial offering price, the Selected Dealers' concession to which we may be
entitled will be paid to us upon the later to occur of the events set forth in
the first sentence of Section 4(c).
Notwithstanding the foregoing provisions of this Section, if
transactions in Securities can be settled through the facilities of The
Depository Trust Company or any other depository or similar facility, if we are
a member, you are authorized, in your discretion, to make appropriate
arrangements for payment and/or delivery through its facilities of Securities to
be purchased by us, or, if we are not a member, settlement may be made through a
correspondent that is a member pursuant to our timely instructions.
SECTION 6. STABILIZATION AND OVER-ALLOTMENT.
The Representatives may, with respect to any offering of Securities, be
authorized to over-allot, to purchase and sell Securities for long or short
account and to stabilize or maintain the market price of Securities. We agree
that, upon the Representatives' request, at any time and from time to time prior
to the termination of the effectiveness of this Agreement with respect to an
offering of Securities, we will report the amount of Securities purchased by us
pursuant to such offering which then remain unsold by us and will, upon the
Representatives' request at any such time, sell to the Representatives for the
account of one or more Underwriters such amount of such unsold Securities as the
Representatives may designate at the initial offering price less an amount to be
determined by the Representatives not in excess of the Selected Dealers'
concession.
SECTION 7. OPEN MARKET TRANSACTIONS.
We agree not to bid for, purchase, attempt to induce others to purchase
or sell, directly or indirectly, any Securities, any other securities of the
Issuer of the same class and series as the Securities and any other securities
of the Issuer which the Representatives may designate, except as brokers
pursuant to unsolicited orders and as otherwise provided in this Agreement. If
the Securities are or include common stock or securities convertible into common
stock, we also agree not to effect or attempt to induce others to effect,
directly or indirectly, any transactions in or relating to put or call options
on any stock of the Issuer, except to the extent permitted by Regulation M
(Rules 100 through 105) under the 1934 Act as interpreted by the Securities and
Exchange Commission (the "Commission").
SECTION 8. TERMINATION; AMENDMENT.
(a) The terms and conditions set forth in (i) Section 4, (ii) the
second sentence of Section 6 or (iii) Section 7 of this Agreement (collectively,
the "offering provisions") will terminate with respect to each offering of
Securities pursuant to this Agreement at the close of business on the 45th day
after the date of the initial offering of such Securities, unless the
effectiveness of such offering provisions is extended or sooner terminated as
here inafter provided. You may extend the effectiveness of such offering
provisions for up to an additional 15 days by notice to us to the effect that
the offering provisions of this Agreement are extended to the date or by the
number of days indicated in such notice. You may terminate such offering
provisions other than those set forth in Section 4(c) at any time by notice to
us to the effect that the offering provisions of this Agreement are terminated,
and you may terminate the provisions of Section 4(c) at any time at or
subsequent to the termination of the other offering provisions by notice to
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<PAGE> 4
us to the effect that the penalty bid provisions of this Agreement are
terminated. All other provisions of the Agreement shall remain operative and in
full force and effect with respect to such offering.
(b) This Agreement may be terminated by either party hereto upon 5
business days' written notice to the other party; provided, however, that with
respect to any particular offering of Securities, if you receive any termination
notice from us after you have advised us of the amount of Securities allotted to
us, this Agreement shall remain in full force and effect as to such offering and
shall terminate with respect to such offering and all previous offerings only in
accordance with and to the extent provided in subsection (a) of this Section 8.
(c) This Agreement may be supplemented or amended by you by notice to
us by written communication and, except for supplements or amendments included
with the information relating to a particular offering of Securities, any such
supplement or amendment to this Agreement shall be effective with respect to any
offering to which this Agreement applies after the date of such supplement or
amendment. Each reference to "this Agreement" herein shall, as appropriate, be
to this Agreement as so supplemented and amended.
SECTION 9. BLUE SKY AND OTHER QUALIFICATIONS.
It is understood and agreed that the Representatives assume no
responsibility or obligation with respect to the right of any Selected Dealer or
other person to sell Securities in any jurisdiction, notwithstanding any
information the Representatives may furnish in that connection.
SECTION 10. ROLE OF THE REPRESENTATIVES; ROLE OF THE SELECTED
DEALERS; LEGAL RESPONSIBILITY.
(a) The Representatives are acting as representatives of each of the
Underwriters in all matters connected with the offering of Securities and with
the Underwriters' purchases of Securities. Any action to be taken, authority
that may be exercised or determination to be made by the Representatives
hereunder may be taken, exercised or made by Cruttenden Roth Incorporated, on
behalf of all Representatives. The rights and liabilities of each Underwriter of
Securities and each Selected Dealer shall be several and not joint.
(b) The Representatives, as such, shall have full authority to take
such action as they may deem advisable in all matters pertaining to the offering
of Securities or arising under this Agreement. The Representatives will have no
liability to any Selected Dealer for any act or omission except for obligations
expressly assumed by the Representatives herein, and no obligations on the part
of the Representatives will be implied hereby or inferred herefrom.
(c) We understand and agree that we are to act as principals in
purchasing Securities and we are not authorized to act as agents for the Issuer,
any selling securityholder or any of the Underwriters in offering Securities to
the public or otherwise.
(d) Nothing contained herein shall constitute us in association or
partnership, with the other Selected Dealers, the Underwriters or
Representatives, or, except as otherwise provided herein, render us liable for
the obligation of any other Selected Dealers, the Underwriters or the
Representatives. If the Selected Dealers among themselves or with the
Underwriters or the Representatives are deemed to constitute a partnership for
Federal income tax purposes, then each Selected Dealer elects to be excluded
from the application of Subchapter K, Chapter 1, Subtitle A, of the Internal
Revenue Code of 1986, as amended, and agrees not to take any position
inconsistent with such election. The Representatives are authorized, in their
discretion, to execute on behalf of the Selected Dealers such evidence of such
election as may be required by the Internal Revenue Service.
SECTION 11. NASD MATTERS.
We represent that we are (i) a member in good standing of the National
Association of Securities Dealers, Inc. (the "NASD") or (ii) a foreign bank,
broker, dealer or other institution not eligible for membership in the NASD. If
we are such a member, we agree that in making sales of Securities we will comply
with all applicable rules of the NASD, including, without limitation, Rule 2740
of the Conduct Rules of the NASD (the "Conduct Rules"). If we are not an NASD
member, we agree to comply as though we were a member with Rules 2730, 2740 and
2750 of the
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<PAGE> 5
Conduct Rules and to comply with the requirements of the NASD's Interpretation
with Respect to Free-Riding and Withholding (IM-2110-1 of the Conduct Rules). If
we are such a foreign bank, broker, dealer or other institution, we agree not to
offer or sell any Securities in the United States of America except through the
Representatives and in making sales of Securities we agree to comply with Rule
2420 of the Conduct Rules as it applies to a nonmember broker or dealer in a
foreign country. We agree that in selling Securities pursuant to any offering
(which agreement shall also be for the benefit of the Issuer or other seller of
such Securities) we will comply with all applicable laws, rules and regulations,
including the applicable provisions of the Securities Act of 1933, as amended,
and the 1934 Act, the applicable rules and regulations of the Commission
thereunder, the applicable rules and regulations of any securities exchange, and
the applicable laws, rules and regulations of any applicable regulatory body
having jurisdiction over the offering.
SECTION 12. NOTICES.
Any notices from the Representatives to us shall be deemed to have been
duly given if mailed, hand delivered, telephoned (and confirmed in writing),
telegraphed, telexed or transmitted by facsimile transmission to us at the
address appearing below, or at such other address, telephone, telex or facsimile
transmission number as we have advised you in writing. Any notice from us to the
Representatives shall be deemed to have been duly given if mailed, hand
delivered, telegraphed, telexed or transmitted by facsimile transmission to
Cruttenden Roth Incorporated, 18301 Von Karman, Irvine, California 92612,
Attention: Syndicate Department; Telephone: (714) 757-5700; Facsimile: (714)
476-8727 or to such other address, telephone, telex or facsimile transmission
number as we shall be notified by the Representatives. Communications by
telegram, telex, facsimile transmission or other written form shall be deemed to
be "written" communications.
SECTION 13. GOVERNING LAW.
This Agreement shall be governed by the laws of the State of New York
applicable to agreements made and to be performed wholly in said State, without
giving effect to rules governing conflicts of law.
Very truly yours,
Name of Firm:
By:
--------------------------------------------
Authorized Officer or Partner
Address:
-----------------------------------------------
-----------------------------------------------
Telephone:
-------------------------------------
Facsimile:
-------------------------------------
Confirmed as of the date first above written.
CRUTTENDEN ROTH INCORPORATED
By:
------------------------------------------
David Walters
Executive Vice President
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<PAGE> 1
EXHIBIT 2.1
AGREEMENT AND PLAN OF EXCHANGE
THIS AGREEMENT AND PLAN OF EXCHANGE (the "Agreement") dated as of April
____, 1998, is made by and among AMERICAN AIRCARRIERS SUPPORT, INC., a South
Carolina corporation ("AASI"), the Shareholders of American Aircarriers Support,
Inc. (the "Shareholders") and AMERICAN AIRCARRIERS SUPPORT, INCORPORATED, a
Delaware corporation (the "Corporation").
WHEREAS, AASI and the Corporation desire to have all of the outstanding
shares of Common Stock of AASI acquired by the Corporation pursuant to the terms
of an agreement and plan of exchange; and
WHEREAS, AASI,the Corporation and the Shareholders wish to provide in
this Agreement for the terms and conditions upon which such a transaction would
be consummated.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE EXCHANGE RELATED MATTERS
SECTION 1.1 THE EXCHANGE.
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined below), each share of Common Stock of AASI (the "AASI
Shares") shall be exchanged for 41,000 shares of Common Stock of the Corporation
(the "Corporation Shares"). After the Effective Time, the separate existence of
AASI shall thereupon cease, and the Corporation shall continue as the
Corporation under the laws of the State of Delaware under the name of "American
Aircarriers Support, Incorporated," and the Shareholders of AASI shall become
shareholders of the Corporation.
(b) The issuance of Corporation Shares in exchange for the AASI Shares
(the "Exchange") shall become effective upon the Corporation's receipt of
executed Letters of Transmittal by all the Shareholders. The date and time when
the Exchange shall become effective is hereinafter referred to as the "Effective
Time." The Corporation shall allocate the Corporation Shares issued hereunder
75% to Karl F. Brown and 25% to Herman O. Brown, Jr.
(c) At the Effective Time, the Corporation shall thereupon and
thereafter possess all the rights, privileges, powers, disabilities and duties
of AASI; and be subject to all the debts, obligations, restrictions,
disabilities and duties of AASI; and all the rights, privileges, powers,
franchises, property and other things in action or belonging to AASI shall be
vested in the Corporation; and title to any real estate, vested by deed or
otherwise in AASI, shall not revert or be in any way impaired by reason of the
Exchange; and all rights of creditors and liens upon any property of AASI shall
be preserved unimpaired, and all debts, liabilities and duties of AASI shall
thenceforth attach to the Corporation, and may be enforced against it to the
same extent as if said debts, liabilities and duties had been incurred or
contracted by it.
<PAGE> 2
SECTION 1.2 DELIVERY OF THE LETTERS OF TRANSMITTAL.
(a) At the Closing (as defined in Section 9.2), each Shareholder of
AASI shall provide an executed Letter of Transmittal representing the consent of
each Shareholder to the exchange of AASI Shares for Corporation Shares which
shall be issued at the rate of 41,000 Corporation Shares for each AASI Share.
Until provided to the Corporation, each Letter of Transmittal shall be deemed
for all purposes to evidence only the right to receive Corporation Shares in
accordance with this Agreement.
(b) If any Corporation Shares are to be delivered to a person other
than the person in whose name the Letter of Transmittal is provided in exchange
therefore is registered, it shall be a condition of the delivery thereof that
the certificate be properly endorsed and otherwise in proper form for transfer.
SECTION 1.3 CERTIFICATE AND ARTICLES OF INCORPORATION. The Certificate
of Incorporation of the Corporation and the Articles of Incorporation of AASI,
as in effect immediately prior to the Effective Time, shall continue to be the
Certificate of the Corporation and the Articles of Incorporation of AASI,
respectively, until the same are amended and changed as provided by law.
SECTION 1.4 BY-LAWS. The By-Laws of the Corporation and AASI, as in
effect immediately prior to the Effective Time, shall be the By-Laws of the
Corporation and AASI, respectively, until the same are amended and changed as
provided by law.
ARTICLE II
REPRESENTATION AND WARRANTIES OF CORPORATION
The Corporation hereby represents and warrants to AASI as follows:
SECTION 2.1 ORGANIZATION AND QUALIFICATION. The Corporation is an
corporation duly organized, validly existing and in good standing under laws of
State of Delaware, and has the requisite corporate power to own all of its
properties and assets and to carry on its business as it is now being conducted.
SECTION 2.2 CAPITALIZATION. As of the date hereof, the authorized
capital stock of the Corporation consists of 20,000,000 shares of Common Stock,
par value $.001 per share, and 2,000,000 shares of Preferred Stock, par value
$.01 per share, of which 4,100,000 shares of Common Stock shall be duly
authorized, validly issued and outstanding, fully paid and nonassessable as of
the Effective Time. The Corporation has reserved 350,000 shares of Common Stock
for issuance upon exercise of options granted under its 1998 Omnibus Stock
Option Plan, of which options to purchase 258,600 shares were outstanding as of
March 20, 1998. In addition, the Representative of the Underwriters will receive
warrants to purchase 200,000 shares of Common Stock during a period of four
years commencing one year from the date of the Corporation's Registration
Statement. The Corporation has further reserved 300,000 shares of Common Stock
for issuance upon exercise of the Underwriters' over-allotment option.
SECTION 2.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Corporation has
the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the
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<PAGE> 3
transactions contemplated hereby. The execution, delivery and performance by the
Corporation of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by its Board of Directors and by
its sole stockholder, and no other corporate proceedings on the part of the
Corporation are necessary to authorize the execution and delivery by the
Corporation of this Agreement and the consummation by it of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Corporation, and constitutes a legal, valid and binding agreement of the
Corporation, enforceable against it in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency
or similar laws affecting the enforcement of creditors rights generally, and
except that the availability of equitable remedies, including specific
performance, is subject to the discretion of the court before which any
proceeding therefor may be brought.
SECTION 2.4 NON-CONTRAVENTION. The Corporation is not subject to or
obligated under any charter, by-law or contract provision, or under any license,
franchise or permit, or any order or decree, which would be breached or violated
or in respect of which a right of acceleration would be created by its execution
and performance of this Agreement.
SECTION 2.5 LITIGATION. There is no claim, suit, action or proceeding
pending or, to the knowledge of the Corporation, threatened against or affecting
the Corporation which can reasonably be expected to affect materially and
adversely the earnings, assets, properties or the financial condition of the
Corporation.
SECTION 2.6 GOVERNMENT APPROVALS. Except the filing of the Articles of
Dissolution by AASI in accordance with the laws of the State of South Carolina,
no governmental consent, approval, hearing, filing, registration or other
action, including the passage of time, is necessary to permit the transactions
contemplated by this Agreement to occur and to be valid and binding upon the
Corporation.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF AASI
AASI represents and warrants to the Corporation as follows:
SECTION 3.1 ORGANIZATION AND QUALIFICATION. AASI is a corporation duly
organized, validly existing and in good standing under the laws of the State of
South Carolina and has the requisite power to own all of its properties and
assets and to carry on its business as it is now being conducted.
SECTION 3.2 CAPITALIZATION. As of the date hereof, there are 100 shares
of Common Stock owned by the Shareholders, all of which are duly authorized,
validly owned and fully paid. As of the Closing, there shall be 100 shares of
Common Stock owned by the Shareholders, and there shall be no options, warrants
or other rights, agreements or commitments obligating AASI to issue any capital
stock.
SECTION 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. AASI has the
requisite power and authority to execute and deliver this Agreement and, subject
to the adoption and approval of this Agreement by its Shareholders, to
consummate the transactions contemplated hereby. The
-3-
<PAGE> 4
execution, delivery and performance by AASI of this Agreement and the
consummation by it of the transactions contemplated hereby have been duly
authorized by its Board of Directors and, except for the approval and adoption
of this Agreement by its Shareholders, no other proceedings on the part of AASI
are necessary to authorize the execution and delivery by AASI of this Agreement
and the consummation by it of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by AASI, and constitutes a legal,
valid and binding agreement of AASI, enforceable against it in accordance with
its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally, and except that the availability of equitable remedies,
including specific performance, is subject to the discretion of the court before
which any proceeding therefor may be brought.
SECTION 3.4 NON-CONTRAVENTION. AASI is not subject to or obligated
under any operating agreement or contract provision, or under any license,
franchise or permit, or any order or decree, which would be breached or violated
or in respect of which a right of acceleration would be created by its execution
and performance of this Agreement.
SECTION 3.5 LITIGATION. There is no claim, suit, action or proceeding
pending or, to the knowledge of AASI, threatened against or affecting AASI or
any of its properties.
SECTION 3.6 GOVERNMENT APPROVALS. Except the filing of the Articles of
Dissolution by AASI in accordance with the laws of the State of South Carolina,
no governmental consent, approval, hearing, filing, registration or other
action, including the passage of time, is necessary to permit the transactions
contemplated by this Agreement to occur and to be valid and binding upon AASI.
SECTION 3.7 FINANCIAL STATEMENTS. AASI has previously provided the
Corporation with audited balance sheets and statement of operations for AASI, as
of and for the year ended December 31, 1997 ("Financial Statements"). The
Financial Statements present fairly the financial position of AASI at the date
indicated and the results of operations for the period specified and have been
prepared on a consistent basis in accordance with generally accepted accounting
principles. Since the respective dates as of which information is given in the
Financial Statements, there has been no material adverse change in the
condition, financial or otherwise, of AASI, or in the earnings, affairs or
business prospects of AASI; there have been no material transactions entered
into by AASI other than those in the ordinary course of business or except as
disclosed by AASI to the Corporation; there have been no material contingent
liabilities incurred by AASI; and there has been no dividend or distribution of
any kind declared, paid or made by AASI with respect to its membership
interests.
SECTION 3.8 SHAREHOLDER AGREEMENTS. Except as disclosed to the
Corporation by AASI, there are no agreements, arrangements or understandings
concerning the voting of AASI's Shares, nor are there any agreements,
arrangements or understandings concerning any transfer of control (whether
voting or otherwise) of AASI's Shares.
SECTION 3.9 TITLE TO ASSETS. AASI has good title to all its assets as
identified on the Financial Statements, free and clear of all security
interests, mortgage, deeds of trust, liens, claims or other encumbrances, except
as disclosed on the Financial Statements or in the notes thereto.
-4-
<PAGE> 5
SECTION 3.10 GOVERNMENTAL PERMITS. AASI has obtained and currently
maintains in full force and effect all approvals, permits and other consents
which it has been required to obtain from any federal, state or local government
agency or body in connection with the ownership, development and use of its
assets.
ARTICLE IV
CONDUCT OF BUSINESS PENDING THE EXCHANGE
SECTION 4.1 CONDUCT OF BUSINESS BY CORPORATION AND AASI PENDING THE
EXCHANGE. Each of the Corporation and AASI covenants and agrees that, prior to
the Effective Time, unless the other shall agree in writing or as otherwise
contemplated by this Agreement:
(a) It shall conduct its business only in the ordinary and usual
course;
(b) It shall not (i) amend its respective Certificate of
Incorporation or By-Laws, or (ii) split, combine or reclassify
its respective outstanding shares, or (iii) declare, set aside
or pay any dividend payable in cash, stock or property with
respect to its shares, except as contemplated by this
Agreement; and
(c) It shall not issue or agree to issue any additional shares or
interests of, or rights of any kind to acquire any shares or
interests of, its respective capital stock of any class.
ARTICLE V
COVENANTS
SECTION 5.1 ACCESS AND INFORMATION. AASI and the Corporation shall each
afford to the other and to the other's accountants, counsel, and other
representatives full access during normal business hours from the date hereof
through the Effective Time to all of its properties, books, contracts,
commitments and records. In the event of the termination of this Agreement, each
party will deliver to the other all documents, work papers and other material,
and all copies thereof, obtained by such party from the other party as a result
of this Agreement. All information contained in such documents will be held in
confidence until such time as such information is otherwise publicly available.
SECTION 5.2 SHAREHOLDERS' APPROVAL. AASI shall promptly call a meeting
of its Shareholders for the purpose of voting upon this Agreement and all other
actions contemplated hereby which require the approval of its Shareholders and
on any other matter which its Board of Directors reasonably determines shall be
submitted to the Shareholders.
SECTION 5.3 BOARD OF DIRECTORS. Commencing on the date hereof and
continuing through the Effective Time, the Board of Directors of the Corporation
shall consist of Messrs. Karl F. Brown, David M. Furr and James T. Comer, III
and Ms. Pamela K. Clement. The Corporation agrees to take all such corporate
action that is necessary to cause the Board of Directors of the Corporation to
consist of the members described above.
-5-
<PAGE> 6
SECTION 5.4 EMPLOYMENT AGREEMENT. As of the Effective Time, the
Corporation shall assume the responsibilities and obligations of AASI under the
employment agreement between Karl F. Brown and AASI, dated January 31, 1998.
SECTION 5.5 ADDITIONAL AGREEMENTS. Subject to the terms and conditions
herein, each of the parties hereto agrees to use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using its best efforts to obtain all necessary waivers, consents and
approvals and to effect all necessary registrations and filings. In the event at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers or directors of
the Corporation shall be authorized to execute and deliver, in the name and on
behalf of either AASI or the Corporation, all appropriate documents and take all
such other necessary or desirable actions.
ARTICLE VI
CONDITIONS
SECTION 6.1 CONDITIONS TO AASI'S OBLIGATION TO EFFECT THE EXCHANGE. The
obligation of AASI to effect the Exchange shall be subject to the fulfillment of
the following conditions at or prior to the Effective Time:
a. This Agreement and the transactions contemplated hereby
shall have been approved and adopted by the Board of Directors and
Shareholders of AASI;
b. No court of competent jurisdiction shall have issued any
order, decree or injunction restraining or preventing the consummation
of the Exchange; in the event such order, decree or injunction is
issued, AASI and the Corporation shall each use its best efforts, and
shall cooperate with the other, to have such order, decree or
injunction dissolved;
c. All representations and warranties made by the Corporation
herein shall be true and correct in all material respects as of the
Closing (as defined in Section 9.2 below), with the same force and
effect as if made at such time; and
d. The Corporation shall have complied in all material
respects with its agreements and covenants contained herein.
SECTION 6. CONDITIONS TO THE CORPORATION'S OBLIGATION TO EFFECT THE
EXCHANGE. The obligation of the Corporation to effect the Exchange shall be
subject to the fulfillment of the following conditions at or prior to the
Effective Time:
-6-
<PAGE> 7
a. This Agreement and the transactions contemplated hereby
shall have been approved and adopted by the Board of Directors of the
Corporation;
b. No court of competent jurisdiction shall have issued any
order, decree or injunction restraining or preventing the consummation
of the Exchange; in the event such order, decree or injunction is
issued, AASI and the Corporation shall each use its best efforts, and
shall cooperate with the other, to have such order, decree or
injunction dissolved;
c. All representations and warranties made by AASI herein
shall be true and correct in all material respects as of the Closing
(as defined in Section 9.2 below), with the same force and effect as if
made at such time;
d. AASI shall have complied in all material respects with its
agreements and covenants contained herein; and
e. From the date of this Agreement through the Closing, there
shall be no change in the financial condition or operating results of
AASI which materially adversely affects AASI, its assets, or the
prospects for its future business operations.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 INDEMNIFICATION. Subject to the provisions of this Article
VII, the Corporation agrees to indemnify in respect of, and hold AASI harmless
against, any and all damages, claims, deficiencies, losses, and expenses
(collectively "Damages") resulting from (i) any material misrepresentation,
breach of warranty, or nonfulfillment or failure to perform any covenant or
agreement on the part of the Corporation made as a part of or contained in this
Agreement or in any certificate executed and delivered pursuant to this
Agreement or in connection with the transactions contemplated hereby, except for
Damages resulting from any such misrepresentations, breach of warranty or
nonfulfillment or failure to perform any such covenant or agreement known to
AASI and waived in writing by AASI as of the Closing, and (ii) any Damages
resulting from Claims asserted by third parties arising from, or directly or
indirectly related to, the offer and sale by the Corporation of its securities.
Subject to the provisions of this Article VII, AASI agrees to indemnify in
respect of, and hold the Corporation harmless against, any and all Damages
resulting from any material misrepresentation, breach of warranty, or
nonfulfillment or failure to perform any covenant or agreement on the part of
AASI made as a part of or contained in this Agreement or in any certificate
executed and delivered pursuant to this Agreement or in connection with the
transactions contemplated hereby except for Damages resulting from any such
misrepresentations, breach of warranty or nonfulfillment or failure to perform
any such covenant or agreement known to the Corporation and waived in writing by
the Corporation as of the Closing. The party claiming indemnification hereunder
is hereinafter referred to as the "Indemnified Party" and the party against whom
such claims are asserted hereunder is hereinafter referred to as the
"Indemnifying Party". Damages for which a claim or action may be asserted
hereunder are hereinafter referred to as a "Loss".
-7-
<PAGE> 8
SECTION 7.2 LIMITATION OF LIABILITY. Neither party shall be liable to
the other party to this Agreement except to the extent that the aggregate amount
of Losses for which they would otherwise (but for this provision) be liable
under this Article VII exceeds in the aggregate the sum of $5,000 and then only
to the extent of such excess.
SECTION 7.3 METHOD OF ASSERTING CLAIMS. All claims for indemnification
by any Indemnified Party under this Article VII shall be asserted and resolved
as follows:
a. In the event that any claim or demand for which an
Indemnifying Party would be liable to an Indemnified Party hereunder is
asserted against or sought to be collected from such Indemnified Party
by a third party, said Indemnified Party shall, within sixty (60) days
of such claim or demand being made, notify the Indemnifying Party of
such claim or demand, specifying the nature of and specific basis for
such claim or demand and the amount or the estimated amount thereof to
the extent then feasible (the "Claim Notice"). The estimate of Loss
contained in the Claim Notice shall not limit the amount of the
Indemnifying Party's ultimate liability under the claim. The
Indemnifying Party shall not be obligated to indemnify the Indemnified
Party with respect to any such claim or demand if the Indemnified Party
fails to notify the Indemnifying Party thereof in accordance with the
provisions of this Agreement within said sixty (60) day period. The
Indemnifying Party shall have 30 days from the personal delivery or
mailing of the Claim Notice (the "Notice Period") to notify the
Indemnified Party (1) whether or not the liability of the Indemnifying
Party to the Indemnified Party hereunder with respect to such claim or
demand is disputed, and (2) whether or not the Indemnifying Party
desires, at the sole cost and expense of the Indemnifying Party, to
defend the Indemnified Party against such claim or demand; provided,
however, that any Indemnified Party is hereby authorized prior to and
during the Notice Period to file any motion, answer or other pleading
which it shall deem necessary or appropriate to protect its interest or
those of the Indemnifying Party and not unreasonably prejudicial to the
Indemnifying Party. In the event that the Indemnifying Party notifies
the Indemnified Party within the Notice Period that it desires to
defend the Indemnified Party against such claim or demand, then, except
as hereinafter provided, the Indemnifying Party shall have the right to
defend by all appropriate proceedings, which proceedings shall be
promptly settled or prosecuted by it to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such
defense or settlement it may do so at its sole cost and expense. If
requested by the Indemnifying Party, the Indemnified Party agrees to
cooperate with the Indemnifying Party and its counsel in contesting any
claim or demand which the Indemnifying Party elects to contest, or, if
appropriate and related to the claim in question, in making any
counterclaim against the person asserting the third party claim or
demand, or any cross complaint against any person but in any such case
at the sole cost and expense of the Indemnifying Party. No claim may be
settled without the consent of the Indemnifying Party, unless such
settlement includes the complete release of the Indemnifying Party.
b. In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder which does not involve a claim
or demand being asserted against or sought to be collected from it by a
third party, the Indemnified Party shall send a Claim Notice with
respect to such claim to the Indemnifying Party.
-8-
<PAGE> 9
If the Indemnifying Party does not notify the Indemnified Party within
the Notice Period that it disputes such claim, the amount of such claim
shall be conclusively deemed a liability of the Indemnifying Party
hereunder.
SECTION 7.4 PAYMENT OF CLAIM. Upon the determination of liability of
AASI or the Corporation pursuant to this Article VII, as the case may be, after
payment by the Indemnified Party of, or upon entry of final judgment or reaching
of a settlement in respect of, an Indemnifiable Claim, or determination of a
Loss to the Indemnified Party occasioned by the breach of a representation and
warranty by the Indemnifying Party, and notice thereof to the Indemnifying
Party, the Indemnifying Party shall within thirty (30) days after receipt of
such notice pay to the Indemnified Party the amount of the payment, judgment,
settlement or Loss, as the case may be.
SECTION 7.5 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification
rights of the parties under this Article VII are independent of and in addition
to such rights and remedies as the parties may have at law or in equity or
otherwise for any misrepresentation, breach of warranty or failure to fulfill
any agreement or covenant hereunder on the part of any party hereto including
without limitation the right to seek specific performance, rescission or
restitution, none of which rights or remedies shall be affected or diminished
hereby.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing:
a. By mutual consent of the Board of Directors of the
Corporation and the Board of Directors of AASI; or
b. By either the Corporation or AASI if the Closing has not
occurred on or before December 31, 1998 due to no fault of the
terminating party.
SECTION 8.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement as provided above, this Agreement shall become void and there shall be
no liability imposed by this Agreement on the part of either the Corporation or
AASI; provided, however, that the confidentiality provisions contained in
Section 5.1 shall continue in full force and effect.
SECTION 8.3 AMENDMENT. This Agreement may be amended by action taken by
the Board of Directors of the Corporation and AASI at any time before or after
approval hereof by their respective stockholders, but, after any such approval,
no amendment shall be made which changes the number of the Corporation Shares
which AASI Shareholders shall be entitled to receive, or which in any way
adversely affects the rights of the Shareholders of AASI. This Agreement may not
be amended except by an instrument in writing signed on behalf of each of the
parties hereto.
SECTION 8.4 EXTENSION; WAIVER. At any time prior to the Effective Time,
the Corporation and AASI, by action taken by their respective Board of
Directors, may (1) extend the time for the performance of any of the obligations
or other acts of the other party hereto, (2) in
-9-
<PAGE> 10
whole or in part, waive any inaccuracy in the representations and warranties of
the other party contained herein or in any schedule hereto or in any document
delivered pursuant hereto, and (3) in whole or in part, waive compliance with
any of the agreements of the other party hereto or conditions contained herein.
Any agreement to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed and delivered by the party which has granted
such extension or waiver.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 INVESTIGATION; SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The respective representations and warranties of the parties contained herein or
in any certificates or other documents delivered prior to or at the Effective
Time shall not be deemed waived or otherwise affected by any investigation made
by any party hereto. Each and every such representation and warranty shall
expire with, and be terminated and extinguished by, the Exchange or the
termination of this Agreement; and thereafter neither the Corporation nor AASI
nor any officer, director or employee thereof shall be under any liability
whatsoever with respect to any such representation or warranty. This Section 9.1
shall have no effect upon any other obligation of the parties hereto, whether to
be performed before or after the Closing.
SECTION 9.2 CLOSING. The closing of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of the
Corporation on the later of (i) the date on which the Corporation shareholders
approve this Agreement, (ii) the date on which AASI Shareholders approve this
Agreement, (iii) the business day on which the last of the conditions contained
in Article VI is fulfilled or waived, or (iv) at such other date and place as
the Corporation and AASI may agree. The date of the Closing is herein referred
to as the "Closing Date." As soon as practicable after the Closing, the Articles
of Dissolution for AASI shall be filed in accordance with South Carolina law.
SECTION 9.3 INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement. Terms such as "herein," "hereof," and
"hereinafter" refer to this Agreement as a whole and not to the particular
sentence or paragraph where they appear, unless the context otherwise requires.
Terms used in the plural include the singular, and vice versa, unless the
context otherwise requires. As used in this Agreement, the term "person" shall
mean and include an individual, partnership, joint venture, limited liability
company, corporation, trust or an unincorporated organization.
SECTION 9.4 MISCELLANEOUS. This Agreement constitutes the entire
agreement of the parties and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof; are not intended to and shall not confer
upon any other person any rights or remedies hereunder or otherwise with respect
to the subject matter hereof; shall not be assigned by operation of law or
otherwise; and shall be governed in all respects, including validity,
interpretation and effect, by the laws of the State of Delaware. This Agreement
may be executed in two or more counterparts, each of which shall be deemed an
original, but which together shall constitute a single agreement.
-10-
<PAGE> 11
SECTION 9.5 BINDING EFFECT; BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, but neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either of the parties
hereto without the prior written consent of the other party. Nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 9.6 BROKERS' AND INVESTMENT BANKERS' FEES. The Corporation and
AASI each represent that no agent, broker, investment banker, or other firm or
person is or will be entitled to any broker's or finder's fee, or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
it.
SECTION 9.7 PRESS RELEASES. The parties agree that each shall furnish
the other, prior to its release, a copy of any publicity releases or press
releases concerning the transactions described herein. Any party receiving a
proposed publicity release or press release shall review the same and promptly
furnish any comments concerning such publicity release or press release to the
other party. No press release shall be issued by either party without the prior
written consent of the other party.
IN WITNESS WHEREOF, AASI and the Corporation have caused this Agreement
to be executed on their behalf by their respective officers hereunto duly
authorized all as of the date first written above.
AMERICAN AIRCARRIERS SUPPORT, INC.,
By:
--------------------------------------
Karl F. Brown, President
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
By:
--------------------------------------
Karl F. Brown, President
IN WITNESS WHEREOF, the undersigned have executed this Agreement below
in their capacity as Shareholders of American Aircarriers Support, Inc.
-----------------------------------------
Karl F. Brown
-----------------------------------------
Herman O. Brown, Jr.
-11-
<PAGE> 1
EXHIBIT 3.1.1
[ /s/ ILLEGIBLE
------------------------------------------
SECRETARY OF STATE
FILED JAN 08, 1990
2 PM]
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF AMENDMENT
Pursuant Section 3-10-106 of the 1976 South Carolina Code, as amended, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
1. The name of the corporation is AVIATION ALLOYS, INC.
2. On January 5, 1990, the corporation adopted the following Amendment(s) of
its Articles of Incorporation:
(Type or attach the complete text of Each Amendment)
That the name of the Corporation be changed from AVIATION
ALLOYS, INC. to AMERICAN AIRCARRIERS SUPPORT, INC.
3. The manner, if not set forth in the amendment, in which any exchange,
reclassification, or cancellation of issued shares provided for in the
Amendment shall be effected, is as follows: (if not applicable, insert
"not applicable" or "NA").
N/A
4. Complete either a or b, whichever is applicable.
a. [ ] Amendment(s) adopted by shareholder action.
At the date of adoption of the amendment, the number of outstanding
shares of each voting group entitled to vote separately on the
Amendment, and the vote of such shares was:
<TABLE>
<CAPTION>
Number of Number of Number of Votes Number of Undisputed*
Voting Outstanding Votes Entitled Represented at Shares Voted
Group Shares to be Cast the meeting For Against
- ----- ----------- -------------- ---------------- ---------------------
<S> <C> <C> <C> <C> <C>
</TABLE>
Date JAN 08 1990
CERTIFIED TO BE A TRUE AND CORRECT COPY
AS TAKEN FROM AND COMPARED WITH THE
ORIGINAL ON FILE IN THIS OFFICE.
/s/ ILLEGIBLE
-------------------------------------
SECRETARY OF STATE OF SOUTH CAROLINA
<PAGE> 2
*NOTE: Pursuant to Section 33-10-106(6)(i), the corporation can
alternatively state the total number of undisputed shares cast for the
amendment by each voting group together with a statement that the
number of cast for the amendment by each voting group was sufficient
for approval by that voting group.
b. [X] The Amendment(s) was duly adopted by the incorporator or board
of directors without shareholder approval pursuant to Section
33-6-102(d), 33-10-102 and 33-10-105 of the 1976 South Carolina
Code as amended, and shareholder action was not required.
5. Unless a delayed date is specified, the effective date of these Articles
of Amendment shall be the date of acceptance for filing by the Secretary of
State (See Section 33-1-230(b)):
------------------------------------------
DATE January 5, 1990 AVIATION ALLOYS, INC.
---------------------- ------------------------------------------
(Name of Corporation)
By: /s/ KARL F. BROWN
------------------------------------------
(Signature)
Karl F. Brown, President
------------------------------------------
(Type or Print Name and Office)
FILING INSTRUCTIONS
1. Two copies of this form, the original and either a duplicate original or a
conformed copy, must be filed.
2. If the space in this form in insufficient, please attach additional sheets
containing a reference to the appropriate paragraph in this form.
3. Filing fees and taxes payable to the Secretary of State at time of filing
application.
<TABLE>
<S> <C>
Filing Fee $ 10.00
Filing tax 100.00
Total $110.00
</TABLE>
Form Approved by South Carolina
Secretary of State 1/89
<PAGE> 3
RECORDED FILED-RECEIVED
DEED BOOK PAGE
VOL 830 PG 278 ----- -----
------- ------- JUL 25 8:59AM '85
YORK COUNTY, S.C. M.H. CARROLL, JR.
C.C.C.P. & G.S.
YORK COUNTY, S.C.
STATE OF SOUTH CAROLINA
SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
AVIATION ALLOYS, INC.
(File This Form in
Duplicate Originals)
For Use By THIS SPACE FOR USE BY
The Secretary of State (Sect. 33-7-30 of 1976 Code) THE SECRETARY OF STATE
File No. /s/ JOHN T. CAMPBELL
---------------- ---------------------
Fee Paid $ FILED
-------------- JUNE 27, 1985
R.N. 9 AM
--------------------
Date
--------------------
- ------------------------
- ------------------------
(INSTRUCTIONS ON PAGE 4)
1. The name of the proposed corporation is AVIATION ALLOYS, INC.
------------------------------------
2. The initial registered office of the corporation is 4283 Pleasant Road
------------------------
Street and Number
located in the city of Ft. Mill , county of York and
------------------ ----------------------
the State of South Carolina and the name of its initial registered agent at
such address is James Richard Caldwell .
-----------------------------------------------------------
3. The period of duration of the corporation shall be perpetual (xxxxxxxxxxx).
4. The corporation is authorized to issue shares of stock as follows:
<TABLE>
<CAPTION>
CLASS OF SHARES AUTHORIZED NO. OF EACH CLASS PAR VALUE
--------------- ---------------------------- ---------
<S> <C> <C>
Common 100,000 $1.00
- ------------------------------ ---------------------------- ---------
- ------------------------------ ---------------------------- ---------
- ------------------------------ ---------------------------- ---------
</TABLE>
Date Jun 27, 1985
--------------
CERTIFIED TO BE A TRUE AND CORRECT
COPY AS TAKEN FROM AND COMPARED WITH
THE ORIGINAL ON FILE IN THIS OFFICE.
/s/ JOHN T. CAMPBELL
- ------------------------------------
SECRETARY OF STATE OF SOUTH CAROLINA
If shares are divided into two or more classes or if any class of shares
is divided into series within a class, the relative rights, preferences, and
limitations of the shares of each class, and of each series within a class, are
as follows:
5. Total authorized capital stock $100,000 divided into 100,000 shares at
$1.00 Par value each. Please see instructions on Page 4.
6. It is represented that the corporation will not begin business until there
has been paid into the corporation the minimum consideration for the issue
of shares, which is $1,000.00 of which at least $500.00 is in cash.
7. The number of directors constituting the initial board of directors of the
corporation is _______________, and the names and addresses of the persons
who are to serve as directors until the first annual meeting of
shareholders or until their successors be elected and qualify are:
James Richard Caldwell Route #2, Box #41, Clover, S.C. 29710
- ------------------------------ ---------------------------------------
Name Address
Barabara H. Caldwell Route #2, Box #41, Clover, S.C. 29710
- ------------------------------ ---------------------------------------
Name Address
Herman O. Brown #4 Spurrier Ct., Lake Wylie, S.C. 29710
- ------------------------------ ---------------------------------------
Name Address
- ------------------------------ ---------------------------------------
Name Address
- ------------------------------ ---------------------------------------
Name Address
<PAGE> 4
---------------------------- ----------------------------
Name Address
---------------------------- ----------------------------
Name Address
8. The general nature of the business for which the corporation is
organized is (it is not necessary to set forth in the purposes
powers enumerated in Section (33-3-10 of 1976 Code).
To recondition and repair aircraft engines, accessories, and other aircraft
parts of every kind and description; to buy, sell and lease aircraft and
aircraft parts and transact any and all business necessary or incident thereto;
to engage in any other business endeavor in the aircraft industry which the
Board of Directors may deem advisable; to engage in all business and pursuits
and to exercise all rights, powers and privileges conferred upon or permitted
to corporations under the laws of the State of South Carolina.
THE FOREGOING POWERS ARE IN ADDITION TO AND NOT BY WAY OF LIMITATION OF ALL
RIGHTS AND POWERS CONFERRED ON CORPORATIONS OR PROPER TO BUSINESSES OF LIKE
KIND UNDER THE LAWS OF THE STATE OF SOUTH CAROLINA.
9. Provisions which the incorporators elect to include in the articles of
incorporation are as follows:
None
10. The name and address of each incorporator is.
<TABLE>
<CAPTION>
Name Street & Box No. City County State
<S> <C> <C> <C> <C>
T. J. Solomon, II 192 South Street, Gastonia, Gaston, North Carolina
</TABLE>
/s/ T. J. SOLOMON, II
-----------------------------------------
(SIGNATURE OF INCORPORATOR)
Date: June 19, 1985 T. J. Solomon, II
----------------------------- -----------------------------------------
(TYPE OR PRINT NAME)
-----------------------------------------
(SIGNATURE OF INCORPORATOR)
-----------------------------------------
(TYPE OR PRINT NAME)
-----------------------------------------
(SIGNATURE OF INCORPORATOR)
-----------------------------------------
(TYPE OR PRINT NAME)
<PAGE> 5
STATE OF NORTH CAROLINA
------------------------------------------------------------------------
COUNTY OF GASTON
-----------------------------------------------------------------------
The undersigned T. J. Solomon, II
---------------------------------------------------------------
- --------------------------------------------------------------------------------
do hereby certify that they are the incorporators of Aviation Alloys, Inc.
Corporation and are authorized to execute this verification; that each of the
undersigned for himself does hereby further certify that he has read the
foregoing document, understands the meaning and purport of the statements
therein contained and the same are true to the best of his information and
belief.
/s/ T. J. SOLOMON, II
-----------------------------------------
(SIGNATURE OF INCORPORATOR)
-----------------------------------------
(SIGNATURE OF INCORPORATOR)
-----------------------------------------
(SIGNATURE OF INCORPORATOR)
(EACH INCORPORATOR MUST SIGN)
CERTIFICATE OF ATTORNEY
11. I, T. J. Solomon, II, an attorney licensed to practice in the State of
South Carolina, certify that the corporation, to whose articles of
incorporation this certificate is attached, has complied with the
requirements of chapter 7 of Title 33 of the South Carolina Code of
1976, relating to the organization of corporations, and that in my
opinion, the corporation is organized for a lawful purpose.
Date: June 19, 1985 /s/ T. J. SOLOMON, II
----------------------------- -----------------------------------------
(SIGNATURE)
T. J. Solomon, II
-----------------------------------------
(TYPE OR PRINT NAME)
Address 192 South Street
----------------------------------
Gastonia, N. C. 28052
-----------------------------------------
SCHEDULE OF FEES
(Payable at time of filing Articles of With Secretary of State)
Fee for filing Articles ______________$
In addition to the above, $.40 for each
$1,000.00 of the aggregate value of
shares which the Corporation is
authorized to issue, but in no case less
than nor more than ____________________.
NOTE: THIS FORM MUST BE COMPLETED IN ITS ENTIRETY BEFORE IT WILL BE ACCEPTED
FOR FILING. THIS FORM MUST BE ACCOMPANIED BY THE FIRST REPORT OF
CORPORATIONS AND A CHECK IN THE AMOUNT OF $10 PAYABLE TO THE SOUTH
CAROLINA TAX COMMISSION.
Please see instructions on the reverse side.
<PAGE> 1
EXHIBIT 3.1.2
CERTIFICATE OF INCORPORATION
OF
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
The undersigned, a natural person eighteen years of age or older,
hereby establishes a corporation pursuant to the Delaware General Corporation
Law, as amended, and adopts the following Certificate of Incorporation:
FIRST: The name of the corporation is American Aircarriers Support,
Incorporated.
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle, State of Delaware 19801. The name of its
registered agent at such address is Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: Authorized Shares.
A. The aggregate number of shares which the Corporation
shall have the authority to issue is 22,000,000; of which 2,000,000
shares of the par value of $.01 shall be designated Preferred Stock
and 20,000,000 shares of the par value of $.001 shall be designated
Common Stock.
B. Authority is hereby expressly granted to the Board of
Directors from time to time to issue shares of the Preferred Stock as
shares of any series of Preferred Stock and, in connection with the
creation of each such series, to fix by the resolution or resolutions
providing for the issue of shares thereof, the number of shares of
such series, and the designations, powers, preferences, and rights,
and the qualifications, limitations, and restrictions, of such series,
to the full extent now or hereafter permitted by the laws of the State
of Delaware.
FIFTH: The name and mailing address of the incorporator is Karl F.
Brown, 3516 Centre Circle Drive, Fort Mill, South Carolina 29715. The powers
of the incorporator shall terminate upon the filing of this Certificate of
Incorporation.
SIXTH: The initial Board of Directors of this Corporation shall
consist of five (5) members, but the number may be increased or decreased in
the manner provided in the By-Laws of this Corporation; provided, however,
that, except as otherwise provided in the By-Laws of this Corporation, the
number of directors constituting the full Board of Directors shall not be
changed without the affirmative vote of at least sixty-six and two-thirds
percent (66 2/3%) of the issued and outstanding shares of Common Stock. The
names and addresses of the persons who are to serve as the directors of the
Corporation upon the filing of this Certificate of Incorporation are:
<PAGE> 2
NAME ADDRESS
---- -------
Karl F. Brown 3516 Centre Circle Drive
Fort Mill, South Carolina 29715
Herman O. Brown 3516 Centre Circle Drive
Fort Mill, South Carolina 29715
David M. Furr 3516 Centre Circle Drive
Fort Mill, South Carolina 29715
The remaining directors shall be appointed by the Board of Directors
after the filing of this Certificate of Incorporation.
SEVENTH: The Board of Directors is authorized to adopt, amend, or
repeal any and all provisions of the By-Laws of the Corporation except as and
to the extent provided in the By-Laws. Notwithstanding any other provision of
this Certificate of Incorporation or the By-Laws of this Corporation (and
notwithstanding that some lesser percentage may be specified by law), no
provision of the By-Laws of the Corporation shall be amended, modified or
repealed by the stockholders of the Corporation, nor shall any provision of the
By-Laws of the Corporation inconsistent with any such provision be adopted by
the stockholders of the Corporation, unless approved by the affirmative vote of
at least seventy-five (75%) of the issued and outstanding shares of Common
Stock.
EIGHTH: Notwithstanding any other provision of this Certificate of
Incorporation or the By-Laws of this Corporation (and notwithstanding that some
lesser percentage may be specified by law), no provision of Articles FOURTH,
SIXTH, SEVENTH, TENTH or TWELFTH of this Certificate of Incorporation shall be
amended, modified or repealed, nor shall any provision of the By-Laws of the
Corporation inconsistent with any such provision be adopted by the stockholders
of the Corporation, unless approved by the affirmative vote of at least
seventy-five (75%) of the issued and outstanding shares of Common Stock.
NINTH: Any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (whether or not by or
in the right of the Corporation) by reason of the fact that he is or was a
director, officer, incorporator, employee or agent of the Corporation, or is or
was serving at the request of the Corporation as a director, officer,
incorporator, employee, partner, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise (including an employee
benefit plan), shall be entitled to be indemnified by the Corporation to the
full extent then permitted by law against expenses (including counsel fees and
disbursements), judgments, fines (including excise taxes assessed on a person
with respect to an employee benefit plan), and amounts paid in settlement
incurred by him in connection with such action, suit, or proceeding. Such
right of indemnification shall inure whether or not the claim asserted is based
on matters which antedate the adoption of this Article NINTH. Such right of
indemnification shall continue as to a person who has ceased to be a director,
officer, incorporator, employee, partner, trustee or agent and shall inure to
the benefit of the heirs and personal representatives of such a person. The
indemnification provided by this Article NINTH shall not be deemed exclusive of
any other rights which may be provided now or in the future under any provision
currently in effect or hereafter adopted in the
-2-
<PAGE> 3
By-Laws, by any agreement, by vote of stockholders, by resolution of
disinterested directors, by provision of law, or otherwise.
TENTH: No director of the Corporation shall be liable to the
Corporation or any of its stockholders for monetary damages for breach of
fiduciary duty as a director, provided that this provision does not eliminate
the liability of the director (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of Title 8 of the Delaware Code, or (iv) for any
transaction from which the director derived an improper personal benefit. For
purposes of the prior sentence, the term "damages" shall, to the extent
permitted by law, include, without limitation, any judgment, fine, amount paid
in settlement, penalty, punitive damages, excise or other tax assessed with
respect to an employee benefit plan, or expense of any nature (including,
without limitation, counsel fees and disbursements). Each person who serves as
a director of the Corporation while this Article TENTH is in effect shall be
deemed to be doing so in reliance on the provisions of this Article TENTH, and
neither the amendment or repeal of this Article TENTH, nor the adoption of any
provision of this Certificate of Incorporation inconsistent with this Article
TENTH, shall apply to or have any effect on the liability or alleged liability
of any director or the Corporation for, arising out of, based upon, or in
connection with any acts or omissions of such director occurring prior to such
amendment, repeal, or adoption of an inconsistent provision. The provisions of
this Article TENTH are cumulative and shall be in addition to and independent
of any and all other limitations on or eliminations of the liabilities of
directors of the Corporation, as such, whether such limitations or eliminations
arise under or are created by any law, rule, regulation, by-law, agreement,
vote of shareholders or disinterested directors, or otherwise.
ELEVENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of Section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
TWELFTH: Notwithstanding any other provision of this Certificate of
Incorporation or the By-Laws of this Corporation, and notwithstanding anything
to the contrary specified by law, no action required or permitted to be taken
at any annual or special meeting of the stockholders of this Corporation may be
taken without such a meeting, and the power of stockholders of this Corporation
-3-
<PAGE> 4
to consent in writing to the taking of such action without a meeting, as
contemplated by Section 228 of the Delaware General Corporation Law, is hereby
specifically denied.
IN WITNESS WHEREOF, I made, signed, and sealed this Certificate of
Incorporation this 6th day of February, 1998.
/s/ KARL F. BROWN
-------------------------------------
Karl F. Brown, Incorporator
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I 1
Registered Office and Registered Agent . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II 1
Shareholders' Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . 1
Section 4. Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Quorum and Adjourned Meetings . . . . . . . . . . . . . . . . 2
Section 6. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 7. Voting Record . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 8. Voting of Shares . . . . . . . . . . . . . . . . . . . . . . 2
Section 9. Closing of Transfer Books . . . . . . . . . . . . . . . . . . 2
Section 10. Action Without a Meeting . . . . . . . . . . . . . . . . . . 3
Section 11. Telephone Meetings . . . . . . . . . . . . . . . . . . . . . 3
Section 12. Director Nominations . . . . . . . . . . . . . . . . . . . . 3
Section 13. New Business . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE III 6
Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. General Powers . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Number . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3. Tenure and Qualifications . . . . . . . . . . . . . . . . . . 6
Section 4. Election . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 5. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 6. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 7. Removal of Directors . . . . . . . . . . . . . . . . . . . . 7
Section 8. Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 9. Quorum and Voting . . . . . . . . . . . . . . . . . . . . . . 7
Section 10. Action Without a Meeting . . . . . . . . . . . . . . . . . . 8
Section 11. Telephone Meetings . . . . . . . . . . . . . . . . . . . . . 8
Section 12. Committees of the Board . . . . . . . . . . . . . . . . . . . 8
Section 13. Compensation . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 14. Presumption of Assent . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV 8
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 1. Officers Designated . . . . . . . . . . . . . . . . . . . . . 8
Section 2. Elections, Qualification and Term of Office . . . . . . . . . 9
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 3. Powers and Duties . . . . . . . . . . . . . . . . . . . . . . 9
Section 4. Other Officers and Agents . . . . . . . . . . . . . . . . . . 10
Section 5. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 6. Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V 10
Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 1. Share Certificates . . . . . . . . . . . . . . . . . . . . . 10
Section 2. Consideration for Shares . . . . . . . . . . . . . . . . . . 10
Section 3. Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Loss or Destruction of Certificate . . . . . . . . . . . . . 11
ARTICLE VI 11
Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1. Books of Accounts, Minutes, and Share Register . . . . . . . 11
Section 2. Copies of Resolutions . . . . . . . . . . . . . . . . . . . . 11
Section 3. Books of Account . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Examination of Records . . . . . . . . . . . . . . . . . . . 11
ARTICLE VII 12
Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VIII 12
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IX 12
Amendment of Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 1. By the Shareholders . . . . . . . . . . . . . . . . . . . . . 12
Section 2. By the Board of Directors . . . . . . . . . . . . . . . . . . 12
ARTICLE X 12
Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE XI 13
Rules of Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
(ii)
<PAGE> 4
BYLAWS
OF
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
ARTICLE I
Registered Office and Registered Agent
The registered office of the corporation shall be located in the State
of Delaware at such place as may be fixed from time to time by the Board of
Directors upon filing of such notices as may be required by law, and the
registered agent shall have a business office identical with such registered
office. Any change in the registered agent or registered office shall be
effective upon filing such change with the office of the Secretary of the State
of Delaware.
ARTICLE II
Shareholders' Meetings
Section 1. Annual Meetings. The annual meeting of the shareholders
of this corporation for the purpose of election of directors and for such other
business as may come before it, shall be held at the principal office of the
corporation in Denver, Colorado, or at such other place within the United
States as may be designated by the Board of Directors, on the second Wednesday
in June of each and every year, at 10:00 a.m., or on such other day and time as
may be specified by the Board of Directors.
Section 2. Special Meetings. Special meetings of the shareholders
for any purpose or purposes may be called at any time by the Board of Directors
to be held at such time and place as the Board of Directors may prescribe.
Except as may be otherwise provided under Delaware law, shareholders of the
corporation, acting in their capacity as such, shall not have the right to call
a special meeting of shareholders.
Section 3. Notice of Meetings. Written notice of annual or special
meetings of shareholders stating the place, day, and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called, shall be given by the Secretary or persons authorized to call the
meeting to each shareholder of record entitled to vote at the meeting. Such
notice shall be given not less than ten (10) (or in the case of a merger or
sale of the Company's assets, the minimum number of days specified by Delaware
law), nor more than sixty (60) days prior to the date of the meeting, either
personally or by mail, by or at the direction of the President, the Secretary,
or the officer or persons calling the meeting. If mailed, such notice shall be
deemed to be delivered when deposited in the United States mail addressed to
the shareholder at his address as it appears on the stock transfer books of the
corporation, with postage thereon prepaid.
<PAGE> 5
Section 4. Waiver of Notice. Except where expressly prohibited by
law or the Certificate of Incorporation, notice of the day, place, hour and
purpose or purposes of any shareholders' meeting may be waived in writing by
any shareholder at any time, either before or after the meeting, and attendance
at the meeting in person or by proxy shall constitute a waiver of such notice
of the meeting unless such person in attendance asserts, if prior to
commencement of such meeting, in writing to the Secretary, or if at the
commencement of such meeting, publicly to the Chairman, that proper notice was
not given.
Section 5. Quorum and Adjourned Meetings. A majority of the
outstanding shares of the corporation entitled to vote, represented in person
or by proxy, shall constitute a quorum at a meeting of the shareholders. A
majority of the shares represented at a meeting, even if less than a quorum,
may adjourn the meeting from time to time without further notice. At such
reconvened meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified. The shareholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough shareholders to leave less than a quorum.
Section 6. Proxies. At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the Secretary of
the corporation before or at the time of the meeting. No proxy shall be valid
after eleven (11) months from the date of its execution, unless otherwise
provided in the proxy. Revocation of a proxy shall not be effective until
written notice thereof has been received by the Secretary of the corporation.
Section 7. Voting Record. At least ten (10) days before each
meeting of shareholders, a complete record of the shareholders entitled to vote
at such meeting, or any adjournment thereof, shall be made, arranged in
alphabetical order, with the address of and number of shares held by each
shareholder, which record shall be available for inspection by any shareholder
at a place within the city in which the meeting is being held for a period of
ten (10) days prior to such meeting. The record shall be kept open at the time
and place of such meeting for the inspection of any shareholder.
Section 8. Voting of Shares. Except as otherwise provided by
Delaware law, the Certificate of Incorporation or these Bylaws, every
shareholder of record shall have the right at every shareholders' meeting to
one vote for every share standing in his name on the books of the corporation.
In each meeting at which a quorum is present, the affirmative vote of a majority
of the shares represented at such meeting and entitled to vote thereat shall be
necessary for the adoption of a motion or for the determination of all questions
and business which shall come before the meeting.
Section 9. Closing of Transfer Books. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders, or any adjournment thereof, or entitled to receive payment of any
dividend, the Board of Directors may provide that the stock transfer books
shall be closed for a stated period not to exceed sixty (60) days nor less than
ten
-2-
<PAGE> 6
(10) days preceding such meeting. In lieu of closing the stock transfer books,
the Board of Directors may fix in advance a record date for any such
determination of shareholders, such date to be not more than sixty (60) days
and, in case of a meeting of shareholders, not less than ten (10) days prior to
the date on which the particular action requiring such determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Board of Directors declaring such dividend is adopted, as the case may be,
shall be the record date for such determination of shareholders. When a
determination of shareholders entitled to vote at any meeting of shareholders
has been made as provided in this Section 9, such determination shall apply to
any adjournment thereof.
Section 10. Action Without a Meeting. The shareholders may take any
action which they could properly take at a meeting without a meeting if a
consent in writing, setting forth the action so taken, is signed by all of the
shareholders entitled to vote with respect to the subject matter thereof. Such
consent shall have the same effect as a unanimous vote.
Section 11. Telephone Meetings. Shareholders may participate in a
meeting of shareholders by means of a conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time, and participation by such means shall
constitute presence in person at a meeting.
Section 12. Director Nominations. Nominations of candidates for
election as directors at any meeting of shareholders may be made (i) by, or at
the direction of, a majority of the Board of Directors or (ii) by any
shareholder entitled to vote at such a meeting. Only persons nominated in
accordance with the procedures set forth in this Section 12 shall be eligible
for election as directors at such a meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the corporation as set forth in this Section 12. To be timely a
shareholder's notice shall be delivered to, or mailed and received at, the
principal executive offices of the corporation not less than sixty (60) days
nor more than ninety (90) days prior to the date of a scheduled shareholders'
meeting, regardless of postponements, deferrals, or adjournments of that
meeting to a later date; provided, however, that if less than seventy (70)
days' notice or prior public disclosure of the scheduled date of such a meeting
is given or made, notice by the shareholder to be timely must be so delivered
or received not later than the close of business on the tenth (10th) day
following the earlier of the day on which such notice of the date of the
scheduled meeting was mailed or the day on which such public disclosure was
made. Such shareholder's notice shall set forth: (a) as to each person whom
the shareholder proposes to nominate for election or re-election as a director
and as to the shareholder giving the notice (i) the name, age, business address
and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of stock of the
corporation which are beneficially owned by such person on the date of such
shareholder notice and (iv) any other information relating to such person that
is required to be disclosed in solicitations of proxies with respect to
nominees for election as directors pursuant
-3-
<PAGE> 7
to Regulation 14A under the Securities and Exchange Act of 1934, as amended,
including, but not limited to, information required to be disclosed by Item
4(b) and Item 6 of Schedule 14A; and (b) as to the shareholder giving the
notice (i) the name and address as they appear on the corporation's books, of
such shareholder and any other shareholders known by such shareholder to be
supporting such nominees and (ii) the class and number of shares of stock of
the corporation which are beneficially owned by such shareholder on the date of
such shareholder notice and by any other shareholders known by such shareholder
to by supporting such nominees on the date of such shareholder notice. At the
request of the Board of Directors, any person nominated by, or at the direction
of, the Board of Directors for election as a director at a meeting of the
shareholders shall furnish to the Secretary of the corporation that information
required to be set forth in a notice of shareholder's meeting which pertains to
the nominee.
No person shall be elected as a director of the corporation unless
nominated in accordance with the procedures set forth in this Section 12.
Ballots bearing the names of all the persons who have been nominated for
election as directors at a meeting of the shareholders in accordance with the
procedures set forth in this Section 12 shall be provided for use at the
meeting.
The Board of Directors may reject any nomination by a shareholder not
timely made in accordance with the requirements of this Section 12. If the
Board of Directors, or a designated committee thereof, determines that the
information provided in a shareholder's notice does not satisfy the
informational requirements of this Section 12 in any material respect, the
Secretary of the corporation shall promptly notify such shareholder of the
deficiency in the notice. The shareholder shall have an opportunity to cure
the deficiency by providing additional information to the Secretary within such
period of time, not to exceed five (5) days from the date such deficiency
notice is given to the shareholder, as the Board of Directors or such committee
shall reasonably determine. If the deficiency is not cured within such period,
or if the Board of Directors or such committee reasonably determines that the
additional information provided by the shareholder, together with information
previously provided, does not satisfy the requirements of this Section 12 in
any material respect, then the Board of Directors may reject such shareholder's
nomination. The Secretary of the corporation shall notify a shareholder in
writing whether his nomination has been made in accordance with the time and
information requirements of this Section 12. Notwithstanding the procedure set
forth in this Section 12, if neither the Board of Directors nor such committee
makes a determination as to the validity of any nominations by a shareholder,
the presiding officer of the meeting of the shareholders shall determine and
declare at the meeting whether a nomination was made in accordance with the
terms of this Section 12. If the presiding officer determines that a
nomination was made in accordance with the terms of this Section 12, he shall
so declare at the meeting and ballots shall be provided for use at the meeting
with respect to such nominee. If the presiding officer determines that a
nomination was not made in accordance with the terms of this Section 12, he
shall so declare at the meeting and the defective nomination shall be
disregarded.
Section 13. New Business. At an annual meeting of shareholders,
only such new business shall be conducted, and only such proposals shall be
acted upon as shall have been brought before the annual meeting (a) by, or at
the direction of, the Board of Directors or (b) by any shareholder
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<PAGE> 8
of the corporation who complies with the notice procedures set forth in this
Section 13. For a proposal to be properly brought before an annual meeting by
a shareholder, the shareholder must have given timely notice thereof in writing
to the Secretary of the corporation. To be timely, a shareholder's notice must
be delivered to, or mailed and received at, the principal executive offices of
the corporation not less than sixty (60) days nor more than ninety (90) days
prior to the scheduled annual meeting, regardless of any postponements,
deferrals or adjournments of that meeting to a later date; provided, however,
that, if less than seventy (70) days' notice or proper public disclosure of the
date of the scheduled annual meeting is given or made, notice by the shareholder
to be timely must be so delivered or received not later than the close of
business on the tenth (10th) day following the earlier of the date on which such
notice of the date of the scheduled annual meeting was mailed or the day on
which such public disclosure was made. A shareholder's notice to the Secretary
shall set forth as to each matter the shareholder proposes to bring before the
annual meeting (a) a brief description of the proposal desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (b) the name and address, as they appear on the corporation's
books, of the shareholder proposing such business and any other shareholders
known by such shareholder to be supporting such proposal, (c) the class and
number of shares of stock of the corporation which are beneficially owned by the
shareholder on the date of such shareholder notice and by any other shareholders
known by such shareholder to be supporting such proposal on the date of such
shareholder notice, and (d) any financial interest of the shareholder in such
proposal.
The Board of Directors may reject any shareholder proposal not timely
made in accordance with the terms of this Section 13. If the Board of
Directors, or a designated committee thereof, determines that the information
provided in a shareholder's notice does not satisfy the informational
requirements of this Section 13 in any material respect, the Secretary of the
corporation shall promptly notify such shareholder of the deficiency in the
notice. The shareholder shall have an opportunity to cure the deficiency by
providing additional information to the Secretary within such period of time,
not to exceed five (5) days from the date such deficiency notice is given to
the shareholder, as the Board of Directors or such committee shall reasonably
determine. If the deficiency is not cured within such period, or if the Board
of Directors or such committee determines that the additional information
provided by the shareholder, together with information previously provided,
does not satisfy the requirements of this Section 13 in any material respect,
then the Board of Directors may reject such shareholder's proposal. The
Secretary of the corporation shall notify a shareholder in writing whether his
proposal has been made in accordance with the time and informational
requirements of this Section 13. Notwithstanding the procedure set forth in
this paragraph, if neither the Board of Directors nor such committee makes a
determination as to the validity of any shareholder proposal, the presiding
officer of the annual meeting shall determine and declare at the annual meeting
whether the shareholder proposal was made in accordance with the terms of this
Section 13. If the presiding officer determines that a shareholder proposal
was made in accordance with the terms of this Section 13, he shall so declare
at the annual meeting and ballots shall be provided for use at the meeting with
respect to any such proposal. If the presiding officer determines that a
shareholder proposal was not made in accordance with the terms of this Section
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<PAGE> 9
13, he shall so declare at the annual meeting and any such proposal shall not
be acted upon at the annual meeting.
This provision shall not prevent the consideration and approval or
disapproval at the annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection with such reports, no
new business shall be acted upon at such annual meeting unless stated, filed
and received as herein provided.
ARTICLE III
Directors
Section 1. General Powers. All corporate powers shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of, the Board of Directors except as
otherwise provided by the laws under which this corporation is formed or in the
Certificate of Incorporation.
Section 2. Number. The number of directors of the corporation
shall be composed of five directors. The number of directors may be increased
or decreased by a resolution of the Board of Directors or the shareholders,
provided that no decrease shall have the effect of shortening the term of any
incumbent director and, provided that, the number of directors constituting the
full Board of Directors shall not be changed without the affirmative vote of at
least sixty-six and two-thirds percent (66 2/3%) of the issued and outstanding
shares of Common Stock.
Section 3. Tenure and Qualifications. Each director shall hold
office until the next annual meeting of shareholders and until his successor
shall have been elected and qualified unless removed in accordance with
Delaware law. Directors need not be residents of any particular state or
shareholders of the corporation.
Section 4. Election. The directors shall be elected by the
shareholders at their annual meeting each year; and if, for any cause, the
directors shall not have been elected at an annual meeting, they may be elected
at a special meeting of shareholders called for that purpose in the manner
provided by these Bylaws.
Section 5. Vacancies. Except as otherwise provided by law, in case
of any vacancy in the Board of Directors, the remaining directors, whether
constituting a quorum or not, may elect a successor to hold office for the
unexpired portion of the term of the director whose place shall be vacant and
until his successor shall have been duly elected and qualified.
Section 6. Resignation. Any director may resign at any time by
delivering written notice to the Secretary of the corporation.
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<PAGE> 10
Section 7. Removal of Directors. At a meeting of shareholders
called expressly for that purpose, the entire Board of Directors, or any member
thereof, may be removed, with or without cause, by vote of the holders of a
majority of shares then entitled to vote at an election of such directors.
Section 8. Meetings.
(a) The annual meeting of the Board of Directors shall be held
immediately after the annual shareholders' meeting (or any special shareholders'
meeting at which a Board of Directors is elected) at the same place as such
shareholders' meeting or at such other place and at such time as may be
determined by the Board of Directors. No notice of the annual meeting of the
Board of Directors shall be necessary.
(b) Special meetings of the Board of Directors may be called at
any time and place upon the call of the Chairman of the Board, President,
Secretary, or any two or more directors. Notice of the time and place of each
special meeting shall be given by the Secretary, or the persons calling the
meeting, by mail, radio, telegram, or by personal communication by telephone or
otherwise at least three (3) days in advance of the time of the meeting. The
purpose of the meeting need not be given in the notice. Notice of any special
meeting may be waived in writing or by telegram (ether before or after such
meeting) and will be waived by any director by attendance.
(c) Regular meetings of the Board of Directors shall be held at
such place and on such day and hour as shall from time to time be fixed by
resolution of the Board of Directors. No notice of regular meetings of the
Board of Directors shall be necessary if the time and place thereof shall have
been fixed by resolution of the Board of Directors and a copy of such
resolution is mailed to each director held at least three (3) days before the
first meeting held pursuant thereto.
(d) At any meeting of the Board of Directors, any business may be
transacted, and the Board of Directors may exercise all of its powers.
Section 9. Quorum and Voting.
(a) A majority of the directors in office at the time of any
meeting or action of the Board of Directors shall constitute a quorum, but a
lesser number may adjourn any meeting from time to time until a quorum is
obtained, and no further notice thereof need be given.
(b) At each meeting of the Board of Directors at which a quorum
is present, the act of a majority of the directors present at the meeting shall
be the act of the Board of Directors. The directors present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
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<PAGE> 11
Section 10. Action Without a Meeting. The Board of Directors or a
committee thereof may take any action which it could properly take at a meeting
without such a meeting if a consent in writing setting forth the action to be
taken shall be signed by all the directors, or all of the members of the
committee, as the case may be. Such consent shall have the same effect as a
unanimous vote.
Section 11. Telephone Meetings. Members of the Board of Directors
or any committee appointed by the Board of Directors may participate in a
meeting of such Board or committee by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other at the same time, and participation by such means
shall constitute presence in person at a meeting.
Section 12. Committees of the Board. The Board of Directors, by
resolutions adopted by a majority of the entire Board of Directors, may
designate from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and one or more other committees. Each such committee
may exercise the authority of the Board of Directors to the extent provided in
such resolution and any subsequent resolutions pertaining thereto and adopted
in like manner, provided that the authority of each such committee shall be
subject to the limitations set forth in Delaware law, as now or hereafter
amended. Such committees shall keep regular minutes of their proceedings and
report to the Board of Directors when requested to do so.
Section 13. Compensation. By resolution of the Board of Directors,
the directors may be paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as director. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
Section 14. Presumption of Assent. A director of the corporation
who is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless his dissent shall be entered in the minutes of the meeting or
unless he shall file his written dissent to such action with the person acting
as the secretary of the meeting before the adjournment thereof or shall forward
such dissent by registered mail to the Secretary of the corporation immediately
after the adjournment of the meeting. Such right to dissent shall not apply to
a director who voted in favor of such action.
ARTICLE IV
Officers
Section 1. Officers Designated. The officers of the corporation
shall be the President and a Secretary, each of whom shall be elected by the
Board of Directors. Such other officers and assistant officers as may be
deemed necessary may be elected or appointed by the Board of
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<PAGE> 12
Directors. Any two or more offices may be held by the same person, except the
offices of President and Secretary.
The Board of Directors may, in its discretion, elect a Chairman of the
Board. If a Chairman of the Board has been elected, he shall, when present,
preside at all meetings of the Board of Directors and the shareholders and
shall have such other powers as the Board of Directors may prescribe.
Section 2. Elections, Qualification and Term of Office. Each of
the officers shall be elected by the Board of Directors. At least two officers
of the corporation shall be directors of the corporation. The officers shall
be elected by the Board of Directors, to hold office at the pleasure of the
Board of Directors.
Section 3. Powers and Duties.
(a) President. The President, subject to the direction and
control of the Board of Directors, shall have general charge and supervision
over its property, business, and affairs. He shall, unless a Chairman of the
Board has been elected and is present, preside at meetings of the shareholders
and the Board of Directors. The President shall be the Chief Executive Officer
of the Corporation, unless the Chairman of the Board has been designated as
such by the Board of Directors.
(b) Vice President. In the absence of the President or his
inability to act, the most senior Vice President shall act in his place and
stead and shall have all the powers and authority of the President, except as
limited by resolution of the Board of Directors. Each Vice President shall
perform such other duties as are assigned by the Board of Directors.
(c) Secretary. The Secretary shall: (1) keep the minutes of the
shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (2) see that all notices are duly given in accordance
with the provisions of these Bylaws or as required by law; (3) be custodian of
the corporate records and of the seal of the corporation and affix the seal of
the corporation to all documents as may be required; (4) keep a register of the
post office address of each shareholder which shall be furnished to the
Secretary by such shareholder; (5) sign with the President, or Vice President,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (6) have general charge
of the stock transfer books of the corporation; and (7) in general perform all
duties as from time to time may be assigned to him by the President or by the
Board of Directors.
(d) Treasurer. Subject to the direction and control of the Board
of Directors, the Treasurer shall have the custody, control, and disposition of
the funds and securities of the corporation and shall account for the same;
and, at the expiration of his term of office, he shall turn over to his
successor all property of the corporation in his possession. The Treasurer
shall cause to be deposited all funds and other valuable effects in the name of
the corporation in such depositories as may be designated by the Board of
Directors. In general, the Treasurer shall
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perform all of the duties incident to the office of Treasurer, and such other
duties as from time to time may be assigned by the Board of Directors.
Section 4. Other Officers and Agents. The Board of Directors may
appoint such other officers and agents as it shall deem necessary or expedient,
who shall hold their office for such terms, and shall exercise such powers and
perform such duties, as shall be determined from time to time by the Board of
Directors.
Section 5. Removal. The Board of Directors shall have the right to
remove any officer whenever in its judgment the best interest of the corporation
will be served thereby. Such removal shall be without prejudice to any contract
rights of the person so removed.
Section 6. Salaries. The salaries of all officers of the corporation
shall be fixed by the Board of Directors.
ARTICLE V
Share Certificates
Section 1. Share Certificates. Share Certificates shall be issued
in numerical order, and each shareholder shall be entitled to a certificate
signed by the President or a Vice President, attested by the Secretary, or an
Assistant Secretary, and sealed with the corporate seal, if any. Facsimiles of
the signatures and seal may be used, as permitted by law. Every share
certificate shall state:
(i) The corporation is organized under the laws of the
State of Delaware;
(ii) The name of the person to whom issued;
(iii) The number, class and series (if any) of shares which
this certificate represents; and
(iv) If the corporation is authorized to issue shares of more
than one class, that upon request and without charge,
the corporation will furnish any shareholder with a full
statement of the designations, preferences, limitations
and relative rights of the shares of each class.
Section 2. Consideration for Shares. Shares of this corporation
may be issued for such consideration expressed in dollars (not less than par,
if the shares have par value) as shall be fixed from time to time by the Board
of Directors. The consideration for the issuance of shares may be paid in
whole or in part in cash, promissory notes, services performed, contracts for
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<PAGE> 14
services to be performed or other tangible or intangible property. The
reasonable charges and expenses of organization or reorganization and the
reasonable expenses of and compensation for the sale or underwriting of its
shares may be paid or allowed by the corporation out of the consideration
received by it in payment of its shares without rendering the shares not fully
paid or assessable.
Section 3. Transfers. Shares may be transferred by delivery of the
certificate, accompanied either by an assignment in writing on the back of the
certificate, or by a written power of attorney to sell, assign and transfer the
same, signed by the record holder of the certificate. Except as otherwise
specifically provided in these Bylaws, no shares of stock shall be transferred
on the books of the corporation until the outstanding certificate therefor has
been surrendered to the corporation.
Section 4. Loss or Destruction of Certificate. In the event of the
loss or destruction of any certificate, a new certificate may be issued in lieu
thereof upon satisfactory proof of such loss or destruction, and upon the giving
of security against loss to the corporation by bond, indemnity or otherwise, to
the extent deemed necessary by the Board of Directors or the Secretary or
Treasurer.
ARTICLE VI
Books and Records
Section 1. Books of Accounts, Minutes, and Share Register. The
corporation shall keep complete books and records of accounts and minutes of
the proceedings of the Board of Directors and shareholders and shall keep at
its registered office, principal place of business, or at the office of its
transfer agent or registrar a share register giving the names of the
shareholders in alphabetical order and showing their respective addresses and
the number of shares held by each.
Section 2. Copies of Resolutions. Any person dealing with the
corporation may rely upon a copy of any of the records of the proceedings,
resolutions, or votes of the Board of Directors or shareholders, when certified
by the President or Secretary.
Section 3. Books of Account. The corporation shall keep
appropriate and complete books of account.
Section 4. Examination of Records. Upon presenting a written
demand requesting examination and providing a detailed statement of the purpose
of such examination, any shareholder of record or holder of record of voting
trust certificates for shares of the corporation for at least six (6) months,
or any holder of record of or the holder of record of voting trust certificates
for at least 5% of the outstanding shares of the corporation, shall have the
right to examine for any proper purpose, in person or by his or her attorney or
agent, during usual
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<PAGE> 15
business hours, the corporation's list of its shareholders, relevant records of
accounts and minutes of meetings and make extracts therefrom.
ARTICLE VII
Corporate Seal
The Board of Directors may provide for a corporate seal which shall
have inscribed thereon the name of the corporation, the year and state of
incorporation and the words "corporate seal".
ARTICLE VIII
Loans
The corporation may not lend money to or guarantee the obligation of a
director of the corporation unless first approved in the manner required by
Delaware law.
ARTICLE IX
Amendment of Bylaws
Section 1. By the Shareholders. Neither these Bylaws nor any
provision herein may be amended, altered, or repealed by the shareholders of
the corporation, nor shall any provision of these Bylaws of the corporation
inconsistent with any such provision be adopted by the stockholders of the
Corporation, unless approved by the affirmative vote of at least seventy-five
(75%) of the issued and outstanding shares of Common Stock.
Section 2. By the Board of Directors. These Bylaws may be amended,
altered, or repealed by the affirmative vote of a majority of the whole Board
of Directors at any regular or special meeting of the Board.
ARTICLE X
Fiscal Year
The fiscal year of the corporation shall be set by resolution of the
Board of Directors.
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<PAGE> 16
ARTICLE XI
Rules of Order
The Board of Directors may adopt rules of procedure to govern any
meeting of shareholders or directors to the extent not inconsistent with law,
the corporation's Certificate of Incorporation, or these Bylaws, as they are in
effect from time to time. In the absence of any rule of procedure adopted by
the Board of Directors, the Chairman of the Board shall make all decisions
regarding such procedure for any meeting.
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<PAGE> 1
EXHIBIT 4.1.2
- --------------------------------------------------------------------------------
REPRESENTATIVE'S WARRANT AGREEMENT
by and between
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
and
CRUTTENDEN ROTH INCORPORATED
-----------------------
April ___, 1998
- --------------------------------------------------------------------------------
<PAGE> 2
REPRESENTATIVE'S WARRANT AGREEMENT
THIS REPRESENTATIVE'S WARRANT AGREEMENT (the "Agreement") is dated as
of April _____, 1998 and entered into by and between AMERICAN AIRCARRIERS
SUPPORT, INCORPORATED, a Delaware corporation (the "Company"), and CRUTTENDEN
ROTH INCORPORATED (the "Warrantholder").
The Company hereby issues and sells, and the Warrantholder hereby
purchases, for the price of $0.001 per warrant, warrants, as hereinafter
described, to purchase up to an aggregate of 200,000 shares (the "Warrant
Shares") of the Company's Common Stock, $0.001 par value per share (the "Common
Stock"), in connection with the initial public offering (the "Public Offering")
by the Company of 2,000,000 Shares of Common Stock pursuant to an Underwriting
Agreement dated as of March ____, 1998 (the "Underwriting Agreement") between
the Company and the Warrantholder, as Representative of the several
Underwriters named in the Underwriting Agreement. The purchase and sale of the
Warrants shall occur on the Closing Date, as that term is defined in the
Underwriting Agreement, and be subject to the conditions to the Underwriters'
obligations to purchase the Common Stock thereunder and the performance of
such obligations by the Underwriters.
In consideration of the foregoing and for the purpose of defining the
terms and provisions of the Warrants and the respective rights and obligations
thereunder, the Company and the Warrantholder, for value received, hereby agree
as follows:
1. TRANSFERABILITY OF WARRANTS.
1.1 Registration. The Warrants shall be numbered and
shall be registered on the books of the Company when issued.
1.2 Transfer. The Warrants shall be transferable only on
the books of the Company maintained at its principal office in Fort Mill, South
Carolina or wherever its principal office may then be located, upon delivery
thereof duly endorsed by the Warrantholder or by its duly authorized attorney
or representative, accompanied by proper evidence of succession, assignment or
authority to transfer. Upon any registration of transfer, the Company shall
execute and deliver a new certificate evidencing the Warrants to the person
entitled thereto and the surrendered Warrants shall be canceled by the Company.
Canceled Warrants shall be disposed of by the Company in a manner satisfactory
to the Company.
1.3 Limitations on Transfer of the Warrants. Subject to
the provisions of Section 11 hereto, the Warrants shall not be sold,
transferred, assigned or hypothecated by the Warrantholder until April ___,
1999, except to (i) one or more persons, each of whom on the date of transfer
is an officer or partner of the Warrantholder; (ii) a successor to the
Warrantholder in a merger or consolidation; (iii) a purchaser of all or
substantially all of the Warrantholder's assets; or (iv) any person receiving
the Warrants from one or more of the persons listed in this Section 1.3 at such
person's or persons' death pursuant to will, trust or the laws of intestate
succession. The Warrants may be divided or combined, upon request to the
Company by the Warrantholder, into a certificate or certificates representing
the right to purchase the same aggregate number of Warrant Shares. Unless the
context indicates otherwise, the term "Warrantholder" shall include any
transferee or transferees of the Warrants pursuant to this Section 1.3,
<PAGE> 3
and the term "Warrants" shall include any and all warrants outstanding pursuant
to this Agreement, including those evidenced by a certificate or certificates
issued upon division, exchange, substitution or transfer pursuant to this
Agreement.
1.4 Warrants. The number of Warrant Shares issuable upon
exercise of the Warrants is subject to adjustment upon the occurrence of
certain events, all as hereinafter provided. The Warrants shall be executed on
behalf of the Company by its President or by a Vice President, attested to by
its Secretary or an Assistant Secretary, and if none, then by its Chief
Financial Officer. A Warrant bearing the signature of an individual who was at
any time the proper officer of the Company shall bind the Company,
notwithstanding that such individual shall have ceased to hold such office
prior to the delivery of such Warrant or did not hold such office on the date
of this Agreement. The Warrants shall be dated as of the date of signature
thereof by the Company either upon initial issuance or upon division, exchange,
substitution or transfer.
1.4.1 Legend on Warrant Shares. Each certificate
for Warrant Shares initially issued upon exercise of the Warrants shall bear
the following legend, unless, at the time of exercise, such Warrant Shares are
subject to a currently effective Registration Statement under (as that term is
defined in Section 11.1) the Securities Act of 1933, as amended (the "1933
Act"):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS AND MAY NOT BE SOLD, EXCHANGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH SECTION
11 OF THE REPRESENTATIVE'S WARRANT AGREEMENT DATED APRIL ____, 1998,
PURSUANT TO WHICH THEY WERE ISSUED."
Any certificate issued at any time in exchange or substitution for
any certificate bearing such legend (except a new certificate issued upon
completion of a public distribution pursuant to a Registration Statement under
the 1933 Act, of the securities represented thereby) shall also bear the above
legend unless, in the opinion of the Company's counsel, the securities
represented thereby need no longer be subject to such restrictions.
2. EXCHANGE OF WARRANT CERTIFICATE. Any Warrant certificate may
be exchanged for another certificate or certificates entitling the
Warrantholder to purchase a like aggregate number of Warrant Shares as the
certificate or certificates surrendered entitled the Warrantholder to purchase.
The Warrantholder desiring to exchange a Warrant certificate shall make such
request in writing delivered to the Company, and shall surrender, properly
endorsed, with signatures guaranteed, the certificate evidencing the Warrant to
be so exchanged. Thereupon, the Company shall execute and deliver to the
Warrantholder entitled thereto a new Warrant certificate as so requested.
<PAGE> 4
3. TERM OF WARRANTS; EXERCISE OF WARRANTS.
3.1 Term; termination Date. Subject to the terms of this
Agreement, the Warrantholder shall have the right to exercise the Warrants as
set forth herein, at any time during the period commencing at 9:00 a.m., Los
Angeles, California time on April ____, 1998 and ending at 5:00 p.m. Los
Angeles, California time, on April ____, 2004 (the "Termination Date"), to
purchase from the Company up to the number of fully-paid and nonassessable
Warrant Shares to which the Warrantholder may at the time be entitled to
purchase pursuant to this Agreement, upon surrender to the Company, at its
principal office, or at the office of the Company's transfer agent, of the
certificate evidencing the Warrants to be exercised, together with a copy of
the purchase form attached hereto (the "Purchase Form") duly completed and
signed, with signatures guaranteed, and upon payment to the Company of the
Warrant Price (as defined in and determined in accordance with the provisions
of this Section 3 and Sections 7 and 8 hereof), for the number of Warrant
Shares in respect of which such Warrants are then exercised, but in no event
for less than one hundred (100) Warrant Shares (unless fewer than an aggregate
of one hundred (100) Warrant Shares are then purchasable under all outstanding
Warrants held by the Warrantholder).
3.2 Exercise Methods. Payment of the Warrant Price (as
that term is defined in Section 7 below) may be made in the manner provided
below in this Section 3.2 for the number of Warrant Shares specified in the
attached Purchase Form. The Warrantholder may make payment of the Warrant
Price, in his, her or its sole discretion, by (i) the payment of cash in the
amount of the Warrant Price multiplied by the number of Warrant Shares being
purchased in connection with such exercise; (ii) the cancellation of
indebtedness, if any, owing by the Company to the Warrantholder in the amount
of the Warrant Price multiplied by the number of Warrant Shares being purchased
in connection with such exercise; (iii) surrendering to the Company shares of
the Company's Common Stock owned by the Warrantholder and having a Current
Market Price (as determined in accordance with Section 9 below) equal to the
Warrant Price multiplied by the number of shares being purchased in connection
with such exercise; (iv) surrendering to the Company the right to acquire a
number of Warrant Shares such that the aggregate Current Market Price of such
surrendered Warrant Shares equals the Warrant Price multiplied by the total
number of Warrant Shares desired to be exercised by the Warrantholder (which
type of cashless exercise shall be referred to herein as an "Appreciation
Currency" exercise (as that term is defined in Section 3.3 below)); (v) a same
day sale brokered exercise; (vi) a margined exercise; (vii) the issuance of a
nonrecourse promissory note (which can be made recourse at any time at the
Warrantholder's option) in the amount of the Warrant Price multiplied by the
number of Warrant Shares being purchased in connection with such exercise and
secured by the Warrant Shares being purchased (or other collateral of
sufficient value specified or substituted by the Warrantholder) and payable one
(1) year from the date of such promissory note, if not prepaid earlier, and
bearing interest at the statutory rate applicable on the date of the promissory
note under the Internal Revenue Code of 1986, as amended, with such interest
payable quarterly in cash or in shares of the Company's Common Stock valued in
accordance with Section 9 hereof; or (viii) any combination of the foregoing
exercise methods. If the Warrants should be exercised only in part, the
Company shall, if the Warrants are surrendered for cancellation, execute and
deliver a new Warrant certificate of the same tenor evidencing the right of the
Warrantholder to purchase the balance of the Warrant Shares purchasable
hereunder upon the same terms and conditions as herein set forth. On receipt
of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of the Warrants, the Company, at its cost and
expense, shall execute and deliver in lieu of the Warrants, new warrants of
like tenor and amount. Upon receipt by the Company or its transfer agent of a
Purchase Form in proper form for exercise, and (except in the case of an
exercise pursuant to clauses (iii) or (iv) above of this Section 3.2)
accompanied by payment as herein provided, the Warrantholder shall be deemed to
be the holder of record of the Warrant Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then be
closed or that
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<PAGE> 5
certificates representing such Warrant Shares shall not then be actually
delivered to the Warrantholder. If the Warrantholder elects to use either of
the exercise methods described in clauses (iii) or (iv) of this Section 3.2,
the number of Warrant Shares issuable upon such exercise shall be based on the
determination, as of the date of the Purchase Form relating to such exercise,
of the Current Market Price of the Company's Common Stock issuable upon such
exercise as determined in accordance with Section 9 below.
Upon payment of such Warrant Price as set forth hereinabove,
the Company shall issue and cause to be delivered with all reasonable dispatch
to or upon the written order of the Warrantholder and in the name or names of
the Warrantholder or, subject to compliance with the provisions of Section 11.1
hereof, in such name or names as the Warrantholder may designate, a certificate
or certificates for the number of full Warrant Shares so purchased upon the
exercise of the Warrant, together with cash, as provided in Section 9 hereof,
in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been
issued and any person so designated to be named therein shall be deemed to have
become a holder of record of such securities as of the date of surrender of the
Warrants and payment of the Warrant Price, as aforesaid. The Warrants shall be
exercisable, at the election of the Warrantholder, either in full or from time
to time in part and, in the event that a certificate evidencing the Warrants is
exercised in respect of less than all of the Warrant Shares specified therein
at any time prior to the Termination Date, a new certificate evidencing the
remaining portion of the Warrants will promptly be issued by the Company.
3.3 Appreciation Currency. As used herein, "Appreciation
Currency" shall mean the consideration given by the surrender of Warrants in
exchange for Warrant Shares. The number of Warrant Shares to which the holder
shall be entitled upon such surrender of Warrants shall be determined by
applying the following formula: WS=NWS$ x [(CMP$-WP$)/CMP$], where:
"WS" is the number of Warrant Shares to which the
holder shall be entitled upon surrender of Warrants;
"NWS$" is the number of Warrant Shares that would be
received if the Warrants surrendered were instead exercised for cash;
"CMP$" is the Current Market Price (as defined in
Section 9 hereof) per share of Common Stock; and
"WP$" is the Warrant Price (as defined in Section 7
hereof) as adjusted and readjusted as set forth in Section 8 hereof.
4. PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of the Warrants or the
securities comprising the Warrant Shares; provided, however, that the Company
shall not be required to pay any tax or taxes that may be payable (i) in
respect of any secondary transfer of the Warrants or the securities comprising
the Warrant Shares; or (ii) as a result of the issuance of Warrant Shares to
any person or entity, other than Cruttenden Roth Incorporated. The Company
shall not be required to issue or deliver any certificate for any Warrant
Shares unless and until the person or entity requesting the issuance thereof
shall have paid to the Company the amount of such tax or shall have produced
evidence that such tax has been paid to the appropriate taxing authority.
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5. MUTILATED OR MISSING WARRANTS. In case the certificate or
certificates evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder, issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
certificate or certificates, or in lieu of and in substitution for the
certificate or certificates that have been lost, stolen or destroyed, a new
Warrant certificate or certificates of like tenor and representing an
equivalent right or interest, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction of such Warrant
and a bond of indemnity, if requested, also satisfactory in form and amount,
and issued at the applicant's cost and expense. Any such applicant for a
substitute Warrant certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe
in writing.
6. RESERVATION OF WARRANT SHARES. There has been reserved, and
the Company shall at all times keep reserved so long as the Warrants remain
outstanding, out of its authorized Common Stock, such number of shares of
Common Stock as shall be subject to purchase under the Warrants. The Company
will supply every transfer agent for the Common Stock and other securities of
the Company issuable upon the exercise of the Warrants with duly executed stock
and other certificates, as appropriate, for such purpose and will provide or
otherwise make available any cash that may be payable as provided in Section 9
hereof.
7. WARRANT PRICE. The price per share at which Warrant Shares
shall be purchasable by the Warrantholder upon the exercise of the Warrants
(the "Warrant Price") shall be ______ Dollars and ____/No ($________ ), subject
to further adjustment pursuant to Section 8 hereof.
8. ADJUSTMENT OF NUMBER OF WARRANT SHARES. The number and kind
of securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
8.1 Adjustments. The number of Warrant Shares
purchasable upon the exercise of the Warrants shall be subject to adjustment as
follows: In case the Company shall (i) pay a dividend in Common Stock or make
a distribution in Common Stock; (ii) subdivide its outstanding Common Stock;
(iii) combine its outstanding Common Stock into a smaller number of shares of
Common Stock; or (iv) issue by reclassification of its Common Stock other
securities of the Company, then the Warrant Price and the number of Warrant
Shares purchasable upon exercise of the Warrants immediately prior thereto
shall be proportionately adjusted so that the Warrantholder shall be entitled
to receive the kind and number of Warrant Shares or other securities of the
Company that he, she or it would have owned or would have been entitled to
receive immediately after the happening of any of the events described above,
had the Warrants been exercised at the Warrant Price immediately prior to the
happening of such event or any record date with respect thereto, whichever is
earlier. Any adjustment made pursuant to this Section 8.1 shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event. For the purpose of this Section 8.1, the
term "Common Stock" shall mean (i) the class of stock designated as the Common
Stock of the Company at the date of this Agreement; or (ii) any other class of
stock resulting from successive changes in or reclassifications of such Common
Stock consisting solely of changes in its par value, or changes from par value
to no par value, or changes from no par value to par value.
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8.2 No Adjustment for Dividends. Except as provided in
Section 8.1 hereof, no adjustment in respect of any dividends or distributions
out of earnings shall be made during the term of the Warrants or upon the
exercise of the Warrants.
8.3 Certificate of Adjustment. Whenever the number of
Warrant Shares purchasable upon the exercise of the Warrants is adjusted as
herein provided, the Company shall cause to be promptly prepared and mailed to
the Warrantholder by first class mail, postage prepaid, notice of such
adjustment and a certificate of the Chief Financial Officer of the Company
setting forth the number of Warrant Shares purchasable upon the exercise of the
Warrants after such adjustment, a brief statement of the facts requiring such
adjustment and the computation by which such adjustment was made; provided,
however, that such a notice of adjustment and certificate shall only be
required for adjustments that result in a change in the Warrant Price or in the
number of Warrant Shares purchasable upon exercise of the Warrants of five
percent (5%) or more.
8.4 Preservation of Purchase Rights upon
Reclassification, Consolidation, etc. In case of any consolidation of the
Company with or merger of the Company into another corporation or company or in
case of any sale or conveyance to another corporation or company of the
property, assets or business of the Company as an entirety or substantially as
an entirety, the Company or such successor or purchasing corporation or
company, as the case may be, shall execute with the Warrantholder an agreement
that the Warrantholder shall have the right thereafter, upon payment of the
Warrant Price in effect immediately prior to such action, to purchase, upon
exercise of the Warrants, the kind and number of Warrant Shares and other
securities and property that the Warrantholder would have owned or have been
entitled to receive after the happening of such consolidation, merger, sale or
conveyance had the Warrants been exercised immediately prior to such action.
In the event of a merger described in Section 368(a)(2)(E) of the Internal
Revenue Code of 1986, as amended, in which the Company is the surviving
corporation, the right to purchase Warrant Shares under the Warrants shall
terminate on the date of such merger and thereupon the Warrants shall become
null and void, but only if the controlling corporation shall agree to
substitute for the Warrants its warrant entitling the holder thereof to
purchase upon its exercise the kind and amount of Warrant Shares and other
securities and property that the Warrantholder would have owned or been
entitled to receive had the Warrants been exercised immediately prior to such
merger. Any such agreements referred to in this Section 8.4 shall provide for
adjustments, which shall be as nearly equivalent as may be practicable to the
adjustments provided for in Section 8.1 hereof. The provisions of this Section
8.4 shall similarly apply to successive consolidations, mergers, sales or
conveyances.
8.5 Par Value of Warrant Shares. Before taking any
action that would cause an adjustment effectively reducing the portion of the
Warrant Price allocable to each Warrant Share below the then par value per
share of the Common Stock issuable upon exercise of the Warrants, the Company
will take any corporate action that may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue fully-paid
and nonassessable Common Stock upon exercise of the Warrants.
8.6 Independent Public Accountants. The Company may
retain a firm of independent public accountants of recognized national standing
(which may be any such firm regularly employed by the Company) to make any
computation required under this Section 8.
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8.7 Statement on Warrant Certificates. Irrespective of
any adjustments in the number of securities issuable upon exercise of the
Warrants, Warrant certificates theretofore or thereafter issued may continue to
express the same number of securities as are stated in the Warrant certificates
initially issuable pursuant to this Agreement. However, the Company may, at
any time, make any change in the form of Warrant certificate that it may deem
appropriate and that does not affect the substance thereof; and any Warrant
certificate thereafter issued, whether upon registration of transfer of, or in
exchange or substitution for, an outstanding Warrant certificate, may be issued
in the form so changed.
9. FRACTIONAL INTERESTS; CURRENT MARKET PRICE. The Company shall
not be required to issue fractional Warrant Shares upon the exercise of the
Warrants. If any fraction of a Warrant Share would, except for the provisions
of this Section 9, be issuable upon the exercise of the Warrants (or any
portion thereof), the Company shall pay an amount in cash equal to the then
Current Market Price (as that term is defined below) per share of Common Stock
multiplied by such fraction. For purposes of this Agreement, the term "Current
Market Price" shall mean (i) if the Common Stock is traded in the
over-the-counter market and not on the Nasdaq National Market System nor on any
national securities exchange, the average of the per share closing bid price on
the twenty (20) consecutive trading days immediately preceding the date in
question, as reported by the Nasdaq SmallCap Market (or an equivalent generally
accepted reporting service if quotations are not reported on the Nasdaq
SmallCap Market); or (ii) if the Common Stock is traded on the Nasdaq National
Market System or on a national securities exchange, the average for the twenty
(20) consecutive trading days immediately preceding the date in question of the
daily per share closing prices on the Nasdaq National Market System or on the
principal stock exchange on which the Common Stock is listed, as the case may
be. For purposes of clause (i) above, if trading in the Common Stock is not
reported by the Nasdaq SmallCap Market, the applicable bid price referred to in
said clause (i) shall be the lowest bid price as reported by the Nasdaq
Electronic Bulletin Board or, if not reported thereon, as reported in the "pink
sheets" published by National Quotation Bureau, Incorporated, and, if such
securities are not so reported, shall be the price of a share of Common Stock
determined by the Company's Board of Directors in good faith. The closing price
referred to in clause (ii) above shall be the last reported sale price or, in
case no such reported sale takes place on such day, the average of the reported
closing bid and asked prices, in either case on the Nasdaq National Market
System or on the national securities exchange on which the Common Stock is then
listed.
10. NO RIGHTS AS SHAREHOLDER; NOTICES TO WARRANTHOLDER. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder or its transferees any rights as a shareholder of the
Company, including the right to vote, receive dividends or other distributions,
consent or receive notices as a shareholder in respect of any meeting of
shareholders for the election of directors of the Company or any other matter,
or any rights whatsoever as shareholders of the Company. If, however, at any
time prior to the expiration of the Warrants and prior to their exercise, any
one or more of the following events shall occur:
10.1 any action that would require an adjustment pursuant
to Section 8.1 hereof; or
10.2 a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger or sale of its
property, assets and business as an entirety or substantially as an entirety)
shall be proposed;
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<PAGE> 9
then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 14 hereof, at least fifteen (15) days
prior to the date fixed as a record date or the date of closing the transfer
books for the determination of the shareholder entitled to any relevant
dividend, distribution, subscription rights or other rights or for the
determination of shareholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be. The failure to give
notice required by this Section 10 or any defect therein shall not affect the
legality or validity of any dividend, distribution, right, dissolution,
liquidation or winding up, or the vote upon any action.
11. RESTRICTIONS ON TRANSFER; REGISTRATION RIGHTS.
11.1 Written Notice. The Warrantholder agrees that prior
to making any disposition of the Warrants or the Warrant Shares, including
without limitation, to persons or entities identified in clauses (i) through
(iv), inclusive, of Section 1.3 hereof, other than pursuant to a registration
statement or other notification or post- effective amendment thereto (herein,
collectively, a "Registration Statement") filed by the Company with, and
declared effective by, the United States Securities and Exchange Commission
(the "Commission"), the Warrantholder shall give written notice to the Company
describing briefly the manner in which any such proposed disposition is to be
made and shall provide such other information as may reasonably be required by
the Company to conclude that no Registration Statement under the 1933 Act or
under applicable state "blue sky" laws, rules or regulations is required with
respect to such disposition, and no such disposition shall be made if the
Company has notified the Warrantholder in writing that in the opinion of
counsel satisfactory to the Warrantholder a Registration Statement under the
1933 Act is required with respect to such disposition and no such Registration
Statement has been filed by the Company with, and, to the extent required,
declared effective by, the Commission.
11.2 "Piggy Back" Registration Rights. Whenever during
the five (5) year period beginning on April ____, 1999 and ending on April
____, 2003, the Company proposes to file with the Commission a Registration
Statement (other than as to securities issued pursuant to an employee benefit
plan or as to a transaction subject to Rule 145 promulgated under the 1933 Act
or for which a Form S-4 Registration Statement could be used), it shall, at
least thirty (30) days prior to each such filing, give written notice of such
proposed filing to the Warrantholder and each holder of Warrant Shares, at
their respective addresses as they appear on the records of the Company, and
shall offer to include and shall, on two (2) occasions only, include in such
filing any proposed disposition of the Warrants and Warrant Shares upon receipt
by the Company, not less than ten (10) days prior to the proposed filing date,
of a request therefor setting forth the facts with respect to such proposed
disposition and all other information with respect to such person or entity
reasonably necessary to be included in such Registration Statement. In the
event that the managing underwriter for said offering advises the Company in
writing that the inclusion of such securities in the offering would be
detrimental to the offering, such securities shall nevertheless be included in
the Registration Statement as long as the Warrantholder and each holder of
Warrants and Warrant Shares desiring to have such securities included in the
Registration Statement agrees in writing, for a period of ninety (90) days
following such offering, not to sell or otherwise dispose of such securities
pursuant to such Registration Statement, which Registration Statement the
Company shall keep effective for a period of at least nine (9) months following
the expiration of such ninety (90) day period.
11.2.1 Demand Registration Rights. In addition to
any Registration Statement pursuant to Section 11.2 above, at any time during
the period the Warrants are exercisable, the Company
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<PAGE> 10
will, as promptly as practicable (but in any event within sixty (60) days),
after written request (the "Request") by Cruttenden Roth Incorporated, or by a
person(s) or entity(ies) holding (or having the right to acquire by virtue of
holding the Warrants) at least fifty percent (50%) of the Warrant Shares that
have been (or may be) issued upon exercise of the Warrants, prepare and file at
its own cost and expense a Registration Statement with the Commission and
appropriate state "blue sky" authorities sufficient to permit the public
offering of the Warrants and Warrant Shares, and will use reasonable efforts at
its own cost and expense through its officers, directors, auditors and counsel,
in all matters necessary or advisable, to cause such Registration Statement to
become effective as promptly as practicable and to maintain such effectiveness
so as to permit resale of the Warrant Shares covered by the Request until the
earlier of the time that all such Warrant Shares have been sold or the
expiration of one hundred-twenty (120) days from the effective date of the
Registration Statement; provided, however, that the Company shall only be
obligated to file one (1) such Registration Statement under this Section
11.2.1.
11.3 Payment of Fees. All fees, disbursements and
out-of-pocket expenses (other than Warrantholders' and holders' of Warrant
Shares brokerage fees and commissions and legal fees of counsel to the
Warrantholders and holders of Warrant Shares, if any) in connection with the
filing of any Registration Statement under Section 11.2 hereof and in complying
with applicable securities and state "blue sky" laws, rules and regulations
shall be borne by the Company. The Company at its cost and expense will supply
any Warrantholder and any holder of Warrant Shares with copies of such
Registration Statement and the prospectus included therein and other related
documents in such quantities as may be reasonably requested by the
Warrantholder or holder of Warrant Shares.
11.4 No Obligation of File. The Company shall not be
required by this Section 11 to file such Registration Statement if, in the
opinion of counsel for the Warrantholder and holders of Warrant Shares and
counsel for the Company (or, should they not agree, in the opinion of another
counsel experienced in securities law matters acceptable to counsel for the
Warrantholder, holders of Warrant Shares and the Company), the proposed public
offering or other transfer as to which such Registration Statement is requested
is exempt from applicable federal and state securities laws, rules, regulations
and would result in unaffiliated purchasers or transferees obtaining securities
that are not "restricted securities," as that term is defined in Rule 144 under
the 1933 Act.
11.5 Regulation A Offerings. The provisions of this
Section 11 and Section 12 hereof shall apply to the extent as provided herein
if the Company chooses to file an Offering Statement under Regulation A
promulgated under the 1933 Act.
11.6 Obligation to Keep Current. The Company agrees that
until all Warrant Shares have been sold under a Registration Statement or
pursuant to Rule 144 under the 1933 Act, it will use reasonable efforts to keep
current the filing of all materials required to be filed with the Commission in
order to permit the holders of Warrant Shares to sell the same under Rule 144.
12. INDEMNIFICATION.
12.1 By the Company. In the event of the filing of any
Registration Statement with respect to the Warrant Shares pursuant to Section
11 hereof, the Company agrees to indemnify and hold harmless the Warrantholder
or any holder of such Warrant Shares and each person or entity, if any, who
controls the Warrantholder or any holder of such Warrant Shares within the
meaning of the 1933 Act,
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against any losses, claims, damages or liabilities, joint or several (which
shall, for all purposes of this Agreement, include, but not be limited to, all
costs of defense and investigation and all reasonable attorneys' fees), to
which the Warrantholder or any holder of such Warrant Shares or such
controlling person may become subject, under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained in any such Registration Statement, or any
related preliminary prospectus, final prospectus, or amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement, preliminary prospectus, final prospectus or amendment
or supplement thereto in reliance upon, and in conformity with, written
information furnished to the Company by the Warrantholder or the holder of such
Warrant Shares or any person or entity who controls the Warrantholder or any
holder of such Warrant Shares within the meaning of the 1933 Act specifically
for use in the preparation thereof. This indemnity will be in addition to any
liability that the Company may otherwise have.
12.2 By the Warrantholder. The Warrantholder and the
holders of the Warrant Shares agree that they will indemnify and hold harmless
the Company, each other person or entity referred to in subparts (1), (2) and
(3) of Section 11(a) of the 1933 Act in respect of the Registration Statement
and each person or entity, if any, who controls the Company within the meaning
of the 1933 Act, against any losses, claims, damages or liabilities (which
shall, for all purposes of this Agreement, include but not be limited to, all
costs of defense and investigation and all reasonable attorneys' fees), to
which the Company or any such director, officer or controlling person may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material
fact contained in such Registration Statement, or any related preliminary
prospectus, final prospectus or amendment or supplement thereto, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in such Registration Statement, preliminary prospectus, final prospectus or
amendment or supplement thereto in reliance upon, and in conformity with,
written information furnished to the Company by the Warrantholder or such
holder of Warrant Shares specifically for use in the preparation thereof. This
indemnity agreement will be in addition to any liability that the Warrantholder
or such holder of Warrant Shares may otherwise have.
12.3 Notice. Promptly after receipt by an indemnified
party under this Section 12 of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against
any indemnifying party under this Section 12, notify the indemnifying party in
writing of the commencement thereof, but the omission so to notify the
indemnifying party will not relieve him, her or it from any liability that he,
she or it may have to any indemnified party otherwise than under this Section
12. In case any such action is brought against any indemnified party, and he,
she or it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that he, she or it shall elect by written notice delivered to the indemnified
party promptly after receiving the aforesaid notice from such indemnified
party, to assume the defense thereof, with counsel reasonably satisfactory to
such indemnified party; provided, however, that if the defendants
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in any such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that there may
be legal defenses available to him, her or it and/or other indemnified parties
that are different from or in addition to those available to the indemnifying
party that poses a conflict of interest for such counsel, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf
of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of the indemnifying party's
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 12 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel
in accordance with the proviso to the next preceding sentence (it being
understood, however, that the indemnifying party shall not be liable for the
expenses of more than one (1) separate counsel (together with appropriate local
counsel) approved by the indemnifying party representing all the indemnified
parties under Sections 12.1 or 12.2 hereof who are parties to such action);
(ii) the indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of commencement of the action; or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the expense
of the indemnifying party. In no event shall any indemnifying party be liable
in respect of any amounts paid in settlement of any action unless the
indemnifying party shall have approved the terms of such settlement; provided,
however, that such consent shall not be unreasonably withheld. No indemnifying
party shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnification could have
been sought hereunder by such indemnified party, unless such settlement
includes an unconditional release of such indemnified party from all liability
on claims that are the subject matter of such indemnification.
13. CONTRIBUTION. In order to provide for just and equitable
contribution under the 1933 Act in any case in which (i) the Warrantholder or
any holder of Warrant Shares or controlling person makes a claim for
indemnification pursuant to Section 12 hereof but it is judicially determined
(by the entry of a final judgment or decree by a court of competent
jurisdiction and the expiration of time to appeal or the denial of the last
right of appeal) that such indemnification may not be enforced in such case
notwithstanding the fact that the express provisions of Section 12 hereof
provide for indemnification in such case; or (ii) contribution under the 1933
Act may be required on the part of the Warrantholder or any holder of Warrant
Shares or controlling person, then the Company and the Warrantholder or any
such holder of the Warrant Shares or controlling person shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(which shall, for all purposes of this Agreement, include, but not be limited
to, all costs of defense and investigation and all attorneys' fees), in either
such case (after contribution from others) on the basis of relative fault as
well as any other relevant equitable considerations. The relative fault shall
be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company, on the
one hand, or the Warrantholder or a holder of Warrant Shares or a controlling
person, on the other hand, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The Company and such holders of such securities and such controlling
persons agree that it would not be just and equitable if contribution pursuant
to this Section 13 were determined by pro rata allocation or by any other
method that does not take account of the equitable considerations referred to
in this Section 13. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof) referred to above in this
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Section 13 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim. No person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall
be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
14. NOTICES. Any notice pursuant to this Agreement by the Company
or by the Warrantholder or a holder of Warrant Shares shall be in writing and
shall be deemed to have been duly given if delivered or mailed by certified or
registered mail, return receipt requested:
14.1 Warrantholder. If to the Warrantholder or a holder
of Warrant Shares, addressed to Cruttenden Roth Incorporated, 18301 Von Karman,
Suite 100, Irvine, California, 92715, Attention: Corporate Finance Department.
14.2 The Company. If to the Company, addressed to it at
3516 Centre Circle Drive, Fort Mill, South Carolina 29715, Attention:
President.
Each party may from time to time change the address to which notices to it are
to be delivered or mailed hereunder by notice in accordance herewith to the
other party.
15. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Warrantholder, or the
holders of Warrant Shares shall bind and inure to the benefit of their
respective successors and permitted assigns hereunder.
16. MERGER OR CONSOLIDATION OF THE COMPANY. The Company may merge
or consolidate with or into any other corporation or company or sell all or
substantially all of its property or assets to another corporation; provided,
however, that the provisions of Section 8.4 hereof are complied with.
17. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements
contained in any schedule, exhibit, certificate or other instrument delivered
by or on behalf of the parties hereto, or in connection with the transactions
contemplated by this Agreement, shall be deemed to be representations and
warranties hereunder. Notwithstanding any investigations made by or on behalf
of the parties to this Agreement, all representations, warranties and
agreements made by the parties to this Agreement or pursuant hereto shall
survive the execution hereof.
18. APPLICABLE LAW. This Agreement shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be construed in accordance with the laws of said State.
19. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or entity other than the Company, the
Warrantholder and the holders of Warrant Shares any legal or equitable right,
remedy or claim under this Agreement. This Agreement shall be for the sole and
exclusive benefit of the Company, the Warrantholder and the holders of Warrant
Shares.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute one and the
same instrument.
-12-
<PAGE> 14
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-13-
<PAGE> 15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the day and year first above written.
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
By:
---------------------------------
Name: Karl F. Brown
Title: President
CRUTTENDEN ROTH INCORPORATED
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
<PAGE> 16
PURCHASE FORM
(To be signed only upon exercise of the Warrant)
To American Aircarriers Support, Incorporated:
The undersigned, the holder of the enclosed Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, a total of ________________________* shares of
the Common Stock of American Aircarriers Support, Incorporated, a Delaware
corporation, and herewith makes payment of $__________ therefor, and requests
that the certificate or certificates for such shares of Common Stock be issued
in the name of and delivered to the undersigned.
DATED:
-----------------------
---------------------------------------
(Signature must conform in all respects
to name of holder as specified on
the face of the Warrant)
---------------------------------------
- -----------------
* Insert here the number of shares called for on the face of the Warrant (or,
in the case of a partial exercise, the portion thereof as to which the Warrant
is being exercised), in either case without making any adjustment for
additional Common Stock or any other stock or other securities or property or
cash that, pursuant to the adjustment provisions of the Warrant Purchase
Agreement, may be deliverable upon exercise.
<PAGE> 1
EXHIBIT 10.1.1
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT effective January 31, 1998 (the
"Agreement") by and between AMERICAN AIRCARRIERS SUPPORT, INC., a South
Carolina corporation (the "Company"), with principal offices located at 3516
Centre Circle Drive, Fort Mill, South Carolina 29715 and KARL F. BROWN (the
"Executive").
NOW THEREFORE, in consideration of the foregoing premises and mutual
covenants herein contained, the parties hereto agree as follows:
1. Employment. The Company agrees to employ the Executive and
the Executive agrees to serve the Company as its Chief Executive Officer and
President.
2. Position and Responsibilities. The Executive shall exert his
best efforts and devote full time and attention to the affairs of the Company.
The Executive shall be in charge of formulating general policy and direction of
the Company, including strategic inventory and engine purchases and sales, and
developing, negotiating and concluding acquisitions, and shall have full
authority and responsibility with respect thereto, subject to the general
direction, approval and control of the Board of Directors and to the
restrictions, limitations and guidelines set forth by the Board of Directors in
resolutions adopted in the minutes of the Board of Directors meetings, copies
of which will be provided to the Executive from time to time and will be
incorporated herein by reference. His powers shall include the authority to
hire and fire personnel of the Company except for members of the Board of
Directors and to retain consultants when he deems necessary in order to
implement Company policies.
3. Board of Directors. The Executive shall at all times
discharge his duties in consultation with and under the supervision of the
Board of Directors of the Corporation. In the
<PAGE> 2
performance of his duties the Executive shall make his principal office at the
corporate headquarters of the Company in Fort Mill, South Carolina.
4. Term of Employment. The term of the Executive's employment
under this Agreement shall be deemed to have commenced on January 1, 1998 and
shall continue for a three-year period until December 31, 2000, subject to
extension as hereinafter provided or termination pursuant to the provisions set
forth in Paragraph 15 hereafter. Provided that Executive is in compliance with
all of his obligations hereunder, the term of Executive's employment shall be
extended for one additional year at the end of each year of the term or
extended term of this Agreement. For example, if Executive is in compliance
with all of his obligations hereunder on January 1, 1999, the term shall be
extended until December 31, 2001, on January 1, 2000, the term shall be
extended until December 31, 2002, and so on.
5. Duties. During the period of his employment hereunder and
except for illness, specified vacation periods and reasonable leaves of
absence, the Executive shall devote his best efforts and full, attention and
skill to the business and affairs of the Company, as such business and affairs
now exist and as they may be hereinafter changed or added to, under and
pursuant to the general direction of the Board of Directors of the Company.
6. Compensation. Commencing on January 1, 1998, the Company
shall pay to the Executive as compensation for his services the sum of $200,000
per year, payable bi-weekly, or such higher salary as may be from time to time
approved by the Board of Directors. In addition, the Executive shall receive
such additional compensation and/or bonuses or stock options as may be voted to
him at the sole discretion of the Board of Directors.
7. Expense Reimbursement. The Company will reimburse the
Executive, at least monthly, for all reasonable and necessary expenses incurred
by him in carrying out his duties under
2
<PAGE> 3
this Agreement. The Executive shall present to the Chief Financial Officer or
Controller each month an itemized account of such expenses in such form as is
reasonably required by the Board of Directors. Such expenses shall include
attorneys' fees and disbursements of Executive in connection with any legal
proceedings (including, but not limited to, arbitration), whether or not
instituted by the Company or Executive, relating to the interpretation or
enforcement of any provision of this Agreement; provided, however, that in the
case of any such proceeding to which the Company and the Executive are adverse
parties, the losing party shall reimburse the prevailing party for all costs
and expenses, including attorneys' fees and disbursements, incurred by the
prevailing party in defense or prosecution of any such proceeding. Prior to
advancing costs and expenses to Executive, the Board of Directors shall have
the right to obtain an agreement, and to require acceptable security therefor,
from Executive requiring him to repay Company for the same should it be
determined that Executive is not entitled to payment of such costs and
expenses.
8. Medical and Dental Coverage. The Executive, his wife, and
those children who qualify will be entitled to participate in the Company's
employee group medical and other group insurance programs on the same basis as
other executives of the Company.
9. Medical Examination. The Executive agrees to submit himself
for physical examination on one occasion per year as requested by the Company
for the purpose of the Company's obtaining life insurance on the life of the
Executive for the benefit of the Company; provided, however, that the Company
shall bear the entire cost of such examinations and shall pay all premiums on
any key man life insurance obtained for the benefit of the Company as
beneficiary.
10. Life Insurance Premiums. If the Executive qualifies for
coverage, the Company agrees to reimburse the Executive up to $10,000 per year
for life insurance premiums which the Executive may pay as premiums on any
policy of life insurance he may purchase for the benefit of his designated
beneficiary or beneficiaries.
3
<PAGE> 4
11. Automobile or Automobile Allowance. The Company will provide
the Executive with an automobile or with an automobile allowance in the amount
of $10,000 per year for the duration of his employment with the Company under
this Agreement. The Company shall also provide insurance on such automobile or
will include a reimbursement for insurance in the automobile allowance.
12. Vacation Time. The Executive shall be entitled to take six
(6) weeks paid vacation per calendar year. Such vacation may not be taken in
any greater than consecutive two (2) week increments. Vacation not used by the
Executive during the calendar year will be carried forward up to a maximum of
twelve (12) weeks accrual going forward.
13. Benefits Payable on Disability. If the Executive becomes
disabled from properly performing services hereunder by reason of illness or
other physical or mental incapacity, the Company shall continue to pay the
Executive his then current salary hereunder for the first twelve (12) months of
such continuous disability commencing with the first date of such disability.
If the Executive qualifies for coverage, during the term of this
Agreement, the Company shall purchase and maintain a policy of Disability
Insurance which, after twelve (12) continuous months of disability, will pay up
to $12,000 per month of the Executive's salary until Executive reaches the age
of 65. After the first twelve (12) months of disability, the Company has no
obligation to supplement or augment disability payments made under any such
disability policy or plan or make any other payment in connection with such
disability.
If the Company is unable to obtain a policy of Disability Insurance,
the Company shall pay $10,000 per month to the Executive for a twelve (12)
month period from the twelfth to the twenty-fourth month from the first date of
such disability.
4
<PAGE> 5
14. Obligations of Executive During and After Employment.
(a) The Executive agrees that during the terms of his
employment under this Agreement, he will engage in no other business
activities directly or indirectly, which are competitive with or which
might place him in a competing position to that of the Company, or any
affiliated company.
(b) The Executive realizes that during the course of his
employment, Executive will have produced and/or have access to
confidential business plans, information, business opportunity
records, notebooks, data, formula, specifications, trade secrets,
customer lists, account lists and secret inventions and processes of
the Company. Therefore, during or subsequent to his employment by the
Company, the Executive agrees to hold in confidence and not to
directly or indirectly disclose or use or copy or make lists of any
such information, except to the extent authorized by the Company in
writing. All records, files, business plans, documents, equipment and
the like, or copies thereof, relating to Company's business which
Executive shall prepare, or use, or come into contact with, shall
remain the sole property of the Company and shall not be removed from
the Company's premises without its written consent, and shall be
promptly returned to the Company upon termination of employment with
the Company. The restrictions and obligations of Executive set forth
in this Section 14(b) shall not apply to (i) information that is or
becomes generally available and known to the aircraft spare parts
industry (other than as a result of a disclosure directly or
indirectly by Executive); or (ii) information that was known to
Executive prior to Executive's employment by the Company.
(c) Because of his employment by the Company, Executive
will have access to trade secrets and confidential information about
the Company, its business plans, its business accounts, its business
opportunities, its expansion plans and its methods of doing business.
5
<PAGE> 6
Executive agrees that for a period of one (1) year after termination
of his employment (except if such termination is as a result of
termination by Executive with cause under Section 17), he will not,
directly or indirectly, compete with the Company in the business of
redistributing aircraft spare parts to businesses doing business with
the Company at the date of termination hereof or within 500 miles of
offices operated by the Company or its agents on the date of
termination. This non-compete agreement shall be void and of no
further force or effect in the event termination occurs pursuant to a
Triggering Event as described in Paragraph 19 hereof and the Company
fails to pay the Executive the amounts required under Paragraphs 19,
or if the Company fails to pay the Executive amounts due pursuant to
Paragraph 17.
(d) In the event this Agreement is terminated by the
Executive without cause pursuant to Paragraph 16 or by the Company
pursuant to a Triggering Event (hereinafter defined), then the
Executive shall have the right to terminate the non-compete agreement
set forth in this Paragraph 14 by releasing the Company from its
obligation to pay the Executive any severance compensation or other
form of compensation otherwise payable hereunder. The Executive shall
make such election within 30 days of termination without cause by the
Company or upon the occurrence of a Triggering Event (hereinafter
defined). The Executive's obligations under the non- compete
agreement and the Company's obligation to pay severance compensation
shall terminate as of the effective date of the notice described above
if the Executive, in his sole discretion, provides the Company such
notice.
(e) In the event a court of competent jurisdiction finds
any provision of this Section 14 to be so overbroad as to be
unenforceable, then such provision shall be reduced in scope by the
court, but only to the extent deemed necessary by the court to render
the provision reasonable and enforceable, it being the Executive's
intention to provide the Company with the broadest protection possible
against harmful competition.
6
<PAGE> 7
15. Termination for Cause by the Company. During the term of this
Agreement there can be no termination of the Executive by the Company except
for "Termination for Cause" as outlined below:
(1) Notwithstanding anything herein to the
contrary the Company may, without liability, terminate the
Executive's employment hereunder for cause at any time upon
written notice from the Board of Directors specifying such
cause, and thereafter the Company's obligations hereunder
shall cease and terminate; provided, however, that the Company
shall pay the Executive two (2) weeks pay and that such
written notice shall not be delivered until after the Board of
Directors shall have given the Executive written notice
specifying the conduct alleged to have constituted such cause
and the Executive has failed to cure such conduct, if curable,
within thirty (30) days following receipt of such notice.
Grounds for termination "for cause" include but are not limited to one
or more of the following:
i) A willful breach of duty by the Executive
during the course of his employment;
ii) Habitual neglect of duty by the Executive;
iii) The Executive's material failure to perform
and/or meet objective and measurable financial standards set
by the Board of Directors and agreed upon by the Executive in
advance;
7
<PAGE> 8
iv) Action or inaction by the Executive which
places the Company in circumstances of financial peril; and
v) Disloyal, dishonest or illegal conduct of the
Executive.
16. Termination by the Executive without Cause. The Executive,
without cause, may terminate this Agreement upon 90 days' written notice to the
Company. In such event, the Executive shall be required to render the services
required under this Agreement during such 90-day period unless otherwise
directed by the Board of Directors. Compensation for vacation time not taken
by Executive shall be paid to the Executive at the date of termination.
17. Termination by the Executive with Cause. The Executive may
terminate his employment with the Company at any time, upon 30 days' written
notice and opportunity for the Company to remedy any non-compliance, by reason
of (i) the Company's material failure to perform its duties pursuant to this
Agreement, (ii) any material diminishment in the duties and responsibilities,
working facilities, or compensation as described in Paragraphs 2, 5 and 6 of
this Agreement, or (iii) Executive's location of employment is moved more than
40 miles from where it is on the date of this Agreement; provided that such
termination takes place within 90 days after receipt by Executive of written
notice of such relocation. In the event of termination of this Agreement by
the Executive for cause, the Executive shall be entitled to all base salary
specified herein for the remaining term of this Agreement.
18. Termination upon Death of Executive. In addition to any other
provision relating to termination, this Agreement shall terminate upon the
Executive's death. No severance allowance shall be paid to the Executive's
estate.
8
<PAGE> 9
19. Lump Sum Compensation. In the event of the occurrence of a
"Triggering Event" which shall be defined to include a (i) change in ownership
in one or a series of transactions of 50% or more of the outstanding shares of
the Company, or (ii) merger, consolidation, reorganization or liquidation of
the Company, and following such Triggering Event the Executive's services are
terminated by the Company or the Executive or the Executive's duties, authority
or responsibilities are substantially diminished, the Executive shall receive
lump sum compensation equal to 2.9 times his annual salary and incentive or
bonus payments, if any, as shall have been paid to the Executive during the
Company's most recent 12-month period within 30 days of the Triggering Event.
If the total amount of the change of control compensation were to exceed three
(3) times the Executive's base amount (the average annual taxable compensation
of the Executive for the five (5) years preceding the year in which the change
of control occurs), the Company and the Executive may agree to reduce the lump
sum compensation to be received by Executive in order to avoid the imposition
of the golden parachute tax as provided in the Tax Reform Act of 1984, as
amended by the Tax Reform Act of 1986.
In the event the Executive is required to hire counsel to negotiate on
his behalf in connection with his termination or resignation from the Company
upon the occurrence of a Triggering Event, or in order to enforce the rights
and obligations of the Company as provided in this Paragraph, the Company shall
reimburse to the Executive all reasonable attorneys' fees which may be expended
by the Executive in seeking to enforce the terms hereof. Such reimbursement
shall be paid every 30 days after the Executive provides copies of invoices
from the Executive's counsel to the Company. However, such invoices may be
redacted to preserve the attorney-client privilege, client confidentiality or
work product.
20. Arbitration. Any controversy, dispute or claim arising out
of, or relating to, this Agreement and/or its interpretation shall, unless
resolved by agreement of the parties, be settled by binding arbitration in
Columbia, South Carolina in accordance with the Rules of the American
9
<PAGE> 10
Arbitration Association then existing. This Agreement to arbitrate shall be
specifically enforceable under the prevailing arbitration law of the State of
South Carolina. The award rendered by the arbitrators shall be final and
judgment may be entered upon the award in any court of the State of South
Carolina having jurisdiction of the matter.
21. General Provisions.
(a) The Executive's rights and obligations under this
Agreement shall not be transferrable by assignment or otherwise, nor
shall Executive's rights be subject to encumbrance or to the claims of
the Company's creditors. Nothing in this Agreement shall prevent the
consolidation of the Company with, or its merger into, any other
corporation, or the sale by the Company of all or substantially all of
its property or assets.
(b) This Agreement and the rights of Executive with
respect to the benefits of employment referred to in Paragraphs 6, 7,
8, 9, 10, 11, 12 and 13 constitute the entire Agreement between the
parties hereto in respect of the employment of the Executive by the
Company and supersede any and all other agreements either oral or in
writing between the parties hereto with respect to the employment of
the Executive.
(c) Executive shall have no duty to mitigate the payment
due him from Company pursuant to this Agreement and any money earned
by Executive from other sources after his employment with the Company
terminates shall not reduce the amount owed him by the Company
pursuant to this Agreement.
(d) The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part thereof are
declared invalid or unenforceable by a court of
10
<PAGE> 11
competent jurisdiction, the validity and enforceability of the
remainder of such provisions or parts thereof and the applicability
thereof shall not be affected thereby.
(e) This Agreement may not be amended or modified except
by a written instrument executed by Company and Executive.
(f) This Agreement and the rights and obligations
hereunder shall be governed by and construed in accordance with the
laws of the State of South Carolina.
22. Construction. Throughout this Agreement the singular shall
include the plural, and the plural shall include the singular, and the
masculine and neuter shall include the feminine, wherever the context so
requires.
23. Text to Control. The headings of paragraphs and sections are
included solely for convenience of reference. If any conflict between any
heading and the text of this Agreement exists, the text shall control.
24. Authority. The officer executing this agreement on behalf of
the Company has been empowered and directed to do so by the Board of Directors
of the Company.
25. Change of Domicile. This Agreement shall, without further
action by the Company or the Executive, be assumed and shall become an
obligation of American Aircarriers Support, Incorporated, a Delaware
corporation, upon the reincorporation of American Aircarriers Support, Inc., a
South Carolina corporation, into the State of Delaware.
11
<PAGE> 12
FOR THE COMPANY: AMERICAN AIRCARRIERS SUPPORT, INC.
DATED: March 5, 1998 By: /s/ KARL F. BROWN
--------------------------
Title: President
-----------------------
FOR THE EXECUTIVE:
DATED: March 5, 1998 By: /s/ KARL F. BROWN
--------------------------
Karl F. Brown
12
<PAGE> 1
EXHIBIT 10.1.2
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT effective January 1, 1998 (the
"Agreement") by and between AMERICAN AIRCARRIERS SUPPORT, INC. (the "Company")
with principal offices at Fort Mill, South Carolina and ELAINE RUDISILL (the
"Executive").
NOW THEREFORE, in consideration of the foregoing premises and mutual
covenants herein contained, the parties hereto agree as follows:
1. Employment. The Company agrees to employ the Executive and the
Executive agrees to serve the Company as its Chief Financial Officer.
2. Position and Responsibilities. The Executive shall exert her best
efforts and devote full time and attention to the affairs of the Company. The
Executive shall have the authority and responsibility given by the general
direction, approval and control of the Board of Directors, President and Chief
Executive Officer of the Company, to the restrictions, limitations and
guidelines set forth by the Board of Directors in resolutions adopted in the
minutes of the Board of Directors meetings, copies of which will be provided to
the Executive from time to time and will be incorporated herein by reference.
3. Term of Employment. The term of the Executive's employment under
this Agreement shall be deemed to have commenced on January 1, 1998 and shall
continue until December 31, 1998 (the "Initial Term"), subject to extension as
hereinafter provided or termination pursuant to the provisions set forth
hereafter. Provided that Executive is in compliance with all of her obligations
hereunder, the term of Executive's employment shall be automatically extended
for an additional one-year terms upon expiration of the Initial Term unless
either party hereto receives 30 days' prior written notice from the other
electing not to extend the Executive's employment. Compensation during the term
shall be that set forth in Section 6 hereof, unless one of the termination
provisions overrides.
4. Duties. During the period of her employment hereunder and except
for illness, specified vacation periods and reasonable leaves of absence, the
Executive shall devote her best efforts and full attention and skill to the
business and affairs of the Company and its affiliated companies, as such
business and affairs now exist and as they may be hereinafter changed or added
to, under and pursuant to the general direction of the Board of Directors of
the Company.
<PAGE> 2
2
5. Compensation. Commencing on January 1, 1998, the Company shall
pay to the Executive as compensation for her services the sum of $65,000 per
year, payable semi-monthly, or such higher salary as may be from time to time
approved by the Board of Directors. In addition, the Executive shall receive
such additional compensation and/or bonuses (including an IPO completion bonus)
or stock options as may be voted to her at the sole discretion of the
Compensation Committee of the Board of Directors.
6. Stock Options. In addition to the compensation described
above, the Executive shall receive 20,000 stock options pursuant to the Omnibus
Stock Plan of 1998.
7. Expense Reimbursement. The Company will reimburse the Executive,
at least semi-monthly, for all reasonable and necessary expenses, including
without limitation, travel expenses, and reasonable entertainment expenses,
incurred by her in carrying out her duties under this Agreement. The Executive
shall present to the Company each month an account of such expenses in such
form as is reasonably required by the Board of Directors.
8. Medical and Dental Coverage. Commencing January 1, 1998, the
Executive will be entitled to participate in the Company's employee group
medical and other group insurance programs on the same basis as other
executives of the Company.
9. Medical Examination. The Executive agrees to submit herself for
physical examination on one occasion per year as requested by the Company for
the purpose of the Company's obtaining life insurance on the life of the
Executive for the benefit of the Company as may be required; provided, however,
that the Company shall bear the entire cost of such examinations and shall pay
all premiums on any key man life insurance obtained for the benefit of the
Company as beneficiary or with respect to any other designated beneficiary.
10. Vacation Time. The Executive shall be entitled each year to a
reasonable vacation in accordance with the established practices of the
Company, now or hereafter in effect for the executive personnel, during which
time the Executive's compensation shall be paid in full.
<PAGE> 3
3
11. Benefits Payable on Disability. If the Executive becomes
disabled from properly performing services hereunder by reason of illness or
other physical or mental incapacity, the Company shall continue to pay the
Executive her then current salary hereunder for the first three (3) months of
such continuous disability commencing with the first date of such disability.
12. Obligations of Executive During and After Employment.
(a) The Executive agrees that during the terms of her
employment under this Agreement, she will engage in no other business
activities directly or indirectly, which are competitive with or which
might place her in a competing position to that of the Company, or any
affiliated company.
(b) The Executive realizes that during the course of her
employment, Executive will have produced and/or have access to
confidential business plans, information, business opportunity
records, notebooks, data, formula, specifications, trade secrets,
customer lists, account lists and secret inventions and processes of
the Company and its affiliated companies. Therefore, during or
subsequent to her employment by the Company, or by an affiliated
company, the Executive agrees to hold in confidence and not to
directly or indirectly disclose or use or copy or make lists of any
such information, except to the extent authorized by the Company in
writing. All records, files, business plans, documents, equipment and
the like, or copies thereof, relating to Company's business, or the
business of an affiliated company, which Executive shall prepare, or
use, or come into contact with, shall remain the sole property of the
Company, or of an affiliated company, and shall not be removed from
the Company's or the affiliated company's premises without its written
consent, and shall be promptly returned to the Company upon
termination of employment with the Company and its affiliated
companies. The restrictions and obligations of Executive set forth in
this Section 12(b) shall not apply to (i) information that is or
becomes generally available and known to the industry (other than as a
result of a disclosure directly or indirectly by Executive); or (ii)
information that was known to Executive prior to Executive's
employment by the Company or its predecessor.
<PAGE> 4
4
(c) Because of her employment by the Company, Executive shall
have access to trade secrets and confidential information about the
Company, its business plans, its business accounts, its business
opportunities, its expansion plans into other geographical areas and
its methods of doing business. Executive agrees that for a period of
two (2) years after termination or expiration of her employment, she
will not, directly or indirectly, compete with the Company in its then
present business or anticipated lines of business.
(d) In the event a court of competent jurisdiction finds any
provision of this Section 12 to be so overbroad as to be
unenforceable, then such provision shall be reduced in scope by the
court, but only to the extent deemed necessary by the court to render
the provision reasonable and enforceable, it being the Executive's
intention to provide the Company with the broadest protection possible
against harmful competition.
13. Termination for Cause by the Company. The Company may, without
liability, terminate the Executive's employment hereunder for cause at any time
upon written notice from the Board of Directors specifying such cause, and
thereafter the Company's obligations hereunder shall cease and terminate;
provided, however, that such written notice shall not be delivered until after
the Board of Directors shall have given the Executive written notice specifying
the conduct alleged to have constituted such cause and the Executive has failed
to cure such conduct, if curable, within fifteen (15) days following receipt of
such notice.
Grounds for termination "for cause" are one or more of the following:
(a) A willful breach of a material duty by the Executive
during the course of her employment;
(b) Habitual neglect of a material duty by the Executive;
(c) Action or inaction by the Executive which places the
Company in circumstances of financial peril; and
(d) Fraud on the Company or conviction of a felony involving
or against the Company.
<PAGE> 5
5
14. Termination by the Executive or the Company Without Cause.
(a) The Executive, without cause, may terminate this
Agreement upon 90 days prior written notice to the Company. In such
event, the Executive shall be required to render the services required
under this Agreement during such 90-day period unless otherwise
directed by the Board of Directors. Compensation for vacation time
not taken by Executive shall be paid to the Executive at the date of
termination. Executive shall be paid for only the ninety (90) day
period pursuant to normal pay practices and then all obligations
regarding pay shall cease.
(b) The Company, without cause, may terminate this Agreement.
In such event, the Company shall pay a severance allowance equal to
ninety (90) days salary to the Executive. No other benefits will be
provided once this Agreement is terminated.
15. Termination upon Death of Executive. In addition to any other
provision relating to the termination, this Agreement shall terminate upon the
Executive's death. In such event, the Company shall pay a severance allowance
equal to ninety (90) days' salary to the Executive's estate.
16. Arbitration. Any controversy, dispute or claim arising out of,
or relating to, this Agreement and/or its interpretation shall, unless resolved
by agreement of the parties, be settled by binding arbitration in Charlotte,
North Carolina in accordance with the Rules of the American Arbitration
Association then existing. This Agreement to arbitrate shall be specifically
enforceable under the prevailing arbitration law of the State of South
Carolina. The award rendered by the arbitrators shall be final and judgment
may be entered upon the award in any court of the State of South Carolina
having jurisdiction of the matter.
17. General Provisions.
(a) The Executive's rights and obligations under this
Agreement shall not be transferrable by assignment or otherwise, nor
shall Executive's rights be subject to encumbrance or to the claims of
the Company's creditors. Nothing in this Agreement shall prevent the
consolidation of the Company with, or its merger into, any other
corporation, or the sale by the Company of all or substantially all of
its property or assets.
<PAGE> 6
6
(b) This Agreement and the rights of Executive with respect
to the benefits of employment referred to herein constitute the entire
Agreement between the parties hereto in respect of the employment of
the Executive by the Company and supersede any and all other
agreements either oral or in writing between the parties hereto with
respect to the employment of the Executive.
(c) The provisions of this Agreement shall be regarded as
divisible, and if any of said provisions or any part thereof are
declared invalid or unenforceable by a court of competent jurisdiction
or in an arbitration proceeding, the validity and enforceability of
the remainder of such provisions or parts thereof and the
applicability thereof shall not be affected thereby.
(d) This Agreement may not be amended or modified except by a
written instrument executed by Company and Executive.
(e) This Agreement and the rights and obligations hereunder
shall be governed by and construed in accordance with the laws of the
State of South Carolina.
18. Construction. Throughout this Agreement the singular shall
include the plural, and the plural shall include the singular, and the
masculine and neuter shall include the feminine, wherever the context so
requires.
19. Text to Control. The headings of paragraphs and sections are
included solely for convenience of reference. If any conflict between any
heading and the text of this Agreement exists, the text shall control.
20. Authority. The officer executing this agreement on behalf of the
Company has been empowered and directed to do so by the Board of Directors of
the Company.
21. Effective Date. This Agreement may be executed on the dates
noted below but shall only be effective on January 1, 1998.
FOR THE COMPANY: AMERICAN AIRCARRIERS SUPPORT, INC.
Dated 2/18/98 By /s/ Karl F. Brown
------------ ----------------------------------
Title: President
FOR THE EXECUTIVE:
Dated 2/18/98 /s/ Elaine Rudisill (SEAL)
------------ ----------------------------------
ELAINE RUDISILL
<PAGE> 1
EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
This Indemnification Agreement, made and entered into this day of
________________, 1998 ("Agreement"), by and between American Aircarriers
Support, Incorporated, a Delaware corporation (the "Company") and
_______________________ ("Indemnitee").
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation, and
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take
on additional service for or on behalf of the Company on the condition that
Indemnitee be so indemnified;
NOW, THEREFORE, in consideration of the promises, conditions,
representations and warranties set forth herein, including Indemnitee's
continued service to the Company, the Company and Indemnitee hereby covenant and
agree as follows:
ARTICLE I - DEFINITIONS
For purposes of this Agreement, the following terms shall have the
meaning given here:
1.01 "Board" shall mean the Board of Directors of the Company.
1.02 "Corporate Status" describes the status of a person who is or was
a director, officer, employee, agent or fiduciary of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit or other
enterprise which such person is or was serving at the express written request of
the Company.
1.03 "Covered Act" means any breach of duty, neglect, error,
misstatement, misleading statement, omission or other act done or wrongfully
attempted by Indemnitee or against any of the foregoing alleged by any claimant
or any claim against Indemnitee solely by reason of being a director or officer
of the Company.
1.04 "D&O Insurance" means the directors' and officers' liability
insurance issued by the insurer(s), and having the policy number(s), amount(s)
and deductible(s) set forth on Exhibit A hereto and any replacement or
substitute policies issued by one or more reputable insurers
<PAGE> 2
providing in all respects coverage at least comparable to and in the same amount
as that provided under the policy or policies identified on Exhibit A.
1.05 "Determination" means a determination, based on the facts known
at the time, made by:
(a) A majority vote of a quorum of disinterested directors; or
(b) Independent Counsel in a written opinion prepared at the
request of a majority of a quorum of Disinterested Directors; or
(c) A majority of the disinterested stockholders of the
Company; or
(d) A final adjudication by a court of competent jurisdiction.
"Determined" shall have a correlative meaning.
1.06 "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
1.07 "Effective Date" means ____________________________, 19____.
1.08 "Excluded Claim" means any payment for Losses or Expenses in
connection with any claim:
(a) Based upon or attributable to Indemnitee gaining in
fact any personal profit or advantage to which Indemnitee is not
entitled; or
(b) For the return by Indemnitee of any remuneration paid to
Indemnitee without the previous approval of the stockholders of the
Company which is illegal; or
(c) For an accounting of profits in fact made from the
purchase or sale by Indemnitee of securities of the Company within the
meaning of Section 16 of the Securities Exchange Act of 1934, as
amended, or similar provisions of any state law; or
(d) Resulting from Indemnitee's knowingly fraudulent,
dishonest or willful misconduct; or
(e) The payment of which by the Company under this Agreement
is not permitted by applicable law.
1.09 "Expenses" shall include all reasonable attorneys fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel expenses,
duplicating costs, printing and binding costs, telephone charges, postage,
delivery service fees, and all other disbursements or expenses of the types
customarily incurred in connection with prosecuting, defending, preparing to
prosecute or defend, investigating, or being or preparing to be a witness in a
Proceeding, but shall not include Fines.
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<PAGE> 3
1.10 "Fines" mean any fine, penalty or, with respect to an employee
benefit plan, any excise tax or penalty assessed with respect thereto.
1.11 "Good Faith" shall mean Indemnitee having acted in good faith and
in a manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and, with respect to any criminal Proceeding, having
had no reasonable cause to believe Indemnitee's conduct was unlawful.
1.12 "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past three years has been, retained to represent (i) the Company or
indemnitee in any matter material to either such party or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement.
1.13 "Loss" means any amount which Indemnitee is legally obligated to
pay as a result of a claim or claims made against him for Covered Acts
including, without limitation, damages and judgments and sums paid in settlement
of a claim or claims, but shall not include Fines.
1.14 "Proceeding" includes any action, suit, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
actual threatened or completed proceeding whether civil, criminal,
administrative or investigative, other than one initiated by Indemnitee. For
purposes of the foregoing sentence, a "Proceeding" shall not be deemed to have
been initiated by Indemnitee where Indemnitee seeks pursuant to Article IX of
this Agreement to enforce Indemnitee's rights under this Agreement relating
thereto.
ARTICLE II - SERVICES BY INDEMNITEE
Indemnitee agrees to serve as a(n) (director) (officer) (employee).
Indemnitee may at any time and for any reason resign from such position (subject
to any other contractual obligation or any obligation imposed by operation of
law).
ARTICLE III - MAINTENANCE OF D&O INSURANCE
3.01 DESCRIPTION OF D&O INSURANCE. Exhibit A contains a complete and
accurate description of the policies of directors' and officers' liability
insurance purchased by the Company, if any.
3.02 NAMED INSURED. In any policies of D&O Insurance which are
maintained by the Company Indemnitee shall be named as an insured in such a
manner as to provide Indemnitee the same rights and benefits, subject to the
same limitations, as are accorded to the Company's directors and officers most
favorably insured by such policy.
3.03 NO OBLIGATION. Nothing herein shall impose upon the Company the
obligation to maintain D&O Insurance if the Company determines in good faith
that such insurance is not reasonably available, the premium costs for such
insurance are disproportionate to the amount
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<PAGE> 4
of coverage provided, or the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit.
ARTICLE IV - INDEMNIFICATION
4.01 INDEMNIFICATION IN GENERAL. The Company shall indemnify and hold
Indemnitee harmless for any Losses, Expenses, judgments, penalties, Fines and
amounts paid in settlement actually and reasonably incurred by Indemnitee or on
Indemnitee's behalf in connection with such Proceeding or any claim, issue or
matter therein, if Indemnitee acted in Good Faith.
4.02 EXCLUDED COVERAGE. The Company shall have no obligation to
indemnify and hold Indemnitee harmless from any Losses or Expense which has been
Determined to constitute an Excluded Claim. Notwithstanding the provisions of
Section 4.01, no such indemnification shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company if applicable law prohibits such
indemnification; provided, however, that, if applicable law so permits,
indemnification shall nevertheless be made by the Company in such event if and
only to the extent that the Court of Chancery of the State of Delaware, or the
court in which such Proceeding shall have been brought or pending, shall
Determine.
4.03 INDEMNIFICATION OF A PARTY WHO IS WHOLLY OR PARTLY SUCCESSFUL.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of Indemnitee's Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, Indemnitee shall be
indemnified to the maximum extent permitted by law, against all Losses,
Expenses, judgments, penalties, Fines and amounts paid in settlement, actually
and reasonably incurred by Indemnitee or on Indemnitee's behalf in connection
therewith. If Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee to the maximum extent permitted by law, against all Losses, Expenses,
judgments, penalties, Fines and amounts paid in settlement, actually and
reasonably incurred by Indemnitee or on Indemnitee's behalf in connection with
each successfully resolved claim, issue or matter. For purposes this Section
4.03 and without limitation, the termination of any claim, issue or matter in
such a Proceeding by dismissal, with or without prejudice, shall be deemed to be
a successful result as to such claim, issue or matter, so long as there has been
no finding (either adjudicated or pursuant to Article VI) Indemnitee did not act
in Good Faith.
4.04 INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any
other provision of this Agreement to the extent that Indemnitee is, by reason of
Indemnitee's Corporate Status, a witness in a Proceeding, Indemnitee shall be
indemnified against all Losses and Expenses actually and reasonably incurred by
Indemnitee or on Indemnitee's behalf in connection therewith.
ARTICLE V - ADVANCEMENT OF EXPENSES
Notwithstanding any provision to the contrary in Article VI, the
Company shall advance all reasonable Expenses which, by reason of Indemnitee's
Corporate Status, are incurred by or on behalf of Indemnitee in connection with
any Proceeding, within twenty (20) days after the
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<PAGE> 5
receipt by the Company of a statement or statements from Indemnitee requesting
such advance or advances, whether prior to or after final disposition of such
Proceeding. Such statement or statements shall reasonably evidence the Expenses
incurred by Indemnitee and shall include or be preceded or accompanied by an
undertaking by or on behalf of Indemnitee to repay any Expenses if it shall
ultimately be determined that Indemnitee is not entitled to be indemnified
against such Expenses. Any advance and undertakings to repay pursuant to this
Article V shall be unsecured and interest free.
ARTICLE VI - PROCEDURES FOR DETERMINATION OF ENTITLEMENT
6.01 INITIAL NOTICE. Promptly after receipt by Indemnitee of notice of
the commencement of or the threat of commencement of any Proceeding, Indemnitee
shall, if indemnification with respect thereto may be sought from the Company
under this Agreement, notify the Company of the commencement thereof. Indemnitee
shall include therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification. The
Secretary of the Company shall promptly advise the Board in writing that
Indemnitee has requested indemnification.
6.02 D&O INSURANCE. If, at the time of the receipt of such notice, the
Company has D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such Proceeding to the insurers in accordance with the
procedures set forth in the respective policies in favor of Indemnitee. The
Company shall thereafter take all necessary or desirable action to cause such
insurers to pay, on behalf of Indemnitee, all Losses and Expenses payable as a
result of such Proceeding in accordance with the terms of such policies.
6.03 EMPLOYMENT OF COUNSEL. To the extent the Company does not, at the
time of the commencement of or the threat of commencement of a Proceeding, have
applicable D&O Insurance, or if a Determination is made that any Expenses
arising out of such Proceeding will not be payable under the D&O Insurance then
in effect, the Company shall be obligated to pay the Expenses of any such
Proceeding in advance of the final disposition thereof as provided in Article V
and the Company, if appropriate, shall be entitled to assume the defense of such
Proceeding, with counsel satisfactory to Indemnitee, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, the Company will not be liable to Indemnitee under this Agreement for
any legal or other Expenses subsequently incurred by Indemnitee in connection
with such defense other than reasonable Expenses of investigation provided that
Indemnitee shall have the right to employ its counsel in any such Proceeding but
the fees and expenses of such counsel incurred after delivery of notice from the
Company of its assumption of such defense shall be at Indemnitee's expense and
provided further that if (i) the employment of counsel by Indemnitee has been
previously authorized by the Company, (ii) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense or (iii) the Company shall not, in
fact, have employed counsel to assume the defense of such Proceeding, the fees
and expenses of counsel shall be at the expense of the Company.
6.04 PAYMENT. All payments on account of the Company's indemnification
obligations under this Agreement shall be made within sixty (60) days of
Indemnitee's written request
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<PAGE> 6
therefor unless a Determination is made that the claims giving rise to
Indemnitee's request are Excluded Claims or otherwise not payable under this
Agreement.
6.05 REIMBURSEMENT BY INDEMNITEE. Indemnitee agrees that he will
reimburse the Company for all Losses and Expenses paid by the Company in
connection with any Proceeding against Indemnitee in the event and only to the
extent that a Determination shall have been made by a court in a final
adjudication from which there is no further right of appeal that Indemnitee is
not entitled to be indemnified by the Company for such Expenses because the
claim is an Excluded Claim or because Indemnitee is otherwise not entitled to
payment under this Agreement.
6.06 COOPERATION. Indemnitee shall cooperate with the person, persons
or entity making the Determination with respect to Indemnitee's entitlement to
indemnification under this Agreement, including providing to such person,
persons or entity upon reasonable advance request any documentation or
information which is not privileged or otherwise protected from disclosure and
which is reasonably available to Indemnitee and reasonably necessary to such
Determination. Any costs or Expenses (including attorneys' fees and
disbursements) incurred by Indemnitee in so cooperating with the person, persons
or entity making such Determination shall be borne by the Company (irrespective
of the determination as to Indemnitee's entitlement to indemnification) and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
ARTICLE VII - SETTLEMENT
The Company shall have no obligation to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any Proceeding effected without
the Company's prior written consent. The Company shall not settle any claim in
any manner which would impose any Fine or other obligation on Indemnitee without
Indemnitee's written consent. Neither the Company nor Indemnitee shall
unreasonably withhold their consent to any proposed settlement.
ARTICLE VIII - RIGHTS NOT EXCLUSIVE
The rights provided hereunder shall not be deemed exclusive of any
other rights to which Indemnitee may be entitled under any bylaw, agreement,
vote of stockholders or of Disinterested Directors or otherwise, both as to
action in his or her official capacity and as to action in any other capacity by
holding such office, and shall continue after Indemnitee ceases to serve the
Corporation as a director or officer.
ARTICLE IX - ENFORCEMENT
9.01 BURDEN OF PROOF. Indemnitee's right to indemnification shall be
enforceable by Indemnitee only in the state courts of the State of Delaware and
shall be enforceable notwithstanding any adverse Determination. In any such
action, if a prior adverse Determination has been made, the burden of proving
that indemnification is required under this Agreement shall be on Indemnitee.
The Company shall have the burden of proving that indemnification is not
required under this Agreement if no prior adverse Determination shall have been
made.
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9.02 COSTS AND EXPENSES. In the event that any action is instituted by
Indemnitee under this Agreement, or to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be paid all court costs and
expenses, including reasonable counsel fees, incurred by Indemnitee with respect
to such action, unless the court determines that each of the material assertions
made by Indemnitee as a basis for such action were not made in Good Faith or
were frivolous.
ARTICLE X - GENERAL PROVISIONS
10.01 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and Indemnitee's heirs, executors and administrators.
10.02 SEVERABILITY. If any provision or provisions of this Agreement is
determined by a court to be invalid, illegal or unenforceable for any reason
whatsoever, such provision shall be limited or modified in its application to
the minimum extent necessary to avoid a violation of law, and, as so limited or
modified, such provision and the balance of this Agreement shall be enforceable
in accordance with its terms.
10.03 IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
10.04 HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
10.05 MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
10.06 NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given it (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which it is so mailed.
If to Indemnitee to: As shown with Indemnitee's signature below
If to the Company to: American Aircarriers Support, Incorporated
3516 Centre Circle Drive
Fort Mill, South Carolina 29715
Attn: Karl F. Brown, President
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or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
10.07 GOVERNING LAW. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Delaware without application of the conflict of laws principles
thereof.
10.08 CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any Proceeding which arises out of or
relates to this Agreement, and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
10.09 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and understanding between the parties hereto in reference to all the matters
herein agreed upon. This Agreement replaces in full all prior indemnification
agreements or understandings of the parties hereto, and any and all such prior
agreements or understandings are hereby rescinded by mutual agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
a Delaware corporation
By:______________________________________
Name:____________________________________
Title:___________________________________
INDEMNITEE
-----------------------------------------
Address:
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EXHIBIT 10.3
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
1998 OMNIBUS STOCK OPTION PLAN
1. PURPOSE
The purpose of this Plan is to promote the interest of the Corporation
and its stockholders and the Corporation's success by providing a method
whereby a variety of equity-based incentive and other Awards may be granted to
Employees and Directors of the Corporation and its Subsidiaries and to selected
Consultants.
2. DEFINITIONS
A. "AWARD" means any form of stock option, restricted stock,
Performance Unit, Performance Share, stock appreciation right, dividend
equivalent or other incentive award granted under the Plan.
B. "AWARD NOTICE" means any written notice from the Corporation
to a Participant or agreement between the Corporation and a Participant that
establishes the terms applicable to an Award.
C. "BOARD OF DIRECTORS" means the Board of Directors of the
Corporation.
D. "CODE" means the Internal Revenue Code of 1986, as amended.
Any reference to the Code includes the regulations promulgated pursuant to the
Code.
E. "COMMITTEE" means the Compensation Committee of the Board of
Directors, or such other committee designated by the Board of Directors, which
is authorized to administer the Plan under Section 3 hereof. The number of
persons who shall serve on the Committee shall be specified from time to time
by the Board of Directors; however, in no event shall there be fewer than two
members of the Committee.
<PAGE> 2
F. "COMMON STOCK" means Common Stock of the Corporation, $.001
par value per share.
G. "CONSULTANT" means any individual who renders services
directly to the Corporation or a Subsidiary or to the Corporation's customers
as defined and designated from time to time by the Committee.
H. "CORPORATION" means American Aircarriers Support,
Incorporated, a Delaware corporation.
I. "DIRECTOR" means a member of the Board of Directors or a
member of the Board of Directors of a Subsidiary.
J. "EMPLOYEE" means any employee of the Corporation or a
Subsidiary and also includes non-employees to whom an offer of employment has
been extended.
K. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
L. "FAIR MARKET VALUE" means, "on any given date (i) if the
Common Stock is traded in the over-the-counter market and not in The Nasdaq
Stock Market or on any national securities exchange, the per share closing bid
prices of the Common Stock as reported by Nasdaq or an equivalent generally
accepted reporting service, (ii) if the Common Stock is traded in The Nasdaq
Stock Market or on a national securities exchange, the per share closing price
of the Common Stock on which it is so listed, as the case may be, (iii) if
trading in the Common Stock is not reported by Nasdaq, the lowest per share bid
price of the Common Stock as reported in the "pink sheets" published by
National Quotation Bureau, Incorporated, (iv) if no such reported price is
reported for such date pursuant to (i), (ii) or (iii) above, then the bid,
closing sale or bid price, respectively, on the first preceding day on which so
reported, or (v) if the Common Stock is not so traded and/or reported for a
30-day period immediately preceding the date for determining Fair Market Value,
the
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Committee shall, in good faith and in conformity with the requirements of
Section 422 of the Code, establish a method for determining the Fair Market
Value."
M. "PARTICIPANT" means any individual to whom an Award is granted
under the Plan.
N. "PERFORMANCE SHARE" means a Unit expressed in terms of, or
valued by reference to, a share of Common Stock.
O. "PERFORMANCE UNIT" means a Unit valued by reference to
designated criteria established by the Committee, other than Common Stock.
P. "PLAN" means this Plan, which shall be known as American
Aircarriers Support, Incorporated 1998 Omnibus Stock Option Plan.
Q. "RULE 16b-3 means Rule 16b-3 promulgated under the Exchange
Act, or any successor rule.
R. "SUBSIDIARY" means a corporation or other business entity (i)
of which the Corporation directly or indirectly has an ownership interest of
50% or more, or (ii) of which it has a right to elect or appoint 50% or more of
the board of directors or other governing body. A Subsidiary shall include
both currently owned Subsidiaries as well as any Subsidiary hereafter acquired.
S. "UNIT" means a bookkeeping entry used by the Corporation to
record the grant of an Award until such time as the Award is paid, cancelled,
forfeited or terminated.
3. ADMINISTRATION
A. The Plan shall be administered by the Committee. The
Committee shall have the authority to:
(i) construe and interpret the Plan;
(ii) promulgate, amend and rescind rules relating to the
implementation of the Plan;
(iii) make all determinations necessary or advisable for the
administration of the Plan, including the selection of
Employees, Consultants and affiliated individuals who
shall be granted Awards, the number of shares of Common
Stock or Units to be subject to each Award, the Award
price, if any, the
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vesting or duration of Awards, and the designation of
stock options as incentive stock options or non-
qualified stock options;
(iv) determine the disposition of Awards in the event of a
Participant's divorce or dissolution of marriage;
(v) determine whether Awards will be granted alone or in
combination or in tandem with other Awards;
(vi) determine whether cash will be paid or Awards will be
granted in replacement of, or as alternatives to, other
grants under the Plan or any other incentive or
compensation plan of the Corporation, a Subsidiary or
an acquired business unit.
B. Subject to the requirements of applicable law, the Committee
may correct any defect, supply any omission, or reconcile any inconsistency in
the Plan, any Award, or any Award Notice; take any and all other actions it
deems necessary or advisable for the proper administration of the Plan;
designate persons other than members of the Committee to carry out its
responsibilities; and prescribe such conditions and limitations as it may deem
appropriate; except that the Committee may not delegate its authority with
regard to the selection for participation of, or the granting of Awards to,
persons under Section 16 of the Exchange Act. Any determination, decision, or
action of the Committee in connection with the construction, interpretation,
administration, or application of the Plan shall be final, conclusive and
binding upon all persons validly claiming under or through persons
participating in the Plan.
C. The Committee may at any time, and from time to time amend or
cancel any outstanding Award, but only with the consent of the person to whom
the Award was granted. Any Award granted may be converted, modified, forfeited
or canceled, prospectively or retroactively, in whole or in part, by the
Committee in its sole discretion. However, no such action may impair the
rights of any person to whom the Award was granted without his or her consent.
The Committee may, in its sole discretion, in whole or in part, waive any
restrictions or conditions applicable to, or accelerate the vesting of, any
Award.
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4. ELIGIBILITY
A. Any Employee is eligible to become a Participant in the Plan.
B. Directors who are not Employees of the Corporation or a
Subsidiary shall receive Awards in accordance with Section 7.
C. Consultants who are not Directors of the Corporation shall be
eligible to receive Awards in accordance with Section 8.
5. SHARES AVAILABLE
Subject to Section 16 of the Plan, the maximum number of shares of
Common Stock issuable on exercise of options (or other Awards) granted under
the Plan (including incentive stock options) shall be 350,000. Notwithstanding
the foregoing sentence, the maximum number of shares of Common Stock that may
be awarded under this Plan in the form of restricted stock awards pursuant to
Section 10 may be limited by the Committee. If an option or SAR expires or is
terminated, surrendered or canceled without have been fully exercised, if
restricted stock or Performance Shares are forfeited, or if any other grant
results in any shares not being issued, the unused shares covered by any such
Award shall again be available for grant under the Plan to any Participant who
is not subject to Section 16 of the Exchange Act.
6. TERM
The Plan shall become effective on February 9, 1998. No Award shall
be granted pursuant to the Plan on or after the tenth anniversary date of such
date, but Awards granted prior to such tenth anniversary may extend beyond that
date to the date(s) specified in the agreement(s) covering such Awards.
7. AWARDS TO NON-EMPLOYEE DIRECTORS
Options granted to Directors who are not Employees of the Corporation
or a Subsidiary shall be subject to the following terms:
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(i) The exercise price shall be not less than 85% of the
Fair Market Value of the underlying Shares of Common
Stock on the date of the grant, payable in accordance
with the alternatives stated in Section 9.B.(ii) of the
Plan;
(ii) The term of the options shall be not more than ten (10)
years;
(iii) The options shall be subject to Section 14 of the Plan.
8. AWARDS TO CONSULTANTS
Consultants shall receive Awards in accordance with the following
terms:
A. No Awards of incentive stock options shall be made to
Consultants.
B. Awards of non-qualified stock options to such Consultants
shall be subject to the following terms:
(i) The exercise price shall be not less than 85% of the
Fair Market Value of the underlying shares of Common
Stock on the date of the grant, payable in accordance
with the alternatives stated in Sections 9.B(ii) and
(iii) of the Plan;
(ii) The term of the options shall be not more than ten (10)
years;
(iii) The options shall be subject to Section 14 of the Plan.
9. STOCK OPTIONS
A. Awards may be granted in the form of stock options. Stock
options may be incentive stock options within the meaning of Section 422 of the
Code or non-qualified stock options (i.e., stock options which are not
incentive stock options).
B. Subject to Section 9.C. relating to incentive stock options,
options shall be in such form and contain such terms as the Committee deems
appropriate. While the terms of options need not be identical, each option
shall be subject to the following terms:
(i) The exercise price shall be the price set by the
Committee but may not be less than 85% of the Fair
Market Value of the underlying shares of Common Stock
on the date of the grant.
(ii) The exercise price shall be paid in cash (including
check, bank draft, or money order), or at the
discretion of the Committee, all or part of the
purchase price may be paid by delivery of the
optionee's full recourse promissory note, delivery of
Common Stock already owned by the Participant
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for at least six (6) months and valued at its Fair
Market Value, by the surrender of all or part of an
Award (including the Award being exercised), in other
property, rights and credits, deemed acceptable by the
Committee, or any combination of the foregoing methods
of payment. In the case of incentive stock options,
the terms of payment shall be determined at the time of
grant.
(iii) Promissory notes given as payment of the exercise
price, if permitted by the Committee, shall contain
such terms as set by the Committee which are not
inconsistent with the following: the unpaid principal
shall bear interest at a rate set from time to time by
the Committee; payments of principal and interest shall
be made no less frequently than annually; no part of
the note shall be payable later than ten (10) years
from the date of purchase of the underlying shares of
Common Stock; and the optionee shall give such security
as the Committee deems necessary to ensure full
payment.
(iv) The term of an option may not be greater than ten (10)
years from the date of the grant.
(v) Neither a person to whom an option is granted nor such
person's legal representative, heir, legatee or
distributee shall be deemed to be the holder of, or to
have any of the rights of a holder or owner with
respect to, any shares of Common Stock subject to such
option unless and until such person has exercised the
option.
C. The following special terms shall apply to grants of incentive
stock options:
(i) Subject to Section 9.C.(ii) of the Plan, the exercise
price of each incentive stock option shall not be less
than 100% of the Fair Market Value of the underlying
shares of Common Stock on the date of the grant.
(ii) No incentive stock option shall be granted to any
Employee who directly or indirectly owns stock
possessing more than 10% of the total combined voting
power of all classes of stock of the Corporation,
unless at the time of such grant the exercise price of
the option is at least 110% of the Fair Market Value of
the underlying shares of Common Stock subject to the
option and such option is not exercisable after the
expiration of five (5) years from the date of the
grant.
(iii) No incentive stock option shall be granted to a person
in his capacity as a Employee of a Subsidiary if the
Corporation has less than a 50% ownership interest in
such Subsidiary.
(iv) Options shall contain such other terms as may be
necessary to qualify the options granted therein as
incentive stock options pursuant to Section 422 of the
Code, or any successor statute, including that such
incentive stock options shall be granted only to
Employees, that such incentive stock options
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are non-transferrable, and which shall conform to all
other requirements of the Code.
10. RESTRICTED STOCK
A. Awards may be granted in the form of restricted stock.
B. Grants of restricted stock shall be awarded in exchange for
consideration in an amount determined by the Committee. The price, if any, of
such restricted stock shall be paid in cash, or at the discretion of the
Committee, all or part of the purchase price may be paid by delivery of the
Participant's full recourse promissory note, delivery of Common Stock already
owned by the Participant for at least six (6) months and valued at its Fair
Market Value, or any combination of the foregoing methods of payment, provided
no less than the par value of the stock is paid in cash, and the Participant
has rendered no less than three (3) months prior service to the Corporation.
C. Restricted stock awards shall be subject to such restrictions
as the Committee may impose and may include, if the Committee shall so
determine, restrictions on transferability and restrictions relating to
continued employment.
D. The Committee shall have the discretion to grant to a
Participant receiving restricted shares all or any of the rights of a
stockholder while such shares continue to be subject to restrictions.
11. PERFORMANCE UNITS AND PERFORMANCE SHARES
A. Awards may be granted in the form of Performance Units or
Performance Shares. Awards of Performance Units and Performance Shares shall
refer to a commitment by the Corporation to make a distribution to the
Participant or to his beneficiary depending on (i) the attainment of the
performance objective(s) and other conditions established by the Committee and
(ii) the base value of the Performance Unit or Performance Shares,
respectively, as established by the Committee.
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<PAGE> 9
B. Settlement of Performance Units and Performance Shares may be
in cash, in shares of Common Stock, or a combination thereof. The Committee
may designate a method of converting Performance Units into Common Stock,
including, but not limited to, a method based on the Fair Market Value of Common
Stock over a series of consecutive trading days.
C. Participants shall not be entitled to exercise any voting
rights with respect to Performance Units or Performance Shares, but the
Committee in its sole discretion may attach dividend equivalents to such
Awards.
12. STOCK APPRECIATION RIGHTS
A. Awards may be granted in the form of stock appreciation
rights. Stock appreciation rights may be awarded in tandem with a stock
option, in addition to a stock option, or may be free-standing and unrelated to
a stock option.
B. A stock appreciation right entitles the Participant to receive
from the Corporation an amount equal to the positive difference between (i) the
Fair Market Value of Common Stock on the date of exercise of the stock
appreciation right and (ii) the grant price or some other amount as the
Committee may determine at the time of grant (but not less than the Fair Market
Value of Common Stock on the date of grant).
C. With respect to persons subject to Section 16 of the Exchange
Act, a stock appreciation right may only be exercised during a period which (i)
begins on the third business day following a date when the Corporation's
quarterly summary statement of sales and earnings is released to the public and
(ii) ends on the 12th business day following such date. This Section 12.C
shall not apply if the exercise occurs automatically on the date when a related
stock option expires.
D. Settlement of stock appreciation rights may be in cash, in
shares of Common Stock, or a combination thereof, as determined by the
Committee.
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<PAGE> 10
13. DEFERRAL OF AWARDS
At the discretion of the Committee, payment of an Award, dividend
equivalent, or any portion thereof may be deferred until a time established by
the Committee. Deferrals shall be made in accordance with guidelines
established by the Committee to ensure that such deferrals comply with
applicable requirements of the Code and its regulations. Deferrals shall be
initiated by the delivery of a written, irrevocable election by the participant
to the Committee or its nominee. Such election shall be made prior to the date
specified by the Committee. The Committee may also (A) credit interest
equivalents on cash payments that are deferred and set the rates of such
interest equivalents and (B) credit dividends equivalents on deferred payments
denominated in the form of shares of Common Stock.
14. EXERCISE OF STOCK OPTIONS OR AWARDS UPON TERMINATION OF EMPLOYMENT OR
SERVICES.
A. Upon cessation of service as a Non-Employee Director or
Consultant, for whatever reason, any and all stock options issuable to such
persons for services rendered, but which have not been granted as of the date
of cessation of service, for services rendered by the Non-Employee Director or
Consultant since the grant date immediately preceding the date of cessation of
service, shall be promptly granted and shall remain exercisable until the
expiration of the term of the option. In addition, all stock options granted
under Sections 7 and 8 and held by the Non-Employee Director or Consultant as
of the date of cessation of service may be exercised by the Non-Employee
Director, or Consultant or his/her heirs or legal representatives until the
expiration of the option term. Subject to Section 22, stock options granted to
other Participants under Section 9 may permit the exercise of options upon the
Participant's termination of employment within the following periods, or such
shorter periods as determined by the Committee at the time of grant:
(i) If on account of death, within twelve (12) months of
such event by the person or persons to whom the
Participant's rights pass by will or the laws of
descent or distribution.
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<PAGE> 11
(ii) If on account of retirement (as defined from time to
time by Corporation policy), stock options may be
exercised within three (3) months of such termination.
(iii) If on account of resignation, options may be exercised
within one (1) month of such termination.
(iv) If for cause (as defined from time to time by
Corporation policy), no unexercised option shall be
exercisable to any extent after termination.
(v) If on account of the taking of a leave of absence for
the purpose of serving the government or the country in
which the principal place of employment of the
Participant is located, either in a military or a
civilian capacity, or for such other purpose or reason
as the Committee may approve, a Participant shall not
be deemed during the period of any such absence alone,
to have terminated his service, except as the Committee
may otherwise expressly provide.
(vi) If on account of disability, within one year following
the disability of the Participant.
(vii) If for any reason other than death, retirement,
resignation, cause, or disability, options may be
exercised within three (3) months of such termination.
B. An unexercised option shall be exercisable only to the extent
that such option was exercisable on the date the Participant's employment or
service terminated. Notwithstanding the foregoing, and except as provided in
Section 14.A. above, terms relating to the exercisability of options may be
amended by the Committee before or after such termination, except in respect to
options granted under Section 7.
C. In no case may an unexercised option be exercised to any
extent by anyone after expiration of its term.
D. To the extent any Award other than stock options is
exercisable by a Participant, such Award shall be exercisable only until
termination (in the case of Employees only) or within the time periods
specified in A(i) to A(vii) above. In the case of a non-Employee Participant,
such Award will be exercisable in accordance with the terms thereof unless the
Committee has required continued service to the Corporation or a Subsidiary as
a condition to the exercise of an Award, in which event
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<PAGE> 12
the exercise of an Award following termination of services by a non-Employee
Participant shall be as provided for by the Committee.
15. ASSIGNABILITY
The rights of a Participant under the Plan shall be assignable by such
Participant, by operation of law or otherwise. No Participant may create a
lien on any funds, securities, rights or other property to which such
Participant may have an interest under the Plan, or which is held by the
Corporation for the account of the Participant under the Plan.
16. ADJUSTMENT OF SHARES AVAILABLE
The Committee shall make appropriate and equitable adjustments in the
shares of Common Stock available for future Awards and the number of shares of
Common Stock covered by unexercised, unvested or unpaid Awards upon the
subdivision of the outstanding shares of Common Stock; the declaration of a
dividend payable in Common Stock; the declaration of a dividend payable in a
form other than Common Stock in an amount that has a material effect on the
price of the shares of Common Stock; the combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise) into a
lesser number of shares of Common Stock; a recapitalization; or a similar
event.
17. PAYMENT OF WITHHOLDING TAXES
As a condition to receiving or exercising an Award, as the case may
be, the Participant shall pay to the Corporation or the employer Subsidiary the
amount of all applicable Federal, state, local and foreign taxes required by
law to be paid or withheld relating to receipt or exercise of the Award.
Alternatively, the Corporation may withhold shares of Common Stock with an
aggregate Fair Market Value equal to such withholding taxes, from any Award in
shares of Common Stock, to the extent the withholding is required by law. The
Corporation may also accept delivery of Common Stock
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<PAGE> 13
already owned by the Participant for at least six (6) months and valued at its
Fair Market Value. The Corporation also may deduct such withholding taxes from
any Award paid in cash.
18. AMENDMENTS
The Board of Directors may amend the Plan at any time and from time to
time, subject to the receipt of stockholder approval where required by Rule
16b-3, by the Code, by the Nasdaq National Market or other exchange regulations
or by state corporation law. Rights and obligations under any Award granted
before amendment of the Plan shall not be materially altered or impaired
adversely by such amendment, except with consent of the person to whom the
Award was granted.
19. REGULATORY APPROVALS AND LISTINGS
Notwithstanding any other provision in the Plan, the Corporation shall
have no obligation to issue or deliver certificates for shares of Common Stock
under the Plan prior to (A) obtaining approval from any governmental agency
which the Corporation determines is necessary or advisable, (B) admission of
such shares to listing on the stock exchange on which the Common Stock may be
listed, and (C) completion of any registration or other qualification of such
shares under any state or Federal law or ruling of any governmental body which
the Corporation determines to be necessary or advisable.
20. NO RIGHT TO CONTINUED EMPLOYMENT OR GRANTS
Participation in the Plan shall not give any Employee any right to
remain in the employ of the Corporation or any Subsidiary. Further, the
adoption of this Plan shall not be deemed to give any Employee or other
individual the right to be selected as a Participant or to be granted an Award.
21. NO RIGHT, TITLE, OR INTEREST IN CORPORATION ASSETS
No Participant shall have any rights as a stockholder of the
Corporation until Participant acquires an unconditional right under an Award to
have shares of Common Stock issued to such Participant. In the case of a
recipient of a stock option, the unconditional right to have shares of
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<PAGE> 14
Common Stock issued to such Participant shall be defined as the date upon which
the Participant has exercised the stock option and tendered valid consideration
to the Corporation for the exercise thereof. To the extent any person acquires
a right to receive payments from the Corporation under this Plan, such rights
shall be no greater than the rights of an unsecured creditor of the
Corporation.
22. SPECIAL PROVISION PERTAINING TO PERSONS SUBJECT TO SECTION 16
Notwithstanding any other item of this Plan, the following shall apply
to persons subject to Section 16 of the Exchange Act, except in the case of
death or disability or unless Section 16 shall be amended to provide otherwise
than as described below, in which event this Plan shall be amended to conform
to Section 16, as amended:
A. Restricted stock or other equity securities (within the
meaning used in Rule 16b-3 of the Exchange Act or any successor rule) offered
pursuant to this Plan must be held for at least six (6) months from the date of
grant; and
B. At least six (6) months must elapse from the date of
acquisition of any stock option, Performance Unit, Performance Share, stock
appreciation right or other derivative security (within the meaning used in
Rule 16b-3 of the Exchange Act or any successor rule) issued pursuant to the
Plan to the date of disposition of such derivative security (other than upon
exercise or conversion) or its underlying equity security.
23. INDEMNIFICATION
In addition to such other rights of indemnification as they may have
as Directors, the members of the Board of Directors or the Committee
administering the Plan shall be indemnified by the Corporation against
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with any appeal therein, to which they or any of them may be a
party by reason of any action taken or failure to act under or in connection
with the Plan or any Award granted thereunder, and against all
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<PAGE> 15
amounts paid by them in settlement thereof (provided such settlement is
approved by legal counsel selected by the Corporation) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such member is liable for negligence or misconduct in the
performance of his duties; provided that within 60 days after institution of
any such action, suit or proceeding, the member shall in writing offer the
Corporation the opportunity, at its own expense, to handle and defend the same.
24. MERGER, REORGANIZATION, EXCHANGE OR SALE OF ASSETS
In the event the Company enters into an agreement providing for the
merger of the Company into another corporation, an exchange of shares with
another corporation, the reorganization of the Company or the sale of
substantially all of the Company's assets, any Awards in the form of unvested
stock options shall become immediately vested and exercisable as of the date of
such merger agreement, exchange agreement, reorganization or sale agreement.
Upon consummation of the merger, exchange, reorganization or sale of assets,
each vested stock option, Performance Unit, Performance Share and stock
appreciation right shall either be assumed by the successor corporation or, if
not so assumed, the successor corporation shall substitute a vested stock
option, Performance Unit, Performance Share or stock appreciation right for
each outstanding vested stock option, Performance Unit, Performance Share and
stock appreciation right on substantially identical terms to the terms of
outstanding Awards in this form.
25. GOVERNING LAW
The Plan shall be governed by and construed in accordance with the
laws of the State of Delaware.
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<PAGE> 1
NATIONSBANK (R) PROMISSORY EXHIBIT 10.4.1
NationsBank, N.A. (Carolinas) NOTE
- --------------------------------------------------------------------------------
Date June 29, 1995
Amount $1,000,000.00
FOR VALUE RECEIVED, the undersigned ("Borrower") unconditionally (and jointly
and severally, if more than one) promise(s) to pay to the order of NationsBank,
N.A. (Carolinas) ("Bank"), Commercial Banking (Banking Center) without setoff,
at its offices at NationsBank Plaza NC1-002-03-10 Charlotte, North Carolina, or
at such other place as may be designated by Bank, the principal amount of ONE
MILLION AND NO/100 Dollars ($1,000,000.00), or so much thereof as may be
advanced from time to time in immediately available funds, together with
interest computed daily on the outstanding principal balance hereunder at an
annual interest rate, and in accordance with the payment schedule, indicated
below. [This Note contains some provisions preceded by boxes. Mark only those
boxes beside provisions which will be applicable to this transaction. A box
which is not marked means that the provision beside it is not applicable to this
transaction.]
RATE
[X] PRIME RATE. The rate shall be the Prime Rate, plus 0.000 percent, per
annum. The "Prime Rate" is the fluctuating rate of interest established By
Bank from time to time, at its discretion, whether or not at such rate
shall be otherwise published. The Prime Rate is established by Bank as an
index or base rate and may or may not at any time be the best or lowest
rate charged by Bank on any loan.
[ ] FIXED RATE. The rate shall be fixed at _________ percent, per annum.
[ ] TREASURY SECURITIES RATE. The Rate shall be the Treasury Securities Rate,
plus _____ percent, per annum. The "Treasury Securities Rate" is a
fluctuating rate of interest applied by Bank from time to time, based on
the most recent monthly average of daily yields on all outstanding United
States Treasury Securities adjusted [illegible] constant maturity of _____
years, as made available by the Federal Reserve Board, rounded upwards to
the nearest one-eighth of one percentage point (0.125%).
[ ] OTHER.
Notwithstanding any other provision contained in this Note, Bank does not intend
to charge and Borrower shall not be required to pay any amount of interest or
other fees or charges that is in excess of the maximum permitted by applicable
law. Any payment in excess of such maximum shall be refunded to Borrower or
credited against principal, the option of Bank.
ACCRUAL METHOD
Interest at the Rate set forth above, unless otherwise indicated, will be
calculated on the basis of the 365/360 method, which computes a daily amount of
interest for a hypothetical year of 360 days, then multiplies such amount by
the actual number of days elapsed in an interest calculation period. If
interest is not to be computed using this method, the method to be used shall
be: N/A.
-------------------------------------------------------------------------
RATE CHANGE DATE
Any Rate based on a fluctuating index or base rate will change, unless
otherwise provided, each time and as of the date that the index or base rate
changes. If the Rate is to change on any other date or at any other interval,
describe: N/A
--------------------------------------------------------------------
In the event any index is discontinued, Bank shall substitute an index
determined by Bank to be comparable, in its sole discretion.
PAYMENT SCHEDULE
All payments received hereunder shall be applied first to the payment of any
expense or charges payable hereunder or under any other documents executed in
connection with this Note ("Loan Documents"), then to interest due and payable,
with the balance being applied to principal, or in such other order as Bank
shall determine at its option.
[ ] PRINCIPAL Principal shall be paid in _________ (___) equal: [ ] monthly,
PLUS [ ] quarterly or [ ] __________ installments of _________each
INTEREST commencing on _______________, ___ together with accrued
interest thereon and continuing on the same day of each
successive month/quarter/or other period (as applicable)
thereafter, with final payment of all unpaid principal and
interest thereon on _____________,___.
[ ] PRINCIPAL Principal and interest shall be paid in _________ (___) equal:
AND [ ] monthly, [ ] quarterly or [ ] ___________ installments of
INTEREST __________each, commencing on ___________________, ___ and
continuing on the same day of each successive month/quarter/or
other period (as applicable) thereafter, with a final payment of
all unpaid principal and interest thereon on _____________,___;
provided that, if accrued interest on any payment date exceeds
the installment amount set forth above, Borrower will pay an
additional amount equal to such excess interest.
[X] SINGLE Principal shall be paid in full in a single payment on May 31,
PRINCIPAL 1996. Interest thereon shall be paid: [ ] at maturity, [X]
PAYMENT monthly, [ ] quarterly or [ ] _______________ commencing on JULY
31, 1995 and continuing on the same day of each successive
month/quarter, or other period (as applicable) thereafter, with
a final payment of all unpaid interest at the stated maturity of
this Note.
[X] DEMAND NOTWITHSTANDING ANY PROVISIONS CONTAINED HEREIN
WHICH MAY BE INCONSISTENT WITH A DEMAND NOTE,
INCLUDING BUT NOT LIMITED TO ANY REFERENCES TO
INSTALLMENTS, A MATURITY DATE, ACCELERATION OR
EVENTS OF DEFAULT, BORROWER ACKNOWLEDGES THAT
BANK MAY DEMAND PAYMENT AT ANY TIME, IN ITS SOLE
DISCRETION.
[ ]OTHER
REVOLVING FEATURE
[X] Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate amount outstanding at any one time equal to the
principal amount of this Note; provided, however, that Borrower is not in
default under any provision of this Note, any Loan Document, or any other
obligation of Borrower to Bank, and provided that the borrowings hereunder
do not exceed any borrowing base or other limitations on borrowings by
Borrower. Bank shall have no liability for its refusal to advance funds
based upon its determination that any conditions of such further advances
have not been met. Bank records of the amounts borrowed from time to time
shall be conclusive proof thereof.
[ ] Uncommitted Facility. Borrower acknowledges and agrees that
notwithstanding any provisions of this Note or the Loan Documents,
Bank has no obligation to make any advance, and that all advances are
at the sole discretion of the Bank.
AUTOMATIC PAYMENT
[ ] Borrower has elected to authorize Bank to effect payment of sums due
under this Note by means of debiting Borrowers account number
___________________. This authorization shall not affect the obligation of
Borrower to pay such sums when due, without notice, if there are
insufficient funds in such account to make such payment in full on the due
date thereof, or if Bank fails to debit the account.
BORROWER REPRESENTS TO BANK THAT THE PROCEEDS OF THIS LOAN ARE TO BE USED
PRIMARILY FOR BUSINESS, COMMERCIAL OR AGRICULTURAL PURPOSES. BORROWER
ACKNOWLEDGES HAVING READ AND UNDERSTOOD, AND AGREES TO BE BOUND BY, ALL TERMS
AND CONDITIONS OF THIS NOTE, INCLUDING THE ADDITIONAL TERMS AND CONDITIONS SET
FORTH ON THE REVERSE SIDE OF THIS NOTE, AND HEREBY EXECUTES THIS NOTE UNDER
SEAL.
Attest: American Aircarriers Support, Inc.
By: /s/ KARL F. BROWN (SEAL)
- ------------------------------- -------------------------------
Karl F. Brown
President
<PAGE> 2
ADDITIONAL TERMS AND CONDITIONS
1. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser, or guarantor
hereof or any other party hereto (collectively "Obligors") and each of them
jointly and severally: (a) waive presentment, demand, notice of demand, notice
of intent to accelerate, and notice of acceleration of maturity, protest, notice
of protest, notice of nonpayment, notice of dishonor, and any other notice
required to be given under the law to any of Obligors, in connection with the
delivery, acceptance, performance, default or enforcement of this Note, of any
indorsement or guaranty of this Note or of any Loan Documents; (b) consent to
any and all delays, extensions, renewals or other modifications of this Note or
the Loan Documents, or waivers of any term hereof or of the Loan Documents, or
releases or discharge by Bank of any of Obligors or release, substitution, or
exchange of any security for the payment hereof, or the failure to act on the
part of Bank or any indulgence shown by Bank, from time to time and in one or
more instances (without notice to or further assent from any of Obligors) and
agree that no such action, failure to act of failure to exercise any right or
remedy on the part of Bank shall in any way affect or impair the obligations of
any Obligors or be construed as waiver by Bank of, or otherwise affect, any of
Bank's right under this Note, under any indorsement or guaranty of this Note or
under any of the Loan Documents; and (c) agree to pay, on demand, all costs and
expenses of collection of this Note of any indorsement or guaranty hereof and/or
the enforcement of Bank's rights with respect to, or the administration,
supervision, preservation, protection of, or realization upon, any property
securing payment hereof, including, without limitation, reasonable attorney's
fees, including fees related to any trial, arbitration, bankruptcy, appeal or
other proceeding, in the amount of 15% of the outstanding balance of this Note.
2. INDEMNIFICATION. Obligors agree to promptly pay, indemnify and hold Bank
harmless from all state and federal taxes of any kind and other liabilities
with respect to or resulting from advances made pursuant to this Note. If this
Note has a revolving feature and is secured by a mortgage, Obligors expressly
consent to the deduction of any applicable taxes from each taxable advance
extended by Bank.
3. PREPAYMENTS. Prepayments may be made in whole or in part at any time on any
loan for which the Rate is based on the Prime Rate. All prepayments of principal
shall be applied in the inverse order of maturity, or in such other order as
Bank shall determine in its sole discretion. Except as expressly permitted by
law, no prepayment of any other loan shall be permitted without the prior
written consent of Bank. Notwithstanding such prohibition, if there is a
prepayment of any such loan, whether by consent of Bank, or because of
acceleration or otherwise, Borrower shall, within 15 days of any request by
Bank, pay to Bank any loss or expense which Bank may incur or sustain as a
result of such prepayment. For the purposes of calculating the amounts owed
only, it shall be assumed that Bank actually funded or committed to fund the
loan through the purchase of an underlying deposit in an amount and for a term
comparable to the loan, and such determination by Bank shall be conclusive,
absent a manifest error in computation.
4. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate of Bank, whether under this Note or any
other Agreement, note or instrument now or hereafter existing, as and when
due(whether upon demand, at maturity or by acceleration; (b) the failure to pay
or perform any other obligation, liability or indebtedness of any of Obligors
whether to Bank or some other party, the security for which constitutes an
encumbrance on the security for this Note; (c) death of any Obligor (if an
individual), or a proceeding being filed or commenced against any Obligor for
dissolution or liquidation, or any Obligor voluntarily or involuntarily
terminating or dissolving or being terminated or dissolved; (d) insolvency of,
business failure of, the appointment of a custodian, trustee, liquidator or
receiver for or for any of the property of, or an assignment for the benefit of
creditors by, or the filing of a petition under bankruptcy, insolvency or
debtor's relief law or for any adjustment of indebtedness, composition or
extension by or against any Obligor; (e) any lien or additional security
interest being placed upon any of the property which is security for this Note;
(f) acquisition at any time or from time to time of title to the whole of or any
part of the property which is security for this Note by any person, partnership,
corporation or other entity; (g) Bank determining that any representation or
warrant made by any Obligor in any Loan documents or otherwise to Bank is, or
was, untrue or materially misleading; (h) failure of any Obligor to timely
deliver such financial statements, including tax returns, and other statements
of condition or other information as Bank shall request from time to time; (i)
any default under any Loan Documents; (j) entry of a judgment against any
Obligor which Bank deems to be of a material nature, in Bank's sole discretion;
(k) the seizure or forfeiture of, or the issuance of any writ of possession,
garnishment or attachment, or any turnover order for any property of any
Obligor; (l) Bank reasonably deeming itself insecure for any reason; (m) the
determination by Bank that a material adverse change has occurred in the
financial condition of any Obligor; or, (n) the failure to comply with any law
or regulating the operation of Borrower's business.
5. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding and all other obligations of Obligor to Bank (however
acquired or evidenced) shall, at the option of Bank, become immediately due and
payable, and/or (b) to the extent permitted by law, the Rule of interest on the
unpaid principal shall, at the option of the Bank, be increased at Bank's
discretion up to the greater of (i) three percent (3%) over the contract rate
(as shown on the face of this Note) or (ii) three Percent (3%) over the Prime
Rate of Bank ("Default Rate"); and/or (c) to the extent permitted by law, a
delinquency charge may be imposed in an amount not to exceed four percent (4%)
of the unpaid portion of any payment in default for more than fifteen days.
Unless the terms of this Note call for repayment of the entire balance of this
Note (both principal and interest) in a single payment ( and not for
installments of interest or principal and interest), the four percent (4%)
delinquency charge may be imposed not only with respect to regular installments
of principal, interest, or interest and principal, but also with respect to any
other payment in default (other than a previous delinquency charge) for more
than fifteen days, including without limitation, a single payment of principal
due at maturity of this Note. In the event that any installment, or portion
thereof, is not paid in a timely fashion, subsequent payments will be applied
first to the past due balance( which shall not include any previous delinquency
charges), specifically to the oldest maturing installments, and a separate
delinquency charge will be imposed for each payment that becomes due until the
default is cured. The provisions herein for a Default Rate or a delinquency
charge shall not be deemed to extend the time for any payment hereunder or to
constitute a "grace period" giving the Obligors a right to cure any default. At
Bank's option, any accrued and unpaid interest, fees or charges may, for
purposes of computing and accruing interest on a daily basis after the due date
of the Note or any installment thereof, be deemed to be a part of the principal
balance, and interest shall accrue on a daily compounded basis after such date
at the rate provided in this Note until the entire outstanding balance of
principal and interest is paid in full. Bank is hereby authorized at any time to
set off and charge against any deposit accounts of any Obligor, as well as any
other property of such party at or under the control of Bank, without notice or
demand, any and all obligations due hereunder.
6. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any Bank's
rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Bank or the Obligations of
Obligor to Bank in any other respect at any other time.
7. APPLICABLE LAW. This Note is delivered in and shall be construed under the
internal laws and judicial decisions of the State of North Carolina, and the
laws of the United States as the same may be applicable.
8. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or the validity of any other
provision herein and the invalidity or unenforceability of any provision of
this Note or of the Loan Documents to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to
other persons or circumstances.
9. JURISDICTION AND VENUE. In any litigation in connection with or to enforce
this Note or any indorsement or guaranty of this Note or any Loan Documents,
Obligors, and each of them, irrevocably consent to and confer personal
jurisdiction on the courts of the State of North Carolina or the United States
courts located within the State of North Carolina, and expressly waive any
objections as to venue in any such courts, and agree that service of process
may be made on Obligors by mailing a copy of the summons and complaint by
registered or certified mail, return receipt requested, to their respective
addresses. Nothing contained herein shall, however, prevent Bank from bringing
any action or exercising any rights within any other state or jurisdiction or
from obtaining personal jurisdiction by any other means available by applicable
law.
10. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS NOTE OR
ANY RELATED NOTES OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM
AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH
THE FEDERAL ARBITRATION ACT(OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE
RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OR
JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC. (J.A.M.S.) AND THE "SPECIAL
RULES" SET FORTH BELOW. IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES
SHALL CONTROL. JUDGEMENT UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT
HAVING JURISDICTION. ANY PARTY TO THE NOTE MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS NOTE APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF
BORROWER'S DOMICILE AT THE TIME OF THIS NOTE'S EXECUTION AND ADMINISTERED BY
J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR AN
ADDITIONAL 60 DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS NOTE SHALL BE DEEMED TO
(I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION
OR REPOSE AND ANY WAIVERS CONTAINED IN THIS NOTE; OR (II) BE A WAIVER BY THE
BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SECTION 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK
THERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF,
OR (B) TO FORECLOSURE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C)
TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER. THE BANK MAY EXERCISE SUCH HELP RIGHTS, FORECLOSURE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS NOTE.
NEITHER THE EXERCISE OR SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE
OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN SUCH
ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING RESORT
TO SUCH REMEDIES.
11. BINDING EFFECT. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successor, assigns, heirs and
personal representatives, provided, however, that no obligations of the Borrower
or the Obligor hereunder can be assigned without prior written consent of Bank.
12. NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE AND ANY OTHER
DOCUMENTS EXECUTED IN CONNECTION HEREWITH REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
<PAGE> 1
EXHIBIT 10.4.2
NATIONSBANK(R)
NationsBank, N.A. (Carolinas) SECURITY AGREEMENT Date June 29, 1995
- --------------------------------------------------------------------------------
Between
BANK; (SECURED PARTY)
NationsBank, N.A. (Carolinas)
Banking Center:
NC1-002-03-10 Charlotte Mecklenburg NC 28255
(address including county)
- --------------------------------------------------------------------------------
and
DEBTOR/PLEDGOR:
American Aircarriers Support, Inc.
4283 Pleasant Road Fort Mill SC 29715
(Name and address including county)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
Debtor/Pledgor is: [ ] Individual [X] Corporation [ ] Partnership [ ] Other
-----------------------------
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Address is Debtor's: [ ] Residence [X] Place of Business [ ] Chief Executive Office if more than one place of business.
</TABLE>
- --------------------------------------------------------------------------------
(THIS AGREEMENT CONTAINS SOME PROVISIONS PRECEDED BY BOXES. MARK ONLY THOSE
BOXES BESIDE PROVISIONS WHICH WILL BE APPLICABLE TO THIS TRANSACTION. A BOX
WHICH IS NOT MARKED MEANS THAT THE PROVISION BESIDE IT IS NOT APPLICABLE TO
THIS TRANSACTION.)
A. SECURITY INTEREST. For good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged and subject to the applicable terms
of this agreement, Debtor/Pledgor (hereinafter referred to as Debtor) assigns
and grants to Bank (also known as Secured Party), a security interest and lien
in the Collateral to secure the payment and the performance of the Obligation.
B. COLLATERAL. The security interest is granted in the following
("Collateral") (Check as applicable)
1.
[X] ACCOUNTS. Any and all accounts, accounts receivable, receivables, contract
rights, book debts, checks, notes, drafts, instruments, chattel paper,
acceptances, choses in action, any and all amounts due to Debtor from a factor
or other forms of obligations and receivables now existing or hereafter arising
out of the business of the Debtor, as well as any and all returned, refused and
repossessed goods, and the cash or non-cash proceeds resulting therefrom.
[X] INVENTORY. Any and all of Debtor's Inventory, including without limitation
any and all goods held for sale or lease or being processed for sale or lease
in Debtor's business as now or hereafter conducted, whether now owned or
hereinafter acquired, including all materials, goods and work in process,
finished goods, and other tangible property held for sale or lease or furnished
or to be furnished under contracts of service or used or consumed in Debtor's
business, along with all documents (including documents of title) covering
inventory, all cash and non-cash proceeds from the sale of inventory including
proceeds from insurance and specifically including but not limited (attach
Schedule if necessary):
[ ] EQUIPMENT. Any and all of Debtor's furnishings, fixtures and equipment,
wherever located, whether now owned or hereafter acquired, together with all
increases, parts, fittings, accessories, equipment, and special tools now or
hereafter affixed to any part thereof or used in connection therewith, and all
products, additions, substitutions, accessions, and all cash and non-cash
proceeds, including proceeds from insurance thereof and thereto, including
without limitation the following (attach Schedule if necessary)
[ ] FIXTURES. All of Debtor's fixtures now existing or hereafter acquired,
together with all substitutes and replacements therefor, all accessions and
attachments thereto, and all tools, parts and equipment now or hereafter added
to or used in connection therewith. These goods are or will become fixtures on
the following described real estate in ______________________ County,
____________________________ (State), owned by: ________________________________
(name of owner) more particularly described as follows:_________________________
________________________________________________________________________________
______________________________________________________________ (insert legal
description (or attach Exhibit) of property, not street address), including
without limitation the following (attach schedule if necessary): _______________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
[ ] INSTRUMENTS AND/OR INVESTMENT DOCUMENTS. The following described
instruments and documents including, without limitation, negotiable
instruments, promissory notes, and documents of title owned or to be owned by
Debtor, certificates of deposit, and all liens, security agreements, leases and
other contracts securing or otherwise relating to any of said instruments or
documents, and all cash and non-cash proceeds and products thereof and such
additional property receivable or distributed in respect of or in exchange for
all or any of such instruments or documents (attach Schedule if necessary): ____
________________________________________________________________________________
________________________________________________________________________________
[ ] GENERAL INTANGIBLES. All patents, trademarks, service marks, trade secrets,
copyrights and exclusive licenses (whether issued or pending) and all
documents, applications, materials and other matters related thereto, all
inventions, and all manufacturing, engineering and production plans, drawings,
specifications, processes and systems, all trade names, computer programs, data
bases, systems and software (including source and object codes), goodwill,
choses in action and all other general intangibles of Debtor whether now owned
or hereafter acquired and all cash and non-cash proceeds thereof, including
without limitation the following described intangible personal property, and
all chattel paper, documents and instruments relating to such intangibles,
including without limitation (attach schedule if necessary): ___________________
________________________________________________________________________________
________________________________________________________________________________
[ ] TIMBER. All of Debtor's uncut timber growing or to be grown on the
following described property, and all cash and non-cash proceeds including
proceeds from insurance, and all products thereof (complete legal description
of real property required)(attach Exhibit if necessary): _______________________
________________________________________________________________________________
________________________________________________________________________________
[ ] OTHER: ____________________________________________________________________
________________________________________________________________________________
___________________________________ (hereinafter referred to as "Goods" and all
proceeds thereof)
2. All substitutes and replacements for, accessions, attachments and other
additions to, tools, parts and equipment used in connection with, and proceeds
and products of, the above Collateral (including all income and benefits
resulting from any of the above, such as dividends payable or distributable in
cash, property or stock; interest, premium and principal payments; redemption
proceeds and subscription rights; all certificates of title, manufacturer's
statements of origin, other documents, accounts and chattel paper arising from
or related to the above Collateral, and returned or repossessed Collateral, any
of which, if received by Debtor, upon request shall be delivered immediately to
Bank.
<PAGE> 2
3. The balance of every deposit account of Debtor under control of Bank and
any other claim of Debtor against Bank, now or hereafter existing, liquidated
or unliquidated, and all money, instruments, securities, documents, chattel
paper, credits, claims, demands, income, and any other property, rights and
interests of Debtor which at any time shall come into the possession or
custody or under the control of Bank or any of its agents, affiliates or
correspondents, for any purpose, and the proceeds of any thereof. Bank shall be
deemed to have possession of any of the Collateral in transit to or set apart
for it or any of its agents, affiliates or correspondents.
C. OBLIGATION.
1. DESCRIPTION OF OBLIGATION. The following obligations ("Obligation") are
secured by this agreement: (a) All debts, obligations, liabilities and
agreements of Debtor to Bank, now or hereafter existing, arising directly or
indirectly between Debtor and Bank whether absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, and all
renewals, extensions or rearrangement of any of the above; (b) Bank's
participation in any loan or other debt of Debtor to another person; (c) All
costs incurred by Bank to obtain, preserve, perfect and enforce this agreement
and maintain, preserve, collect and enforce the Collateral; (d) Interest on the
above amounts as agreed between Bank and Debtor; (e) All debt, obligations and
liabilities of
(if the preceding space is completed, such party, together with the Debtor
named above, is hereinafter referred to collectively as "Debtor") to Bank of
the kinds described in this Item C, now existing or hereinafter arising; (f)
All expenses of the Bank, including fees and expenses of the Bank's counsel,
incident to the enforcement of payment of all obligations of the Debtor by any
action or participation in, or in connection with a case or proceeding under
the Bankruptcy Code, or any successor statute thereto; (g) If the Debtor is not
the obligor of any of the Obligations, and in the event any amount paid to the
Bank on any Obligation is subsequently recovered from the Bank in or as a
result of any bankruptcy, insolvency or fraudulent conveyance proceeding, the
Debtor shall be liable to the Bank for the amounts so recovered up to the fair
market value of the Collateral whether or not the Collateral has been released
or the security interest terminated. In the event the Collateral has been
released or the security interest terminated, the fair market value of the
Collateral shall be determined, at the Bank's option, as of the date the
Collateral was released, the security interest terminated, or said amounts were
recovered; and (h) All amounts which may be owed to Bank pursuant to all other
loan documents executed between Bank and any other Debtor.
Notwithstanding the foregoing, if the Collateral is personal property used as a
principal residence (such as a mobile home or a houseboat) or "household goods"
(as that term is defined at 12 C.F.R. Section 227.12, as it may be amended from
time to time) which are not in the Bank's possession and which are not
fixtures, such Collateral shall not secure any liability contracted for
personal family or household purposes between the Debtor or an obligor and the
Bank already in existence on the date hereof or that arises hereafter, unless
the Debtor otherwise expressly agrees.
D. DEBTOR'S WARRANTIES. Debtor hereby represents and warrants to Bank as
follows:
1. FINANCING STATEMENTS. Except as may be noted by schedule attached hereto
and incorporated herein by reference, no financing statement covering the
Collateral is or will be on file in any public office, except the financing
statements relating to this security interest, and no security interest, other
than the one herein created, has attached or been perfected in the Collateral
or any part thereof.
2. OWNERSHIP. Debtor owns, or will use the proceeds of any loans by Bank to
become the owner of, the Collateral free from any setoff, claim, restriction,
lien, security interest or encumbrance except liens for taxes not yet due and
the security interest hereunder.
3. FIXTURES AND ACCESSIONS. None of the Collateral is affixed to real estate
or is an accession to any goods, or will become a fixture or accession, except
as expressly set out herein.
4. CLAIMS OF DEBTORS ON COLLATERAL. All account debtors and other obligors
whose debts or obligations are part of the Collateral have no right to setoffs,
counterclaims or adjustments, and no defenses in connection therewith.
5. POWER AND AUTHORITY. Debtor has full power and authority to make this
agreement.
E. DEBTOR'S COVENANTS. Until full payment and performance of all Obligations
and termination or expiration of any obligation or commitment of Bank to make
advances or loans to Debtor, unless Bank otherwise consents in writing:
1. OBLIGATION AND THIS AGREEMENT. Debtor shall perform all of its agreements
herein and in any other agreements between it and Bank.
2. OWNERSHIP OF COLLATERAL. Debtor shall defend the Collateral against all
claims and demands of all persons at any time claiming any interest therein
adverse to Bank. Debtor shall keep the Collateral free from all liens and
security interests except those for taxes not yet due and the security interest
hereby created.
3. INSURANCE. Debtor shall insure the Collateral with companies acceptable to
Bank. Such insurance shall be in an amount not less than the fair market value
of the Collateral and shall be against such casualties, with such deductible
amounts as Bank shall approve. All insurance policies shall be written for the
benefit of Debtor and Bank as their interests may appear, payable to Bank as
loss payee, or in other form satisfactory to Bank, and such policies or
certificates evidencing the same shall be furnished to Bank. All policies of
insurance shall provide for written notice to Bank at least 30 days prior to
cancellation. Risk of loss or damage is Debtor's to the extent of any
deficiency in any effective insurance coverage.
4. MAINTENANCE. Debtor shall keep all tangible Collateral in good condition.
5. BANK'S COSTS. Debtor shall pay all costs necessary to obtain, preserve,
perfect, defend and enforce this security interest, collect the Obligation, and
preserve, defend, enforce and collect the Collateral including but not limited
to taxes, assessments, insurance premiums, repairs, reasonable attorney's fees
and legal expenses, food, rent, storage costs and expenses of sales. Whether
Collateral is or is not in Bank's possession, and without any obligation to do
so and without waiving Debtor's default for failure to make any such payment,
Bank at its option may pay any such costs and expenses, discharge encumbrances
on Collateral, and pay for insurance of Collateral, and such payment shall be a
part of the Obligation and bear interest at the rate set out in the Obligation.
Debtor agrees to reimburse Bank on demand for any costs so incurred.
6. INFORMATION AND INSPECTION. Debtor shall (i) promptly furnish Bank any
information with respect to Collateral requested by Bank; (ii) allow Bank or
its representatives to inspect the Collateral, at any time and wherever
located, and to inspect and copy, or furnish Bank or its representatives with
copies of, all records relating to the Collateral and the Obligation; (iii)
furnish Bank or its representatives such information as Bank may request to
identify Collateral, at the time and in the form requested by Bank; and (iv)
deliver upon request to Bank shipping and delivery receipts evidencing the
shipment of goods and invoices evidencing the receipt of, and the payment for,
Collateral.
7. ADDITIONAL DOCUMENTS. Debtor shall sign and deliver any papers furnished
by Bank which are necessary or desirable in the judgment of Bank to obtain,
maintain and perfect the security interest hereunder and to enable Bank to
comply with the Federal Assignment of Claims Act or any other federal or state
law in order to obtain or perfect Bank's interest in Collateral or to obtain
proceeds of Collateral.
8. PARTIES LIABLE ON COLLATERAL. Debtor will preserve the liability of all
obligors on any Collateral, will preserve the priority of all security
therefor, and will deliver to Bank the original certificates of title on all
motor vehicles or other titled vehicles constituting the Collateral. Bank shall
have no duty to preserve such liability or security, but may do so at the
expense of Debtor, without waiving Debtor's default.
9. RIGHT OF BANK TO NOTIFY DEBTORS. At any time, whether Debtor is or is not
in default hereunder, Bank may notify persons obligated on any Collateral to
make payments directly to Bank and Bank may take control of all proceeds of any
Collateral. Until Bank elects to exercise such rights, Debtor, as agent of
Bank, shall collect and enforce all payments owed on Collateral.
10. RECORDS OF COLLATERAL. Debtor at all times will maintain accurate books
and records covering the Collateral. Debtor immediately will mark all books and
records with an entry showing the absolute assignment of all Collateral to Bank
and Bank is hereby given the right to audit the books and records of Debtor
relating to Collateral at any time and from time to time. The amounts shown as
owed to Debtor on Debtor's books and on any assignment schedule will be the
undisputed amounts owing and unpaid.
11. DISPOSITION OF COLLATERAL. If disposition of any Collateral gives rise to
an account, chattel paper or instrument, Debtor immediately shall notify Bank,
and upon request of Bank shall assign or indorse the same to Bank. No
Collateral may be sold, leased, manufactured, processed or otherwise disposed
of by Debtor in any manner without the prior written consent of Bank, except
Collateral sold, leased, manufactured, processed or consumed in the ordinary
course of business.
12. ACCOUNTS. Each account held as Collateral will represent the valid and
legally enforceable obligation of third parties, and shall not be evidenced by
any instrument or chattel paper.
13. LOCATION OF COLLATERAL. Debtor shall give Bank written notice of each
office of Debtor in which records of Debtor pertaining to accounts held as
Collateral are kept, and each location at which Collateral is or will be kept,
and of any change of any such location. If no such notice is given, all records
of Debtor pertaining to Collateral are and shall be kept at Debtor's address
shown above. All Collateral of Debtor will be kept at Debtor's address shown
above unless otherwise noted as follows:
14. NOTICE OF CHANGES. Debtor will notify Bank immediately of any material
change in the Collateral, of a change in Debtor's residence or location, of a
change in any matter warranted or represented by Debtor in this agreement or
furnished to Bank, and of any event of default.
15. USE AND REMOVAL OF COLLATERAL. Debtor will not use the Collateral illegally
nor, unless previously indicated as a fixture, permit the Collateral to be
affixed to real or personal property without the prior written consent of Bank.
Debtor will not permit any of the Collateral to be removed from the locations
specified herein without the prior written consent of Bank, except for the sale
of inventory in the ordinary course of business.
<PAGE> 3
16. POSSESSION OF COLLATERAL. Debtor will deliver all other instruments,
documents and chattel paper which are part of the Collateral and in Debtor's
possession to the Bank immediately, or if hereafter acquired, immediately
following acquisition, appropriately indorsed to Bank's order, or with
appropriate, executed powers. Debtor waives presentment, notice of acceleration,
demand, notice of dishonor, protest, and all other notices with respect thereto.
17. CONSUMER CREDIT. If any Collateral or proceeds includes obligations of
third parties to Debtor, the transactions giving rise to the Collateral shall
conform in all respects to the applicable state or federal law including but not
limited to consumer credit law. Debtor shall hold harmless and indemnify Bank
against any cost, loss or expense arising from Debtor's breach of this
covenant.
18. CHANGE OF NAME/STATUS. Without the written consent of Bank, Debtor shall
not change its name, change its corporate status, use any trade name or engage
in any business in which it was not engaged on the date of this agreement.
19. POWER OF ATTORNEY. Debtor appoints Bank as Debtor's attorney-in-fact with
full power in Debtor's name and behalf to do every act which Debtor is
obligated to do or may be required to do hereunder; however, nothing in this
paragraph shall be construed to obligate Bank to take any action hereunder nor
shall Bank be liable to Debtor for failure to take any action hereunder. This
appointment shall be deemed a power coupled with an interest and shall not be
terminable as long as the Obligations are outstanding and shall not terminate
on the disability or incompetence of the Debtor.
20. WAIVERS BY DEBTOR. Debtor waives notice of the creation, advance,
increase, existence, extension or renewal of, and of any indulgence with
respect to, the Obligation; waives presentment, demand, notice of dishonor, and
protest; waives notice of the amount of the Obligation outstanding at any time,
notice of any change in financial condition of any person liable for the
Obligation or any part thereof, notice of any event of default, and all other
notices respecting the Obligation; and agrees that maturity of the
Obligation and any part thereof may be accelerated, extended or renewed one or
more times by Bank in its discretion, without notice to Debtor. Debtor waives
any right to require that any action be brought against any other person or to
require that resort be had to any other security or to any balance of any
deposit account. The Debtor further waives any right of subrogation or to
enforce any right of action against any other Debtor until the Obligation is
paid in full.
21. OTHER PARTIES AND OTHER COLLATERAL. No renewal or extension of or any
other indulgence with respect to the Obligation or any part thereof, no release
of any security, no release of any person (including any maker, indorser,
guarantor or surety) liable on the Obligation, no delay in enforcement of
payment, and no delay or omission or lack of diligence or care in exercising
any right or power with respect to the Obligation or any security therefor or
guaranty thereof or under this agreement shall in any manner impair or affect
the rights of Bank under the law, hereunder, or under any other agreement
pertaining to the Collateral. Bank need not file suit or assert a claim for
personal judgement against any person for any part of the Obligation or seek to
realize upon any other security for the Obligation, before foreclosing or
otherwise realizing upon the Collateral for the purpose of paying the
Obligation. Debtor waives any right to the benefit of or to require or control
application of any other security or proceeds thereof, and agrees that Bank
shall have no duty or obligation to Debtor to apply to the Obligation any such
other security or proceeds thereof.
22. COLLECTION AND SEGREGATION OF ACCOUNTS. The Bank hereby authorizes the
Debtor to collect the Collateral, subject to the direction and control of the
Bank, but the Bank may, without cause or notice, curtail or terminate said
authority at any time. Upon notice by the Bank, whether oral or in writing, to
the Debtor, the Debtor shall forthwith upon receipt of all checks, drafts, cash,
and other remittances in payment of or on account of the Collateral, deposit the
same in one or more special accounts maintained with the Bank over which the
Bank alone shall have the power of withdrawal. The remittance of the proceeds of
such Collateral shall not, however, constitute payment or liquidation of such
Collateral until the Bank shall receive good funds for such proceeds. Funds
placed in such special accounts shall be held by the Bank as security for all
Obligations secured hereunder. These proceeds shall be deposited in precisely
the form received, except for the indorsement of the Debtor where necessary to
permit collection of items, which endorsement the Debtor agrees to make, and
which indorsement the Bank is also hereby authorized, as attorney-in-fact, to
make on behalf of the Debtor. In the event the Bank has notified the Debtor to
make deposits to a special account, pending such deposit, the Debtor agrees that
it will not commingle any such checks, drafts, cash or other remittances with
any funds or other property of the Debtor, but will hold them separate and apart
therefrom, and upon an express trust for the Bank until deposit thereof is made
in the special account. The Bank will, from time to time, apply the whole or any
part of the Collateral funds on deposit in this special account against such
Obligations as are secured hereby as the Bank may in its sole discretion elect.
At the sole election of the Bank, any portion of said funds on deposit in the
special account which the Bank shall elect not to apply to the Obligations, may
be paid over by the Bank to the Debtor.
23. COMPLIANCE WITH STATE AND FEDERAL LAWS. Debtor will comply with all State
and Federal laws and regulations applicable to its business, whether now in
effect or hereafter enacted including but not limited to the wage and hours
laws and relating to the use or disposal of hazardous materials and wastes.
F. RIGHTS AND POWERS OF BANK
1. GENERAL. Bank, before or after default, without liability to Debtor may:
obtain from any person information regarding Debtor or Debtor's business, which
information any such person also may furnish without liability to Debtor;
require Debtor to give possession or control of any Collateral to Bank; indorse
as Debtor's agent any instruments, documents or chattel paper in Collateral or
representing proceeds of Collateral; contact account debtors directly to verify
information furnished by Debtor; take control of proceeds, including stock
received as dividends or by reason of stock splits; release Collateral in its
possession to any Debtor, temporarily or otherwise; require additional
Collateral; reject as unsatisfactory any property hereafter offered by Debtor
as Collateral; set standards from time to time to govern what may be used as
after acquired Collateral; designate, from time to time, a certain percent of
the Collateral as the loan value and require Debtor to maintain the Obligation
at or below such figure; take control of funds generated by the Collateral,
such as cash dividends, interest and proceeds or refunds from insurance, and
use same to reduce any part of the Obligation and exercise all other rights
which an owner of such Collateral may exercise, except the right to vote or
dispose of Collateral before an event of default; at any time transfer any of
the Collateral or evidence thereof into its own name or that of its nominee;
and demand, collect, convert, redeem, receipt for, settle, compromise, adjust,
sue for, foreclose or realize upon Collateral, in its own name or in the name
of Debtor, as Bank may determine. Bank shall not be liable for failure to
collect any account or instruments, or for any act or omission on the part of
the Bank, its officers, agents or employees, except willful misconduct and
gross negligence. The foregoing rights and powers of Bank will be in addition
to, not a limitation upon, any rights and powers of Bank given by law,
elsewhere in this agreement, or otherwise. If Debtor fails to maintain any
required insurance, to the extent permitted by applicable law Bank may (but is
not obligated to) purchase single interest insurance coverage for the
Collateral which insurance may at Bank's option (i) protect only Bank and not
provide any remuneration or protection for Debtor directly and (ii) provide
coverage only after the Obligation has been declared due as herein provided.
The premiums for any such insurance purchased by Bank shall be a part of the
Obligation and shall bear interest as provided in B.1.d hereof.
2. CONVERTIBLE COLLATERAL. Bank, may present for conversion any Collateral
which is convertible into any other instrument or investment security or a
combination thereof with cash, but Bank shall not have any duty to present for
conversion any Collateral unless it shall have received from Debtor detailed
written instructions to that effect at a time reasonably far in advance of the
final conversion date to make such conversion possible.
G. DEFAULT
1. EVENT OF DEFAULT. An event of default shall occur if: (i) there is a
loss, theft, damage or destruction of any material portion of the Collateral
for which there is no insurance coverage or for which, in the opinion of the
Bank there is insufficient insurance coverage; or (ii) if Debtor or any other
obligor on the Obligation shall fail to timely and properly pay or observe,
keep or perform any term, covenant, agreement or condition in this agreement or
in any other agreement between Debtor and any other obligor on the Obligation,
including in any other note or instrument, loan agreement, security agreement,
deed of trust, mortgage, promissory note, assignment or other agreement or
instrument concerning the Obligation.
2. RIGHTS AND REMEDIES. If any Event of Default shall occur, then, in each
and every such case, the Bank may, without presentment, demand, or protest;
notice of default, dishonor, demand, non-payment, or protest; notice of intent
to accelerate all or any part of the Obligation; notice of acceleration of all
or any part of the Obligation; or notice of any other kind, all of which Debtor
hereby expressly waives, (except for any notice required under this agreement,
any other loan document or applicable law); at any time thereafter exercise
and/or enforce any of the following rights and remedies:
a) POSSESSION AND COLLECTION OF COLLATERAL. At its option: (i) take
possession or control of, store, lease, operate, manage, sell or otherwise
dispose of, all or any part of the Collateral; (ii) notify all parties under any
account or contract right forming all or any part of the Collateral to make any
payments otherwise due to the Debtor directly to the Bank; (iii) in the Bank's
own name, or in the name of the Debtor, demand, collect, receive, sue for, and
give receipts and releases for, any and all amounts due under such accounts and
contract rights; (iv) indorse as the agent of the Debtor any check, note,
chattel paper, documents, or instruments forming all or any part of the
Collateral; (v) make formal application for transfer to the Bank (or to any
assignee of the Bank to any purchaser of any of the Collateral) of all of the
Debtor's permits, licenses, approvals, agreements, and the like relating to the
Collateral or to the Debtor's business; (vi) take any other action which the
Bank deems necessary or desirable to protect and realize upon its security
interest in the Collateral; and (vii) in addition to the foregoing, and not in
substitution therefor, exercise any one or more of the rights and remedies
exerciseable by the Bank under any other provision of this agreement, under any
of the other loan documents, or as provided by applicable law (including,
without limitation, the Uniform Commercial Code as in effect in North Carolina
(hereinafter referred to as the "UCC")). In taking possession of the Collateral
the Bank may enter the Debtor's promises and otherwise proceed without legal
process, if this can be done without breach of the peace. The Debtor shall, upon
the Bank's demand, promptly make the Collateral or other security available to
the Bank at a place designated by the Bank, which place shall be reasonably
deemed convenient to both parties.
The Bank shall not be liable for, nor be prejudiced by, any loss, depreciation
or other damages to the Collateral, unless caused by the Bank's willful and
malicious act. The Bank shall have no duty to take any action to preserve or
collect the Collateral.
b) RECEIVER. Obtain the appointment of a receiver for all or any of the
Collateral, the Debtor hereby consenting to the appointment of such a receiver
and agreeing not to oppose any such appointment.
c) RIGHT OF SET OFF. Without notice or demand to the Debtor, set off and
apply against any and all of the Obligations any and all deposits (general or
special, time or demand, provisional or final) and any other indebtedness, at
any time held or owing by the Bank to or for the credit of the account of the
Debtor.
Bank shall be entitled to immediate possession of all books and records
evidencing any Collateral or pertaining to chattel paper covered by this
agreement and it or its representatives shall have the authority to enter upon
any premises upon which any of the same, or any Collateral, may be situated and
remove the same therefrom without liability. Bank may surrender any insurance
policies in Collateral and receive the unearned premium thereon. Debtor shall
be entitled to any surplus and shall be liable to Bank for any deficiency. The
proceeds of any disposition after default available to satisfy the Obligation
shall be applied to the Obligation in such order and in such manner as Bank in
its discretion shall decide.
<PAGE> 4
H. GENERAL
1. PARTIES BOUND. Bank's rights hereunder shall inure to the benefit of its
successors and assigns, and in the event of any assignment or transfer of any
of the Obligation or the Collateral, Bank thereafter shall be fully discharged
from any responsibility with respect to the Collateral so assigned or
transferred, but Bank shall retain all rights and powers hereby given with
respect to any of the Obligation or Collateral not so assigned or transferred.
All representations, warranties and agreements of Debtor if more than one are
joint and several and all shall be binding upon the personal representatives,
heirs, successors and assigns of Debtor.
2. WAIVER. No delay of Bank in exercising any power or right shall operate as
a waiver thereof; nor shall any single or partial exercise of any power or right
preclude other or further exercise thereof or the exercise of any other power or
right. No waiver by Bank of any right hereunder or of any default by Debtor
shall be binding upon Bank unless in writing, and no failure by Bank to exercise
any power or right hereunder or waiver of any default by Debtor shall operate as
a waiver of any other or further exercise of such right or power or of any
further default. Each right, power and remedy of the Bank as provided for in any
of the loan documents, or which shall now or hereafter exist at law or in equity
or by statute or otherwise, shall be cumulative and concurrent and shall be in
addition to every other such right, power or remedy. The exercise or beginning
of the exercise by the Bank of any one or more of such rights, powers or
remedies shall not preclude the simultaneous or later exercise by the Bank of
any or all other such rights, powers or remedies.
3. AGREEMENT CONTINUING. This agreement shall constitute a continuing
agreement, applying to all future as well as existing transactions, whether or
not of the character contemplated at the date of this agreement, and if all
transactions between Bank and Debtor shall be closed at any time, shall be
equally applicable to any new transactions thereafter. Provisions of this
agreement, unless by their terms exclusive, shall be in addition to other
agreements between the parties. Time is of the essence of this agreement.
4. DEFINITIONS. Unless the context indicates otherwise, definitions in the
UCC apply to words and phrases in this agreement; if UCC definitions conflict,
Article 9 definitions apply.
5. NOTICE. Notice shall be deemed reasonable if mailed postage prepaid at
least 5 days before the related action (or if the UCC elsewhere specifies a
longer period, such longer period) to the address of Debtor given above.
6. MODIFICATIONS. No provision hereof shall be modified or limited except by
a written agreement expressly referring hereto and to the provisions so
modified or limited and signed by the Debtor and Bank, nor by course of
conduct, usage of trade.
7. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision
of this security agreement shall not affect the enforceability or validity of
any other provision herein and the invalidity or unenforceability of any
provision of any loan document to any person or circumstance shall not affect
the enforceability or validity of such provision as it may apply to other
persons or circumstances.
8. GENDER AND NUMBER. Where appropriate, the use of one gender shall be
construed to include the others or any of them; and the singular number shall
be construed to include the plural, and vice versa.
9. APPLICABLE LAW AND VENUE. This agreement has been delivered in the State
of North Carolina and shall be construed in accordance with the laws of that
State. It is performable by Debtor in the county or city of Bank's address set
out above and Debtor expressly waives any objection as to venue in any such
location. Wherever 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
provisions or the remaining provisions of this agreement.
10. FINANCING STATEMENT. To the extent permitted by applicable law, a carbon,
photographic or other reproduction of this security agreement or any financing
statement covering the Collateral shall be sufficient as a financing statement.
11. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which shall be considered to be an original, but all of
which shall constitute one in the same instrument. As used herein "this
agreement" shall include all attachments and addends.
12. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.) AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE
BORROWER'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND ADMINISTERED
BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP
TO AN ADDITIONAL 60 DAYS.
B. RESERVATIONS OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO (I)
LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION OR
REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY THE
BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY SUBSTANTIALLY
EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO (A) TO
EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE BANK
MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR OBTAIN
SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE PENDENCY OF
ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT. AT BANK'S
OPTION, FORECLOSURE UNDER A DEED OF TRUST OR MORTGAGE MAY BE ACCOMPLISHED BY
ANY OF THE FOLLOWING: THE EXERCISE OF A POWER OF SALE UNDER THE DEED OF TRUST
OR MORTGAGE, OR BY JUDICIAL SALE UNDER THE DEED OF TRUST OR MORTGAGE, OR BY
JUDICIAL FORECLOSURE. NEITHER THIS EXERCISE OR SELF HELP REMEDIES NOR THE
INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR
ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES. DEBTOR AGREES THAT
BANK AT ITS SOLE OPTION MAY CHOOSE MEDIATION, AND/OR BINDING ARBITRATION
PROCEDURES PERTAINING TO ANY CONTROVERSY(IES) OR DISPUTE(S) ARISING BETWEEN
DEBTOR AND BANK. DEBTOR AGREES TO ABIDE BY THE SELECTION THAT BANK MAKES TO
RESOLVE ANY CONFLICTS OR DISPUTES BETWEEN DEBTOR AND BANK AND TO PARTICIPATE IN
THE MEDIATION AND/OR BINDING ARBITRATION PROCESS IF SELECTED. DEBTOR AND BANK
AGREE THAT EACH WILL BEAR THEIR PORTION OF EXPENSES RELATED TO MEDIATION AND/OR
BIDING ARBITRATION.
13. NOTICE OF FINAL AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER LOAN
DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN OR ORAL AGREEMENTS BETWEEN
THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly
executed under seal by their duly authorized representatives as of the date
first above written.
BANK/SECURED PARTY: DEBTOR/PLEDGOR:
NATIONSBANK, N.A. (CAROLINAS)
By: /s/ KEITH T. ROBELEN (Seal) American Aircarriers Support, Inc.
----------------------------
Keith T. Robelen
Vice President
ATTEST:
/s/ JUDY B. MARTIN, SEC. By: /s/ KARL F. BROWN (Seal)
- -------------------------------- -------------------------
Karl F. Brown
President
<PAGE> 1
EXHIBIT 10.4.2
NATIONSBANK (R)
NationsBank, N.A. (Carolinas) CONTINUING AND UNCONDITIONAL GUARANTY
- --------------------------------------------------------------------------------
1. GUARANTY. FOR VALUE RECEIVED, and to induce NationsBank, N.A. (Carolinas)
NationsBank Plaza
--------------------------------
Banking Center
NationsBank Plaza , Charlotte , NC , 28255 ,
- ------------------------- ------------------ -------- -------------
Bank Street Address City State Zip Code
(Attn: Commercial Lending I) (herein called "Bank"), to make loans or advances
---------------------
or to extend credit or other financial accommodations or benefits, with or
without security, to or for the account of American Aircarriers Support, Inc.
-------------------------------------
Borrower's Name
4283 Pleasant Road , Fort Mill , SC , 29715 ,
- ------------------------- ------------------ -------- -------------
Street Address City State Zip Code
(herein called "Borrower"), the undersigned (herein called "Guarantor"), if more
than one, then each of them jointly and severally, hereby becomes surety for and
irrevocably and unconditionally guarantees to Bank the full and prompt payment
when due, whether by acceleration or otherwise, of any and all Liabilities (as
hereinafter defined) of Borrower to Bank, together with reasonable attorney's
fees, costs and expenses incurred by Bank in enforcing any and all of such
indebtedness. This Guaranty is continuing and unlimited as to the amount.
Guarantor further unconditionally guarantees the faithful, prompt and complete
compliance by Borrower with all terms, conditions, covenants, agreements and
undertakings of Borrower (herein collectively referred to as the "Obligations")
under all notes and other documents evidencing the Liabilities, as hereinafter
defined, and under all deeds to secure debt, deeds of trust, mortgages, security
agreements and other agreements, documents and instruments executed in
connection with the Liabilities or related thereto (all such deeds to secure
debt, deeds of trust, mortgages, security agreements and other documents
securing payment of the Liabilities and all notes and other agreements,
documents, and instruments evidencing or relating to the Liabilities and
Obligations being herein collectively called the "Loan Documents"). The
undertakings of Guarantor hereunder are independent of the Liabilities and
Obligations of the Borrower and a separate action or actions for payment,
damages or performance may be brought or prosecuted against Guarantor, whether
or not an action is brought against the Borrower or to realize upon the security
for the Liabilities and/or Obligations and whether or not Borrower is joined in
any such action or actions, and whether or not notice is given or demand is made
upon the Borrower.
Bank shall not be required to proceed first against Borrower, or any other
person, firm or corporation, whether primarily or secondarily liable, or
against any Collateral held by it, before resorting to Guarantor for payment,
and Guarantor shall not be entitled to assert as a defense to the
enforceability of the Guaranty any defense of Borrower with respect to any
Liabilities or Obligations.
2. PARAGRAPH HEADINGS AND GOVERNING LAW. Guarantor agrees that the paragraph
headings in this Guaranty are for convenience only and that they will not limit
any of the provisions of the Guaranty. Guarantor further agrees that this
Guaranty shall be governed by and construed in accordance with the laws of the
State of North Carolina and applicable United States federal law. Guarantor
further agrees that this Guaranty shall be deemed to have been made in the State
of North Carolina at Bank's address indicated herein, and shall be governed by,
and construed in accordance with, the laws of the State of North Carolina, or
the United States courts located within the State of North Carolina, and is
performable in the State of North Carolina.
3. DEFINITIONS.
A. "Liability" or "Liabilities" as used herein shall include without
limitation, all liabilities, overdrafts, indebtedness, and obligations of
Borrower to Bank, whether direct or indirect, absolute or contingent, joint or
several, secured or unsecured, due or not due, contractual or tortious,
liquidated or unliquidated, arising by operation of law or otherwise, now or
hereafter existing, or held or to be held by the Bank for its own account or as
agent for another or others, whether created directly, indirectly, or acquired
by assignment or otherwise, including but not limited to all extensions or
renewals thereof, and all sums as payable under or by virtue thereof, including
without limitation, all amounts of principal and interest, all expenses
(including attorney's fees and cost of collection as specified) incurred in the
collection thereof or the enforcement of rights thereunder or in enforcing this
Guaranty (including without limitation, any liability arising from failure to
comply with state or federal laws, rules and regulations concerning the control
of hazardous wastes or substances at or with respect to any real estate securing
any loan guaranteed hereby), whether arising in the ordinary course of business
or otherwise, and whether held or to be held by Bank for its own account or as
agent for another or others. If Borrower is a partnership, corporation or other
entity the term "Liability" or "Liabilities" as used herein shall include all
Liabilities to Bank of any successor entity or entities.
B. "Guarantor" as used herein shall mean Guarantor or any one or
more of them. Anyone executing this Guaranty shall be bound by the terms
hereof without regard to execution by anyone else. This Guaranty is binding
upon Guarantor, his, their or its executors, administrators, successors or
assigns, and shall inure to the benefit of Bank, its successors, endorsees or
assigns.
"Guarantor" as used in this instrument shall be construed as singular or plural
to correspond with the number of persons executing this instrument as Guarantor.
The pronouns used in this Agreement are in the masculine gender but shall be
construed as female or neuter as an occasion may require.
C. "Collateral" means the property subject to a security interest,
and includes accounts and chattel paper which have been sold, including but not
limited to all additions and accessions thereto, all replacements or
substitutes therefor, and all immediate and remote proceeds of the sale or
other disposition thereof.
4. WAIVERS BY GUARANTOR. Guarantor waives notice of acceptance of this
Guaranty, notice of any Liability or Obligations to which it may apply, and
waives presentment, demand for payment, protest, notice of dishonor or
nonpayment of any Liabilities, waiver of notice of intent to accelerate, waiver
of notice of acceleration and notice of any suit or the taking of other action
by Bank against Borrower, Guarantor or any other person and any other notice to
any party liable thereon (including Guarantor) and any applicable statute of
limitations.
Each Guarantor also hereby waives any claim, right or remedy which such
Guarantor may now have or hereafter acquire against the Borrower that arises
hereunder and/or from the performance by any Guarantor hereunder including,
without limitation, any claim, remedy or right of subrogation, reimbursement,
exoneration, contribution, indemnification, or participation in any claim, right
or remedy of the Bank against the Borrower or any security which the Bank now
has or hereafter acquires, whether nor not such claim, right or remedy arises in
equity, under contract, by statute, under common law or otherwise.
Guarantor hereby agrees to waive the benefits of any provision of law requiring
that the Bank exhaust any right or remedy, or take any action, against the
Borrower, any Guarantor, any other person and/or property including but not
limited to the provisions of the N.C. Gen. Stat. Section 26-7 through 26-9,
inclusive, as amended, or otherwise.
Bank may at any time and from time to time (whether before or after revocation
or termination of this Guaranty) without notice to Guarantor (except as required
by law,) without incurring responsibility to Guarantor, without impairing,
releasing, or otherwise affecting the obligations of Guarantor, in whole or in
part, and without the endorsement or execution by Guarantor of any additional
consent, waiver or guaranty: (a) change the manner, place or terms of payment;
(b) change or extend the time of or renew or alter, any Liability or Obligation
or installment thereof, or any security therefor; (c) loan additional monies or
extend additional credit to Borrower, with or without security, thereby creating
new Liabilities or Obligations the payment or performance of which shall be
guaranteed hereunder, and the Guaranty herein made shall apply to the
Liabilities and Obligations as so changed, extended, surrendered, realized upon
or otherwise altered; (d) sell, exchange, release, surrender, realize upon or
otherwise deal with in any manner and in any order any property at any time
pledged or mortgaged to secure the Liabilities or Obligations and any offset
there against; (e) exercise or refrain from exercising any rights against
Borrower or others (including Guarantor) or act or refrain from acting in any
other manner; (f) settle or compromise any Liability or Obligation or any
security therefor and subordinate the payment of all or any part thereof to the
payment of any Liability or Obligation of any other parties primarily or
secondarily liable on any of the Liabilities or Obligations; (g) release or
compromise any liability of Guarantor hereunder or any Liability or Obligation
of any other parties primarily or secondarily liable on any of the Liabilities
or Obligations; or (h) apply any sums from any sources to any Liability without
regard to any Liabilities remaining unpaid.
<PAGE> 2
5. SUBORDINATION. Upon demand of Bank, Guarantor agrees that it will not
demand, take or receive from the Borrower, by set-off or in any other manner,
payment of any liabilities and/or obligations, now and at any time or times
hereafter owing by the Borrower to Guarantor unless and until all the
Liabilities shall have been fully paid, and any security interest, liens or
encumbrances which Guarantor now has and from time to time hereafter may be upon
any of the assets of the Borrower shall be made subordinate, junior and
inferior and postponed in priority, operation and effect to any security
interest of Bank in such assets.
6. WAIVERS BY BANK. No delay on the part of Bank in exercising any of its
options, powers or rights, or any partial or single exercise thereof, shall
constitute a waiver thereof. No waiver of any of its rights hereunder, and no
modification or amendment of this Guaranty, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; and each
such waiver, if any, shall apply only with respect to the specific instance
involved, and shall in no way impair the rights of Bank or the obligations of
Guarantor to Bank in any other respect at any other time.
7. TERMINATION. This Guaranty shall continue until written notice of
revocation signed by each respective Guarantor or until written notice of the
death of such Guarantor shall actually have been received by Bank,
notwithstanding change in name, location, composition or structure of, or the
dissolution, termination or increase, decrease or change in personnel, owners
or partners of Borrower, or any one or more of Guarantors, provided, however,
that no notice of revocation or termination hereof shall affect in any manner
rights arising under this Guaranty with respect to Liabilities or Obligations
that shall have been created, contracted, assumed or incurred prior to receipt
of such written notice pursuant to any agreement entered into by Bank prior to
receipt of such notice, and the sole effect of such notice of revocation or
termination hereof shall be to exclude from this Guaranty, Liabilities or
Obligations thereafter arising that are unconnected with Liabilities or
Obligations theretofore arising or transaction entered into theretofore.
In the event of the death of a Guarantor, the liabilities of the estate of the
deceased Guarantor shall continue in full force and effect as to (i) the
Liabilities existing at the date of death, and any renewals or extensions
thereof, and (ii) loans or advances made to or for the account of Borrower
after the date of death of the deceased Guarantor pursuant to the liabilities
of Bank under a commitment made to Borrower prior to the date of such death.
As to all surviving Guarantors, this Guaranty shall continue in full force and
effect after the death of a Guarantor, not only as to the Liabilities existing
at that time, but also as to Liabilities thereafter incurred by Borrower to
Bank.
8. PARTIAL INVALIDITY AND/OR ENFORCEABILITY OF GUARANTY. The
unenforceability or invalidity of any provision of this Guaranty shall not
affect the enforceability or validity of any other provision herein and the
invalidity or unenforceability of any provision of any Loan Document as it may
apply to any person or circumstance shall not affect the enforceability or
validity of such provision as it may apply to other persons or circumstances.
In the event Bank is required to relinquish or return the payments, the
Collateral or the proceeds thereof, in whole or in part, which had been
previously applied to or retained for application against any Liability, by
reason of a proceeding arising under the Bankruptcy Code, or for any other
reason, this Guaranty shall automatically continue to be effective
notwithstanding any previous cancellation or release effected by the Bank.
9. OBLIGATIONS OF GUARANTOR. In the event that Borrower fails to perform any
of the Obligations or pay any of the Liabilities, Guarantor shall upon demand
by Bank, promptly and with due diligence pay all Liabilities and perform and
satisfy for the benefit of Bank all Obligations.
Guarantor will not become a party to a merger or consolidation with any other
company, except where Guarantor is the surviving corporation or entity, and all
covenants under this Guaranty Agreement are assumed by the surviving
corporation. Further, Guarantor may not change the status of or type of entity
that Guarantor is, without the written consent of Bank and all covenants under
this Guaranty Agreement are assumed by the new or surviving entity. Guarantor
further agrees that this Guaranty Agreement shall be binding, legal and
enforceable against Guarantor in the event Borrower changes its name, status or
type of entity.
10. FINANCIAL AND OTHER INFORMATION. Guarantor agrees to furnish to Bank any
and all financial information and any other information regarding Guarantor
and/or Collateral requested in writing by Bank within ten (10) days of the date
of the request. The Guarantor has made an independent investigation of the
financial condition and affairs of the Borrower prior to entering into this
Guaranty, and the Guarantor has made and will continue to make an independent
appraisal of the creditworthiness of the Borrower; and in entering into this
Guaranty the Guarantor has not relied upon any representation of the Bank as to
the financial condition, operation or creditworthiness of the Borrower. The
Guarantor further agrees that the Bank shall have no duty or responsibility now
or hereafter to make any investigation or appraisal of the Borrower on behalf of
the Guarantor or to provide the Guarantor with any credit or other information
which may come to its attention now or hereafter.
11. NOTICES. All notices required or permitted to be given to Bank herein
shall be sent by registered or certified mail, return receipt requested to the
Bank at the address shown in the preamble to this agreement. Guarantor agrees
that all notices required or permitted to be given to Guarantor shall be sent by
first class mail, postage prepaid United States mail. The parties agree that
the notice shall be considered received by Guarantor five (5) days after being
placed in the United States mail.
12. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the
failure to pay or perform any Obligation, Liability or indebtedness of Borrower
or Guarantor to Bank, or to any affiliate of Bank, whether under this Guaranty
or any other agreement, note or instrument now or hereafter existing, as and
when due (whether upon demand, at maturity or by acceleration); (b) the failure
to pay or perform any other Obligation, Liability or indebtedness of Borrower
or Guarantor as and when due, whether to Bank or some other party, the
Collateral for which constitutes an encumbrance on the Collateral for this
Guaranty; (c) death of any Borrower or Guarantor (if any individual), or a
proceeding being filed or commenced against a Borrower or Guarantor for
dissolution or liquidation, or any Borrower or Guarantor voluntarily or
involuntarily terminating or dissolving or being terminated or dissolved; (d)
the insolvency of, the business failure of, the appointment of a custodian,
trustee, liquidator or receiver for or for any of the property of, or an
assignment for the benefit of creditors by, or the filing of a petition under
any bankruptcy, insolvency or debtor's relief law or for any adjustment of
indebtedness, composition or extension by or against Borrower or Guarantor; (e)
any lien or additional security interest being placed upon any of the
Collateral which is security for this Guaranty; (f) acquisition at any time or
from time to time of title to the whole of or any part of the Collateral which
is security for this Guaranty by any person, partnership, corporation, or other
entity; (g) Bank determining that any representation or warranty made by
Borrower or Guarantor to Bank is, or was, untrue or materially misleading; (h)
failure of Borrower or Guarantor to timely deliver such financial statements,
including tax returns, and other statements of condition or other information
as Bank shall request from time to time; (i) any default under any Loan
Documents; (j) entry of a judgment against Borrower or Guarantor which Bank
deems to be of a material nature, in Bank's sole discretion; (k) the seizure or
forfeiture of, or the issuance of any writ of possession, garnishment or
attachment, or any turnover order for any property of Borrower or Guarantor;
(l) Bank reasonably deeming itself insecure for any reason; (m) the
determination by Bank that a material adverse change has occurred in the
financial condition of Borrower or Guarantor; (n) the failure to comply with
any law regulating the operation of Borrower's business; (o) termination of
Guaranty by Guarantor; or, (p) the inability of the Borrower or Guarantor to
pay debts as they mature whether owing to Bank or any other party.
13. REMEDIES. Upon the occurrence of any event of default hereunder, Bank
shall have all of the remedies of a creditor and, to the extent applicable, of
a secured party, under all applicable law, and without limiting the generality
of the foregoing, Bank may, at its option and without notice or demand: (a)
declare any Liability accelerated and due and payable at once; and (b) take
possession of any Collateral wherever located, and sell, resell, assign,
transfer and deliver all or any part of said Collateral of Borrower or
Guarantor at any public or private sale or otherwise dispose of any or all of
the Collateral in its then condition, for cash or on credit of for future
delivery, and in connection therewith Bank may impose reasonable conditions
upon any such sale. Bank, unless prohibited by law the provisions of which
cannot be waived, may purchase all or any part of said Collateral to be sold,
free from and discharged of all trusts, claims, rights or redemption and
equities of the Borrower or Guarantor whatsoever; Guarantor acknowledges and
agrees that the sale of any Collateral through any nationally recognized
broker-dealer, investment banker or any other method common in the securities
industry shall be deemed a commercially reasonable sale under the Uniform
Commercial Code or any other equivalent statute or federal law, and expressly
waives notice thereof except as provided herein; and (c) set-off against any or
all liabilities of Guarantor all money owed by Bank in any capacity to
Guarantor whether or not due, and also set-off against all other Liabilities of
Borrower or Guarantor to Bank all money owed by Bank in any capacity to any
Borrower or Guarantor, and if exercised by Bank, Bank shall be deemed to have
exercised such right of set-off and to have made a charge against any such
money immediately upon the occurrence of such default although made or entered
on the books subsequent thereto.
<PAGE> 3
14. ATTORNEY FEES, COST AND EXPENSES. Guarantor shall pay all costs of
collection and attorney's fees equal to the greater of (a) fifteen percent
(15%) of any liability due and unpaid if Bank proceeds to collect such
Liability through the services of an attorney at law, whether through the
initiation of legal proceedings or otherwise, plus reasonable attorney's fees
incurred in appellate proceedings, or (b) reasonable attorney's fees, including
reasonable attorney's fees in connection with any suit, mediation or
arbitration proceeding, out of court payment agreement, trial, appeal,
bankruptcy proceedings or otherwise, incurred or paid by Bank in enforcing the
payment of any Liability or enforcing or preserving any right or interest of
Bank hereunder, including the collection, preservation, sale or delivery of any
Collateral from time to time pledged to Bank, and after deducting such fees,
costs and expenses from proceeds of sale or collection, Bank may apply any
residue to pay any of the Liabilities and Guarantor shall continue to be liable
for any deficiency with interest at the rate specified in any instrument
evidencing the Liability or, at the Bank's option, equal to the highest lawful
rate, which shall remain a liability.
15. PRESERVATION OF PROPERTY. Bank shall not be bound to take any steps
necessary to preserve any rights in any of the property of Guarantor pledged to
Bank to secure Guarantor's obligation against prior parties who may be liable
in connection therewith, and Guarantor hereby agrees to take any such steps.
Bank, nevertheless, at any time, may (a) take any action it deems appropriate
for the care or preservation of such property or of any right of Guarantor or
Bank therein, (b) demand, sue for, collect or receive any money or property at
any time due, payable or receivable on account of or in exchange for any
property of Guarantor, (c) compromise and settle with any person liable on such
property, or (d) extend the time of payment or otherwise change the terms of
the Loan Documents as to any party liable on the Loan Documents, all without
notice to, without incurring responsibility to, and without affecting any of
the obligations or liabilities of Guarantor.
16. COLLATERAL. The Bank at all times and from time to time shall have the
right to require Guarantor to deliver to Bank Collateral satisfactory to Bank
to secure Guarantor's undertakings hereunder and/or the liabilities of
Guarantor hereunder.
Bank shall have a properly perfected security interest in all of Guarantor's
funds on deposit with Bank to secure the balance of any liabilities and/or
obligations that Guarantor may now or in the future owe the Bank. Bank is
granted a contractual right of set-off and will not be liable for dishonoring
checks or withdrawals where the exercise of Bank's contractual right of set-off
or security interest results in insufficient funds in Guarantor's account. As
authorized by law, Guarantor grants to Bank this contractual right of set-off
and security interest in all property of Guarantor now or at anytime hereafter
in possession of Bank, including but not limited to any joint account, special
account, account by the entireties, tenancy in common, and all dividends and
distributions now or hereafter in the possession or control of Bank.
[ ] CHECK IF APPLICABLE. In addition to the provisions stated above, Guarantor
hereby pledges, assigns and grants to Bank a security interest in and title to
the Collateral described in the security agreement, deed of trust, deed to
secure debt, mortgage or other Collateral instrument dated __________, ____
which Collateral, except for any margin stock (as defined in Regulation U of the
Board of Governors of the Federal Reserve System), shall secure this Guaranty,
whether currently existing or arising in the future. Guarantor agrees to execute
such security agreements, financing statements and other documents as Bank may
reasonably require or request to obtain and perfect its security interest in
said Collateral.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY RELATED AGREEMENTS OR INSTRUMENTS, INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT, SHALL BE DETERMINED BY BINDING ARBITRATION IN
ACCORDANCE WITH THE FEDERAL ARBITRATION ACT (OR IF NOT APPLICABLE, THE
APPLICABLE STATE LAW), THE RULES OF PRACTICE AND PROCEDURE FOR THE ARBITRATION
OF COMMERCIAL DISPUTES OF JUDICIAL ARBITRATION AND MEDIATION SERVICES, INC.
(J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN THE EVENT OF ANY
INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON ANY ARBITRATION
AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY TO THIS
AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO
COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES
IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(A) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE CITY OF THE
BORROWER'S DOMICILE AT THE TIME OF THIS AGREEMENT'S EXECUTION AND ADMINISTERED
BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY
PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN THE AMERICAN ARBITRATION
ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90
DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A
SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR
UP TO AN ADDITIONAL 60 DAYS.
(B) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO
(I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION
OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II) BE A WAIVER BY
THE BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF THE BANK HERETO
(A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B)
TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT.
NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE
OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
18. EXECUTION UNDER SEAL. This Guaranty is being executed under seal by the
Guarantor.
19. NOTICE OF FINAL AGREEMENT. THIS WRITTEN CONTINUING AND UNCONDITIONAL
GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.
IN WITNESS WHEREOF, the undersigned has caused this Guaranty to be executed
under seal on the 29th day of June, 1995.
Witnessed by:
/s/ KEITH T. ROBELEN /s/ KARL F. BROWN [SEAL]
- --------------------------- -----------------------------
Keith T. Robelen Karl F. Brown
Vice-President
<PAGE> 1
EXHIBIT 10.4.4
NATIONSBANK, N. A.
PROMISSORY NOTE
Customer# 911841-307
Date December 10, 1997 []New [X]Renewal Amount $2,000,000.00 Maturity Date
May 31, 1998
================================================================================
Bank: Borrower:
NationsBank, N.A. American Aircarriers Support, Inc.
Banking Center: 4283 Pleasant Road
Fort Mill, South Carolina 29715
101 S Tryon Street
Charlotte, North Carolina 28255
County: Mecklenburg County: York
================================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank,
the principal amount of Two Million Dollars and No/100 Dollars ($2,000,000.00),
or so much thereof as may be advanced from time to time in immediately
available funds, together with interest computed daily on the outstanding
principal balance hereunder, at an annual interest rate, and in accordance with
the payment schedule, indicated below.
[THIS NOTE CONTAINS SOME PROVISIONS PRECEDED BY BOXES. IF A BOX IS MARKED, THE
PROVISION APPLIES TO THIS TRANSACTION; IF IT IS NOT MARKED, THE PROVISION DOES
NOT APPLY TO THIS TRANSACTION.]
1. RATE.
PRIME RATE. The Rate shall be the Prime Rate, plus 0.00 percent, per annum.
The "Prime Rate" is the fluctuating rate of interest established by Bank from
time to time, at its discretion, whether or not such rate shall be otherwise
published. The Prime Rate is established by Bank as an index and may or may
not at any time be the best or lowest rate charged by Bank on any loan.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges
in excess of the maximum permitted by the applicable law of the State of North
Carolina; if any higher rate ceiling is lawful, then that higher rate ceiling
shall apply. Any payment in excess of such maximum shall be refunded to
Borrower or credited against principal, at the option of Bank.
2. ACCRUAL METHOD. Unless otherwise indicated, interest at the Rate set forth
above will be calculated by the 365/360 day method (a daily amount of interest
is computed for a hypothetical year of 360 days; that amount is multiplied by
the actual number of days for which any principal is outstanding hereunder).
If interest is not to be computed using this method, the method shall be: N/A.
3. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the index
or base rate changes. If the Rate is to change on any other date or at any
other interval, the change shall be: N/A. In the event any index is
discontinued, Bank shall substitute an index determined by Bank to be
comparable, in its sole discretion.
4. PAYMENT SCHEDULE. All payments received hereunder shall be applied first
to the payment of any expense or charges payable hereunder or under any other
loan documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.
SINGLE PRINCIPAL PAYMENT. Principal shall be paid in full in a single payment
on May 31, 1998. Interest thereon shall be paid monthly, commencing on
December 31, 1997, and continuing on the last day of each successive month,
quarter or other period (as applicable) thereafter, with a final payment of
all unpaid interest at the stated maturity of this Note.
5. REVOLVING FEATURE.
[X] Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate amount outstanding at any one time equal to the principal
amount of this Note, provided, that Borrower is not in default under any
provision of this Note, any other documents executed in connection with this
Note, or any other note or other loan documents now or hereafter executed in
connection with any other obligation of Borrower to Bank, and provided that the
borrowings hereunder do not exceed any borrowing base or other limitation on
borrowings by Borrower. Bank shall incur no liability for its refusal to
advance funds based upon its determination that any conditions of such further
advances have not been met. Bank records of the amounts borrowed from time to
time shall be conclusive proof thereof.
[] UNCOMMITTED FACILITY. Borrower acknowledges and agrees that,
notwithstanding any provisions of this Note or any other documents executed
in connection with this Note, Bank has no obligation to make any advance,
and that all advances are at the sole discretion of Bank.
[] OUT-OF-DEBT PERIOD. For a period of at least __ consecutive days during
[] each fiscal year, [] any consecutive 12-month period, Borrower shall
fully pay down the balance of this Note, so that no amount of principal or
interest and no other obligation under this Note remains outstanding.
1 Approved: 09-21-95
Revised: 06-21-96
<PAGE> 2
6. AUTOMATIC PAYMENT.
[] Borrower has elected to authorize Bank to effect payment of sums due under
this Note by means of debiting Borrower's account number _______. This
authorization shall not affect the obligation of Borrower to pay such sums when
due, without notice, if there are insufficient funds in such account to make
such payment in full on the due date thereof, or if Bank fails to debit the
account.
7. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser, or guarantor
hereof or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any
Obligor in connection with the delivery, acceptance, performance, default or
enforcement of this Note, any indorsement or guaranty of this Note, or any
other documents executed in connection with this Note or any other note or
other loan documents now or hereafter executed in connection with any
obligation of Borrower to Bank (the "Loan Documents"); (b) consent to all
delays, extensions, renewals or other modifications of this Note or the Loan
Documents, or waivers of any term hereof or of the Loan Documents, or release
or discharge by Bank of any of Obligors, or release, substitution or exchange
of any security for the payment hereof, or the failure to act on the part of
Bank, or any indulgence shown by Bank (without notice to or further assent from
any of Obligors), and agree that no such action, failure to act or failure to
exercise any right or remedy by Bank shall in any way affect or impair the
obligations of any Obligors or be construed as a waiver by Bank of, or
otherwise affect, any of Bank's rights under this Note, under any indorsement
or guaranty of this Note or under any of the Loan Documents; and (c) agree to
pay, on demand, all costs and expenses of collection or defense of this Note or
of any indorsement or guaranty hereof and/or the enforcement or defense of
Bank's rights with respect to, or the administration, supervision,
preservation, protection of, or realization upon, any property securing payment
hereof, including, without limitation, reasonable attorney's fees, including
fees related to any suit, mediation or arbitration proceeding, out of court
payment agreement, trial, appeal, bankruptcy proceedings or other proceeding,
in the amount of 15% of the outstanding balance due under this Note.
8. PREPAYMENTS. Prepayments may be made in whole or in part at any time on
any loan for which the Rate is based on the Prime Rate. All prepayments of
principal shall be applied in the inverse order of maturity, or in such other
order as Bank shall determine in its sole discretion. Except as may be
prohibited by applicable law, no prepayment of any other loan shall be
permitted without the prior written consent of Bank. Notwithstanding such
prepayment prohibition, if there is a prepayment of any such loan, whether by
consent of Bank, or because of acceleration or otherwise, Borrower shall,
within 15 days of any request by Bank, pay to Bank, unless prohibited by
applicable law, any loss or expense which Bank may incur or sustain as a result
of such prepayment. For the purposes of calculating the amounts owed only, it
shall be assumed that Bank actually funded or committed to fund the loan
through the purchase of an underlying deposit in an amount and for a term
comparable to the loan, and such determination by Bank shall be conclusive,
absent a manifest error in computation.
9. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge
may be imposed in an amount not to exceed four percent (4%) of the unpaid
portion of any payment that is more than fifteen days late. Unless the terms
of this Note call for repayment of the entire balance of this Note (both
principal and interest) in a single payment and not for installments of
interest or principal and interest, the 4% delinquency charge may be imposed
not only with respect to regular installments of principal or interest or
principal and interest, but also with respect to any other payment in default
under this Note (other than a previous delinquency charge), including without
limitation a single payment of principal due at the maturity of this Note. In
the event any installment, or portion thereof, is not paid in a timely manner,
subsequent payments will be applied first to the past due balance (which shall
not include any previous delinquency charges), specifically to the oldest
maturing installment, and a separate delinquency charge will be imposed for
each payment that becomes due until the default is cured.
10. EVENTS OF DEFAULT. The following are events of default hereunder: (a)
the failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to any other party;
(c) the death of any Obligor (if an individual); (d) the resignation or
withdrawal of any partner or a material owner/Guarantor of Borrower, as
determined by Bank in its sole discretion; (e) the commencement of a
proceeding against any Obligor for dissolution or liquidation, the voluntary or
involuntary termination or dissolution of any Obligor or the merger or
consolidation of any Obligor with or into another entity; (f) the insolvency
of, the business failure of, the appointment of a custodian, trustee,
liquidator or receiver for or for any of the property of, the assignment for
the benefit of creditors by, or the filing of a petition under bankruptcy,
insolvency or debtor's relief law or the filing of a petition for any
adjustment of indebtedness, composition or extension by or against any Obligor;
(g) the determination by Bank that any representation or warranty made to Bank
by any Obligor in any Loan Documents or otherwise is or was, when it was made,
untrue or materially misleading; (h) the failure of any Obligor to timely
deliver such financial statements, including tax returns, other statements of
condition or other information, as Bank shall request from time to time; (i)
the entry of a judgment against any Obligor which Bank deems to be of a
material nature, in Bank's sole discretion; (j) the seizure or forfeiture of,
or the issuance of any writ of possession, garnishment or attachment, or any
turnover order for any property of any Obligor; (k) the determination by Bank
that it is insecure for any reason; (l) the determination by Bank that a
material adverse change has occurred in the financial condition of any Obligor;
or (m) the failure of Borrower's business to comply with any law or regulation
controlling its operation.
11. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor
to Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the maximum rate allowed by law, or if
none, 25% per annum (the "Default Rate"). The provisions herein for a Default
Rate and a delinquency charge shall not be deemed to extend the time for any
payment hereunder or to constitute a "grace period" giving Obligors a right to
cure any default. At Bank's option, any accrued and unpaid interest, fees or
charges may, for purposes of computing and accruing interest on a daily basis
after the due date of the Note or any installment thereof, be deemed to be a
part of the principal balance, and interest shall accrue on a daily compounded
basis after such date at the Default Rate provided in this Note until the
entire outstanding balance of principal and interest is paid in full. Bank is
hereby authorized at any time to set off and charge against any deposit
accounts of any Obligor, as well as any money, instruments, securities,
documents, chattel paper, credits, claims, demands, income and any other
property, rights and interests of any Obligor which at any time shall come into
the possession or custody or under the control of Bank or any of its agents,
affiliates or correspondents, without notice or demand, any and all obligations
due hereunder. Additionally, Bank shall have all rights and remedies available
under each of the Loan Documents, as well as all rights and remedies available
at law or in equity.
12. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date.
All rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The
2 Approved: 09-21-95
Revised: 06-21-96
<PAGE> 3
acceptance by Bank of any partial payment shall not constitute a waiver of any
default or of any of Bank's rights under this Note. No waiver of any of its
rights hereunder, and no modification or amendment of this Note, shall be
deemed to be made by Bank unless the same shall be in writing, duly signed on
behalf of Bank; each such waiver shall apply only with respect to the specific
instance involved, and shall in no way impair the rights of Bank or the
obligations of Obligor to Bank in any other respect at any other time.
13. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of North Carolina. In any litigation in
connection with or to enforce this Note or any indorsement or guaranty of this
Note or any Loan Documents, Obligors, and each of them, irrevocably consent to
and confer personal jurisdiction on the courts of the State of North Carolina
or the United States located within the State of North Carolina and expressly
waive any objections as to venue in any such courts. Nothing contained herein
shall, however, prevent Bank from bringing any action or exercising any rights
within any other state or jurisdiction or from obtaining personal jurisdiction
by any other means available under applicable law.
14. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision
of this Note shall not affect the enforceability or validity of any other
provision herein and the invalidity or unenforceability of any provision of
this Note or of the Loan Documents to any person or circumstance shall not
affect the enforceability or validity of such provision as it may apply to
other persons or circumstances.
15. BINDING EFFECT. This Note shall be binding upon and inure to the benefit
of Borrower, Obligors and Bank and their respective successors, assigns, heirs
and personal representatives, provided, however, that no obligations of
Borrower or Obligors hereunder can be assigned without prior written consent of
Bank.
16. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is
in any way incompatible with any other Loan Document concerning this
obligation, the Note shall control over any other document, and if the Note
does not address an issue, then each other document shall control to the extent
that it deals most specifically with an issue.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW.
IN THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT
UPON ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION.
ANY PARTY TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION,
INCLUDING A SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY
CONTROVERSY OR CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING
JURISDICTION OVER SUCH ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION,
THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS
WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT
LIMITED TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES
SUCH AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE
APPOINTMENT OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE
UPON SUCH PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE,
DURING OR AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO
THIS INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP
REMEDIES NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR
PROVISIONAL OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF
THE CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
BORROWER REPRESENTS TO BANK THAT THE PROCEEDS OF THIS LOAN ARE TO BE USED
PRIMARILY FOR BUSINESS, COMMERCIAL OR AGRICULTURAL PURPOSES. BORROWER
ACKNOWLEDGES HAVING READ AND UNDERSTOOD, AND AGREES TO BE BOUND BY, ALL TERMS
AND CONDITIONS OF THIS NOTE AND HEREBY EXECUTES THIS NOTE UNDER SEAL AS OF THE
DATE HERE ABOVE WRITTEN.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
BORROWER CORPORATE OR PARTNERSHIP BORROWER
/s/ (Seal) American Aircarriers Support, Inc.
- ---------------------------------- ----------------------------------
/s/ (Seal) By: /s/ Karl F. Brown (Seal)
- ---------------------------------- -----
Name: Karl F. Brown
Title: President
3 Approved: 09-21-95
Revised: 06-21-96
<PAGE> 1
EXHIBIT 10.4.5
NATIONSBANK, N. A.
PROMISSORY NOTE
Customer# 911841
<TABLE>
<S> <C> <C> <C>
Date March 4, 1998 Increase to note #307 Amount $4,000,000.00 Maturity Date May 31, 1998
------------- ------------- ------------
</TABLE>
===============================================================================
Bank: Borrower:
NationsBank, N.A.
Banking Center: American Aircarriers Support, Inc.
4283 Pleasant Road
NationsBank, N.A. Fort Mill, South Carolina 29715
101 South Tryon Street
Charlotte, N.C.
County: Mecklenburg County: York
===============================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally (and jointly and
severally, if more than one) promises to pay to the order of Bank, its
successors and assigns, without setoff, at its offices indicated at the
beginning of this Note, or at such other place as may be designated by Bank, the
principal amount of Four Million Dollars and no\100 Dollars ($4,000,000.00), or
so much thereof as may be advanced from time to time in immediately available
funds, together with interest computed daily on the outstanding principal
balance hereunder, at an annual interest rate, and in accordance with the
payment schedule, indicated below.
[THIS NOTE CONTAINS SOME PROVISIONS PRECEDED BY BOXES. IF A BOX IS MARKED, THE
PROVISION APPLIES TO THIS TRANSACTION; IF IT IS NOT MARKED, THE PROVISION DOES
NOT APPLY TO THIS TRANSACTION.]
1. RATE. The Rate shall be the Wall Street Journal 3 months day LIBOR Rate, plus
Two percent, per annum. The "Wall Street Journal LIBOR Rate" is a fluctuating
rate of interest equal to the 3 months London Interbank Offered Rate as
published in the "Money Rates" section of the Wall Street Journal on the
immediately preceding business day as adjusted from time to time in Bank's sole
discretion for then applicable reserve requirements, deposit insurance
assessment rates and other regulatory costs. Interest will accrue on any
non-business day at the rate in effect on the immediately preceding business
day.
Notwithstanding any provision of this Note, Bank does not intend to charge and
Borrower shall not be required to pay any amount of interest or other charges in
excess of the maximum permitted by the applicable law of the State of North
Carolina; if any higher rate ceiling is lawful, then that higher rate ceiling
shall apply. Any payment in excess of such maximum shall be refunded to Borrower
or credited against principal, at the option of Bank.
2. ACCRUAL METHOD. Unless otherwise indicated, interest at the Rate set forth
above will be calculated by the 365/360 day method (a daily amount of interest
is computed for a hypothetical year of 360 days; that amount is multiplied by
the actual number of days for which any principal is outstanding hereunder). If
interest is not to be computed using this method, the method shall be:
n\a.
3. RATE CHANGE DATE. Any Rate based on a fluctuating index or base rate will
change, unless otherwise provided, each time and as of the date that the index
or base rate changes. If the Rate is to change on any other date or at any other
interval, the change shall be: n\a. In the event any index is discontinued, Bank
shall substitute an index determined by Bank to be comparable, in its sole
discretion.
4. PAYMENT SCHEDULE. All payments received hereunder shall be applied first to
the payment of any expense or charges payable hereunder or under any other loan
documents executed in connection with this Note, then to interest due and
payable, with the balance applied to principal, or in such other order as Bank
shall determine at its option.
SINGLE PRINCIPAL PAYMENT. Principal shall be paid in full in a single payment on
May 31, 1998. Interest thereon shall be paid monthly, commencing on March 31,
1998, and continuing on the last day of each successive month, quarter or other
period (as applicable) thereafter, with a final payment of all unpaid interest
at the stated maturity of this Note.
5. REVOLVING FEATURE.
[x] Borrower may borrow, repay and reborrow hereunder at any time, up to a
maximum aggregate amount outstanding at any one time equal to the principal
amount of this Note, provided, that Borrower is not in default under any
provision of this Note, any other documents executed in connection with this
Note, or any other note or other loan documents now or hereafter executed in
connection with any other obligation of Borrower to Bank, and provided that the
borrowings hereunder do not exceed any borrowing base or other limitation on
borrowings by Borrower. Bank shall incur no liability for its refusal to advance
funds based upon its determination that any conditions of such further advances
have not been met. Bank records of the amounts borrowed from time to time shall
be conclusive proof thereof.
[] UNCOMMITTED FACILITY. Borrower acknowledges and agrees that,
notwithstanding any provisions of this Note or any other documents executed
in connection with this Note, Bank has no obligation to make any advance,
and that all advances are at the sole discretion of Bank.
1
<PAGE> 2
[] OUT-OF-DEBT PERIOD. For a period of at least consecutive days during []
each fiscal year, [] any consecutive 12-month period, Borrower shall fully
pay down the balance of this Note, so that no amount of principal or
interest and no other obligation under this Note remains outstanding.
6. AUTOMATIC PAYMENT.
[] Borrower has elected to authorize Bank to effect payment of sums due under
this Note by means of debiting Borrower's account number ____________. This
authorization shall not affect the obligation of Borrower to pay such sums when
due, without notice, if there are insufficient funds in such account to make
such payment in full on the due date thereof, or if Bank fails to debit the
account.
7. WAIVERS, CONSENTS AND COVENANTS. Borrower, any indorser, or guarantor hereof
or any other party hereto (individually an "Obligor" and collectively
"Obligors") and each of them jointly and severally: (a) waive presentment,
demand, protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law to any Obligor
in connection with the delivery, acceptance, performance, default or enforcement
of this Note, any indorsement or guaranty of this Note, or any other documents
executed in connection with this Note or any other note or other loan documents
now or hereafter executed in connection with any obligation of Borrower to Bank
(the "Loan Documents"); (b) consent to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Bank of any of Obligors, or
release, substitution or exchange of any security for the payment hereof, or the
failure to act on the part of Bank, or any indulgence shown by Bank (without
notice to or further assent from any of Obligors), and agree that no such
action, failure to act or failure to exercise any right or remedy by Bank shall
in any way affect or impair the obligations of any Obligors or be construed as a
waiver by Bank of, or otherwise affect, any of Bank's rights under this Note,
under any indorsement or guaranty of this Note or under any of the Loan
Documents; and (c) agree to pay, on demand, all costs and expenses of collection
or defense of this Note or of any indorsement or guaranty hereof and/or the
enforcement or defense of Bank's rights with respect to, or the administration,
supervision, preservation, protection of, or realization upon, any property
securing payment hereof, including, without limitation, reasonable attorney's
fees, including fees related to any suit, mediation or arbitration proceeding,
out of court payment agreement, trial, appeal, bankruptcy proceedings or other
proceeding, in the amount of 15% of the outstanding balance due under this Note.
8. PREPAYMENTS. Prepayments may be made in whole or in part at any time on any
loan for which the Rate is based on the Prime Rate or on any other fluctuating
Rate or index which may change daily. All prepayments of principal shall be
applied in the inverse order of maturity, or in such other order as Bank shall
determine in its sole discretion. Except as may be prohibited by applicable law,
no prepayment of any other loan shall be permitted without the prior written
consent of Bank. Notwithstanding such prepayment prohibition, if there is a
prepayment of any such loan, whether by consent of Bank, or because of
acceleration or otherwise, Borrower shall, within 15 days of any request by
Bank, pay to Bank, unless prohibited by applicable law, any loss or expense
which Bank may incur or sustain as a result of such prepayment. For the purposes
of calculating the amounts owed only, it shall be assumed that Bank actually
funded or committed to fund the loan through the purchase of an underlying
deposit in an amount and for a term comparable to the loan, and such
determination by Bank shall be conclusive, absent a manifest error in
computation.
9. DELINQUENCY CHARGE. To the extent permitted by law, a delinquency charge may
be imposed in an amount not to exceed four percent (4%) of the unpaid portion of
any payment that is more than fifteen days late. Unless the terms of this Note
call for repayment of the entire balance of this Note (both principal and
interest) in a single payment and not for installments of interest or principal
and interest, the 4% delinquency charge may be imposed not only with respect to
regular installments of principal or interest or principal and interest, but
also with respect to any other payment in default under this Note (other than a
previous delinquency charge), including without limitation a single payment of
principal due at the maturity of this Note. In the event any installment, or
portion thereof, is not paid in a timely manner, subsequent payments will be
applied first to the past due balance (which shall not include any previous
delinquency charges), specifically to the oldest maturing installment, and a
separate delinquency charge will be imposed for each payment that becomes due
until the default is cured.
10. EVENTS OF DEFAULT. The following are events of default hereunder: (a) the
failure to pay or perform any obligation, liability or indebtedness of any
Obligor to Bank, or to any affiliate or subsidiary of NationsBank Corporation,
whether under this Note or any Loan Documents, as and when due (whether upon
demand, at maturity or by acceleration); (b) the failure to pay or perform any
other obligation, liability or indebtedness of any Obligor to any other party;
(c) the death of any Obligor (if an individual); (d) the resignation or
withdrawal of any partner or a material owner/Guarantor of Borrower, as
determined by Bank in its sole discretion; (e) the commencement of a proceeding
against any Obligor for dissolution or liquidation, the voluntary or involuntary
termination or dissolution of any Obligor or the merger or consolidation of any
Obligor with or into another entity; (f) the insolvency of, the business failure
of, the appointment of a custodian, trustee, liquidator or receiver for or for
any of the property of, the assignment for the benefit of creditors by, or the
filing of a petition under bankruptcy, insolvency or debtor's relief law or the
filing of a petition for any adjustment of indebtedness, composition or
extension by or against any Obligor; (g) the determination by Bank that any
representation or warranty made to Bank by any Obligor in any Loan Documents or
otherwise is or was, when it was made, untrue or materially misleading; (h) the
failure of any Obligor to timely deliver such financial statements, including
tax returns, other statements of condition or other information, as Bank shall
request from time to time; (i) the entry of a judgment against any Obligor which
Bank deems to be of a material nature, in Bank's sole discretion; (j) the
seizure or forfeiture of, or the issuance of any writ of possession, garnishment
or attachment, or any turnover order for any property of any Obligor; (k) the
determination by Bank that it is insecure for any reason; (l) the determination
by Bank that a material adverse change has occurred in the financial condition
of any Obligor; or (m) the failure of Borrower's business to comply with any law
or regulation controlling its operation.
11. REMEDIES UPON DEFAULT. Whenever there is a default under this Note (a) the
entire balance outstanding hereunder and all other obligations of any Obligor to
Bank (however acquired or evidenced) shall, at the option of Bank, become
immediately due and payable and any obligation of Bank to permit further
borrowing under this Note shall immediately cease and terminate, and/or (b) to
the extent permitted by law, the Rate of interest on the unpaid principal shall
be increased at Bank's discretion up to the maximum rate allowed by law, or if
none, 25% per annum (the "Default Rate"). The provisions herein for a Default
Rate and a delinquency charge shall not be deemed to extend the time for any
payment hereunder or to constitute a "grace period" giving Obligors a right to
cure any default. At Bank's option, any accrued and unpaid interest, fees or
charges
2
<PAGE> 3
may, for purposes of computing and accruing interest on a daily basis after the
due date of the Note or any installment thereof, be deemed to be a part of the
principal balance, and interest shall accrue on a daily compounded basis after
such date at the Default Rate provided in this Note until the entire outstanding
balance of principal and interest is paid in full. Bank is hereby authorized at
any time to set off and charge against any deposit accounts of any Obligor, as
well as any money, instruments, securities, documents, chattel paper, credits,
claims, demands, income and any other property, rights and interests of any
Obligor which at any time shall come into the possession or custody or under the
control of Bank or any of its agents, affiliates or correspondents, without
notice or demand, any and all obligations due hereunder. Additionally, Bank
shall have all rights and remedies available under each of the Loan Documents,
as well as all rights and remedies available at law or in equity.
12. NON-WAIVER. The failure at any time of Bank to exercise any of its options
or any other rights hereunder shall not constitute a waiver thereof, nor shall
it be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Bank shall be cumulative and may be pursued singly,
successively or together, at the option of Bank. The acceptance by Bank of any
partial payment shall not constitute a waiver of any default or of any of Bank's
rights under this Note. No waiver of any of its rights hereunder, and no
modification or amendment of this Note, shall be deemed to be made by Bank
unless the same shall be in writing, duly signed on behalf of Bank; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Bank or the obligations of Obligor to Bank
in any other respect at any other time.
13. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights and
obligations of Borrower and Bank shall be governed by and interpreted in
accordance with the law of the State of North Carolina. In any litigation in
connection with or to enforce this Note or any indorsement or guaranty of this
Note or any Loan Documents, Obligors, and each of them, irrevocably consent to
and confer personal jurisdiction on the courts of the State of North Carolina or
the United States located within the State of North Carolina and expressly waive
any objections as to venue in any such courts. Nothing contained herein shall,
however, prevent Bank from bringing any action or exercising any rights within
any other state or jurisdiction or from obtaining personal jurisdiction by any
other means available under applicable law.
14. PARTIAL INVALIDITY. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
15. BINDING EFFECT. This Note shall be binding upon and inure to the benefit of
Borrower, Obligors and Bank and their respective successors, assigns, heirs and
personal representatives, provided, however, that no obligations of Borrower or
Obligors hereunder can be assigned without prior written consent of Bank.
16. CONTROLLING DOCUMENT. To the extent that this Note conflicts with or is in
any way incompatible with any other Loan Document concerning this obligation,
the Note shall control over any other document, and if the Note does not address
an issue, then each other document shall control to the extent that it deals
most specifically with an issue.
17. ARBITRATION. ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
INCLUDING BUT NOT LIMITED TO THOSE ARISING OUT OF OR RELATING TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY RELATED INSTRUMENTS, AGREEMENTS OR
DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, SHALL
BE DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION
ACT (OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT MAY BRING AN ACTION, INCLUDING A
SUMMARY OR EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR
CLAIM TO WHICH THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH
ACTION.
A. SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF ANY
BORROWER=S DOMICILE AT THE TIME OF THE EXECUTION OF THIS INSTRUMENT, AGREEMENT
OR DOCUMENT AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN ARBITRATOR; IF
J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE ARBITRATION, THEN
THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL ARBITRATION HEARINGS WILL
BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR ARBITRATION; FURTHER, THE
ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE PERMITTED TO EXTEND THE
COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60 DAYS.
B. RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE
DEEMED TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS INSTRUMENT, AGREEMENT OR
DOCUMENT; OR (II) BE A WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12
U.S.C. SEC. 91 OR ANY SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE
RIGHT OF BANK HERETO (A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED
TO) SETOFF, OR (B) TO FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY
COLLATERAL, OR (C) TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH
AS (BUT NOT LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT
OF A RECEIVER. BANK MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH
PROPERTY, OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
INSTRUMENT, AGREEMENT OR DOCUMENT. NEITHER THIS EXERCISE OF SELF HELP REMEDIES
NOR THE INSTITUTION OR MAINTENANCE OF AN ACTION FOR FORECLOSURE OR PROVISIONAL
OR ANCILLARY REMEDIES SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY,
INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CONTROVERSY OR CLAIM OCCASIONING RESORT TO SUCH REMEDIES.
BORROWER REPRESENTS TO BANK THAT THE PROCEEDS OF THIS LOAN ARE TO BE USED
PRIMARILY FOR BUSINESS, COMMERCIAL OR
3
<PAGE> 4
AGRICULTURAL PURPOSES. BORROWER ACKNOWLEDGES HAVING READ AND UNDERSTOOD, AND
AGREES TO BE BOUND BY, ALL TERMS AND CONDITIONS OF THIS NOTE AND HEREBY EXECUTES
THIS NOTE UNDER SEAL AS OF THE DATE HERE ABOVE WRITTEN.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
CORPORATE OR PARTNERSHIP BORROWER
American Aircarriers Support, Inc.
- ----------------------------------
By: /s/ Karl F. Brown (Seal)
----------------------------------------------------
Name: Karl F. Brown
Title: President
- -------------------------------------------------------
Attest (If Applicable)
[Corporate Seal]
4
<PAGE> 1
EXHIBIT 10.4.6
[NATIONSBANK LETTERHEAD]
February 19, 1998
Mr. Karl Brown
President
American Aircarriers Support, Inc.
3516 Centre Circle Dr.
Fort Mill, South Carolina 29715
Dear Karl:
Thank you for the opportunity to make the following commitment to you.
NationsBank, N.A. (the "Bank") is pleased to have approved for American
Aircarriers Support, Inc. (the "Borrower") a credit facility consisting of a
Revolving Line of Credit in an amount not to exceed $10,000,000.00 (the
"Loan"). This commitment is for the purpose of supporting working capital
(accounts receivable and inventory), engine leasing, the issuance of Letters of
Credit and for general corporate purposes.
This commitment is subject to the execution and delivery to the Bank of legal
documents yet to be prepared, including, without limitation, loan agreements,
promissory notes, guaranties, and collateral and security documents. All such
documents must be satisfactory in form and substance to the Bank and its
counsel.
The making and funding of any loans under this commitment (in addition to any
other conditions which may be required in the documents referred to in the
preceding paragraph) is expressly subject to the terms and conditions set forth
in the attached Terms and Conditions.
If you find the terms and conditions of this commitment to be acceptable to
you, please execute the enclosed copy of this letter and return it to the
undersigned. This commitment shall expire, if not signed and returned along
with the commitment fee, by February 25, 1998. In addition, the closing of the
Loan shall occur prior to March 25, 1998.
We appreciate the opportunity to provide you with the financial services of
NationsBank, N.A.
Sincerely,
Paul W. Rehkow
Assistant Vice President
Accepted and agreed to this 19th day of February, 1998.
AMERICAN AIRCARRIERS SUPPORT, INC.
By: /s/ Karl F. Brown
--------------------------
Karl F. Brown, President
<PAGE> 2
TERMS AND CONDITIONS
BORROWER: American Aircarriers Support, Inc.
PURPOSE: Proceeds to be used by Borrower to support working capital (accounts
receivable and inventory), engine leasing, the issuance of Letters of Credit,
and for general corporate purposes.
AMOUNT OF LOAN: Not to exceed $10,000,000.00, with a $2,000,000.00 sub-limit
for issuance of Letters of Credit.
MATURITY DATE: September 30, 1998
INTEREST RATE: Interest on the outstanding principal under the Loan will be
payable monthly in arrears and be a floating rate per annum equal to the 30,
60, 90, or 180 day LIBOR, as elected by the Borrower, as determined by
NationsBank and adjusted for reserves, deposit insurance assessments and other
regulatory costs plus the Applicable Margin. For informational purposes, the
90 day LIBOR, as of February 19, 1998, is 5.63%.
The Applicable Margin shall be based on the Borrower's Debt to Tangible Net
Worth Ratio as defined under the Financial Covenants section herein. The
calculation and any change in the Applicable Margin shall take place on the
first day of the month immediately following receipt of financial statements
for the preceding fiscal quarter. The following parameters shall govern the
Applicable Margin:
<TABLE>
<CAPTION>
Debt to Tangible Net Worth Ratio Applicable Margin
-------------------------------- -----------------
<S> <C>
> than 1.0 to 1.0 2.25%
< or equal to 1.0 to 1.0 but 2.00%
> or equal to 0.60 to 1.0
< than 0.60 to 1.0 1.75%
</TABLE>
COMMITMENT FEE: Borrower agrees to pay a commitment fee of $23,000.00 upon
acceptance of this commitment.
REPAYMENT TERMS: Principal shall be paid in full in a single payment on
September 30, 1998. Interest thereon shall be paid monthly, commencing on
March 31, 1998 and continuing on the last day of each successive month
thereafter, with a final payment of all unpaid interest at the stated maturity
date of the Loan.
Borrower may borrow, repay and reborrow under the Loan at any time, provided,
that Borrower is not in default under any provision of the Loan, any other
documents executed in connection with this Loan, or any other note or loan
documents now or hereafter executed in connection with any other obligation of
Borrower to Bank, and provided that the borrowings hereunder do not exceed any
borrowing base or other limitation on borrowings.
<PAGE> 3
LOAN DOCUMENTS:
The Loan shall be made under and governed by definitive Loan documents to be
executed and delivered by the Borrower to the Bank and containing the terms set
forth in this commitment and such other terms, conditions, representations,
warranties and covenants as are usual and customary in lending transactions
such as the Loan, which documents may include one or more promissory notes,
loan agreements, security agreements, guaranties, letter of credit
applications/agreements, financing statements, assignment of lease and such
other documents, instruments, certificates, registrations and agreements
executed and/or delivered by Borrower, any guarantor or third party in
connection with the Loan (collectively, the "Loan Documents").
COLLATERAL: The Borrower will assign and grant to Bank a first lien security
interest in Collateral (hereinafter defined) to secure the payment and the
performance of the Loan.
Collateral is defined as all accounts receivable, inventory, assignments of
lease agreements, and proceeds of the foregoing, now owned or hereafter
acquired by Borrower.
The Bank will also take a first priority assignment of insurance upon the life
of Karl F. Brown in the amount of $1,000,000.00. This insurance shall be
assigned to Bank simultaneous with the release of the guaranty of Karl F.
Brown.
GUARANTORS: This Loan shall be unconditionally and fully guaranteed by Karl F.
Brown whose obligations to the Bank shall be joint and several with Borrower
and shall be on such other written terms as are acceptable to the Bank.
Guaranty will be released upon successful completion of an Initial Public
Offering by Borrower satisfactory to Bank.
CONDITIONS PRECEDENT TO FIRST ADVANCE:
Prior to the making by the Bank of the first advance to the Borrower, the
following conditions precedent shall have been satisfied.
The Bank shall have received, duly executed, all Loan Documents and any other
documents and instruments necessary or advisable in connection with the Loan,
all of which shall be in form and substance satisfactory to the Bank and its
counsel.
ADVANCE PROCEDURE:
Advances on this Loan will be requested by telephonic or written communication
from a person reasonably believed by the Bank to be an authorized
representative of the Borrower. Unless otherwise agreed by the Bank, all
advances will be made to a demand deposit account maintained at the Bank in the
name of the Borrower.
Borrower will agree to maintain a borrowing base (hereinafter referred as
"Borrowing Base") satisfactory at all times to Bank with the following
parameters.
If outstandings under the Loan are $4,000,000.00 or less, a monthly
Borrowing Base certification will not be required. However, should
outstandings under the Loan exceed $4,000,000.00, the Bank will
require a monthly Borrowing Base certificate with the following
conditions:
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<PAGE> 4
ACCOUNTS RECEIVABLE
The Bank will lend an amount not to exceed 80% of Domestic Receivables
less than 90 days from invoice. The Bank will lend an amount not to
exceed 80% of Foreign Receivables less than 90 days from invoice.
Eligible Foreign Receivables shall not exceed $2,000,000.00 of
receivable availability under the Borrowing Base. In addition,
ineligible accounts receivable will also include an entire account
should 50% of that account balance be greater than 90 days from
invoice.
INVENTORY
The Bank will advance an amount not to exceed 60% of Borrowers total
"parts inventory" (defined as inventory ready for sale which is not
whole aircraft engines or leased engines).
WHOLE AIRCRAFT ENGINES (DOMESTIC AND FOREIGN DOMICILED)
The Bank will advance 90% of the lower of cost or appraised value
while the engine is being overhauled (the "Overhaul Period"). The
Overhaul Period shall not exceed six (6) months. At the end of the
Overhaul Period, the Bank will then advance 90% of the lower of total
documented engine cost or re-appraised value for a period not to
exceed six (6) months (the "Inception Period"). At the end of the
Inception Period the Bank will, for a period not to exceed six (6)
months, lend 75% against the lower of engine cost or appraised value.
During the following 12 months, the Bank would lend 50% against the
lower of engine cost or appraised value. If the engine has not sold
during the preceding twelve month period, the engine would be deleted
from the Borrowing Base unless the borrower gets the engine
re-appraised by an appraiser acceptable to the Bank and, at the Bank's
sole option, the above percentages could be re-applied.
As additional expenditures are made on the engine during the Overhaul
Period, Borrower shall periodically, but no more frequent than
monthly, submit a "report of expenditures" satisfactory to Bank
detailing the additional direct overhaul costs against which the Bank
may advance 90% of the invoiced amount.
LEASED ENGINES
Leased Engines will be eligible for advances under separate term
notes, which will be carved out of the Loan amount subject to review
and assignment of perspective leases. These notes will be advanced at
the lesser of 80% of the engine's cost or appraised value.
Amortization of term notes will be related to the remaining life of
the lease but not to exceed forty-eight (48) months. Borrower will
agree to furnish quarterly depreciation reports on each engine under
lease, and a note's balance may not exceed 80% an engine's
depreciated value.
CAPS ON BORROWING BASE COMPONENTS
Availability under the Borrowing Base will be capped at $5,000,000.00
for parts inventory, $5,000,000.00 for leased engines and
$2,000,000.00 for Foreign Receivables. There will be no cap within
the Loan on domestic receivables nor on whole aircraft engines held
for resale.
Total advances under the Loan cannot exceed 100% of the book value of
the Company's core assets (accounts receivable plus inventory).
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<PAGE> 5
Should a whole aircraft engine or leased engine be dismantled into parts
inventory, the inventory will be required to be reclassified into the
appropriate category under the Borrowing Base.
FIELD EXAM: Bank will conduct a field exam, at the Borrower's expense, to
confirm the appropriateness of the above parameters and overall advances of the
Borrowing Base as collateral. The field exam shall occur between July 1, 1998
and July 31, 1998 if the outstandings under the Loan are equal to or less than
$4,000,000.00. If the outstandings under the Loan exceed $4,000,000.00, the
Bank reserves the right to require the field exam prior to July 1, 1998, and,
if there are no outstandings under the Loan prior to July 31, 1998, no field
exam will be conducted. The Bank will pay for any and all costs associated
with the field exam which exceed $2,000.00.
REPORTING REQUIREMENTS:
So long as the Borrower is indebted to the Bank, the Borrower shall submit to
the Bank the following:
1. Quarterly, within 45 days of the end of each quarter, internally prepared
financial statements of the Borrower, including a balance sheet and income
statement; and
2. Annually, within ninety (90) days following the end of the Borrower's
fiscal year, a balance sheet and income statement prepared in accordance with
generally accepted accounting principles on an Audited basis by an independent
certified public accountant acceptable to the Bank, including statements of
financial condition, income, cash flows and changes in shareholders' equity.
3. Guarantor shall submit personal financial statements, on NationsBank's
standard form, to the Bank on an annual basis.
REPRESENTATIONS AND WARRANTIES: Customary, including confirmation of
corporation status and authority; execution, delivery and performance of loan
documents do not violate law or existing agreements; no litigation except as
disclosed to Bank; ownership of property; payment of taxes; no material adverse
change in financial condition or operations since December 31, 1997; principal
place of business; compliance with environmental laws and continuation of
representations and warranties.
FINANCIAL COVENANTS: The loan documentation will contain the following
financial covenants:
Debt to Tangible Net Worth: Maintain a ratio of debt to tangible net worth of
not greater than 1.75 to 1.0 as of the end of each of Borrower's fiscal
quarters. Debt is defined as all liabilities of the Borrower in accordance
with generally accepted accounting principals. Tangible Net Worth is defined
as the total net worth less leasehold improvements, organizational expense,
transfers to affiliates, employees, shareholders and related parties, and all
other intangible assets as defined in accordance with generally accepted
accounting principals.
Minimum Tangible Net Worth: Beginning at December 31, 1997, the Borrower will
maintain a Minimum Tangible Net Worth of $4,500,000 plus 50% of all net profit
after tax in each successive year beginning in fiscal year 1998.
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<PAGE> 6
Cash Flow Coverage Ratio: Maintain a minimum ratio of cash flow to debt
service of not less than 1.25 to 1.0, measured initially upon receipt of June
30, 1998 financials, on a rolling four quarter basis. For this purpose cash
flow coverage shall be defined as: Net Income after Taxes plus Interest
Expense, Depreciation, Amortization, and other Non- Cash charges divided by
Interest Expense plus Current Maturities of Long-Term Debt, Current Maturities
of Capitalized Leases, and Dividends.
All accounting terms not specifically defined or specified herein shall have
the meanings generally attributed to such terms under generally accepted
accounting principles ("GAAP"), as in effect from time to time, consistently
applied.
AFFIRMATIVE COVENANTS: Customary, including delivery of financial statements,
reports and other information requested by Bank; maintenance of insurance;
continuation of business and maintenance of existence; compliance with laws and
necessary Federal Aviation Administration regulations; payment of taxes;
maintenance of property and notice of environmental claims.
NEGATIVE COVENANTS: Customary, including: limitations on capital expenditures,
lease expenditures, compensation, transfer of assets or control, liens,
borrowings, payments of dividends and distributions, and change of business.
EVENTS OF DEFAULT: A default shall occur under this Letter of Commitment and
under each of the Loan Documents and under any other promissory note executed
by Borrower in favor of Bank if the Borrower defaults in the payment of any
amounts due and owing under the Loan or any other indebtedness owing to Bank
or fails to timely and properly observe, keep or perform any term, covenant,
agreement or condition in any of the Loan Documents or in any other loan
agreement, promissory note, security agreement or other contract securing or
evidencing payment of any indebtedness of Borrower of any loan to Bank or to
any affiliate or subsidiary of NationsBank Corporation.
REMEDIES UPON DEFAULT: If an event of default shall occur Bank shall have all
rights, powers and remedies available under each of the loan Documents as well
as all rights and remedies available at law or in equity.
CLOSING COSTS AND EXPENSES: The Borrower shall pay all costs and expenses
incurred by the Bank in connection with the Bank's review, due diligence and
closing of the Loan, including attorneys' fees incurred by the Bank in
connection with the negotiation and preparation of the Loan Documents, and all
necessary Uniform Commercial Code filings at each location where Borrower's
inventory and leased engines may be located, whether or not the Loan actually
closes. The Bank is currently pursuing and acting in good faith to determine
the appropriate limit on Bank's attorneys' fees to be paid by Borrower.
MATERIAL ADVERSE CHANGE: This commitment may be terminated, in the sole
discretion of the Bank, upon the occurrence of a material adverse change in the
financial condition of the Borrower or any other person liable to the Bank for
the repayment of this Loan.
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<PAGE> 7
NON-ASSIGNABLE: This commitment and the right of Borrower to receive loans
hereunder may not be assigned by Borrower.
RELIANCE: This commitment constitutes an offer by the Bank to the Borrower to
make a Loan on the terms and conditions set forth herein and should not be
relied upon by any third party for any purpose.
AMENDMENT AND WAIVER: No alteration, modification, amendment or waiver of any
terms and conditions of this commitment, or of any of the documents required by
or delivered to the Bank under this commitment, shall be effective or
enforceable against the Bank unless set forth in a writing signed by the Bank.
GOVERNING LAW: This commitment and the Loan shall be governed by and construed
in accordance with the laws of the State of North Carolina (without regard to
choice of law principles).
INTEGRATION: The terms set forth above represent the entire understanding
between the Borrower and the Bank with respect to the subject matter of this
commitment, and this commitment supersedes any prior and contemporaneous
agreements, commitments, discussions and understandings, oral or written, with
respect to the subject matter of this commitment.
6
<PAGE> 1
EXHIBIT 10.5.1
STATE OF SOUTH CAROLINA
COUNTY OF YORK LEASE OF REAL PROPERTY
THIS AGREEMENT, executed the 30th day of June, 1993, to be effective as of
the 1st day of January, 1993 between B & C ENTERPRISES, hereinafter referred to
as "Lessor", and AMERICAN AIRCARRIERS SUPPORT, INC. (AASI), hereinafter
referred to as "Lessee".
W I T N E S S E T H
WHEREAS, Lessor owns certain realty suitable for leasing;
WHEREAS, Lessee is desirous of leasing said realty to utilize in its
business;
NOW, THEREFORE,in consideration of and subject to the premises, the mutual
covenants herein contained, and each and every act performed hereunder by all
of the parties, such parties enter into the following Articles of Agreement:
ARTICLE I
THE DEMISED PREMISES AND THE TERM
Section 1.01 - Demised Premises. Lessor hereby warrants that it is the
owner of that certain realty which Lessor lets and demises to Lessee, and the
Lessee leases from Lessor. Said real estate is more particularly described in
Exhibit "A" annexed hereto and is hereinafter designated and referred to as
"Demised Premises".
Section 1.02 - Title. Lessor warrants that it has a merchantable fee simple
title in and to the Demised Premises free and clear of all liens, easements,
restrictions and encumbrances, rights of way of record and easements of record
now existing thereon for public utilities and highway use except those which
have been disclosed to the Lessee.
Section 1.03 - Zoning. Lessor warrants that the Demised Premises and all
improvements thereon are currently being used in compliance with existing
zoning.
Section 1.04 - Habendum and Term. Lessor hereby leases the Demised Premises
to Lessee to have and to hold the Demised Premises with the rights, privileges,
easements and appurtenances
<PAGE> 2
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thereto attaching and belonging, to the Lessee, its successors and assigns,
with a quiet and undisturbed possession to Lessee, for an initial term of five
(5) years from the date hereof ("the Initial Term"). At the end of the Initial
Term the Lessee shall have the option to enter a five (5) year renewal term at
the rate of $4,200 per month.
Section 1.05 - Use. The Lessee covenants not to use the Demised Premises or
any improvements thereon for any illegal or unlawful purpose, and further
covenants not to grant permission for the use by any subtenant or occupant for
illegal or unlawful purposes, and the Lessee covenants that it will
immediately, upon the discovery of any such illegal or unlawful use, exert its
best efforts to compel the discontinuance of such uses.
ARTICLE II
RENT
Section 2.01 - Rent. The Lessee shall pay the Lessor during the Initial
Term of this lease rent in the amount of Three Thousand Seven Hundred Fifty
Dollars ($3,750.00) per month, payable in advance on the first day of each
month commencing on the earlier of June 1, 1993 or the date a certificate of
occupancy is provided for the Demised Property.
Section 2.02 - Rent Payment. The Lessee shall during the term hereby
granted, pay to the Lessor the rent herein reserved and all such other sums as
may become payable on account of the Lessee's default in the observance of any
of the covenants herein contained on the Lessee's part to be performed, at the
time and in the manner limited and prescribed herein for the payment thereof.
Section 2.03 - Late Payment. Any installment of rent accruing under the
provisions of this lease which is not paid within 10 days of when due shall
bear interest at the rate of ten percent (10%) per annum from the date due
until paid, plus an additional service fee of two percent (2%) for each
delinquent payment due.
<PAGE> 3
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ARTICLE III
LESSEE'S COVENANTS
Section 3.01 - Taxes and Assessments. Lessee agrees to pay ten (10) days
before delinquent all taxes, general and special assessments and other public
charges levied upon or assessed against the Demised Premises which become
payable from and after the date this lease commences until expiration or
termination of this lease.
Section 3.02 - Receipts; Proration. Lessee shall exhibit to Lessor from
time to time official receipts evidencing payment of taxes as required in
Section 3.01 prior to the delinquent date. Any such taxes and other public
charges assessed against the Demised Premises for the tax year in which this
lease commences or terminates shall be equitably prorated between the parties
hereto if the commencement and the end of the term of this lease do not
coincide with the beginning or end of the tax year.
Section 3.03 - Installment Payment. Lessee shall have the right to execute
in the name of the Lessor and as its attorney in fact such agreement or
agreements or other instrument which may be required or permitted by law to
permit the payment of such taxes or assessments in installments, but Lessee
shall not be liable to pay any installments for taxes not due at the end of
this original or any renewed term after occupancy of the Lessee has closed.
Section 3.04 - Unpaid Taxes. If Lessee fails to pay any such taxes,
assessments or other public charges which it is obligated to pay as provided in
this Article, before the same become delinquent, then and in such event, Lessor
may pay the same, together with any interest and penalties thereon, and the
amount so paid shall be deemed rent immediately due and payable by Lessee to
Lessor within 10 days of written demand, together with interest thereon from
the payment date at the rate of ten percent (10%) per annum plus an additional
service fee of two percent (2%).
Section 3.05 - Contest of Taxes. Anything in this Article to the contrary
notwithstanding, Lessor agrees that Lessee shall have the right, at Lessee's
sole cost and expense, to contest the legality, validity, or the basis of
calculation, of any of the taxes, assessments or other public charges provided
to be paid by
<PAGE> 4
4
Lessee, but no such contest shall be carried on or maintained by Lessee after
such taxes, assessments or other public charges become delinquent unless Lessee
shall have duly paid the amount involved under protest or shall procure and
maintain a stay of all proceedings to enforce any collection thereof and any
forfeiture or sale of the Demised Premises, and shall also provide for payment
thereof together with all penalties, interest, cost and expense by deposit of a
sufficient sum of money or by a good and sufficient undertaking as may be
required by law to accomplish such stay. Lessor agrees that it will, at the
request of Lessee, execute or join in the execution of any instrument or
documents necessary in connection with any such contest except bonds or
undertakings. In the event any such contest is made by Lessee, Lessee shall
promptly, upon final determination thereof adversely to Lessee, pay and
discharge the amount involved, or affected by, any such contest, together with
any penalties, fines, interest, costs and expenses that may have accrued
thereon.
<PAGE> 5
5
Section 3.06 - Maintenance, Repairs and Capital Costs. As between the
Lessor and the Lessee, the Lessee shall pay or cause to be paid all repair,
maintenance and capital costs and shall take good care of the Demised Premises
and keep the same and all parts thereof, together with any and all alterations,
additions and improvements therein or thereto, in good order and condition,
except for normal wear and tear, damage done by casualty not covered by the
provisions of the usual fire and extended coverage insurance. Lessor and
Lessee shall meet in January of each year and agree on any maintenance that is
to be performed, which shall be completed within ninety (90) days of said
meeting, unless Lessor extends said period for reasonable cause demonstrated by
Lessee.
Section 3.07 - Fees and Commissions. Lessor and Lessee represent to each
other that neither party has engaged the services of a real estate broker or
agent in negotiating or consuming the closing of this Lease. Lessor and
Lessee agree to indemnify and hold each other free and harmless of any
obligation for real estate commissions, finder's fees and legal fees earned as
services performed in connection with this lease.
Section 3.08 - Indemnification of Lessor. Lessee covenants and agrees that
Lessor shall not be liable for any injuries or damages to persons, entities, or
property from any cause whatsoever by reason of the use, occupation, control or
enjoyment of the Demised Premises by Lessee, or any person entering thereon for
any reason or invited (other than Lessor or their agents), suffered or
permitted by Lessee to go or be thereon or holding under Lessee at any time
during the term of this lease, and Lessee will save and hold harmless Lessor
from and against any and all liability, penalties, damages, expenses and
judgments whatsoever on account of such injuries or damages. The injuries and
damages referred to in this paragraph shall include, without limiting the
generality of the preceding provisions, to injuries, damages and mechanic's
liens arising directly or indirectly out of any demolition, repairs,
restoration, reconstruction, changes, alterations and construction which Lessee
may make or cause to be made upon the Demised Premises or any part thereof.
Lessee, at Lessee's expense, agrees to employ legal counsel to defend any
action for which any claim shall be made for injuries or damages commenced
against Lessor by reason of the foregoing.
<PAGE> 6
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Section 3.09 - Compliance with Laws. The Lessee covenants that it will
during the demised term properly observe and at its own expense promptly comply
with and execute all present and future laws, rules, regulations and notices of
every nature and kind whatsoever of any governmental agency or authority
concerning the Demised Premises. It is expressly understood that the Lessee
shall have thirty (30) days or such time as said authorities shall accord, or
that Lessee shall necessarily need, within which to comply with, contest, obey,
carry out, observe and/or perform any such law, rule, regulation or notice.
Section 3.10 - Utilities. Lessee shall either pay or cause to be paid all
charges for gas, electricity, water, sewer and other public utility services
supplied to the Demised Premises during the term of this lease.
Section 3.11 - Insurance. The Lessee shall, during the demised term,
maintain adequate fire and casualty and general liability insurance coverage on
the Demised Premises in solvent, mutual or stock companies or company, insuring
both the Lessor and the Lessee within the body of the insurance contract, in an
amount and form reasonably acceptable to the Lessor, such to be disclosed to
Lessor upon obtaining a commitment for the same.
ARTICLE IV
LESSOR'S COVENANTS
Section 4.01 - Quiet Possession. The Lessor covenants that the Lessee, upon
payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times during
the terms hereby granted, peaceably and quietly have, hold and enjoy the
Demised Premises for the term of this lease.
ARTICLE V
ENVIRONMENTAL COMPLIANCE
Section 5.01 - Definitions "Toxic or Hazardous Substances" shall be
interpreted broadly to include, but not be limited to, any material or
substance that is defined or classified under
<PAGE> 7
7
federal, state or local laws as: (a) a "hazardous substance" pursuant to
Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601(14), Section 311 of the Federal Water
Pollution Control Act, 33 U.S.C. Section 1321, as now or hereafter amended; (b)
a "hazardous waste" pursuant to Section 1004 or Section 3001 of the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6903, 42 U.S.C. Section 6921,
as now or hereafter amended; (c) a toxic pollutant under Section 307(1)(a) of
the Federal Water Pollution Control Act, 33 U.S.C. Section 1317(1)(a); (d) a
"hazardous air pollutant" under Section 112 of the Clean Air Act, 42 U.S.C.
Section 7412, as now or hereafter amended; (e) a "hazardous material" under the
Hazardous Material Transportation Act, 49 U.S.C. Section 1802(2), as now or
hereafter amended; (f) toxic or hazardous pursuant to regulations promulgated
now or hereafter under the aforementioned laws; or (g) presenting a risk to
human health or the environment under other applicable federal, state or local
laws, ordinances, or regulations, as now or as may be passed or promulgated in
the future. "Toxic or Hazardous Substances" shall also mean any substance that
after release into the environment upon exposure, ingestion, inhalation or
assimilation, either directly from the environment or indirectly by ingestion
through food chains, will or may reasonably be anticipated to cause death,
disease, behavior abnormalities, cancer or genetic abnormalities. "Toxic or
Hazardous Substance" specifically includes, but it not limited to, asbestos,
polychlorinated biphenyls (PCBs), petroleum and petroleum based derivatives and
urea formaldehyde.
Section 5.02 - Indemnities
Lessee agrees to indemnify, defend (with counsel satisfactory to Lessor) and
hold Lessor and its officers, employees, contractors, and agents harmless from
any claims, judgments, damages, penalties, fines, expenses, liabilities or
losses arising during or after the Lease Term out of or in any way relating to
the presence, release or disposal of Toxic or Hazardous Substances on or from
the Demised Premises where such presence, release or disposal results from any
act or omission of Lessee during its occupancy of the Demised Premises. Such
indemnity shall, without limitation, include costs incurred in connection with:
<PAGE> 8
8
(i) the presence or suspected presence of Toxic or Hazardous
Substances in the soil, groundwater or soil vapor on or under the Demised
Premises resulting from any act or omission of Lessee;
(ii) the presence or suspected presence of Toxic or Hazardous
Substances on or under the Demised Premises as a result of any discharge,
dumping, spilling (accidental or otherwise) onto the Demised Premises by
Lessee during Lessee's occupance of the Demised Premises or after the Lease
Term commences.
The indemnification provided by this section shall also specifically cover,
without limitation, costs incurred in connection with any investigation of site
conditions or any cleanup, remedial removal or restoration work required in
either event by any federal, state or local governmental agency or political
subdivision or by court order because of the presence or suspected presence of
Toxic or Hazardous Substances in the soil, groundwater, or soil vapor on or
under the Demised Premises, for which Lessee is responsible as provided above.
Such costs may include, but not be limited to, response costs incurred as a
result of the order of a court or governmental agency and related attorneys
fees, consultants fees, and expert fees.
The foregoing environmental indemnity shall survive the expiration or
earlier termination of this Lease and/or any transfer of all or any portion of
the Demised Premises, or of any interest in this Lease.
ARTICLE VI
EMINENT DOMAIN
Section 6.01 - Eminent Domain. If more than ten percent (10%) of the land
area of the Demised Premises is taken under the power of eminent domain
(including any conveyance made in lieu thereof), and such taking shall make the
operation of Lessee's business on the Demised Premises impractical, then Lessee
shall have the right to terminate this lease by giving Lessor written notice of
such termination within thirty (30) days after such taking or condemnation. If
Lessee does not so elect to terminate
<PAGE> 9
9
this lease, the rental to be paid by Lessee hereunder shall be
equitably reduced in proportion to Lessee's loss of the use of the Demised
Premises. Any award or awards payable on account of any taking or condemnation
of all or part of the Demised Premises shall be payable to Lessor.
ARTICLE VII
DEFAULT
Section 7.01 - Termination of Lease. Upon occurrence of any default, Lessor
may, at its option, in addition to any other remedy or right given hereunder or
by law,
(a) terminate and cancel this lease at any time after the expiration of
thirty (30) days from the giving of written notice of default to the party
in default, but only if the party in default has not remedied such default
within the said thirty (30) days or if the party in default has not
commenced such act or acts as shall be necessary to remedy the default and
shall complete such act or acts promptly; or
(b) terminate this lease for the nonpayment of rent at any time after the
expiration of ten (10) days following written notice to Lessee of nonpayment
of such rent (provided each default has not been cured); and
(c) any termination of this lease under sub-paragraphs (a) and (b) of this
Section 6.01 shall not prejudice Lessor's right to prosecute any other
remedy which it may have for a breach of this lease or default hereunder.
Section 7.02 - Event of Default Defined. Each of the following shall be
deemed an event of default:
(a) Default in the payment of rent or other payments hereunder where such
default has not been cured within 10 days of written notice of such default;
(b) If Lessee shall default in the performance or observance of any other
covenant or condition of this lease by the Lessee to be performed or
observed and such default has not been cured within 30 days written notice
of such default;
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(c) The filing or execution or occurrence of
(1) A petition in bankruptcy by or against the Lessee which remains
undischarged for 60 days after filing;
(2) A petition or answer against Lessee seeking a reorganization,
arrangement, composition, readjustment, liquidation, dissolution or
other relief of the same or different kind under any provision of the
Bankruptcy Act;
(3) Adjudication of Lessee as a bankrupt or insolvent or insolvency
in the bankruptcy or equity sense;
(4) An assignment by Lessee for the benefit of creditors, whether by
trust mortgage or otherwise;
(5) A petition or other proceeding by or against the Lessee for, or
the appointment of, a trustee, receiver, guardian, conservator or
liquidator of Lessee with respect to all or substantially all of its
property;
(6) A petition or other proceeding by or against the Lessee for its
dissolution or liquidation, or the taking of possession of the
property of the Lessee by any governmental authority in connection
with dissolution or liquidation; or
(7) The taking by any person of the leasehold created hereby or part
thereof upon execution, attachment or other process of law or equity
(except pursuant to a valid assignment or sublease pursuant to
Article VIII).
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Section 7.03 - Repossession. Upon termination of this lease as hereinabove
provided, or pursuant to statute, or by summary proceedings or otherwise, the
Lessor may enter forthwith without further demand or notice upon any part of
the Demised Premises, if it has not theretofore done so, and resume possession
either by summary proceedings, or by action at law or in equity or by entry or
otherwise as the Lessor may determine, and shall not be liable in trespass or
for any damages to Lessee or any other person. In no event shall such re-entry
or resumption of possession or reletting as hereafter provided be deemed to be
an acceptance or surrender of this lease or a waiver of the rights or remedies
of Lessor hereunder.
Section 7.04 - Reletting. Upon termination of this lease in any manner
above provided, the Lessor shall use reasonable efforts to relet the Demised
Premises.
Section 7.05 - Lessor's Right to Cure Default of Lessee. If Lessee shall be
in default in any of the terms or provisions of this lease, other than the
payment of rental, Lessor may, after thirty (30) days written notice to Lessee,
immediately or at any time thereafter, without being required to give notice,
perform the same for the account of Lessee and at the cost and expense of
Lessee, and Lessee shall pay to Lessor on demand any amount properly paid by
Lessor including reasonable attorney fees for such purpose, with interest
thereon at the rate of ten percent (10%) per annum plus an additional service
fee of two percent (2%) from the date of payment thereof by Lessor.
Section 7.06 - Non-Exclusive Effect. The default provisions in this Article
VII shall not operate to exclude, override or limit any other right or remedy
provided in this lease, but shall be read in conjunction with the other
provisions hereof as supplementary thereto, and any election by the party for
whose benefit a particular provision operates, as communicated in any notice to
the other party, shall be conclusive as to the provision under which the former
is proceeding. Unless otherwise specified in such notice, however, any such
election shall not act as a waiver of the right to proceed under any other
provision at any other time with respect to the same or any other breach,
default, omission or failure of performance which may be the subject of the
election.
<PAGE> 12
12
Section 7.07 - Lessor Default. If Lessor breaches any of its obligations
under this Lease, Lessee shall have all rights at law or equity against Lessor
for such breach, provided Lessor has not cured such breach after 30 days
written notice thereof.
<PAGE> 13
13
ARTICLE VIII
ASSIGNMENT, SUBLETTING, ATTORNMENT
Section 8.01 - Assignment. This lease may be assigned only with the written
consent of the Lessor which will not be unreasonably withheld but the original
Lessee shall continue to be primarily responsible for its obligations
hereunder. If Lessee is sold, reorganized, or merged during the Initial Term
or any extension thereof Lessee shall be responsible for producing a
creditworthy tenant acceptable to Lessor or shall have an offer to purchase the
Demised Premises on terms acceptable to Lessor.
Section 8.02 - Subletting. Lessee shall not sublet the Demised Premises or
any part thereof without the express written consent of the Lessor which will
not be unreasonably withheld.
Section 8.03 - Assignment by Lessor. Lessor may, from time to time, without
further consent of Lessee, assign Lessor's interest in this lease, either in
whole or in part, to any bank, insurance company, or other established lending
institution, but only subject to the rights of Lessee under this lease and only
while the Lessee is not in default.
ARTICLE IX
TRANSFER OF LESSOR'S INTEREST
Section 9.01 - Transfer of Lessor's Interest. In the event of the sale,
assignment or transfer by Lessor of its interest in the Demised Premises or in
this lease (other than a collateral assignment to secure a debt of Lessor) to a
successor in interest who expressly assumes the obligations of Lessor
hereunder, Lessor shall thereupon be released or discharged from all of its
covenants and obligations hereunder, except such obligations as shall have
accrued prior to any such sale, assignment or transfer; and Lessee agrees to
look solely to such successor in interest of Lessor for performance of such
obligations. Any securities given by Lessee to Lessor to secure performance of
Lessee's obligations hereunder may be assigned and transferred by Lessor to
such successor in interest of Lessor; and, upon acknowledgment by such
successor of receipt of such security and
<PAGE> 14
14
its express assumption of the obligation to account to Lessee for such security
in accordance with the terms of this lease, Lessor shall thereby be discharged
of any further obligation relating thereto. Lessor's assignment of the lease
or of any or all of its rights herein shall in no manner affect Lessee's
obligations hereunder. Lessee shall thereafter attorn and look to such
assignee, as Lessor, provided Lessee has first received written notice of such
assignment of Lessor's interest.
ARTICLE X
SUPPLEMENTARY AGREEMENT
Section 10.01 - Agreement as to Modification. Lessee agrees at any time and
from time to time upon not less than ten (10) days prior written request by
Lessor, to execute, acknowledge and deliver to Lessor, and Lessor agrees at any
time and from time to time, upon not less than ten (10) days prior written
request by Lessee, to execute, acknowledge and deliver to Lessee a statement in
writing certifying that this lease is unmodified and in full force and effect
(or if there have been mutually agreed upon modifications that the same is in
full force and effect, as modified, and stating the modifications), and the
dates to which the fixed rent and other charges have been paid in advance, if
any, and whether or not there is any existing default, other than on any
existing mortgage, by Lessee with respect to any sums of money required to be
paid by Lessee under the terms of this lease, or notice of default served by
Lessor, it being intended that any such statement delivered pursuant to this
paragraph may be relied upon by any prospective purchaser of the fee or
leasehold estate or by any prospective or existing mortgagee or assignee of any
mortgage upon the leasehold estate, or by any prospective assignee or subtenant
of the leasehold estate. If any such certification by Lessor shall allege
non-performance by Lessee, the nature and extent of such non-performance shall,
insofar as actually known by Lessor, be summarized therein. In the event that
either party shall fail to execute, acknowledge and deliver to the other each
statement prior to the expiration of said ten (10) day period, it shall be
conclusively presumed a certification that this lease is unmodified and in full
force and effect, that all rental has been paid to date and that there is no
existing default.
<PAGE> 15
15
Section 10.02 - Acknowledgment of Rent. The Lessor within ten (10) days,
upon request of the Lessee or any holder of a mortgage on the fee or leasehold
interest herein demised, will furnish a written statement duly acknowledging
the amount of rent and additional rent due, if any.
Section 10.03 - Easements. Lessor covenants and agrees that it will execute
any and all instruments that may be required of the Lessor in connection with
the granting of easements for installation of water, gas, steam, electricity,
telephone, sewage and storm drainage of the various utility companies affecting
any street, opened or proposed, on any part of the Demised Premises.
<PAGE> 16
16
Section 10.04 - Notice of Default. Wherever in this lease the Lessor is
given the right to pay any sum of money or perform any act which, by the terms
of this lease, are to be performed by the Lessee, Lessor agrees that it will
not so pay or perform until it has given Lessee thirty (30) days written notice
of its intent so to do and the Lessee at the expiration of such thirty (30) day
period has not made such payment or commenced and is diligently prosecuting
such performance; provided, however, that such period shall not exceed any
other period of notification specifically set forth herein relating to specific
acts of the parties hereto, it being specifically understood that this thirty
(30) day period notice shall not control or override the other notice
requirements specifically set forth in the lease agreement.
ARTICLE XI
NOTICES
Any and all notices by the Lessor to the Lessee, or by the Lessee to the
Lessor, shall be in writing and by registered or certified mail addressed to
the respective addresses below stated:
To the Lessor by Communication addressed to:
B & C Enterprises
790 Stowe Road
Clover, SC 27910
To the Lessee by Communication addressed to:
American Aircarriers Support, Inc.
4283 Pleasant Road
Fort Mill, SC 29715
Rent shall be payable by check sent by ordinary mail to the Lessor at the above
address for notices.
<PAGE> 17
17
ARTICLE XII
VALIDITY OF PROVISIONS
If any clause or provision herein contained shall be adjudged invalid, the
same shall not affect the validity of any other clause or provision of this
lease or constitute any cause of action in favor of either party as against the
other, unless the same shall prevent the operation upon the Demised Premises of
the use now contemplated by the parties.
The Lessor and the Lessee hereto agree to execute and deliver upon notice as
set forth elsewhere in this lease, any and all instruments in writing necessary
to carry out any terms, conditions, covenants or assurances in this lease.
ARTICLE XIII
BINDING ON HEIRS
It is further covenanted and agreed, by and between the Lessor and the
Lessee, that all the covenants, agreements, provisions, conditions and
undertakings in this lease contained shall extend to and be binding upon the
heirs, executors, successors, and assigns of the respective Lessor and Lessee
hereto, and the same as if they were in every case named and expressed, and
shall be construed as covenants running with the land; and that wherever in
this lease reference is made to either the Lessor or the Lessee hereto, it
shall be held to include and apply to (wherever and whenever applicable) also
the heirs, executors, successor, personal or legal representatives, and assigns
of each Lessor or Lessee, and same as if in each and every case so expressed.
ARTICLE XIV
HOLDING OVER.
If Lessee shall hold over after the expiration of the term of this lease, or
any extension thereof, such tenancy shall be from month to month only and upon
all the terms, covenants and conditions hereof.
<PAGE> 18
18
ARTICLE XV
EXTENSION OF TIME
It is covenanted and agreed by and between the Lessor and the Lessee that
the time or times herein specified within which the Lessee or Lessor is
required to perform any act or to do anything in order to comply with the terms
and provisions of this lease except for the obligation to pay rent or other
sums coming due, shall be, and they are each hereby, extended to the extent
that the Lessee or Lessor is actually and in good faith delayed or hindered by
strikes, lockouts, force majeure, the elements, or other causes or conditions
beyond Lessee's or Lessor's control.
ARTICLE XVI
SURRENDER OF PREMISES
The Lessee shall surrender and deliver up the Demised Premises, in as good
condition as when received, reasonable and ordinary wear and tear excepted.
ARTICLE XVII
INSPECTION
The Lessor shall have access to the Demised Premises at reasonable hours for
inspection. Lessor's inspection shall be on a reasonable interval and upon
reasonable notice to the Lessee.
ARTICLE XVIII
ATTORNEYS' FEES
In the event it is necessary for either Lessor or Lessee to commence legal
action against the other on account of a default or violation of any of the
terms or conditions of this lease, by the other, the party prevailing in such
action shall be entitled to recover, in addition to any other relief granted,
attorneys' fees in an amount which the Court may determine to be reasonable.
<PAGE> 19
19
ARTICLE XIX
CONSTRUCTION AND INTERPRETATION
The titles, headings or catch lines preceding the Articles of this lease
agreement are for the purpose of easy reference and shall not be considered a
part of this agreement. Further, this lease agreement is made and executed in
the State of North Carolina and shall be construed, interpreted, and enforced
pursuant to the laws of the State of North Carolina.
ARTICLE XX
SHORT FORM LEASE
Lessor or Lessee shall have the right to require of the other party that a
short form lease be executed at the time of the execution of this lease
instrument, or thereafter upon request at Lessee's sole expense said short form
lease to be for recording purposes only.
<PAGE> 20
20
ARTICLE XXI
WAIVER
No waiver of a breach of any of the agreements or provisions contained in
this lease shall be construed to be a waiver of any subsequent breach of the
same or of any other provisions in the lease.
ARTICLE XXII
COMPLETE AGREEMENT
This instrument contains the complete agreement of the parties regarding the
terms and conditions of the lease of the Demised Premises and there are no oral
or written conditions, terms, understanding of other agreements pertaining
thereto which have not been incorporated herein.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals as of the day and year first above written.
LESSOR:
B & C Enterprises
By /s/Richard Caldwell
-----------------------------------------
General Partner
By /s/ Herman O. Brown, Jr.
-----------------------------------------
General Partner
LESSEE:
AMERICAN AIRCARRIERS SUPPORT, INC.
By /s/ Karl F. Brown
-----------------------------------------
President
ATTEST:
/s/ Herman O. Brown, Jr.
- -----------------------
Secretary
<PAGE> 21
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STATE OF NORTH CAROLINA
COUNTY OF GASTON
I, /s/ Lori Beam, Notary Public, do hereby certify that J.R. and
Barbara H. Caldwell, General Partners of B & C Enterprises personally appeared
before me this day and acknowledged the due execution of the foregoing
instrument for the purposes therein expressed.
WITNESS my hand and notarial seal, this 30th day of June, 1993.
/s/ Lori Beam
-----------------------------------------
Notary Public
My Commission expires: 12-16-96
STATE OF NORTH CAROLINA
COUNTY OF GASTON
I, /s/ Lori Beam, Notary Public, do hereby certify that Karl F. Brown,
personally appeared before me this day, who being by me duly sworn, says that
he is the President of AMERICAN AIRCARRIERS SUPPORT, INC., a corporation and
that the seal affixed to the foregoing instrument in writing is the corporate
seal of the corporation, and that said writing was signed by him, in behalf of
the said corporation, by its authority duly given; and the said Herman Brown,
acknowledged the said writing to be the act and deed of said corporation.
WITNESS, my hand and notarial seal, this 30th day of June, 1993.
/s/ Lori Beam
-----------------------------------------
Notary Public
My Commission expires:12-16-96
<PAGE> 22
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EXHIBIT A
RE: SECTION 1.01, LEASE OF REAL PROPERTY EXECUTED THE ____ DAY OF
______________, 1993, AND EFFECTIVE AS OF THE ____ DAY OF ______________, 1993,
BETWEEN AND AMONG B & C ENTERPRISES AND AMERICAN AIRCARRIERS SUPPORT, INC.
Description of Demised Premises
A building consisting of 15,000 square feet located at 4283 Pleasant Road,
Fort Mill, SC 29715.
<PAGE> 1
EXHIBIT 10.5.2
STATE OF SOUTH CAROLINA
COUNTY OF YORK LEASE OF REAL PROPERTY
THIS AGREEMENT, executed the 30th day of July, 1997, to be effective
as of the 1st day of August, 1997 between BROWN ENTERPRISES, hereinafter
referred to as "Lessor", and AMERICAN AIRCARRIERS SUPPORT, INC. (AASI),
hereinafter referred to as "Lessee".
W I T N E S S E T H
WHEREAS, Lessor owns certain realty suitable for leasing;
WHEREAS, Lessee is desirous of leasing said realty to utilize in its
business;
NOW, THEREFORE,in consideration of and subject to the premises, the
mutual covenants herein contained, and each and every act performed hereunder
by all of the parties, such parties enter into the following Articles of
Agreement:
ARTICLE I
THE DEMISED PREMISES AND THE TERM
Section 1.01 - Demised Premises. Lessor hereby warrants that it is the
owner of that certain realty which Lessor lets and demises to Lessee, and the
Lessee leases from Lessor. Said real estate is more particularly described in
Exhibit "A" annexed hereto and is hereinafter designated and referred to as
"Demised Premises".
Section 1.02 - Title. Lessor warrants that it has a merchantable fee
simple title in and to the Demised Premises free and clear of all liens,
easements, restrictions and encumbrances, rights of way of record and easements
of record now existing thereon for public utilities and highway use except
those which have been disclosed to the Lessee.
Section 1.03 - Zoning. Lessor warrants that the Demised Premises and
all improvements thereon are currently being used in compliance with existing
zoning.
Section 1.04 - Habendum and Term. Lessor hereby leases the Demised
Premises to Lessee to have and to hold the Demised Premises
<PAGE> 2
2
with the rights, privileges, easements and appurtenances thereto attaching and
belonging, to the Lessee, its successors and assigns, with a quiet and
undisturbed possession to Lessee, for an initial term of five (5) years from
the date hereof ("the Initial Term"). At the end of the Initial Term the
Lessee shall have the option to enter a five (5) year renewal term at the rate
of _________ per month.
Section 1.05 - Use. The Lessee covenants not to use the Demised
Premises or any improvements thereon for any illegal or unlawful purpose, and
further covenants not to grant permission for the use by any subtenant or
occupant for illegal or unlawful purposes, and the Lessee covenants that it
will immediately, upon the discovery of any such illegal or unlawful use, exert
its best efforts to compel the discontinuance of such uses.
ARTICLE II
RENT
Section 2.01 - Rent. The Lessee shall pay the Lessor during the
Initial Term of this lease rent in the amount of Seven Thousand Two Hundred
Fifty Dollars ($7,250.00) per month, payable in advance on the first day of
each month commencing on the earlier of August 1, 1997 or the date a
certificate of occupancy is provided for the Demised Property.
Section 2.02 - Rent Payment. The Lessee shall during the term hereby
granted, pay to the Lessor the rent herein reserved and all such other sums as
may become payable on account of the Lessee's default in the observance of any
of the covenants herein contained on the Lessee's part to be performed, at the
time and in the manner limited and prescribed herein for the payment thereof.
Section 2.03 - Late Payment. Any installment of rent accruing under
the provisions of this lease which is not paid within 10 days of when due shall
bear interest at the rate of ten percent (10%) per annum from the date due
until paid, plus an additional service fee of two percent (2%) for each
delinquent payment due.
<PAGE> 3
3
ARTICLE III
LESSEE'S COVENANTS
Section 3.01 - Taxes and Assessments. Lessee agrees to pay ten (10)
days before delinquent all taxes, general and special assessments and other
public charges levied upon or assessed against the Demised Premises which
become payable from and after the date this lease commences until expiration or
termination of this lease.
Section 3.02 - Receipts; Proration. Lessee shall exhibit to Lessor
from time to time official receipts evidencing payment of taxes as required in
Section 3.01 prior to the delinquent date. Any such taxes and other public
charges assessed against the Demised Premises for the tax year in which this
lease commences or terminates shall be equitably prorated between the parties
hereto if the commencement and the end of the term of this lease do not
coincide with the beginning or end of the tax year.
Section 3.03 - Installment Payment. Lessee shall have the right to
execute in the name of the Lessor and as its attorney in fact such agreement or
agreements or other instrument which may be required or permitted by law to
permit the payment of such taxes or assessments in installments, but Lessee
shall not be liable to pay any installments for taxes not due at the end of
this original or any renewed term after occupancy of the Lessee has closed.
Section 3.04 - Unpaid Taxes. If Lessee fails to pay any such taxes,
assessments or other public charges which it is obligated to pay as provided in
this Article, before the same become delinquent, then and in such event, Lessor
may pay the same, together with any interest and penalties thereon, and the
amount so paid shall be deemed rent immediately due and payable by Lessee to
Lessor within 10 days of written demand, together with interest thereon from
the payment date at the rate of ten percent (10%) per annum plus an additional
service fee of two percent (2%) .
Section 3.05 - Contest of Taxes. Anything in this Article to the
contrary notwithstanding, Lessor agrees that Lessee shall have the right, at
Lessee's sole cost and expense, to contest the legality, validity, or the basis
of calculation, of any of the taxes, assessments or other public charges
provided to be paid by Lessee, but no such contest shall be carried on or
maintained by Lessee after such taxes, assessments or other public charges
become
<PAGE> 4
4
delinquent unless Lessee shall have duly paid the amount involved under protest
or shall procure and maintain a stay of all proceedings to enforce any
collection thereof and any forfeiture or sale of the Demised Premises, and
shall also provide for payment thereof together with all penalties, interest,
cost and expense by deposit of a sufficient sum of money or by a good and
sufficient undertaking as may be required by law to accomplish such stay.
Lessor agrees that it will, at the request of Lessee, execute or join in the
execution of any instrument or documents necessary in connection with any such
contest except bonds or undertakings. In the event any such contest is made by
Lessee, Lessee shall promptly, upon final determination thereof adversely to
Lessee, pay and discharge the amount involved, or affected by, any such
contest, together with any penalties, fines, interest, costs and expenses that
may have accrued thereon.
Section 3.06 - Maintenance, Repairs and Capital Costs. As between the
Lessor and the Lessee, the Lessee shall pay or cause to be paid all repair,
maintenance and capital costs and shall take good care of the Demised Premises
and keep the same and all parts thereof, together with any and all alterations,
additions and improvements therein or thereto, in good order and condition,
except for normal wear and tear, damage done by casualty not covered by the
provisions of the usual fire and extended coverage insurance. Lessor and
Lessee shall meet in January of each year and agree on any maintenance that is
to be performed, which shall be completed within ninety (90) days of said
meeting, unless Lessor extends said period for reasonable cause demonstrated by
Lessee.
Section 3.07 - Fees and Commissions. Lessor and Lessee represent to
each other that neither party has engaged the services of a real estate broker
or agent in negotiating or consuming the closing of this Lease. Lessor and
Lessee agree to indemnify and hold each other free and harmless of any
obligation for real estate commissions, finder's fees and legal fees earned as
services performed in connection with this lease.
Section 3.08 - Indemnification of Lessor. Lessee covenants and agrees
that Lessor shall not be liable for any injuries or damages to persons,
entities, or property from any cause whatsoever by reason of the use,
occupation, control or enjoyment of the Demised Premises by Lessee, or any
person entering thereon for any reason or invited (other than Lessor or their
agents), suffered or
<PAGE> 5
5
permitted by Lessee to go or be thereon or holding under Lessee at any time
during the term of this lease, and Lessee will save and hold harmless Lessor
from and against any and all liability, penalties, damages, expenses and
judgments whatsoever on account of such injuries or damages. The injuries and
damages referred to in this paragraph shall include, without limiting the
generality of the preceding provisions, to injuries, damages and mechanic's
liens arising directly or indirectly out of any demolition, repairs,
restoration, reconstruction, changes, alterations and construction which Lessee
may make or cause to be made upon the Demised Premises or any part thereof.
Lessee, at Lessee's expense, agrees to employ legal counsel to defend any
action for which any claim shall be made for injuries or damages commenced
against Lessor by reason of the foregoing.
Section 3.09 - Compliance with Laws. The Lessee covenants that it will
during the demised term properly observe and at its own expense promptly comply
with and execute all present and future laws, rules, regulations and notices of
every nature and kind whatsoever of any governmental agency or authority
concerning the Demised Premises. It is expressly understood that the Lessee
shall have thirty (30) days or such time as said authorities shall accord, or
that Lessee shall necessarily need, within which to comply with, contest, obey,
carry out, observe and/or perform any such law, rule, regulation or notice.
Section 3.10 - Utilities. Lessee shall either pay or cause to be paid
all charges for gas, electricity, water, sewer and other public utility
services supplied to the Demised Premises during the term of this lease.
Section 3.11 - Insurance. The Lessee shall, during the demised term,
maintain adequate fire and casualty and general liability insurance coverage on
the Demised Premises in solvent, mutual or stock companies or company, insuring
both the Lessor and the Lessee within the body of the insurance contract, in an
amount and form reasonably acceptable to the Lessor, such to be disclosed to
Lessor upon obtaining a commitment for the same.
<PAGE> 6
6
ARTICLE IV
LESSOR'S COVENANTS
Section 4.01 - Quiet Possession. The Lessor covenants that the Lessee,
upon payment of the rent above reserved, and upon the due performance of the
covenants and agreements herein contained, shall and may at all times during
the terms hereby granted, peaceably and quietly have, hold and enjoy the
Demised Premises for the term of this lease.
ARTICLE V
ENVIRONMENTAL COMPLIANCE
Section 5.01 - Definitions "Toxic or Hazardous Substances" shall be
interpreted broadly to include, but not be limited to, any material or
substance that is defined or classified under federal, state or local laws as:
(a) a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. Section
9601(14), Section 311 of the Federal Water Pollution Control Act, 33 U.S.C.
Section 1321, as now or hereafter amended; (b) a "hazardous waste" pursuant to
Section 1004 or Section 3001 of the Resource Conservation and Recovery Act, 42
U.S.C. Section 6903, 42 U.S.C. Section 6921, as now or hereafter amended; (c) a
toxic pollutant under Section 307(1)(a) of the Federal Water Pollution Control
Act, 33 U.S.C. Section 1317(1)(a); (d) a "hazardous air pollutant" under
Section 112 of the Clean Air Act, 42 U.S.C. Section 7412, as now or hereafter
amended; (e) a "hazardous material" under the Hazardous Material Transportation
Act, 49 U.S.C. Section 1802(2), as now or hereafter amended; (f) toxic or
hazardous pursuant to regulations promulgated now or hereafter under the
aforementioned laws; or (g) presenting a risk to human health or the
environment under other applicable federal, state or local laws, ordinances, or
regulations, as now or as may be passed or promulgated in the future. "Toxic
or Hazardous Substances" shall also mean any substance that after release into
the environment upon exposure, ingestion, inhalation or assimilation, either
directly from the environment or indirectly by ingestion through food chains,
will or may reasonably be anticipated to cause death, disease, behavior
abnormalities, cancer or genetic abnormalities. "Toxic or Hazardous Substance"
specifically includes, but it not limited to, asbestos, polychlorinated
biphenyls (PCBs), petroleum and petroleum based derivatives and urea
formaldehyde.
<PAGE> 7
7
Section 5.02 - Indemnities
Lessee agrees to indemnify, defend (with counsel satisfactory to
Lessor) and hold Lessor and its officers, employees, contractors, and agents
harmless from any claims, judgments, damages, penalties, fines, expenses,
liabilities or losses arising during or after the Lease Term out of or in any
way relating to the presence, release or disposal of Toxic or Hazardous
Substances on or from the Demised Premises where such presence, release or
disposal results from any act or omission of Lessee during its occupancy of the
Demised Premises. Such indemnity shall, without limitation, include costs
incurred in connection with:
(i) the presence or suspected presence of Toxic or Hazardous
Substances in the soil, groundwater or soil vapor on or under the
Demised Premises resulting from any act or omission of Lessee;
(ii) the presence or suspected presence of Toxic or Hazardous
Substances on or under the Demised Premises as a result of any
discharge, dumping, spilling (accidental or otherwise) onto the
Demised Premises by Lessee during Lessee's occupance of the Demised
Premises or after the Lease Term commences.
The indemnification provided by this section shall also specifically
cover, without limitation, costs incurred in connection with any investigation
of site conditions or any cleanup, remedial removal or restoration work
required in either event by any federal, state or local governmental agency or
political subdivision or by court order because of the presence or suspected
presence of Toxic or Hazardous Substances in the soil, groundwater, or soil
vapor on or under the Demised Premises, for which Lessee is responsible as
provided above. Such costs may include, but not be limited to, response costs
incurred as a result of the order of a court or governmental agency and related
attorneys fees, consultants fees, and expert fees.
The foregoing environmental indemnity shall survive the expiration or
earlier termination of this Lease and/or any transfer of all or any portion of
the Demised Premises, or of any interest in this Lease.
<PAGE> 8
8
ARTICLE VI
EMINENT DOMAIN
Section 6.01 - Eminent Domain. If more than ten percent (10%) of the
land area of the Demised Premises is taken under the power of eminent domain
(including any conveyance made in lieu thereof), and such taking shall make the
operation of Lessee's business on the Demised Premises impractical, then Lessee
shall have the right to terminate this lease by giving Lessor written notice of
such termination within thirty (30) days after such taking or condemnation. If
Lessee does not so elect to terminate this lease, the rental to be paid by
Lessee hereunder shall be equitably reduced in proportion to Lessee's loss of
the use of the Demised Premises. Any award or awards payable on account of any
taking or condemnation of all or part of the Demised Premises shall be payable
to Lessor.
ARTICLE VII
DEFAULT
Section 7.01 - Termination of Lease. Upon occurrence of any default,
Lessor may, at its option, in addition to any other remedy or right given
hereunder or by law,
(a) terminate and cancel this lease at any time after the expiration
of thirty (30) days from the giving of written notice of default to
the party in default, but only if the party in default has not
remedied such default within the said thirty (30) days or if the party
in default has not commenced such act or acts as shall be necessary to
remedy the default and shall complete such act or acts promptly; or
(b) terminate this lease for the nonpayment of rent at any time after
the expiration of ten (10) days following written notice to Lessee of
nonpayment of such rent (provided each default has not been cured);
and
(c) any termination of this lease under sub-paragraphs (a) and (b) of
this Section 6.01 shall not prejudice Lessor's right to prosecute any
other remedy which it may have for a breach of this lease or default
hereunder.
<PAGE> 9
9
Section 7.02 - Event of Default Defined. Each of the following shall
be deemed an event of default:
(a) Default in the payment of rent or other payments hereunder where
such default has not been cured within 10 days of written notice of
such default;
(b) If Lessee shall default in the performance or observance of any
other covenant or condition of this lease by the Lessee to be
performed or observed and such default has not been cured within 30
days written notice of such default;
(c) The filing or execution or occurrence of
(1) A petition in bankruptcy by or against the Lessee which
remains undischarged for 60 days after filing;
(2) A petition or answer against Lessee seeking a
reorganization, arrangement, composition, readjustment,
liquidation, dissolution or other relief of the same or
different kind under any provision of the Bankruptcy Act;
(3) Adjudication of Lessee as a bankrupt or insolvent or
insolvency in the bankruptcy or equity sense;
(4) An assignment by Lessee for the benefit of creditors,
whether by trust mortgage or otherwise;
(5) A petition or other proceeding by or against the Lessee
for, or the appointment of, a trustee, receiver, guardian,
conservator or liquidator of Lessee with respect to all or
substantially all of its property;
(6) A petition or other proceeding by or against the Lessee
for its dissolution or liquidation, or the taking of
possession of the property of the Lessee by any governmental
authority in connection with dissolution or liquidation; or
(7) The taking by any person of the leasehold created hereby
or part thereof upon execution, attachment or other process of
law or equity (except pursuant to a valid assignment or
sublease pursuant to Article VIII).
<PAGE> 10
10
Section 7.03 - Repossession. Upon termination of this lease as
hereinabove provided, or pursuant to statute, or by summary proceedings or
otherwise, the Lessor may enter forthwith without further demand or notice upon
any part of the Demised Premises, if it has not theretofore done so, and resume
possession either by summary proceedings, or by action at law or in equity or
by entry or otherwise as the Lessor may determine, and shall not be liable in
trespass or for any damages to Lessee or any other person. In no event shall
such re-entry or resumption of possession or reletting as hereafter provided be
deemed to be an acceptance or surrender of this lease or a waiver of the rights
or remedies of Lessor hereunder.
Section 7.04 - Reletting. Upon termination of this lease in any
manner above provided, the Lessor shall use reasonable efforts to relet the
Demised Premises.
Section 7.05 - Lessor's Right to Cure Default of Lessee. If Lessee
shall be in default in any of the terms or provisions of this lease, other than
the payment of rental, Lessor may, after thirty (30) days written notice to
Lessee, immediately or at any time thereafter, without being required to give
notice, perform the same for the account of Lessee and at the cost and expense
of Lessee, and Lessee shall pay to Lessor on demand any amount properly paid by
Lessor including reasonable attorney fees for such purpose, with interest
thereon at the rate of ten percent (10%) per annum plus an additional service
fee of two percent (2%) from the date of payment thereof by Lessor.
Section 7.06 - Non-Exclusive Effect. The default provisions in this
Article VII shall not operate to exclude, override or limit any other right or
remedy provided in this lease, but shall be read in conjunction with the other
provisions hereof as supplementary thereto, and any election by the party for
whose benefit a particular provision operates, as communicated in any notice to
the other party, shall be conclusive as to the provision under which the former
is proceeding. Unless otherwise specified in such notice, however, any such
election shall not act as a waiver of the right to proceed under any other
provision at any other time with respect to the same or any other breach,
default, omission or failure of performance which may be the subject of the
election.
<PAGE> 11
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Section 7.07 - Lessor Default. If Lessor breaches any of its
obligations under this Lease, Lessee shall have all rights at law or equity
against Lessor for such breach, provided Lessor has not cured such breach after
30 days written notice thereof.
ARTICLE VIII
ASSIGNMENT, SUBLETTING, ATTORNMENT
Section 8.01 - Assignment. This lease may be assigned only with the
written consent of the Lessor which will not be unreasonably withheld but the
original Lessee shall continue to be primarily responsible for its obligations
hereunder. If Lessee is sold, reorganized, or merged during the Initial Term
or any extension thereof Lessee shall be responsible for producing a
creditworthy tenant acceptable to Lessor or shall have an offer to purchase the
Demised Premises on terms acceptable to Lessor.
Section 8.02 - Subletting. Lessee shall not sublet the Demised
Premises or any part thereof without the express written consent of the Lessor
which will not be unreasonably withheld.
Section 8.03 - Assignment by Lessor. Lessor may, from time to time,
without further consent of Lessee, assign Lessor's interest in this lease,
either in whole or in part, to any bank, insurance company, or other
established lending institution, but only subject to the rights of Lessee under
this lease and only while the Lessee is not in default.
ARTICLE IX
TRANSFER OF LESSOR'S INTEREST
Section 9.01 - Transfer of Lessor's Interest. In the event of the
sale, assignment or transfer by Lessor of its interest in the Demised Premises
or in this lease (other than a collateral assignment to secure a debt of
Lessor) to a successor in interest who expressly assumes the obligations of
Lessor hereunder, Lessor shall thereupon be released or discharged from all of
its covenants and obligations hereunder, except such obligations as shall have
accrued prior to any such sale, assignment or transfer; and Lessee agrees to
look solely to such successor in interest of Lessor for performance of such
obligations. Any securities given by Lessee to Lessor to secure performance of
Lessee's obligations hereunder may
<PAGE> 12
12
be assigned and transferred by Lessor to such successor in interest of Lessor;
and, upon acknowledgment by such successor of receipt of such security and its
express assumption of the obligation to account to Lessee for such security in
accordance with the terms of this lease, Lessor shall thereby be discharged of
any further obligation relating thereto. Lessor's assignment of the lease or
of any or all of its rights herein shall in no manner affect Lessee's
obligations hereunder. Lessee shall thereafter attorn and look to such
assignee, as Lessor, provided Lessee has first received written notice of such
assignment of Lessor's interest.
ARTICLE X
SUPPLEMENTARY AGREEMENT
Section 10.01 - Agreement as to Modification. Lessee agrees at any
time and from time to time upon not less than ten (10) days prior written
request by Lessor, to execute, acknowledge and deliver to Lessor, and Lessor
agrees at any time and from time to time, upon not less than ten (10) days
prior written request by Lessee, to execute, acknowledge and deliver to Lessee
a statement in writing certifying that this lease is unmodified and in full
force and effect (or if there have been mutually agreed upon modifications that
the same is in full force and effect, as modified, and stating the
modifications), and the dates to which the fixed rent and other charges have
been paid in advance, if any, and whether or not there is any existing default,
other than on any existing mortgage, by Lessee with respect to any sums of
money required to be paid by Lessee under the terms of this lease, or notice of
default served by Lessor, it being intended that any such statement delivered
pursuant to this paragraph may be relied upon by any prospective purchaser of
the fee or leasehold estate or by any prospective or existing mortgagee or
assignee of any mortgage upon the leasehold estate, or by any prospective
assignee or subtenant of the leasehold estate. If any such certification by
Lessor shall allege non-performance by Lessee, the nature and extent of such
non-performance shall, insofar as actually known by Lessor, be summarized
therein. In the event that either party shall fail to execute, acknowledge and
deliver to the other each statement prior to the expiration of said ten (10)
day period, it shall be conclusively presumed a certification that this lease
is unmodified and in full force and effect, that all rental has been paid to
date and that there is no existing default.
<PAGE> 13
13
Section 10.02 - Acknowledgment of Rent. The Lessor within ten (10)
days, upon request of the Lessee or any holder of a mortgage on the fee or
leasehold interest herein demised, will furnish a written statement duly
acknowledging the amount of rent and additional rent due, if any.
Section 10.03 - Easements. Lessor covenants and agrees that it will
execute any and all instruments that may be required of the Lessor in
connection with the granting of easements for installation of water, gas,
steam, electricity, telephone, sewage and storm drainage of the various utility
companies affecting any street, opened or proposed, on any part of the Demised
Premises.
Section 10.04 - Notice of Default. Wherever in this lease the Lessor
is given the right to pay any sum of money or perform any act which, by the
terms of this lease, are to be performed by the Lessee, Lessor agrees that it
will not so pay or perform until it has given Lessee thirty (30) days written
notice of its intent so to do and the Lessee at the expiration of such thirty
(30) day period has not made such payment or commenced and is diligently
prosecuting such performance; provided, however, that such period shall not
exceed any other period of notification specifically set forth herein relating
to specific acts of the parties hereto, it being specifically understood that
this thirty (30) day period notice shall not control or override the other
notice requirements specifically set forth in the lease agreement.
ARTICLE XI
NOTICES
Any and all notices by the Lessor to the Lessee, or by the Lessee to
the Lessor, shall be in writing and by registered or certified mail addressed
to the respective addresses below stated:
To the Lessor by Communication addressed to:
Brown Enterprises
P.O. Box 7566
Charlotte, NC 28241
<PAGE> 14
14
To the Lessee by Communication addressed to:
American Aircarriers Support, Inc.
4283 Pleasant Road
Fort Mill, SC 29715
Rent shall be payable by check sent by ordinary mail to the Lessor at the above
address for notices.
ARTICLE XII
VALIDITY OF PROVISIONS
If any clause or provision herein contained shall be adjudged invalid,
the same shall not affect the validity of any other clause or provision of this
lease or constitute any cause of action in favor of either party as against the
other, unless the same shall prevent the operation upon the Demised Premises of
the use now contemplated by the parties.
The Lessor and the Lessee hereto agree to execute and deliver upon
notice as set forth elsewhere in this lease, any and all instruments in writing
necessary to carry out any terms, conditions, covenants or assurances in this
lease.
ARTICLE XIII
BINDING ON HEIRS
It is further covenanted and agreed, by and between the Lessor and the
Lessee, that all the covenants, agreements, provisions, conditions and
undertakings in this lease contained shall extend to and be binding upon the
heirs, executors, successors, and assigns of the respective Lessor and Lessee
hereto, and the same as if they were in every case named and expressed, and
shall be construed as covenants running with the land; and that wherever in
this lease reference is made to either the Lessor or the Lessee hereto, it
shall be held to include and apply to (wherever and whenever applicable) also
the heirs, executors, successor, personal or legal representatives, and assigns
of each Lessor or Lessee, and same as if in each and every case so expressed.
<PAGE> 15
15
ARTICLE XIV
HOLDING OVER
If Lessee shall hold over after the expiration of the term of this
lease, or any extension thereof, such tenancy shall be from month to month only
and upon all the terms, covenants and conditions hereof.
ARTICLE XV
EXTENSION OF TIME
It is covenanted and agreed by and between the Lessor and the Lessee
that the time or times herein specified within which the Lessee or Lessor is
required to perform any act or to do anything in order to comply with the terms
and provisions of this lease except for the obligation to pay rent or other
sums coming due, shall be, and they are each hereby, extended to the extent
that the Lessee or Lessor is actually and in good faith delayed or hindered by
strikes, lockouts, force majeure, the elements, or other causes or conditions
beyond Lessee's or Lessor's control.
ARTICLE XVI
SURRENDER OF PREMISES
The Lessee shall surrender and deliver up the Demised Premises, in as
good condition as when received, reasonable and ordinary wear and tear
excepted.
ARTICLE XVII
INSPECTION
The Lessor shall have access to the Demised Premises at reasonable
hours for inspection. Lessor's inspection shall be on a reasonable interval
and upon reasonable notice to the Lessee.
ARTICLE XVIII
ATTORNEYS' FEES
In the event it is necessary for either Lessor or Lessee to commence
legal action against the other on account of a default or
<PAGE> 16
16
violation of any of the terms or conditions of this lease, by the other, the
party prevailing in such action shall be entitled to recover, in addition to
any other relief granted, attorneys' fees in an amount which the Court may
determine to be reasonable.
ARTICLE XIX
CONSTRUCTION AND INTERPRETATION
The titles, headings or catch lines preceding the Articles of this
lease agreement are for the purpose of easy reference and shall not be
considered a part of this agreement. Further, this lease agreement is made and
executed in the State of North Carolina and shall be construed, interpreted,
and enforced pursuant to the laws of the State of North Carolina.
ARTICLE XX
SHORT FORM LEASE
Lessor or Lessee shall have the right to require of the other party
that a short form lease be executed at the time of the execution of this lease
instrument, or thereafter upon request at Lessee's sole expense said short form
lease to be for recording purposes only.
ARTICLE XXI
WAIVER
No waiver of a breach of any of the agreements or provisions contained
in this lease shall be construed to be a waiver of any subsequent breach of the
same or of any other provisions in the lease.
ARTICLE XXII
COMPLETE AGREEMENT
This instrument contains the complete agreement of the parties
regarding the terms and conditions of the lease of the Demised Premises and
there are no oral or written conditions, terms, understanding of other
agreements pertaining thereto which have not been incorporated herein.
<PAGE> 17
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IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals as of the day and year first above written.
LESSOR:
Brown Enterprises
By /s/ Herman O. Brown, Jr.
--------------------------------
General Partner
By /s/ Karl F. Brown
--------------------------------
General Partner
LESSEE:
AMERICAN AIRCARRIERS SUPPORT, INC.
By /s/ Karl F. Brown
-------------------------------
President
ATTEST:
/s/ Hermon O. Brown, Jr.
- --------------------------
Secretary
[SEAL]
<PAGE> 1
EXHIBIT 10.6
S CORPORATION TAX ALLOCATION
AND INDEMNIFICATION AGREEMENT
THIS S CORPORATION TAX ALLOCATION AND INDEMNIFICATION AGREEMENT (the
"Agreement") is made and entered into this ____ day of April, 1998 between
AMERICAN AIRCARRIERS SUPPORT, INC., a South Carolina corporation (the
"Company") and HERMAN O. BROWN, JR. AND KARL F. BROWN (collectively the
"Stockholders) (the Company and the Stockholders are hereinafter referred to
individually as "party" and collectively as the "parties").
WITNESSETH:
WHEREAS, the Company contemplates a public offering of its stock in
order to raise additional equity capital for the purpose of expanding the
operations of the business, reducing indebtedness of the Company, making
payment of an S Corporation distribution and other corporate purposes (the
"Public Offering");
WHEREAS, upon completion of such Public Offering, the Company plans to
distribute a Special Dividend to the Stockholders in an amount equal to the
lesser of $2,000,000 or one-half of the Company's undistributed Accumulated
Adjustments Account as defined in Section 1368(e)(1) of the Code (as
hereinafter defined) as of the close of the Short S Year after all tax payment
distributions have been made (as hereinafter defined).
WHEREAS, the Company and the Stockholders have entered into this
Agreement as a condition to the foregoing distribution and the contemplated
Public Offering;
WHEREAS, from its inception, the Company has been taxed as an S
corporation (as defined in the Code) and will continue to be an S corporation
until the Termination Date (as hereinafter defined), after which it will be
taxed as a C corporation;
WHEREAS, the Stockholders currently are the only stockholders of the
Company, and will continue to be so until the closing of the Public Offering
(the "Closing"); and
WHEREAS, the Company and the Stockholders wish to provide for a tax
allocation and indemnification agreement in connection with the Company's
termination as an S corporation.
<PAGE> 2
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Definitions. The following terms, as used herein, have the
following meanings:
"C Short Year" means that portion of the S Termination Year of the
Company defined in Section 1362(e)(1)(B) of the Code.
"Code" means the Internal Revenue Code of 1986, as amended.
"Special Dividend" means a cash distribution of the lesser of
$2,000,000 or one-half of the Company's estimated accumulated adjustment
account as of the Termination Date.
"S Corporation Period" means the period commencing on inception and
ending on the Termination Date.
"S Corporation Taxable Income" means the taxable income of the Company
from all sources during the S Corporation Period.
"S Short Year" means that portion of the S Termination Year of the
Company defined in Section 1362(e)(1)(A) of the Code.
"S Termination Year" shall have the meaning set forth in Section
1362(e)(4) of the Code.
"Tax Distribution" means the distribution of cash to pay the
Stockholders' federal and state income taxes calculated at the highest
applicable rates on the pass-through of items of income of the Company.
"Termination Date" means the date on which the S corporation status of
the Company is terminated pursuant to section 1362(d)(1) of the Code.
ARTICLE 2
ELECTION TO TERMINATE; S TERMINATION YEAR
2.1 Termination of S Status. The parties intend to terminate the
Company's status as an S corporation by electing to do so under Code Section
1362(d)(1).
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<PAGE> 3
2.2 Effective Date. Pursuant to Section 1362(d)(1) of the Code,
the election to terminate the Company's status as an S corporation shall be
effective on the date immediately preceding the date of the Public Offering
which shall be the "Termination Date".
2.3 S Termination Year. The Company's fiscal year in which the S
corporation status of the Company is terminated will be an S Termination Year
for federal tax purposes.
2.4 S Short Year. Pursuant to Section 1362(e)(1) of the Code, the
S Termination Year of the Company shall be divided into two short taxable
years: an S Short Year and a C Short Year. The S Short Year of the Company
shall be that portion of the Company's S Termination Year beginning on the
first day of such fiscal year and ending on the day immediately preceding the
Termination Date. For federal income tax purposes, the Company will be treated
as an S corporation during its S Short Year.
2.5 C Short Year. Pursuant to Section 1362(e)(1)(B) of the Code,
that portion of the S Termination Year of the Company beginning on the
Termination Date and ending on the last day of the 1998 fiscal year, shall be
the C Short Year of the Company. For federal income tax purposes, the Company
will be taxed as a C corporation during its C Short Year.
ARTICLE 3
ALLOCATION OF INCOME
3.1 Allocation Election. The Company intends to allocate tax
items to its S Short Year and C Short Year pursuant to the method contained in
Section 1362(e)(3) of the Code, but may allocate pursuant to any other
permitted method under Section 1362(e) of the Code.
3.2 Payment of Tax for Short Year. As soon as reasonably possible
after the close of the S Short Year, the Company shall make a Tax Distribution
to the Stockholders to pay any applicable federal and state income taxes at the
highest applicable rates. This Tax Distribution is in addition to any other
Tax Distribution that has been made or will be made with regard to the payment
of any applicable federal and state income taxes at the highest applicable
rates for the tax year ending December 31, 1997.
3
<PAGE> 4
ARTICLE 4
TAXES
4.1 Liability for Taxes Incurred During S Corporation Years
Including S Short Year. The Stockholders, severally and not jointly, covenant
and agree that they shall pay any and all taxes attributable to their allocable
shares of taxable income of the Company they are required to pay for all
taxable periods (or that portion of any period including the S Short Year)
during which the Company was an S corporation. The Company shall pay a Tax
Distribution as set forth herein.
4.2 Liability for Taxes Incurred During C Corporation Years
Including C Short Years. The Company covenants and agrees that the Company
shall pay any and all taxes attributable to taxable income of the Company
required to be paid by the Company for the C Short Year and all taxable periods
thereafter during which the Company is a C corporation.
4.3 Company's Indemnification for Tax Liabilities. The Company
hereby agrees to indemnify, defend and hold harmless each Stockholder from and
against any and all losses, liabilities, obligations, damages, impositions,
assessments, fines, deficiencies, costs and expenses, including without
limitation, attorneys' and accountants' fees and expenses to represent
Stockholders during any audit and subsequent contest or litigation of said
taxes, with respect to all federal and state income taxes of any kind
whatsoever (computed at the highest federal and/or state income tax rate in
effect for the year of adjustment) including interest, penalties and additions
to taxes, imposed upon a Stockholder as a result of any final determination of
an adjustment (by reason of an amended return, claim for refund, audit or
otherwise) including any increase in items of income or gain or any decrease in
items of loss, deduction or credit, reported to such stockholder by the Company
with respect to the Company's S Corporation Period, but such adjustment or
change shall not include (i) an adjustment or change which results in an
increase in an item of income or gain reported to a Stockholder by the Company
with respect to one or more of the taxable years falling
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<PAGE> 5
within the Company's S Corporation Period and a corresponding decrease in an
item of income or gain with respect to one or more of the other taxable years
falling within the Company's S Corporation Period; or (ii) an adjustment or
change which results in a decrease in an item of loss, deduction or credit
reported to a Stockholder by the Company with respect to one or more of the
taxable years falling within the Company's S Corporation Period and a
corresponding increase in an item of loss, deduction or credit with respect to
one or more of the other taxable years falling within the Company's S
Corporation Period. Any such payment to a Stockholder pursuant to this Section
4.3 shall be made on a "grossed-up" basis, so that in the event any amount
received hereunder by a Stockholder constitutes taxable income to such
Stockholder, the amount of such payment hereunder shall be computed so that the
Stockholder receives full indemnification hereunder on an after-tax basis.
The Company acknowledges further that it shall be solely responsible
for any federal, state and local taxes (including interest and penalties, if
any) relating to the Built-in Gains tax imposed by Section 1374 of the Code and
the tax on Excess Passive Investment Income imposed by Section 1375 of the
Code, if any.
4.4 Stockholders' Indemnification for Tax Liabilities. The
Stockholders, severally (according to the percentage of the outstanding shares
of the Company's Common Stock owned by each Stockholder for the years of
adjustment) and not jointly, hereby agree to indemnify, defend and hold
harmless the Company from and against all liability with respect to all federal
and state income taxes of any kind whatsoever (computed at the highest federal
and/or state income tax rate in effect for the year of adjustment) including
interest, penalties and additions to taxes resulting from any final
determination of an adjustment (by reason of an amended return, claim for
refund, audit or otherwise) to the Stockholders' taxable income resulting in a
decrease in the Stockholders' S corporation taxable income and a corresponding
increase in the federal or state, as the case may be, income tax liability
payable by the Company. Notwithstanding the foregoing, the amount of the
payments made by a Stockholder pursuant to this Section 4.4 shall not exceed an
amount, if any, by which (i) the amount of the reduction in the federal and
state income tax liability and interest thereon of the Stockholder which
results from the shifting of S corporation taxable income to a C corporation
taxable year of the Company, exceeds (ii) all reasonable costs incurred by the
Stockholder reasonably attributable to securing such reduction in tax
liability.
4.5 Payments. The Stockholders or the Company, as the case may
be, shall make any payment required under this Agreement within thirty (30)
calendar days after receipt of notice from the other party that a payment is
due by such party to the appropriate taxing authority.
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<PAGE> 6
4.6 Subrogation. The party (or parties) providing the indemnity
under either Section 4.3 or Section 4.4 (defined solely for purposes of this
Section 4.6 as the "Indemnifying Party") shall be subrogated to all rights of
recovery (the "Subrogation Claims") that the party (or parties) being
indemnified under Section 4.3 or Section 4.4, respectively (defined solely for
purposes of this Section 4.6 as the "Indemnified Party"), may have against any
person or organization in respect of the tax liabilities for which the
Indemnifying Party is providing indemnity. Such right of subrogation shall not
exceed the amount paid by the Indemnifying Party to the Indemnified Party. The
Indemnified Party shall execute and deliver instruments and papers and do
whatever else is reasonably necessary to secure such rights of subrogation for
the Indemnifying Party. The Indemnified Party shall provide all reasonable
assistance as requested by the Indemnifying Party in order for the Indemnifying
Party to pursue the Subrogation Claims. The Indemnified Party shall do nothing
after any Subrogation Claim arises to prejudice the rights of the Indemnifying
Party.
4.7 Payments After Post-Termination Transition Period. If any
Stockholder is required to include any payment received pursuant to this
Agreement after the expiration of the "post-termination transition period" (as
defined in Section 1377(b) of the Code) in computing his gross income in a tax
return, other than any payment made under Section 4.3 where the Stockholder
failed to give the Company timely notice to allow the Company to make such
payment prior to the expiration of the "post-termination transition period",
then (i) the Stockholder shall notify the Company of such inclusion in income,
and (ii) in addition to all other payments made under this Agreement, the
Company shall also pay to the Stockholder an amount which, when added to the
payment so included, will place the recipient Stockholder in the same net
after-tax position that he would have been in had the payment not been so
included.
4.8 Notices of Audits and Adjustments.
(a) If any Stockholder receives notice of an intention by a
taxing authority to audit any return of the Stockholder that includes
any item of income, gain, deduction, loss or credit reported by the
Company with respect to the Company's S Corporation Period, such
Stockholder shall inform the Company, in writing, of the audit
promptly after receipt of such notice. If any Stockholder receives
notice from a taxing authority of any proposed adjustment for which
the Company may
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<PAGE> 7
be required to indemnify the Stockholder hereunder (a "Proposed
Adjustment"), the Stockholder shall give notice to the Company of the
Proposed Adjustment promptly after receipt of such notice from a
taxing authority. Upon receipt of such notice from a Stockholder, the
Company may, by in turn giving prompt written notice to each of the
Stockholders, request that the Stockholders contest such Proposed
Adjustment. If the Company shall request that any Proposed Adjustment
be contested, then the Stockholders shall, at the Company's
expense,contest the Proposed Adjustment or permit the Company and its
representatives, at the Company's request and expense, to contest the
Proposed Adjustment (including pursuing all administrative and
judicial appeals and processes). The Company shall pay to the
Stockholders on demand all costs and expenses (including attorneys'
and accountants' fees) that the Stockholders may incur in contesting
such Proposed Adjustments at audit or subsequent litigation. No
Stockholder shall make, accept or enter into a settlement or other
compromise with respect to any taxes indemnified hereunder, or forego
or terminate any proceeding undertaken hereunder without the consent
of the Company, which consent shall not be unreasonably withheld.
(b) If the Company receives notice of an intention by a
taxing authority to audit any return of the Company that includes any
item of income, gain, deductions, loss or credit reported by the
Company with respect to the period during which the Company was a S
corporation, the Company shall inform the Stockholders, in writing, of
the audit promptly after receipt of such notice. If the Company
receives notice from a taxing authority of any proposed adjustment for
which any of the Stockholders may be required to indemnify the Company
hereunder (a "Company Proposed Adjustment"), the Company shall give
notice to each of the Stockholders of the Company Proposed Adjustment
promptly after receipt of such notice from a taxing authority. Upon
receipt of such notice from the Company, any of the Stockholders may,
by in turn giving prompt written notice to the Company, request that
the Company contest such Company Proposed Adjustment. If any of the
Stockholders shall request that any Company Proposed Adjustment be
contested, then the Company shall contest the Company Proposed
Adjustment (including pursuing all administrative and judicial appeals
and processes) at the Company's expense and shall permit the
Stockholder to participate in such proceeding. The Company shall not
make,
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<PAGE> 8
accept or enter into a settlement or other compromise with respect to
any taxes indemnified hereunder, or forego or terminate any proceeding
undertaken hereunder without the consent of the Stockholders, which
consent shall not be unreasonably withheld.
ARTICLE 5
DISTRIBUTIONS
5.1 Distribution of Accumulated Adjustments Account. Prior to the
consummation of the Public Offering, the Company's board of directors shall
declare a special cash dividend (the "Special Dividend") payable to the
Stockholders separate from any and all Tax Distributions. The Special Dividend
will be equal to the lesser of $2,000,000 or one-half of the Company's
estimated accumulated adjustments account (as the term is defined in Section
1368 of the Code) (the "AAA") as of the Termination Date. The Company agrees
to pay the Special Dividend to the Stockholders promptly following the Public
Offering and that: (a) if the Special Dividend exceeds the amount per the
formula set forth as finally determined by the Company's accountants in the
course of preparing the Company's tax returns for the 1998 year (the "Final
AAA"), such excess shall be paid by the Stockholders to the Company, and (b) if
the amount of AAA distribution per the formula set forth exceeds the Special
Dividend, such excess shall be paid by the Company to the Stockholders, in
either case, within thirty (30) days of the date of such determination and
together with interest thereon, at the Applicable Federal Rate (as defined in
Section 1274 of the Code) in effect as of the date of such payment, for the
period from the date the Special Dividend was paid to the date of such payment.
The Final AAA shall be determined by the Company's tax return for the Company's
S Short Year in a manner consistent with prior practice.
ARTICLE 6
MISCELLANEOUS
6.1 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute one instrument representing the
Agreement between the parties hereto.
6.2 Construction of Terms. Nothing herein expressed or implied is
intended, or shall be construed, to confer upon or give any person, firm or
corporation, other than the parties hereto or
8
<PAGE> 9
their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
6.3 Cost of Enforcement; Interest. If, within thirty (30) days
after demand to comply with the obligations of one of the parties to this
Agreement served in writing on the other, compliance or reasonable assurance of
compliance is not forthcoming, and the other party engages the services of an
attorney to enforce rights under this Agreement, the prevailing party in any
action shall be entitled to recover all reasonable costs and expenses
(including reasonable fees of attorneys and legal assistants, whenever
incurred, whether before trial or appellate proceeding, at trial, on appeal or
otherwise).
6.4 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with the laws of the State of South
Carolina, other than those provisions relating to the conflict of laws of
different jurisdictions if the effect of the application of such provisions
would be to cause the laws of a jurisdiction other than South Carolina to apply
hereto.
6.5 Jurisdiction; Venue. The parties agree that jurisdiction for
any litigation arising out of this Agreement or any document delivered in
connection herewith shall be in Charlotte, North Carolina.
6.6 Notices. All notices and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given when received, if personally delivered; when transmitted, if
transmitted by electronic fax, telecopy or similar electronic transmission
method; the day after it is sent, if sent by recognized expedited delivery
service; and five days after it is sent, if mailed, first class mail, postage
prepaid. In each case notice shall be sent to the parties at Post Office Box
7556, Charlotte, North Carolina 28241 or to such other address as any party
shall have specified by notice in writing to the other parties.
6.7 Amendment and Modification. This Agreement may be amended,
modified or supplemented only by a written agreement executed by all of the
parties hereto.
6.8 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 heirs, successors and permitted
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<PAGE> 10
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, nor is this Agreement intended
to confer upon any other person except the parties any rights or remedies
hereunder.
6.9 Interpretation. The title, article and section headings
contained in this Agreement are solely for the purpose of reference, are not
part of the agreement of the parties and shall not in any way affect the
meaning or interpretation of this Agreement.
6.10 Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be illegal, invalid or
unenforceable in any respect, the same shall not in any respect affect the
validity, legality, or enforceability of the remainder of this Agreement, and
the parties shall use their best efforts to replace such illegal, invalid or
unenforceable provisions with an enforceable provision approximating, to the
extent possible, the original intent of the parties.
6.11 Entire Agreement. This Agreement embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. There are no representations, promises, warranties,
covenants, or undertakings, other than those expressly set forth or referred to
herein. This Agreement supersedes all prior agreements and the understandings
between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AMERICAN AIRCARRIERS SUPPORT, INC.
By
------------------------------------
/s/Herman O. Brown, Jr.(SEAL)
---------------------------------------
HERMAN O. BROWN, JR.
/s/ Karl F. Brown (SEAL)
---------------------------------------
KARL F. BROWN
10
<PAGE> 1
EXHIBIT 10.7
STATE OF SOUTH CAROLINA
COUNTY OF YORK JOINT VENTURE AGREEMENT
THIS AGREEMENT, made and entered into as of the 26th day of January,
1998 by and among AMERICAN AIRCARRIERS SUPPORT, INC., and GLOBAL TURBINE
SERVICES, INC. (all of whom together are hereinafter collectively sometimes
referred to as "Venturers").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to form a Joint Venture
(hereinafter referred to as the "Venture") for the term and upon the conditions
hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
contained, it is agreed by and among the parties hereto as follows:
ARTICLE I
BASIC STRUCTURE
1.1 Form and Purpose. The parties hereby form a Venture and agree
to be governed by the laws of the State of South Carolina. The purpose for
which the Venture is organized is to own, acquire, rent, lease, sell and
otherwise deal in three JT3D-7 jet airplane engines.
1.2 Term. The Venture shall commence on the date first signed and
shall continue until it is dissolved, its affairs are wound up and final
liquidating distributions are made pursuant to this Agreement.
ARTICLE II
FINANCIAL ARRANGEMENTS
2.1 Initial Contributions. Each Venturer has made available to
the initial capital of the Venture property in the amount of $235,000 in cash
or cash equivalent.
2.2. Share of Profits and Losses. The Venture's profits and losses
shall be allocated to the Venturers equally.
<PAGE> 2
2
2.3 Distributions. Distributions to the Venturers of net
operating profits of the Venture, as hereinafter defined, shall be made at such
time as the Majority of the Venturers shall reasonably agree. Such
distributions shall be made to the Venturers simultaneously. For the purpose
of this Agreement, net operating profit for any accounting period shall mean
the gross receipts of the Venturer for such period, less the sum of all cash
expenses of operation of the Venture, and such sums as may be necessary to
establish a reserve for operating expenses.
2.4 Compensation. No Venturer shall be entitled to receive any
compensation from the Venture, nor shall any Venturer receive any drawing
account from the Venture.
ARTICLE III
DISSOLUTION
3.1 Dissolution. In the event that the Venture shall hereafter be
dissolved for any reason whatsoever, a full and general account of its assets,
liabilities and transactions shall at once be taken. Such assets may be sold
and turned into cash as soon as possible and all debts and other amounts due
the Venture collected. The proceeds thereof shall thereupon be applied as
follows:
(a) To discharge the debts and liabilities of the Venture and the
expenses of liquidation.
(b) To pay each Venturer or his legal representative any unpaid
salary, drawing account, interest or profits to which he shall then be
entitled.
(c) To repay to any Venturer the capital he made available.
(d) To divide the surplus, if any, among the Venturers or their
representatives according to each Venturer's then Percentage Share of Profits.
ARTICLE IV
MISCELLANEOUS
4.1 Entire Agreement. This Agreement sets forth the entire
Agreement and understanding among the parties. This Agreement
<PAGE> 3
3
shall be effective only when signed by all of the parties on the signature
pages hereto.
4.2 Binding Effect - Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and nothing in this Agreement is intended to confer on any person
other than the parties any rights, remedies, obligations or liabilities
whatsoever.
4.3 Applicable Law. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws
of the State of South Carolina applicable to contracts made and performed
therein.
4.4 Executing Counterparts. For the convenience of the parties
hereto, this Agreement may be executed in one original and in one or more
counterparts, all of which together shall constitute one and the same document.
4.5 Notices. All notices which are required to be given or may be
given pursuant to the terms of this Agreement shall be in writing and shall be
sufficient in all respects if delivered or mailed by registered mail, postage
prepaid as follows:
If to American Aircarriers Support, Inc.:
American Aircarriers Support, Inc.
P. O. Box 7566
Charlotte, NC 28241
If to Global Turbine Services, Inc.:
Global Turbine Services, Inc.
8693 N.W. 66th Street
Miami, FL 33166
4.6 Headings. The headings in the sections of this Agreement are
inserted for convenience only.
4.7 Pronouns. All pronouns used in this Agreement shall be deemed to
include the singular and the plural whenever necessary or appropriate to effect
the intent of this Agreement.
<PAGE> 4
4
IN WITNESS WHEREOF, the parties have executed this Agreement pursuant
to authority duly given.
AMERICAN AIRCARRIERS SUPPORT, INC.
By /s/ Karl F. Brown
---------------------------------
President
GLOBAL TURBINE SERVICES, INC.
By /s/ Mike Evans
---------------------------------
President
<PAGE> 1
EXHIBIT 10.8
VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT executed at Fort Mill, South Carolina, by and
among American Aircarriers Support, Incorporated, a Delaware corporation (the
"Company"), Herman O. Brown, Jr., an individual residing in Lake Wylie, South
Carolina (the "Stockholder"), and David M. Furr and his successors in trust
(the "Trustee").
WHEREAS, the Stockholder owns a total of 1,025,000 shares of Common
Stock of the Company, and
WHEREAS, in order to secure continuity and stability of the Company's
policies and management, the Stockholder deems it advisable and has agreed to
enter into this Agreement pursuant to which the Stockholder will deposit all of
the 1,025,000 shares he currently owns and all other shares of the Common Stock
or other voting securities of the Company hereafter acquired, of record or
beneficially, by the Stockholder (collectively, the "Shares") with the Trustee
and the Trustee will obtain voting control with respect to the Shares, and
WHEREAS, the Stockholder has agreed that the Trustee shall take and hold
for the period which is hereinafter stated the legal title to the Shares, to be
held by him and to act under the terms of this Agreement, and
WHEREAS, the Trustee has consented to act under this Agreement for the
purposes herein provided,
NOW, THEREFORE, in consideration of the mutual covenants of the parties
which are hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which is hereby acknowledged, it is hereby agreed:
1. Agreement. Copies of this Agreement, and of every supplemental or
amendatory agreement, shall be filed in the Company's principal office in Fort
Mill, South Carolina. All such copies shall be open to the inspection of the
Company's stockholders daily during business hours. All Voting Trust
Certificates (defined below) issued as hereinafter provided shall be issued,
received, and held subject to all the terms of this Agreement.
2. Transfer of Common Stock to Trustee. (a) The Stockholder shall
deposit with the Trustee certificates evidencing his Shares. Should the
Stockholder acquire additional Shares after the date hereof by exercise of
options, the Stockholder shall deposit additional certificates for the
Company's Common Stock so acquired with the Trustee within 10 days of such
acquisition. No stock shall be deposited hereunder except stock having general
voting powers, as provided in the Company's Certificate of Incorporation. All
such stock certificates shall be endorsed, or accompanied by such executed
instruments of transfer as to enable the Trustee to cause such certificates to
be transferred into the name of the Trustee, as hereinafter provided. On
receipt by the Trustee of the certificates for any Shares and their transfer
into the name of the Trustee, the Trustee shall hold them subject to the terms
of this Agreement, and shall thereupon issue and deliver to the Stockholder
Voting Trust Certificates (defined below) for the Shares so deposited.
Stockholder represents and warrants that, upon his transfer of the Shares to
the Trustee, he will not be a "control person" as such term is defined under
Federal and state securities laws.
<PAGE> 2
(b) All certificates for Shares of the Company transferred and
delivered to the Trustee pursuant to this Agreement shall be surrendered by the
Trustee to the Company and cancelled, and new certificates therefor shall be
issued to and held by the Trustee in the name of "David M. Furr, as Voting
Trustee u/t/a dated February 20, 1998, for Herman O. Brown."
3. Voting Trust Certificates. The voting trust certificates shall be
substantially in the form set forth in Exhibit A hereto (the "Voting Trust
Certificates").
4. Transfer of Certificates and Shares.
(a) During the term of this Agreement, the Shares may be sold,
transferred, assigned, pledged, hypothecated or otherwise transferred by the
Stockholder, subject to compliance by the Stockholder with the terms of this
Agreement.
(b) If the Stockholder determines to sell any or all of the Shares
by means of a sale (a "Sale"), the Stockholder shall so notify the Trustee of
such determination by a written notice (a "Notice of Sale"), which Notice of
Sale shall state the number of Shares sold. If the Shares are sold in public
market transactions, in no event shall the number of Shares set forth in a
Notice of Sale exceed the number of Shares that the Stockholder would be
permitted to sell pursuant to Rule 144 or Rule 144(k), as applicable,
promulgated under the Securities Act of 1933, as amended, or pursuant to any
lock-up agreement with any investment banking firm. Upon receipt of a Notice
of Sale by the Trustee, the Shares subject to the Notice of Sale shall be
transferred into the name of the purchaser (or into the name of a registered
broker or dealer designated by the purchaser) on the stock transfer records of
the Company and such Shares shall no longer be subject to this Agreement.
(c) Notwithstanding any of the other provisions of this Agreement,
the Stockholder shall have the absolute right to transfer, pledge or
hypothecate any or all Voting Trust Certificates owned by the Stockholder;
provided, however, any such transfer, pledge or hypothecation shall be subject
to this Agreement and any foreclosure of a pledge or hypothecation shall be
deemed a Transfer of the Voting Trust Certificates and the party seeking to
foreclose such pledge or hypothecation shall execute an agreement to become a
party and subject to this Agreement with the same force and effect as if such
transferee had executed this original Agreement, and shall be considered to be
within the meaning of the term Stockholder whenever used herein.
(d) Upon the death of any registered holder of Voting Trust
Certificates subject to this Agreement, the Trustee shall, upon surrender to
the Trustee of the Voting Trust Certificate(s) which were registered in the
decedent's name duly endorsed for surrender and cancellation, and delivery of
such other documents as the Trustee may reasonably require, cause said Voting
Trust Certificate(s) to be cancelled and the Trustee shall thereafter promptly
surrender the certificates representing the Shares subject to such Voting Trust
Certificates to the Company for cancellation and reissuance in the name(s) of
the Stockholder's heirs or legal representatives.
(e) During the term of this Agreement, the Trustee, in his
capacity as Trustee pursuant to this Agreement, shall not have the power to
sell the Shares without the written authorization of the Stockholder. Any
sales shall be made in compliance with all applicable State and Federal
securities laws and any lock-up agreement with any investment banking firm. If
a sale of the Shares by the
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<PAGE> 3
Trustee in his capacity as Trustee pursuant to this Agreement occurs at any
time, the proceeds shall be distributed by the Trustee to and among the holder
or holders of the Voting Trust Certificates upon the surrender of said Voting
Trust Certificates.
(f) The Voting Trust Certificates shall be transferable at the
Trustee's principal office in Gastonia, North Carolina (and at such other
office as the Trustee may designate by an instrument signed by him and sent by
mail to the registered holders of Voting Trust Certificates), on the books of
the Trustee, by the registered owner thereof, either in person or by attorney
thereto duly authorized, upon surrender thereof, according to the rules
established for that purpose by the Trustee. The Trustee may treat the
registered holder as owner thereof for all purposes, but he shall not be
required to deliver certificates representing the Shares hereunder without the
surrender of such Voting Trust Certificates.
(g) If a Voting Trust Certificate is lost, stolen, mutilated, or
destroyed, the Trustee, in his discretion, may issue a duplicate of such
certificate upon receipt of: (1) evidence of such fact satisfactory to him;
(2) indemnity reasonably satisfactory to him; and (3) the existing certificate,
if mutilated. The Trustee shall not be required to recognize any transfer of a
Voting Trust Certificate not made in accordance with the provisions hereof,
unless the person claiming such ownership has produced indicia of title
satisfactory to the Trustee, and has in addition deposited with the Trustee
indemnity reasonably satisfactory to him.
5. Termination Procedure. (a) Upon the termination of this Agreement
at any time, as hereinafter provided, the Trustee, at such time as he may
choose during the period commencing 20 days before and ending 20 days after
such termination, shall mail written notice of such termination to the
registered owners of the Voting Trust Certificates, at the addresses appearing
on the Trustee's transfer books. After the date specified in any such notice
(which date shall be fixed by the Trustee), the Voting Trust Certificates shall
cease to have any effect, and their holders shall have no further rights under
this Agreement other than to receive certificates for the Shares or other
property distributable under the terms hereof and upon the surrender of such
Voting Trust Certificates.
(b) Within 30 days after the termination of this Agreement, the
Trustee shall deliver, to the registered holders of all Voting Trust
Certificates, certificates for the number of Shares represented thereby, upon
the surrender thereof properly endorsed, such delivery to be made in each case
at the Trustee's office.
(c) At any time subsequent to 30 days after the termination of this
Agreement, the Trustee may deposit with the Company stock certificates
representing the number of Shares represented by the Voting Trust Certificates
then outstanding, with authority in writing to the Company to deliver such
stock certificates in exchange for Voting Trust Certificates representing a
like number of Shares of the Company. Upon such deposit all further liability
of the Trustee for the delivery of such stock certificates and the delivery or
payment of dividends upon surrender of the Voting Trust Certificates shall
cease, and the Trustee shall not be required to take any further action
hereunder.
6. Dividends. (a) Prior to the termination of this Agreement, the
Stockholder (or his transferees) shall be entitled to receive payments equal to
the cash dividends, if any, received by the Trustee upon a like number of
shares of the Company's Common Stock as is called for by each such
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<PAGE> 4
Voting Trust Certificate. If any dividend in respect of the Shares deposited
with the Trustee is paid, in whole or in part, in the Company's stock having
general voting powers, the Trustee shall likewise hold, subject to the terms of
this Agreement, the certificates for Shares which are received by him on
account of such dividend. The Stockholder (or his transferees) holding Shares
on which such stock dividend has been paid shall be entitled to receive a
Voting Trust Certificate issued under this Agreement for the number of Shares
received as such dividend with respect to the Shares represented by such Voting
Trust Certificate. Holders entitled to receive the dividends described above
shall be those registered as such on the Trustee's transfer books at the close
of business on the day fixed by the Company for the taking of a record to
determine those holders of its Common Stock entitled to receive such dividends,
or if the Trustee has fixed a date, as hereinafter in this paragraph provided,
for the purpose of determining the holders of Voting Trust Certificates
entitled to receive such payment or distribution, then registered as such at
the close of business on the date so fixed by the Trustee.
(b) If any dividend in respect of the Shares deposited with the
Trustee is paid other than in cash or in capital stock having general voting
powers, then the Trustee shall distribute the same to the Stockholder (or his
transferees) at the close of business on the day fixed by the Trustee for
taking a record to determine the holders of Voting Trust Certificates entitled
to receive such distribution. Such distribution shall be made to such holders
of Voting Trust Certificates ratably, in accordance with the number of Shares
represented by their respective Voting Trust Certificates.
(c) The Trustee may temporarily close the transfer books for a
period not exceeding 20 days preceding the date fixed for the payment or
distribution of dividends or the distribution of assets or rights, or at any
other time in the Trustee's discretion. In lieu of providing for the closing
of the books against the transfer of Voting Trust Certificates, the Trustee may
fix a date not exceeding 20 days preceding any date fixed by the Company for
the payment or distribution of dividends, or for the distribution of assets or
rights, as a record date for the determination of the holders of Voting Trust
Certificates entitled to receive such payment or distribution. The holders of
Voting Trust Certificates of record at the close of business on such date shall
exclusively be entitled to participate in such payments or distribution.
(d) In lieu of receiving cash dividends upon the Shares and paying
the same to the holders of Voting Trust Certificates pursuant to the provisions
of this Agreement, the Trustee may instruct the Company in writing to pay such
cash dividends to the holders of the Voting Trust Certificates. Upon receipt
of such written instructions, the Company shall pay such cash dividends
directly to the holders of the Voting Trust Certificates. Upon such
instructions being given by the Trustee to the Company, and until revoked by
the Trustee, all liability of the Trustee with respect to such cash dividends
shall cease. The Trustee may at any time revoke such instructions.
7. Subscription Rights. If any stock or other securities of the
Company are offered for subscription to the holders of the Shares, the Trustee,
promptly upon receipt of notice of such offer, shall mail a copy thereof to the
Stockholder and his transferees. Upon receipt by the Trustee, at least five
days prior to the last day fixed by the Company for subscription and payment,
of a request from any such registered holder of Voting Trust Certificates to
subscribe in his behalf, accompanied with the sum of money required to pay for
such stock or securities (not in excess of the amount subject to subscription
in respect of the Shares represented by the Voting Trust Certificate held by
such
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<PAGE> 5
certificate holder), the Trustee shall make such subscription and payment.
Upon receiving from the Company the certificates for Shares or securities so
subscribed for, the Trustee shall issue to such holder a Voting Trust
Certificate in respect hereof if the Shares or securities received have general
voting powers. If, however, the Shares or securities do not have general
voting powers, the Trustee shall mail or deliver such securities to the
certificate holder in whose behalf the subscription was made, or may instruct
the Company to make delivery directly to the certificate holder entitled
thereto.
8. Dissolution of the Company. In the event of the dissolution or
total or partial liquidation of the Company, whether voluntary or involuntary,
the Trustee shall receive the moneys, securities, rights, or property to which
the holders of the Shares deposited hereunder are entitled, and shall
distribute the same among the registered holders of Voting Trust Certificates
in proportion to their interests, as shown by the books of the Trustee.
Alternatively, the Trustee may in his discretion deposit such moneys,
securities, rights, or property with any bank or trust company doing business
in Fort Mill, South Carolina, with authority and instructions to distribute the
same as above provided, and upon such deposit all further obligations or
liabilities of the Trustee in respect of such moneys, securities, rights or
property so deposited shall cease.
9. Reorganization of the Company. If the Company is merged into or
consolidates with another corporation, or all or substantially all of its
assets are transferred to another corporation, then in connection with such
transfer the term "Company" for all purposes of this Agreement shall be deemed
to include such successor corporation, and the Trustee shall receive and hold
under this Agreement any stock of such successor corporation received on
account of the ownership, as Trustee hereunder, of the stock held hereunder
prior to such merger, consolidation, and transfer. Voting Trust Certificates
issued and outstanding under this Agreement at the time of such merger,
consolidation, or transfer may remain outstanding, or the Trustee, may, in his
discretion, substitute for such Voting Trust Certificates new Voting Trust
Certificates in appropriate form, and the terms "stock" and "capital stock" as
used herein shall be taken to include any stock which may be received by the
Trustee in lieu of all or any part of the Shares.
10. Rights of Trustee. (a) Until the actual delivery to the holders
of Voting Trust Certificates issued hereunder of stock certificates in exchange
therefor, and until the surrender of the Voting Trust Certificates for
cancellation, the Trustee shall have the exclusive right, subject to the
provisions of this paragraph hereinafter set forth, to exercise, in person or
by his nominees or proxies, all of the Stockholder's voting rights and powers
in respect of all Shares deposited hereunder, and to take part in or consent to
any corporate or stockholders' action of any kind whatsoever. The Stockholder
shall have no right to vote the Shares. The right to vote shall include the
right to vote for the election of directors, and in favor of or against any
resolution or proposed action of any character whatsoever, which may be
presented at any meeting or require the consent of the Company's stockholders.
Without limiting such general right, it is understood that such action or
proceeding may include, upon terms satisfactory to the Trustee or to his
nominees or proxies thereto appointed by him, mortgaging, creating a security
interest in, and pledging of all or any part of the Company's property, the
lease or sale of all or any part of its property, for cash, securities or other
property, and the dissolution of the Company, or its consolidation, merger,
reorganization or recapitalization.
(b) In voting the Shares held by him hereunder either in person or
by his nominees or proxies, the Trustee shall exercise his best judgment to
select suitable directors of the Company, and
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<PAGE> 6
shall otherwise, insofar as he may as a stockholder of the Company, take such
part or action in respect to the management of its affairs as he may deem
necessary so as to be kept advised on the affairs of the Company and its
management. In voting upon any matter that may come before him at any
stockholders' meeting, the Trustee shall exercise like judgment. The Trustee,
however, shall not be personally liable for any action taken pursuant to his
vote or any act committed or omitted to be done under this Agreement, provided
that such commission or omission does not amount to willful misconduct on his
part and that he at all times exercises good faith in such matters.
11. Trustees. (a) The Trustee (and any successor Trustee) may at any
time resign by mailing to the registered holders of Voting Trust Certificates a
written resignation, to take effect ten days thereafter or upon its prior
acceptance. Upon the death or disability of David M. Furr, or upon his
resignation as Trustee, Karl F. Brown shall be the successor Trustee during the
remainder of this Agreement. Such designation of a successor trustee may be
made by filing in the Company's principal office, in Fort Mill, South Carolina,
a deed of appointment of such successor Trustee, duly executed by him, under
seal, and acknowledged as deeds for the conveyance of real estate are required
to be acknowledged under the laws of South Carolina then in force. Any
designation by David M. Furr of the successor Trustee may be revoked in whole
or in part by him at any time, without notice, by filing a deed of revocation
in the same form as the deed of appointment hereinabove provided for and in the
same places. Upon the death, disability or resignation of David M. Furr, the
Trustee designated by him, as hereinabove provided, shall become the successor
Trustee hereunder. Upon his death or resignation without having appointed a
Trustee to succeed him (or if he has appointed such Trustee but has revoked the
appointment or such Trustee has died, become disabled or resigned and David M.
Furr has failed to appoint a successor), and upon the death, disability or
resignation of any successor Trustee acting hereunder, further Trustees under
this Agreement shall be designated by the registered holders of Voting Trust
Certificates issued and outstanding under this Agreement representing a
majority of the Shares standing in the name of the Trustee hereunder.
(b) The rights, powers, and privileges of the Trustee named
hereunder shall be possessed by successor Trustees, with the same effect as
though such successors had originally been parties to this Agreement. The word
"Trustee," as used in this Agreement, means the Trustee or any successor
Trustees acting hereunder, and shall include both the single and the plural
number. The words "he," "him," and "his", as used in this Agreement in
reference to the Trustee shall mean "they," "them," and "their," respectively,
when more than one Trustee is acting hereunder.
12. Term. This Agreement shall be effective as of the date hereof and
shall continue in effect until the tenth anniversary of the date hereof, but
shall terminate automatically if any of the following events occur: (1) the
execution and acknowledgement (as deeds for the conveyance of real estate are
required to be acknowledged under the laws of South Carolina then in effect) by
the Trustee hereunder of a deed of termination of this Agreement, duly filed in
the Company's office in Fort Mill, South Carolina, which deed shall state that
the Stockholder or his assigns has sold the Shares and, accordingly, this
Agreement shall expire upon the filing of the deed of termination; or (2) the
death of the Stockholder. This Agreement shall automatically renew for an
additional term of ten years if the Stockholder continues to own Shares upon
expiration of the initial term hereof.
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<PAGE> 7
13. Compensation and Reimbursement of Trustee. The Trustee shall serve
without compensation. The Trustee shall have the right to incur and pay such
reasonable expenses and charges, and to employ and pay such agents, attorneys,
and counsel as he may deem necessary and proper to effectuate this Agreement.
All such expenses or charges incurred by and due to the Trustee may be deducted
from the dividends or other moneys or property received by him on the Shares
deposited hereunder. Nothing herein contained shall disqualify the Trustee or
successor Trustees, or incapacitate him or them from serving the Company or any
of its subsidiaries as officer or director, or in any other capacity, and in
any such capacity receiving compensation.
14. Notice. (a) Unless otherwise specifically provided herein, any
notice to or communication with the holders of the Voting Trust Certificates
hereunder shall be deemed to be sufficiently given if sent by registered or
certified mail, postage prepaid, addressed to such holders at their respective
addresses appearing on the Trustee's transfer books. The addresses of the
holders of Voting Trust Certificates, as shown on the Trustee's transfer books,
shall in all cases be deemed to be the addresses of Voting Trust Certificate
holders for all purposes under this Agreement, without regard to what other or
different addresses the Trustee may have for any Voting Trust Certificate
holder on any other books or records of the Trustee. Every notice so given
shall be effective, whether or not received, and the date of mailing shall be
the date such notice is deemed given for all purposes.
(b) Any notice to the Company hereunder shall be sufficient if
mailed to the Company at 3516 Centre Circle Drive, Fort Mill, South Carolina
29715, or to such other address as the Company may designate by notice in
writing to the Trustee.
(c) Any notice to the Trustee hereunder shall be sent by registered
or certified mail, postage prepaid, to the Trustee, addressed to him at such
addresses as he may from time to time furnish in writing to the Company, and if
no such address has been so furnished by the Trustee, then to him in care of
the Company.
(d) All distributions of cash, securities or other property
hereunder by the Trustee to the holders of Voting Trust Certificates may be
made, in the Trustee's discretion, by mail (regular or registered mail, as the
Trustee may deem advisable), in the same manner as hereinabove provided for the
giving of notices to the holders of Voting Trust Certificates.
15. Entire Agreement. This Agreement supersedes all agreements
previously made between the parties relating to its subject matter. There are
no other understandings or agreements between them.
16. Non-Waiver. No delay or failure by a party to exercise any right
under this Agreement, and no partial or single exercise of that right shall
constitute a waiver of that or any other right, unless otherwise expressly
provided herein.
17. Headings. Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.
18. Governing Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of Delaware.
-7-
<PAGE> 8
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.
20. Binding Effect. The provisions of this Agreement shall be binding
upon and inure to the benefit of each of the parties and their respective legal
representatives, successors and assigns.
IN WITNESS WHEREOF, the Company and the Trustee have executed this
Agreement, and the Stockholder has executed this Agreement and has stated the
number of Shares of the Company deposited by him.
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
Attest:
By: /s/ KARL F. BROWN
-----------------------------------
/s/ DAVID M. FURR Karl F. Brown, President
- -----------------------------
Assistant Secretary
/s/ DAVID M. FURR
------------------------------------------
David M. Furr, Trustee
STOCKHOLDER:
/s/ HERMAN O. BROWN, JR.
-----------------------------------------
Herman O. Brown, Jr.
Number of Shares Deposited: 1,025,000
-8-
<PAGE> 1
EXHIBIT 23.2
The Board of Directors
American Aircarriers Support, Inc.
We consent to the use in this registration statement on Form SB-2 of our report
dated February 18, 1998 with respect to the financial statements of American
Aircarriers Support, Inc. as of December 31, 1996 and 1997 and for the years
then ended included herein and to the reference to our firm under the heading
"Experts" in the prospectus.
Cherry, Bekaert & Holland, L.L.P.
Charlotte, North Carolina
March 19, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS OF AMERICAN AIRCARRIERS SUPPORT, INC AS OF
AND FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 DEC-31-1997
<CASH> 1,773,294 750,448
<SECURITIES> 0 0
<RECEIVABLES> 733,951 2,058,798
<ALLOWANCES> 25,000 100,000
<INVENTORY> 1,803,695 5,625,107
<CURRENT-ASSETS> 4,308,533 8,378,667
<PP&E> 212,689 462,159
<DEPRECIATION> 85,572 126,364
<TOTAL-ASSETS> 4,485,650 9,049,462
<CURRENT-LIABILITIES> 877,243 4,180,254
<BONDS> 812,554 0
0 0
0 0
<COMMON> 100 100
<OTHER-SE> 2,795,753 4,869,108
<TOTAL-LIABILITY-AND-EQUITY> 4,485,650 9,049,462
<SALES> 8,352,095 13,250,328
<TOTAL-REVENUES> 8,352,095 13,250,328
<CGS> 5,479,380 7,946,467
<TOTAL-COSTS> 883,962 1,186,634
<OTHER-EXPENSES> 1,250 (36,284)
<LOSS-PROVISION> 44,193 80,156
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> 1,943,310 4,073,355
<INCOME-TAX> 777,300 1,629,300
<INCOME-CONTINUING> 1,166,010 2,444,055
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,166,010 2,444,055
<EPS-PRIMARY> 0.28 0.60
<EPS-DILUTED> 0.28 0.59
</TABLE>
