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FORM 10-KSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number: 0-24275
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 52-2081515
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
587 GREENWAY INDUSTRIAL DRIVE
LAKEMONT BUSINESS PARK
FORT MILL, SOUTH CAROLINA 29715
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (803) 548-2160
Securities registered pursuant to Section 12(b) of the Exchange Act:
NONE
Securities registered pursuant to section 12(g) of the Exchange Act:
COMMON STOCK, $.001 PAR VALUE PER SHARE
Indicate by checkmark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
As of March 10, 1999, the aggregate market value of the 2,250,000 shares of
common stock (the registrant's only common equity) held by non-affiliates was
$21,656,250 based on the closing sale price of the common stock on the Nasdaq
National Market(R) on such date.
There were 7,190,104 shares of the registrant's common stock outstanding at the
close of business on March 10, 1999.
DOCUMENTS INCORPORATED BY REFERENCE:
The information required by Part III of this annual report is incorporated by
reference to the registrant's proxy statement if filed with the SEC by April
30, 1999. If the proxy statement is not filed by that date, the information
required by Part III of this annual report will be filed with the SEC as an
amendment to this annual report by April 30, 1999. Certain exhibits listed in
Part IV of this annual report are incorporated by reference from prior filings
made by the registrant with the SEC.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
American Aircarriers Support, Incorporated ("AAS") is an international supplier
of aviation services, which include sales of aircraft components and spare
parts, maintenance, overhaul and repair of those products, and engine
management services. Its customers include major commercial passenger and cargo
airlines, other maintenance and repair facilities and other redistributors
located throughout the world. Until the fourth quarter of 1998, substantially
all of the revenues of AAS were derived from the sale of the following
products:
o complete Pratt & Whitney JT8D series engines and, to a lesser extent,
General Electric CFM56 engines;
o engine components and spare parts primarily for these two types of
engines; and
o airframe components and spare parts primarily for Boeing,
McDonnell-Douglas and Airbus aircraft.
In the last quarter of 1998, AAS began to implement an acquisition strategy
aimed primarily at expanding its aviation capabilities with related products,
such as engine management services, maintenance, overhaul and repair services
and manufacturing capabilities, and becoming a full service "one stop" supplier
of products and services for customers. Between October 1, 1998 and November
19, 1998, AAS used three newly formed subsidiaries to acquire substantially all
of the assets, and/or the inventory, of:
o Global Turbine Services, Inc ("GTI") and its affiliate Turbine
Inspections, Incorporated ("TII"), an engine management service;
o Condor Flight Spares, Inc. ("Condor"), a redistributor of landing gear
parts and now a FAA certified landing gear maintenance, overhaul and
repair facility;
o American Jet Engine Services, Inc. ("Amjet"), a FAA certified
maintenance, overhaul and repair facility specializing in jet engines;
and
o Global Air Spares, Inc. ("GASI") and Atlantic Airmotive Corporation
("AAC"), both Amjet affiliates engaged in jet engine and engine parts
redistribution.
As a result of these transactions, AAS has expanded its service base and offers
the following additional aviation services:
o FAA-certified engine maintenance and repair;
o FAA-certified landing gear maintenance and repair; and
o Engine management services.
Operations of Amjet, Condor, GTI, TII, GASI and AAC (collectively referred to
as the "acquired companies" in this report) have continued or expanded in the
locations in which they were previously operating. Amjet, GASI and AAC now
operate as AAS-Amjet, Inc. ("AAS-Amjet"); Condor now operates as AAS Landing
Gear Services, Inc. ("AAS Landing Gear"); and GTI and TII operate as AAS Engine
Services, Inc. ("AAS Engine Services"). Unless the context otherwise required,
the term "AAS" in this report includes AAS and the acquired companies. The
principal executive office of AAS was recently relocated to 587 Greenway
Industrial Drive, Lakemont Business Park, Fort Mill, South Carolina 29715. The
phone number of the executive office is (803) 548-2160.
INDUSTRY OVERVIEW AND BUSINESS STRATEGY
Management of AAS believes that the annual worldwide market for aircraft
components and spare parts is approximately $11 billion, approximately $1.3
billion of which represents sales of aircraft components and spare parts in the
redistribution market. Management also believes that the annual worldwide
market for aircraft maintenance, overhaul and repair is approximately $27
billion. According to the 1998 BOEING REPORT, global air
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travel is projected to increase approximately 63% by the year 2007, and the
number of passenger and cargo aircraft in service will increase approximately
44% to 17,700 from 12,300 in that same time period. Management expects the
aviation sales and service provider market to continue to grow due to the
number of aircraft which will be required to service the projected growth in
the passenger and cargo airline industry. To meet the demand for aircraft,
management believes operators will keep their older aircraft in operation for a
longer period of time. The 1998 BOEING REPORT estimated that two-thirds of the
12,300 aircraft, or approximately 8,200 aircraft, in use in 1997 will still be
in service twenty years later in 2017. The primary market for redistribution
sales and maintenance, overhaul and repair services is older aircraft.
Accordingly, as an increased number of older commercial aircraft are kept in
service, the demand for components and spare parts and maintenance, overhaul
and repair services to keep these aircraft in service also increases.
Management also expects that cost considerations will continue to cause
aircraft operators and maintenance, overhaul and repair facilities to purchase
components and spare parts from redistributors rather than from new parts
manufacturers. Cost considerations will also cause airlines to continue the
trends of outsourcing inventory management functions and leasing rather than
purchasing to reduce capital requirements, reducing the number of approved
suppliers, increasing the utilization of third-party service providers and
relying on just in time inventory management. Finally, management believes that
airlines prefer to use approved full service suppliers which are capable of
providing improved documentation and traceability, larger inventories, higher
standards of quality control and, most importantly, are capable of providing
"one stop shopping" for the supply of spare parts and aircraft components and
the maintenance, overhaul and repair of those parts and components. The
strategy of AAS is to enhance its position as a leading redistributor of engine
and airframe components and spare parts, to expand its maintenance, overhaul
and repair capabilities, and to integrate other aviation services in order to
provide "one stop shopping" to its customers as the aircraft industry continues
its growth.
OPERATIONS
Until the fourth quarter of 1998, the principal source of revenue for AAS has
been the sale of engines, engine components and spare parts and airframe
components and spare parts in the redistribution market. It generates these
revenues primarily from purchasing engines, engine components and spare parts
and airframe components and spare parts, having necessary repairs made by
licensed repair facilities, then selling those items from its inventory. It
also generates revenues from consignment sales and exchange transactions. Under
a typical consignment arrangement, AAS does not acquire title to the components
and spare parts, but rather remits to the title owner of the components and
spare parts being sold a percentage of the profits from the sale. 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, AAS delivers a component or spare part
in exchange for a "core" unit, which is the same part as the part delivered by
AAS, but in need of overhaul. The customer pays an exchange fee upon delivery.
Upon receipt of the "core" unit from the customer, AAS has the core overhauled,
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, at
a sales price agreed upon at the time the exchange transaction was negotiated.
AAS has from time to time since its inception also generated revenues from
leasing engines and select airframe components and spare parts to aircraft
operators. Both large and small aircraft operators seeking to lower working
capital requirements, capital expenditures and overhead expenses are
increasingly leasing complete engines rather than maintain spare engine pools.
Under an operating lease, the lessor retains title to the property.
Accordingly, AAS has the ability to re-lease, sell or disassemble the aircraft
or engines for components and spare parts at the expiration of the lease term.
Management believes that there is an increasing demand by customers for not
only engine operating leases, but for rotable inventory aircraft operating
leases. Management also believes that product sales will be enhanced by
expanding leasing services, because AAS will have the opportunity to sell
components and spare parts both for the leased aircraft or engines as well as
other aircraft or engines in the lessee's fleet when needed. Accordingly, AAS
intends to expand the leasing business.
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AAS has been rapidly expanding its core business by broadening and increasing
its inventory by acquiring engines, components and spare parts for a variety of
wide-body aircraft. The results of operations to date have depended
substantially upon engine sales and sales of airframe components and spare
parts in the redistribution market for Boeing 737 aircraft and engine
components and spare parts for the Pratt & Whitney JT8 engine series. AAS
intends to expand its CFM56 complete engine and engine components and spare
parts inventory, offer an expanded range of avionics and instrumentation
products, and expand its product lines by adding engines such as the JT9D, CF6
and PW4000 engines used in Boeing 747 and 767 aircraft, the McDonnell-Douglas
DC-10 and the Airbus A300, and the engine components and spare parts and
airframe components and spare parts for those same wide-body aircraft.
Management of AAS also determined that another means to increase revenues and
operating income was to integrate new services and products with its
redistribution capabilities and to become a full service aviation supplier.
Accordingly, in the last quarter of 1998, AAS began the integration by adding
the acquired companies to its operations. AAS now offers engine and landing
gear maintenance, overhaul and repair and engine management services.
PRODUCTS
COMPLETE ENGINES, ENGINE COMPONENTS AND SPARE PARTS. AAS has concentrated on
the Pratt & Whitney JT8 series engines and, to a lesser extent, General
Electric CFM56 engines and their related components and spare parts.. Industry
sources estimate that the JT8D engine powers approximately 40% of commercial
aircraft worldwide, including Boeing 737-100 and -200 aircraft, 727 aircraft
and McDonnell-Douglas DC-9 aircraft. The CFM56 is used to power aircraft
including Boeing 737-300, -400 and -500 aircraft, McDonnell-Douglas DC-8 and a
variety of Airbus aircraft. It is the second most popular engine worldwide
based on the number of aircraft powered by this engine type. Production of the
JT8D ceased in 1987, but operators of existing narrow-body aircraft continue to
maintain their JT8D engines because there is no cost-effective replacement for
those engines.
AAS generally purchases most of its engines in non-serviceable condition,
commissions necessary repairs to a third party licensed repair facility (or to
AAS-Amjet, its own newly acquired FAA licensed repair facility), and then
resells or leases the completely overhauled engines. Where possible, AAS uses
engine components and spare parts from its own inventory in order to minimize
out-of-pocket repair cost and maximize inventory turnover.
AIRFRAME COMPONENTS AND SPARE PARTS. Inventory of airframe components and spare
parts including avionics, hydraulics, landing gear and flight surfaces consists
primarily of rotables for Boeing, McDonnell-Douglas and Airbus aircraft. A
rotable is a part which is removed either periodically as dictated by the FAA,
an original equipment manufacturer or an operator's maintenance procedures, or,
on an as-needed basis. After removal a rotable is typically repaired or
overhauled and either re-used an indefinite number of times or used for a
designated number of allowable flight hours and/or cycles. Airframe components
and spare parts are generally obtained from disassembly of aircraft and
purchase of bulk inventory. After purchase, and disassembly if required, the
components and spare parts are sent to AAS where evaluations are undertaken and
repairs are commissioned as required.
SERVICES
Each of the acquisition transactions in the last quarter of 1998 enabled AAS to
expand the products and services which it offered to its customers. The
services now offered include engine maintenance, overhaul and repair, landing
gear maintenance, overhaul and repair, and engine management services.
ENGINE MAINTENANCE, OVERHAUL AND REPAIR. AAS-Amjet is a FAA licensed 145 repair
facility which specializes in the maintenance, overhaul and repair of JT8D
engines. AAS-Amjet overhauls engines for airlines and other end user customers
as well as on behalf of the Company as a whole.
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LANDING GEAR MAINTENANCE, OVERHAUL AND REPAIR. Prior to the acquisition of its
assets by AAS, Condor was a redistributor of complete landing gear, as well as
landing gear components and spare parts. Subsequent to the acquisition, it
obtained FAA certification to repair and maintain landing gear. The FAA
certification allows AAS Landing Gear it to overhaul wide-body and narrow body
landing gear, making it one of only a very few non-airline overhaul facilities
in the United States. AAS is currently utilizing the services of AAS Landing
Gear for all maintenance, overhaul and repair work on its owned landing gear.
Like AAS-Amjet, AAS Landing Gear performs maintenance, overhaul and repair
services for entities other than AAS.
ENGINE MANAGEMENT SERVICES. AAS Engine Services provides total engine
management services, including borescoping, trend monitoring, engine condition
analysis and valuation, overhaul management and troubleshooting. Engine
borescoping is a diagnostic procedure in which a video camera is inserted into
engine sections to analyze the condition of an engine without disassembly.
These services are provided to AAS when it has the opportunity to obtain an
engine and to owners of engines who want someone to analyze and evaluate their
engines, arrange for required overhaul or maintenance services and monitor the
provision of those services.
INVENTORY ACQUISITION
AAS obtains most of its component and spare part inventory by purchasing
individual components and spare parts from airlines, manufacturers, repair
facilities or other redistributors; excess inventory from aircraft operators
("bulk inventory purchases"); or aircraft and engines for disassembly.
BULK INVENTORY PURCHASES. AAS makes bulk inventory purchases by bidding on the
inventory of companies that are eliminating certain portions of their component
and spare part inventory. Generally those companies are selling their inventory
because they retired an aircraft type from their fleet, or they instituted an
inventory reduction program to reduce costs, or they are downsizing operations
or they are dissolving their businesses. Bulk inventory purchases generally
allow AAS 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. When AAS acquired substantially all of
the assets of the acquired companies, the purchases included approximately $5.5
million of engines, engine components and spare parts, airframe components and
spare parts and landing gear components and spare parts. These purchases could
also be deemed bulk inventory purchases.
DISASSEMBLY PURCHASES. 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. 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 the aircraft or to 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.
AAS acquires aircraft for disassembly if management believes that it can
recover the total purchase price within three to twenty-four months through the
sale of a portion of the components and spare parts and can sell the remaining
components and spare parts over the subsequent five years. AAS catalogues all
of the hundreds of components and spare parts on an aircraft which is to be
disassembled by using either its own computerized data base information or by
information provided by the seller or, if none is available, by creating its
own data base. AAS enters the list of components and spare parts and all the
relevant information regarding the components and spare parts, including each
part's repair history, into its computer data base. Entry of this data into the
computer data base as soon as the aircraft is purchased enables sales personnel
to begin marketing efforts as soon as the purchase is completed.
In 1998, AAS acquired and disassembled an Airbus A310 airframe and two Boeing
737-200 aircraft. The aggregate acquisition costs of these three was
approximately $3.2 million, which was funded from a draw under
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a credit facility with NationsBank, N.A. (the "Credit Facility"). AAS retained
a third party contractor to disassemble these aircraft where they were
purchased. During the third quarter of 1998, the third party contractor began
to ship the hundreds of components and spare parts derived by the disassembly
to AAS for cleaning, inspection and evaluation. At the end of the third
quarter, all of the four engines and a significant number of components and
spare parts from the two Boeing 737-200 aircraft had been sold and AAS had
recovered approximately 78% of the purchase price. At December 31, 1998, AAS
had not completed the Airbus A310 disassembly project.
SALES AND MARKETING
AAS has developed a sales and marketing program for its redistribution
activities which includes well-trained and knowledgeable in-house sales
personnel and commissioned independent sales agents, customer service
specialists, computerized inventory management, listing of aircraft components
and spare parts in two electronic industry data base catalogues and a home page
on the Internet.
In addition to directly marketing its inventory, AAS utilizes the services of
independent sales agents who primarily specialize in international sales. Each
sales agent has extensive experience with the requirements of aircraft
operators and other customers. Sales agents are paid on a commission basis and
are retained under agency agreements terminable at will by either party. In
addition to performing sales activities, these sales agents assist in
identifying opportunities to purchase aircraft, engines and bulk components and
spare parts inventories. AAS is focusing on increasing the number of sales
agents in the international market, not only to increase sales, but to help
identify opportunities to purchase aircraft and spare parts on a worldwide
basis.
As a means of generating exposure to existing and potential customers, AAS
lists its inventory in the Inventory Locator Service ("ILS") and the Air
Transport Association's Airline Inventory Redistribution System ("AIRS")
computerized data bases. 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 a particular component or spare part.
AAS also advertises in select industry catalogues and management attends a
number of industry conferences and trade shows in order to acquaint potential
customers with the redistribution capabilities of AAS.
Both manufacturers' prices for new parts and market forces establish the price
for aircraft components and spare parts in the redistribution market. No
pricing service or price catalogue exists for those components and spare parts.
Rather, prices are determined by referencing new parts catalogues with
consideration given to existing supply and demand conditions. Often, aircraft
operators will opt for quality components and spare parts from redistributors
even when new components and spare parts are still in production. Aircraft
components and spare parts sold in the redistribution market must meet the same
FAA quality standards as new components and parts, but they cost less, and are
often more readily available, than new components and parts. Prices for engines
generally 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 or a spare part.
AAS also markets its engine and landing gear maintenance, overhaul and repair
services and its engine management services to customers purchasing aircraft
components and spare parts, and markets its aircraft components and spare parts
to customers of the engine and landing gear maintenance, overhaul and repair
services and engine management services.
AAS also maintains a website on the Internet which can be located at
HTTP://WWW.A-A-S.COM. The website is designed to create a new channel of sales
and marketing. The web site contains information concerning products
and services available through AAS and the acquired companies. It will
eventually accommodate e-commerce sales transactions and allow customers to
submit orders directly to AAS entirely over the Internet.
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CUSTOMERS
Domestic sales accounted for approximately 77% of total revenues of AAS in 1998
and foreign sales accounted for the remaining approximately 23% of such
revenues. Customers of AAS include over 500 domestic and international
commercial passenger and cargo airlines, maintenance and repair facilities and
other redistributors. In 1998, no customer accounted for in excess of 10% of
net sales, although one customer accounted for 5% of net sales. In a given
period, a substantial portion of the net sales of AAS may be attributable to a
small number of customers due to the substantial cost of engines. However, in
1998, the customer who accounted for 5% of net sales did not purchase an
engine.
QUALITY ASSURANCE
Aircraft operators require a readily available and identifiable source of
components and spare parts meeting regulatory and manufacturing requirements.
Accordingly, AAS maintains stringent quality control standards and procedures
and has implemented a total quality assurance program. In September 1996, the
FAA issued an advisory circular (FAA Advisory Circular 00-56) to support the
implementation of a voluntary accreditation program for civil aircraft parts
suppliers. This accreditation program established quality standards applicable
to suppliers such as AAS, and designated FAA recognized quality assurance
organizations to perform quality assurance audits for accreditation of these
suppliers. AAS is a member of Airline Suppliers Association ("ASA") and that
organization was the FAA recognized quality assurance organization which
performed the initial quality assurance audit for accreditation of AAS. In
October 1998, ASA found that AAS meets requirements of ASA's Quality System
Standard "ASA-100" and the FAA Advisory Circular 00-56 and was accredited. AAS
will be subject to quality assurance audits on an on-going basis in order to
maintain its accreditation. Although accreditation is voluntary and not
required in order to conduct operations, management believes that accreditation
is invaluable as a sales tool. 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.
An important factor in the aircraft components and spare parts redistribution
market relates to the documentation and traceability of aircraft components and
spare parts. AAS requires all of its suppliers to provide adequate
documentation as dictated by customers.
WARRANTIES
AAS provides no warranties with the aircraft components and spare parts it
sells unless the part was repaired by AAS-Amjet or AAS Landing Gear. It
provides a pass-through to its customers of any warranty rights it receives
from third party maintenance and repair facilities. Engine repairs are
customarily warranted by maintenance and repair facilities, including
AAS-Amjet, for a period of six months or 1,000 flying hours. Landing gear
repairs are generally warranted for THE EARLIER OF TEN YEARS OR THE NEXT
OVERHAUL. Only labor and workmanship are warranted on repairs; parts are
warrantied by the manufacturer. AAS generally accepts returns of aircraft
components and spare parts by its customers within a period of 45 days from the
date of sale.
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 and aircraft equipment are continuously
maintained in proper condition to ensure safe operation of aircraft. The
regulations dictate the monitoring, inspection, maintenance and repair
procedures and schedules for the various types of aircraft, engines and
aircraft components and spare parts and require such procedures be performed
only by licensed repair facilities utilizing licensed technicians.
Demonstration of compliance with applicable FAA and manufacturing standards is
required prior to installation of a component or spare part on an aircraft.
Accordingly, AAS only utilizes
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licensed repair facilities (including AAS Landing Gear and AAS-Amjet) to repair
and certify the products it sells and maintains the quality assurance program
described above to provide customers with required compliance documentation.
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 products of AAS. All stage 2
aircraft must install hush-kits to meet the FAA 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 Environmental Protection Agency and the various agencies of
the European Union have sought the adoption of stricter standards limiting the
emission of nitrous oxide from aircraft engines. Management of AAS believes
that certain aircraft operators will continue to utilize older aircraft because
the cost of acquiring new replacement aircraft is substantially greater than
the cost to update an older aircraft to comply with noise emission standards
and the Aging Aircraft Program.
While the redistribution business is not regulated by the FAA, the products AAS
sells to its customers must be accompanied by documentation which enables the
customers to comply with the regulatory requirements applicable to those
customers. AAS-Amjet and AAS Landing Gear, the newly acquired repair
operations, must be certified by the FAA and, in some cases, by original
equipment manufacturers, in order to perform maintenance, overhaul and repair
services. Management believes that these operations are in material compliance
with applicable regulations. Certified repair operations are periodically
inspected and must comply with all regulations to maintain certification.
Personnel at repair facilities must also be certified to perform the services
they provide.
PRODUCT LIABILITY
A catastrophic accident or incident occurs periodically in the commercial
aviation industry. If the incident occurs due to failure of any part of the
aircraft, product liability claims could be asserted against the seller,
manufacturer, repairer or lessor of the part. No lawsuit has ever been filed
against AAS based upon a product liability theory and AAS maintains product
liability insurance in the amount of $100 million. Management believes this
amount is adequate, however, claims could arise in excess of that amount.
Moreover, AAS may be unable to obtain product liability insurance coverage in
the future or it may be only available at an unacceptable cost. The financial
condition of AAS could be adversely affected if it had to pay, or even defend,
a catastrophic product liability claim not fully covered by insurance.
COMPETITION
The aircraft components and spare parts redistribution market is highly
competitive and fragmented. AAS competes against a limited number of
well-capitalized companies offering a broad range of products and services and
numerous small competitors serving distinct market niches. The principal
companies with which AAS currently competes are AAR Corp., The AGES Group,
Aviation Sales Company, AVTEAM, Inc., Banner Aerospace, Kellstrom Industries
and The Memphis Group, all of which are significantly larger and have greater
market share and financial resources than AAS. Customers in need of aircraft
parts also 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.
Management believes that depth of inventories, the ability to provide a broad
array of both products and required services, timeliness, quality and
traceability of products, service and price are the key competitive factors in
the industry. If AAS is unsuccessful in maintaining its competitive position,
it may lose market share and its financial results may be materially adversely
affected.
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EMPLOYEES
At December 31, 1999, AAS had 132 full-time employees and one part-time
employee. Of these, 10 are principally engaged in management, 9 are engaged in
sales and marketing, 37 are certified repair technicians or certified mechanics,
4 are engineers and the remainder are engaged as repair technicians, or in
operations, accounting and administration. None of its employees are subject to
collective bargaining agreements. Management believes employee relations are
excellent.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 AND RISK FACTORS
This Report on Form 10-KSB may contain forward-looking statements. When used in
this report, the words "may," "will," "expect," "anticipate," "continue,"
"estimate," "project," "intend," "believe" and similar expressions, variations
of these words or the negative of those words are intended to identify
forward-looking statements within the meaning of Section 27A of the Act and
Section 21E of the Securities Exchange Act of 1934 regarding events, conditions
and financial trends including, without limitation, business conditions in the
aircraft spare parts industry and the general economy, competitive factors,
inventory risks due to concentration on Boeing 737 aircraft and JT8 engines,
availability of inventory, expansion of product lines, regulation and
dependence on repair facilities and other risks or uncertainties detailed in
other SEC filings. Such statements are based on management's current
expectations and are subject to risks, uncertainties and assumptions. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, the actual plan of operations, business strategy,
operating results and financial position could differ materially from those
expressed in, or implied by, such forward-looking statements.
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ITEM 2. DESCRIPTION OF PROPERTIES
The following sets forth certain information with respect to the facilities
currently leased by AAS. In addition to the amounts shown for rent, AAS is also
obligated to pay its pro rata share of taxes, assessments and maintenance
expenses attributable to each of its facilities.
<TABLE>
<CAPTION>
APPROX. CURRENT
SQUARE ANNUAL LEASE
LOCATION FOOTAGE RENTAL LESSOR TERMINATION
-------- ------- ------- ------ -----------
<C> <C> <C> <C> <C>
3516 Centre Circle Drive 25,000 $ 87,000 Brown Enterprises July 30, 2002
Fort Mill, South Carolina 29715(1)
587 Greenway Industrial Drive 122,000 425,000 Crescent Resources, December 31, 2003
Lakemont Business Park Inc.
Fort Mill, South Carolina 29715(2)
4283 Pleasant Road 15,000 50,000 B&C Enterprises December, 2002
Fort Mill, South Carolina 29715(3)
6929 NW 46 Street 40,000 259,800 Condor Properties November 8, 2008
Miami, Florida 33166(4) of Miami, Inc.
1550 NW 108 Avenue 12,800 83,250 Condor Properties December 17, 2008
Miami, Florida 33172(5) of Miami, Inc.
13945 S.W. 139th Street 15,000 63,900 Anton K. Khoury November 15, 1999
Miami, Florida 33186(6)
7980-88 N.W. 56th Street 12,000 62,622 Hanna K. Khoury November 15, 1999
Miami, Florida 33166(7)
Hollywood - North Perry Airport 20,000 118,000 Shasta Aviation December 1, 2001
7501 Pembroke Road Corp., d/b/a/ as
Pembroke Pines, Florida 33023(8) Crescent Helicopters
</TABLE>
- -------------------------
(1) Until mid February 1999, 6,000 square feet of this facility was used for
corporate headquarters and approximately 19,000 square feet was used for
shipping, receiving and inventory storage. Karl F. Brown, an officer and
director of AAS, and Herman O. Brown, Jr., one of the principal
stockholders of AAS and father of Karl F. Brown, are general partners of
Brown Enterprises. Until this facility is subleased, released or sold,
AAS will remain liable on this lease.
(2) In mid February 1999, AAS moved its corporate headquarters to this
facility. Approximately 16,000 square feet is used for corporate
headquarters and the remaining106,000 square feet are used for shipping,
receiving and inventory storage.
(3) This facility is a warehouse used by AAS for inventory storage. Herman O.
Brown, Jr., one of the principal stockholders of AAS and father of Karl
F. Brown, is a general partner of B & C Enterprises.
(4) This facility includes approximately 5,000 square feet of office space,
approximately 5,000 square feet used for shipping, receiving and
inventory storage space and approximately 30,000 square feet used to
perform the repair services for AAS Landing Gear. Ned Angene and Martin
Washofsky, officers of AAS Landing Gear, are the principal shareholders
of Condor Properties of Miami, Inc.
(5) Substantially all of this facility will be used as a plating facility for
plating performed by both AAS Landing Gear and AAS-Amjet. Ned Angene and
Martin Washofsky, officers of AAS Landing Gear, are the principal
shareholders of Condor Properties of Miami, Inc.
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<PAGE> 11
(6) Substantially all of this facility is used for the repair services
performed by AAS-Amjet. Anton Khoury is an officer of AAS-Amjet and a
director of AAS.
(7) Substantially all of this facility is used for the repair services
performed by AAS-Amjet. (8) Substantially all of this facility is used
for inventory storage by AAS Engine Services.
ITEM 3. LEGAL PROCEEDINGS
AAS 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
business, operations or financial condition of AAS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of fiscal 1998 to a vote of
security holders through the solicitation of proxies or otherwise.
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<PAGE> 12
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of AAS is quoted on The Nasdaq Stock Market(R) under the
trading symbol AIRS. The following table sets forth the range of high and low
closing sale prices, as reported by The Nasdaq Stock Market, from May 28, 1998
(the date on which the common stock commenced trading) through December 31,
1998. The prices set forth below reflect interdealer quotations, without retail
markups, markdowns or commissions, and may not represent actual transactions.
FISCAL YEAR 1998 HIGH LOW
---------------- --------- ---------
May 28, 1998 through end of
Second Quarter $ 6.25 $ 6.00
Third Quarter 6.25 4.25
Fourth Quarter 9.75 4.50
On March 10, 1999, the closing sale price of the common stock was $9.625. As
of March 10, 1999, the number of record shareholders of the common stock was
approximately 35. The number of sets of proxy material for the upcoming Annual
Meeting of Shareholders requested by brokers for their beneficial owners
indicates that there are approximately 975 beneficial shareholders.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board of Directors. In connection with the termination of its S
Corporation status, AAS distributed to its shareholders a total of $2.4
million. This amount represented approximately 50% of the accumulated taxable
income not previously distributed plus an amount equal to the estimated 1998
tax liability of its stockholders through the date of termination of the S
Corporation election. Other than that distribution, the Board of Directors has
never declared or paid any cash dividends and it does not anticipate paying any
cash dividends on its common stock in the foreseeable future.
UNREGISTERED SECURITIES. AAS issued unregistered shares of its common stock as
part of the purchase price in each of the transactions with the acquired
companies. It issued 625,000 shares of common stock valued at $3,750,000 to
Amjet, 90,104 shares of common stock valued at $518,100 to GTI and TII, and
125,000 shares of common stock valued at $750,000 to Condor. All of these
issuances were made to acquired companies whose principals had access to
information enabling them to evaluate the merits and risks of the investment by
virtue of their relationship to AAS, the business of their respective acquired
companies and their economic bargaining power. AAS relied on Section 4(2) of
the Securities Act of 1933, as amended (the "Act") for the exemption from the
registration requirements with respect to such issuances.
For a period of one year, the acquired companies may "piggy-back" the shares
acquired pursuant to their respective agreements onto certain types of
registration statements which AAS files to register its securities under the
Act for a public offering. Each of the acquired companies also was granted the
right to a "demand" that AAS file a registration statement under the Act
covering their respective shares. The "demand" registration right commences
after July 1, 1999 with respect to Amjet and GTI and September 1, 1999 with
respect to Condor. The respective demand rights may only be exercised on one
occasion. All expenses incurred in connection with the registration of these
shares, excluding underwriting discounts or fees, are payable by AAS.
USE OF PROCEEDS OF THE INITIAL PUBLIC OFFERING. AAS registered 2,300,000 shares
of common stock for sale to the public on a Form SB-2 Registration Statement
(Reg. No. 333-48497) (the "Registration Statement") declared effective on May
28, 1998. AAS also registered 200,000 warrants to purchase shares of common
stock and 200,000 shares of common stock underlying such warrants issued to
Cruttenden Roth Incorporated, the underwriter of the public offering.
-12-
<PAGE> 13
A closing on the initial public offering of 2,000,000 shares of common stock
was held June 2, 1998 and a closing on an additional 250,000 over-allotment
shares of common stock was held July 14, 1998. AAS received aggregate gross
proceeds of $13.5 million from the sale of these 2,250,000 shares at an
offering price of $6.00 per share. Expenses incurred by AAS in connection with
the issuance and distribution of these shares were $945,000 for underwriting
discounts and commissions, $270,000 for expenses paid to or for underwriters,
and $641,000 for other expenses (consisting of registration fees, filing fees,
legal fees, printing and engraving, consulting fees, accounting fees and
transfer agent fees and costs, appraisal fees, insurance costs, presentation
and travel expense), for total expenses of $1,856,000. Included in other
expenses were legal fees of $182,000 (of which $96,000 was paid to a
co-counsel) paid to a law firm in which a director of AAS is a partner. No
other expenses were direct or indirect payments to directors, officers or their
associates or to persons owning ten percent or more of any class of equity
securities of AAS or to affiliates of AAS. The resulting net offering proceeds
after payment of all expenses was $11,644,000.
The net offering proceeds were used as follows: an aggregate of $3.0 million to
repay advances from two stockholders and to make distributions to those two
stockholders in connection with the termination of the S- Corporation status of
AAS, $3.0 million for repayment of a portion of outstanding indebtedness and
$5.6 million to acquire additional inventory. One of the stockholders receiving
a portion of the $3.0 million amount is an officer, director and principal
shareholder and the other is a principal shareholder. No other expenditures
were direct or indirect payments to directors, officers or their associates or
to persons owning ten percent or more of any class of equity securities of AAS
or to affiliates of AAS. Furthermore, the use of proceeds described above does
not represent a material change in the use of proceeds described in the
prospectus contained in the Registration Statement. Substantially all of the
proceeds have been expended and this is the final required report of the use of
the proceeds.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS (AND NOTES THERETO) APPEARING ELSEWHERE IN THIS REPORT ON FORM
10-KSB.
OVERVIEW
AAS is an international supplier of aviation services, which include sales of
aircraft components and spare parts in the redistribution market, maintenance,
overhaul and repair of those products, and engine management services,
primarily to other maintenance and repair facilities, major commercial
passenger and cargo airlines and other redistributors located throughout the
world. Historically, revenues have principally been 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 avionics, rotable, repairable and expendable airframe components and spare
parts for Boeing, McDonnell-Douglas and Airbus aircraft. AAS fulfills
customers' requirements for engine and airframe components and spare parts
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.
-13-
<PAGE> 14
In the last quarter of 1998, AAS began to implement an acquisition strategy
aimed primarily at integrating its aviation capabilities with related products,
such as engine management services, maintenance, overhaul and repair services
and manufacturing capabilities, and becoming a full service "one stop" supplier
of both products and services for customers. Between October 1, 1998 and
November 19, 1998, using three newly formed subsidiaries to acquire
substantially all of the assets, including inventory, of the acquired
companies. All of the acquisitions have been accounted for under the purchase
method of accounting. As a result, revenues in the last quarter of 1998 include
revenues from the provision of FAA certified overhaul and maintenance services
through AAS-Amjet and AAS Landing Gear and engine management services through
AAS Engines, services previously provided by certain of the acquired companies.
The material financial terms of each of the asset purchase transactions are set
forth below.
GTI AND TII. AAS acquired substantially all of the assets of GTI and TII for a
purchase price $1.1 million and assumption of certain accounts payable not to
exceed $305,013. The purchase price was comprised of $586,932 cash paid from
working capital and issuance of 90,104 shares of common stock valued at
$518,100.
CONDOR. AAS acquired substantially all of the operating assets of Condor for a
purchase price $1.75 million. The purchase price was comprised of $1.0 million
cash paid from working capital and issuance of 125,000 shares of common stock
valued at $750,000. Condor received one-half of the cash payment on November 9,
1998 and the other one-half of the cash payment and the shares of common stock
on November 30, 1998, the date upon which it received FAA certification to
overhaul and maintain landing gear for commercial aircraft.
AMJET. AAS acquired substantially all of the assets of Amjet for a purchase
price of $12.25 million and assumption of certain accounts and trade payables,
certain warranty claims, employee bonuses, and claims and liability arising
from specified investigations. The purchase price was comprised of
approximately $8.5 million cash paid from the Credit Facility, the issuance of
625,000 shares of common stock valued at $3.75 million. In addition, AAS
acquired the inventories of GASI and AAC for an aggregate purchase price of
$2.55 million cash, also paid from the Credit Facility.
AAS was incorporated in the State of South Carolina under the name Aviation
Alloys, Inc. in June 1985 and commenced active operations under its current
name in 1990. It was recapitalized, reincorporated in the State of Delaware and
converted from a S Corporation to a C Corporation immediately prior to its
initial public offering in May 1998. The statement of operations data includes
a pro forma provision for federal and state income taxes as if AAS were a C
Corporation subject to federal and state income taxes for all years presented.
See Note 3 to Financial Statements for more information. The statement of
operations data also includes pro forma net income, pro forma earnings per
share and pro forma weighted average shares outstanding to take into account
the public offering in May 1998.
RESULTS OF OPERATIONS
The operating results of AAS are affected by many factors, including the volume
and timing of orders from large customers, the timing of expenditures and
method of purchasing inventory in anticipation of future sales, and the mix of
aircraft engines and components and spare parts contained, at any time, in the
Company's inventory or sold during any period. A large portion of the Company's
operating expenses are relatively fixed. Since the Company typically does not
obtain long-term purchase orders or commitments from its customers, it must
anticipate the future volume of orders based upon the historic purchasing
patterns of its customers and upon its discussions with its customers as to
their future requirements. Cancellations, reductions or delays in orders by a
customer or group of customers could have a material adverse effect on the
Company's business, financial condition and results of operations.
The table on the following page sets forth, for the periods indicated, the
percentage of net sales represented by certain items included in the statements
of operations:
-14-
<PAGE> 15
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales.......................................................... 100.0% 100.0% 100.0%
Cost of sales...................................................... 60.9 60.0 65.6
---- ---- ----
Gross profit....................................................... 39.1 40.0 34.4
Selling and marketing.............................................. 6.4 5.3 6.6
General and administrative......................................... 6.3 4.3 4.5
---- ---- ---
Operating income................................................... 26.4 30.4 23.3
Interest and other income (expense), net........................... (.7) .3 --
---- ---- -------
Net income before taxes............................................ 25.7 30.7 23.3
Income taxes....................................................... 9.8(1) 12.3(1) 9.3(1)
---- ---- -------
Net income after taxes............................................. 15.9%(1) 18.4%(1) 14.0%(1)
==== ==== ======
</TABLE>
- -------------
(1) See Note 3 to the Financial Statements for information on the calculation
of this pro forma provision for federal and state income tax.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
Net sales (gross sales, net of allowances for returns) for 1998 increased $13.1
million, or 98.3%, to $26.3 million from $13.2 million in 1997. Growth in the
sales of engines, engine components and airframe components and spare parts by
AAS accounted for approximately 72% of the total $13.1 million increase. Sales
associated with the companies acquired during the fourth quarter accounted for
approximately 28%. Sales to international customers of engine and airframe
components and spare parts increased approximately $2.0 million, to
approximately $6.0 million in 1998 as compared to approximately $4.2 million in
1997; however, as a percentage of net sales, international sales of engine and
airframe components and spare parts decreased to 23% of net sales in 1998 from
30% of net sales in 1998.
Cost of sales increased $8.1 million, or 101.3%, to $16.0 million in 1998 as
compared to $7.9 million in 1997. As a percentage of net sales, the increase
was 0.9%. Cost of sales consists primarily of product costs (acquisition costs
and costs associated with repairs, overhaul or certification), freight charges
and certain labor and overhead expenses. Gross profit increased to $10.3
million in 1998 from $5.3 million in 1997. As a percentage of net sales, gross
profit decreased slightly to 39.1% in 1998 from 40.0% in 1997. The increase in
cost of sales as a percentage of revenue and the decrease in gross profit as a
percentage of revenue was due primarily to the increase in the labor intensive
activities associated with repair and overhaul operations, which added
significant direct labor and overhead expenses to the cost of sales.
Selling and marketing expenses increased $968,000, or 137.7%, to $1.7 million
in 1998 from $703,000 in 1997. This increase is primarily due to outside sales
office expense, commissions paid to agents on increased sales volumes in 1998,
compensation expenses related to additional sales personnel, sales related
travel and advertising costs, and increased sales expenses relating to the
acquired companies. As a percentage of net sales, selling and marketing
expenses increased to 6.4% in 1998 from 5.3% in 1997.
General and administrative expenses increased $1.1 million, or 195.5%, to $1.7
million in 1998 from $564,000 in 1997. This increase is primarily due to the
addition of compensation expense associated with the employment of the
principals and employees of the companies acquired during the fourth quarter
and the new occupancy charges, such as rent and depreciation, associated with
the facilities of the acquired companies. Also included in 1998 expenses are
increased occupancy charges associated with the addition of corporate offices
and warehouse space and professional fees and insurance premiums associated
with operating as a public entity. As a percentage of net sales, general and
administrative expenses increased to 6.3% in 1998 from 4.3% in 1997.
Net other expense totaled $185,000 in 1998 as compared to net other income of
$36,000 in 1997. Although interest income and other income increased by
approximately $25,000 in 1998, primarily from investment of the public offering
proceeds, interest expense on higher levels of indebtedness outstanding under
the Credit Facility increased approximately $245,000.
As a result of the above, net income before taxes increased $2.7 million, or
66.1%, to $6.8 million in 1998 from $4.1 million in 1997. AAS was not subject
to federal and state income taxes in 1997 and only became subject to
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<PAGE> 16
such taxes on May 28, 1998 when it terminated its election to be taxed as an S
Corporation in connection with its initial public offering. Actual net income
after income tax expense of $1.8 million was $5.0 in 1998. However, to allow
comparisons with C Corporations, pro forma federal and state income taxes have
been assumed to reflect the reconciliation between the statutory provision for
income taxes and the actual pro forma income tax provision. Based on this
assumption, AAS would have incurred pro forma income taxes of $2.6 million in
1998 and $1.6 million in 1997, resulting in pro forma net income of $4.2
million and $2.4 million in 1998 and 1997, respectively.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Net sales increased $4.8 million, or 58.6%, to $13.2 million in 1997 from $8.4
million in 1996. Sales to international customers increased $3.2 million, to
$4.2 million in 1997 from $1.0 million in 1996, as AAS obtained new customers
in Europe and the Far East during 1997.
Cost of sales increased $2.4 million, or 45.0%, to $7.9 million in 1997 from
$5.5 million in 1996. Gross profit increased to $5.3 million in 1997 from $2.9
million in 1996, reflecting an increase in gross profit as a percentage of net
sales to 40.0% from 34.4%. 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%, to $703,000 in
1997 from $551,000 in 1996. 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 to 5.3% in 1997 from 6.6% in 1996.
General and administrative expenses increased $186,000, or 49.4%, to $564,000
in 1997 from $378,000 in 1996. This increase reflects increased personnel
expense resulting from higher staffing levels, expenses associated with
relocation to a new headquarters facility, increased insurance expense, and an
increase in the discretionary contribution by AAS to the employee profit
sharing plan. As a percentage of net sales, general and administrative expenses
declined to 4.3% in 1997 from 4.5% in 1996.
Net other income totaled $36,000 in 1997 compared to net other expense of
$1,000 in 1996. While interest expense increased to $79,000 in 1997 from
$74,000 in 1996, interest income increased to $81,000 in 1997 from $71,000 in
1996 and other income increased to $35,000 in 1997 from $1,000 in 1996.
As a result of the above, net income increased $2.1 million, or 109.6%, to $4.1
million in 1997 from $1.9 million in 1996. As AAS was not subject to federal
and state income taxes. However, 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, AAS would have incurred pro forma income taxes of
$1.6 million in 1997 and $777,000 in 1996, resulting in pro forma net income of
$2.4 million and $1.2 million in 1997 and 1996, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity for AAS prior to completion of the May 1998
initial public offering were cash flow from operating activities, borrowings
under the Credit Facility and advances from its two founders. AAS requires
capital to purchase inventory, to fund product servicing and overhaul
facilities, for normal operating expenses and for general working capital
purposes.
The Credit Facility was initially established with NationsBank in June 1995. In
July 1998, AAS entered into a new agreement with NationsBank which expanded its
revolving Credit Facility. This new Credit Facility permits borrowings of up to
$30.0 million, $10.0 million of which replaced the working capital line which
was to mature September 30, 1998 and $20.0 million of which was restricted to
funding acquisitions. The new Credit Facility was amended in March 1999 to
permits borrowings of up to $35.0 million, $15.0 million for working capital
and $20.0 million for acquisitions. This is a revolving credit line, with
principal due on maturity and interest payable monthly. The Credit Facility
bears interest at the London Interbank Offered Rate ("LIBOR") plus an amount
between 1.25% and 2.5%, is secured by accounts receivable and inventory, and
matures June 30, 2000. As of
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<PAGE> 17
December 31, 1998, AAS had $3.2 million outstanding under the working capital
line of the Credit Facility and $13.0 million outstanding under the acquisition
line of the Credit Facility. The financial situation of AAS changed
significantly upon completion of the May 1998 initial public offering and the
receipt of net proceeds of $11.6 million from the offering. It changed
significantly again in the fourth quarter of 1998 as a result of AAS making
significant cash payments and borrowings in its acquisition of the assets of the
acquired companies and incurring significant fees and expenses in connection
with such transactions.
As of December 31, 1998, the principal sources of liquidity included cash and
cash equivalents of $2.2 million, net accounts receivable of $4.0 million, and
$6.8 million and $7.0 million of borrowings still available under the working
capital line and acquisition line, respectively, of the Credit Facility. AAS
had working capital of $19.7 million and $11.3 million of long-term debt as of
December 31, 1998.
For the year ended December 31, 1998, operating activities used cash of $6.9
million, primarily for increases in inventory, partially offset by net income
and increases in accounts payable and accrued expenses. Net cash used in
investing activities during the year ended December 31, 1998 was $13.5 million,
reflecting the purchase of certain fixed assets and investments, while net cash
provided by financing activities during the same period was $21.8 million,
consisting primarily of proceeds from the public offering, net of offering
transaction costs, and borrowings under the Credit Facility, partially offset
by debt repayments and distributions in connection with the termination of the
S-Corporation status of AAS.
Capital expenditures were approximately $2.8 million and $263,000 in 1998 and
1997, respectively. The expenditures in 1998 were primarily for equipment and
leasehold improvements in facilities of the acquired companies and in the new
plating facility currently under construction. Expenditures in 1997 were
primarily for furniture and fixtures installed in the corporate headquarters
facility. At December 31, 1998, the Company had outstanding commitments to
acquire machinery and equipment of approximately $2.0 million.
Existing cash balances, accounts receivable and amounts available under the
Credit Facility should be sufficient to meet capital requirements for at least
the next 12 months. If capital requirements increase thereafter, AAS could be
required to secure additional sources of capital. It may not be capable of
securing additional capital or the terms upon which such capital could be
secured may not be acceptable.
INFLATION
Although management cannot accurately anticipate the effect of inflation on
operations, it does not believe that inflation has had, or is likely in the
foreseeable future to have, a material effect on results of operations or the
financial condition of AAS. Increases in fuel costs due to inflation may
adversely affect demand for used aircraft, thereby decreasing demand for
aircraft components and spare parts.
RECENT ACCOUNTING PRONOUNCEMENTS
Please refer to Note 2 - Summary of Significant Accounting Policies - Impact of
Recently Issued Accounting Standards in the accompanying financial statements
for recent pronouncements by the Financial Accounting Standards Board ("FASB")
of Statements of Financial Accounting Standards No. 133 and Note 2 - Summary of
Significant Accounting Policies - Pro forma Earnings Per Share and Note 13 -
Earnings Per Share in the accompanying financial statements regarding Statement
of Financial Accounting Standard No. 128.
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<PAGE> 18
YEAR 2000 ISSUES
AAS is cognizant of the issues associated with the programming code in existing
computer systems and devices that utilize microchip processors as the year 2000
approaches. The "Year 2000" problem is pervasive and complex, as virtually
every computer operation will be affected in some way by the rollover of the
two-digit year value to "00". Computer systems that do not properly recognize
date-sensitive information when the year changes to 2000 could generate
erroneous data or fail.
In the ordinary course of business, AAS has replaced or is in the process of
replacing non-compliant hardware and software in all of its facilities as well
as those of the acquired companies with systems that are Year 2000 ready. AAS
has confirmed with the licensors of financial information and operational
applications that have been licensed from outside vendors that those products
are Year 2000 ready.
The information system used by AAS in tracking and processing inventory
currently is non-compliant. AAS has contracted for the development of a
proprietary system to replace the existing system. Testing and implementation
of the system is expected to be completed in the third quarter of 1999. Should
management assess that the new system will not be implemented prior to the end
of 1999, AAS can purchase and install upgrades of the existing system that are
or will be Year 2000 ready at a cost approximating $50,000.
Year 2000 issues may also affect the computer systems of the customers, vendors
and financial institutions with which AAS and the acquired companies do
business. AAS has made inquiry of significant customers, vendors and financial
institutions and has been advised that these customers expect to be Year 2000
ready in sufficient time to allow for testing and system implementation before
December 31, 1999.
Management of AAS believes all of its systems and those of the acquired
companies will be fully Year 2000 ready by September 30, 1999 and that amounts
currently budgeted for hardware and software upgrades will be sufficient to
address expenses associated with any Year 2000 issues. Approximately $225,000
was expended during 1998 and approximately $500,000 is budgeted for expenditure
during 1999 for information systems acquisition and development. As many of
these expenditures are for information and operational systems enhancements, a
significant portion of these expenditures will be capitalized and amortized.
Management does not anticipate that any other material expenditures will be
necessary to achieve Year 2000 compliance. Failure to achieve full Year 2000
compliance prior to December 31, 1999 could have a material adverse impact on
results of operations of AAS.
ITEM 7. FINANCIAL STATEMENTS
INDEX
PAGE
----
Report of Independent Certified Public Accountants.................... F-2
Consolidated Balance Sheets...................................... F-3
Consolidated Statements of Operations............................ F-4
Consolidated Statements of Stockholders' Equity.................. F-5
Consolidated Statements of Cash Flows............................ F-6
Notes to Consolidated Financial Statements....................... F-7
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
AAS has not had any changes in or any disagreement with its auditors
on any matter of accounting principles or practices or financial statement
disclosure.
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<PAGE> 19
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
ITEM 10. EXECUTIVE COMPENSATION.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
AAS will file with the SEC a proxy statement for its annual meeting of
shareholders to be held in May 1999. The information called for by items 9
through 12 above will be included in that proxy statement, which is
incorporated herein by reference. If the proxy statement is not filed with the
SEC by April 30, 1999, then the information required by items 9 through 12 will
be filed as an amendment to this report by April 30, 1999.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT SB ITEM
- ----------- -------- --------
<S> <C> <C>
* 1.1 Form of Underwriting Agreement between American Aircarriers Support, 1
Incorporated and Cruttenden Roth Incorporated.
* 1.2 Form of Master Selected Dealers Agreement between Cruttenden Roth 1
Incorporated and selected dealers.
* 2.1 Form of Agreement and Plan of Exchange among American Aircarriers Support, 2
Inc., a South Carolina corporation, American Aircarriers Support, Incorporated, a
Delaware corporation, and Messrs. Karl F. Brown and Herman O. Brown, Jr.
y 2.2 Asset Purchase Agreement among American Aircarriers Support, Incorporated, 2
American Aircarriers Support Acquisition Corp., Global Turbine Services, Inc.
and Turbine Inspections, Incorporated.
# 2.3 Asset Purchase Agreement among American Aircarriers Support, Incorporated, 2
American Aircarriers Support Acquisition III Corp., Condor Flight Spares, Inc.,
Ned Angene and Martin Washofsky.
x 2.4 Asset Purchase Agreement among American Aircarriers Support, Incorporated, 2
American Jet Engine Services, Inc. and its Shareholders, and American Aircarriers
Support Acquisition II Corp.
* 3.1.1 Articles of Incorporation, as amended, of American Aircarriers Support, Inc. as 3
filed on June 27, 1985, and as amended on January 8, 1990, with the Secretary of
State of the State of South Carolina.
* 3.1.2 Certificate of Incorporation of American Aircarriers Support, Incorporated as filed 3
on February 9, 1998, with the Secretary of State of the State of Delaware.
* 3.2 Bylaws of American Aircarriers Support, Incorporated. 3
* 4.1.1 Form of specimen certificate for common stock of American Aircarriers Support, 4
Incorporated.
* 4.1.2 Form of Representative's Warrant Agreement issued by American Aircarriers 4
Support, Incorporated to Cruttenden Roth Incorporated
</TABLE>
-19-
<PAGE> 20
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT SB ITEM
- ----------- -------- --------
<S> <C> <C>
y 4.2 Registration Rights between American Aircarriers Support, Incorporated and M. 4
Mike Evans.
# 4.3 Registration Rights Agreement between American Aircarriers Support, 4
Incorporated and Condor Flight Spares, Inc.
x 4.4 Registration Rights Agreement between American Aircarriers Support, 4
Incorporated and American Jet Engine Services, Inc.
* 10.1.1 Employment Agreement, dated January 31, 1998, by and between Karl F. Brown 10
and American Aircarriers Support, Incorporated.
* 10.1.2 Employment Agreement, effective January 1, 1998, by and between Elaine T. 10
Rudisill and American Aircarriers Support, Incorporated.
y 10.1.3 Executive Employment Agreement between American Aircarriers Support, 10
Incorporated and M. Mike Evans
# 10.1.4 Employment Agreement between American Aircarriers Support, Incorporated and 10
Ned Angene.
# 10.1.5 Employment Agreement between American Aircarriers Support, Incorporated and 10
Martin Washofsky.
x 10.1.6 Executive Employment Agreement between American Aircarriers Support, 10
Incorporated and Anton K. Khoury.
x 10.1.7 Executive Employment Agreement between American Aircarriers Support, 10
Incorporated and Hanna K. Khoury.
**10.1.8 Executive Employment Agreement between American Aircarriers Support, 10
Incorporated and Joseph E. Civiletto.
* 10.2 Form of Indemnification Agreement to be entered into between American 10
Aircarriers Support, Incorporated and each officer and director of American
Aircarriers Support, Incorporated.
* 10.3 1998 Omnibus Stock Option Plan, effective February 9, 1998, authorizing 450,000 10
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 American 10
Aircarriers Support, Incorporated.
* 10.4.2 Security Agreement, dated June 29, 1995, between NationsBank, N.A. and 10
American Aircarriers Support, Incorporated.
* 10.4.3 Continuing and Unconditional guaranty, dated June 29, 1995, from Karl F. Brown 10
to NationsBank, N.A.
* 10.4.4 Promissory Note Renewal, increasing principal amount to $2 million, issued to 10
NationsBank, N.A. by American Aircarriers Support, Incorporated.
* 10.4.5 Promissory Note Renewal, increasing principal amount to $4 million, issued to 10
NationsBank, N.A. by American Aircarriers Support, Incorporated.
* 10.4.6 Commitment Letter, dated February 19, 1998, from NationsBank, N.A. to 10
American Aircarriers Support, Incorporated.
</TABLE>
-20-
<PAGE> 21
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT SB ITEM
- ----------- -------- --------
<S> <C> <C>
* 10.4.7 Promissory Note, dated April 9, 1998, issued to NationsBank, N.A. by American 10
Aircarriers Support, Incorporated.
* 10.4.8 Loan Agreement, dated April 9, 1998, between NationsBank, N.A. and American 10
Aircarriers Support, Incorporated.
* 10.4.9 Security Agreement, dated April 9, 1998, between NationsBank, N.A. and 10
American Aircarriers Support, Incorporated.
* 10.4.10 Continuing and Unconditional Guaranty, dated April 9, 1998, from Karl F. Brown 10
to NationsBank, N.A.
+ 10.4.11 Loan (Credit Facility) Agreement, dated July 13, 1998, between NationsBank, 10
N.A. and American Aircarriers Support, Incorporated.
**10.4.12 Modification to the Credit Facility dated January 1999, and corrected promissory 10
notes, between NationsBank, N.A. and American Aircarriers Support,
Incorporated.
**10.4.13 Modification to the Credit Facility dated March 3, 1999, between NationsBank, 10
N.A. and American Aircarriers Support, Incorporated.
* 10.5.1 Lease Agreement, dated June 30, 1993, between B&C Enterprises and American 10
Aircarriers Support, Incorporated.
* 10.5.2 Lease Agreement, dated July 30, 1997, between Brown Enterprises and American 10
Aircarriers Support, Incorporated.
# 10.5.3 Lease Agreement, dated November 9, 1998, between American Aircarriers 10
Support, Incorporated and Condor Properties of Miami, Inc.
x 10.5.4 Lease of Real Property, dated November 19, 1998, between American Aircarriers 10
Support, Incorporated and Anton K. Khoury.
x 10.5.5 Lease of Real Property, dated November 19, 1998, between American Aircarriers 10
Support, Incorporated and Hanna K. Khoury.
**10.5.6 Lease of Real Property, dated November 6, 1998, between American Aircarriers 10
Support, Incorporated and Crescent Resources, Inc.
**10.5.7 Lease of Real Property, dated October 1, 1997, between Global Turbine Services 10
and Shasta Aviation Corp., d/b/a as Crescent Helicopters assigned to American
Aircarriers Support, Incorporated October 1, 1998.
**10.5.8 Lease of Real Property, dated December 17, 1998, between AAS Landing Gear 10
Services, Inc. and Condor Properties of Miami, Inc.
* 10.6 Form of S Corporation Tax Allocation and Indemnification Agreement among 10
American Aircarriers Support, Incorporated, Karl F. Brown and Herman O.
Brown, Jr.
* 10.7 Joint Venture Agreement, dated January 26, 1998, between Global Turbine 10
Services, Inc. and American Aircarriers Support, Incorporated.
* 10.7.1 Joint Venture Agreement, dated January 26, 1998, between Global Turbine 10
Services, Inc. and American Aircarriers Support, Incorporated.
* 10.8 Voting Trust Agreement, dated February 23, 1998 among Herman O. Brown, Jr., 10
David M. Furr, as Trustee, and American Aircarriers Support, Incorporated.
</TABLE>
-21-
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT NO. DOCUMENT SB ITEM
- ----------- -------- --------
<S> <C> <C>
* 10.9 Form of Lock-Up Agreements between shareholders of American Aircarriers 10
Support, Incorporated and Cruttenden Roth Incorporated.
* 10.9.1 Consignment Agreement between American Aircarriers Support, Incorporated and 10
M. Mike Evans.
* 10.10 Sale and Purchase Agreement, Two Boeing 737-200 Aircraft, between European 10
Aviation Limited and American Aircarriers Support, Incorporated.
x 10.10.1 Inventory Sales Agreement between American Aircarriers Support, Incorporated 10
and Global Air Spares, Inc.
x 10.11 Aircraft Engine Sales Agreement between American Aircarriers Support, 10
Incorporated and Atlantic Airmotive.
**11. Schedule computing net income per common share 11
**21. Subsidiaries of the Registrant 21
* 23. Consent of Cherry, Bekaert & Holland, L.L.P., independent certified public 23
accountants for American Aircarriers Support, Incorporated.
**27. Financial Data Schedule. 27
</TABLE>
- -----------------------------
* Incorporated by reference from Registration Statement on Form SB-2 (File
No. 333-48497).
+ Incorporated by reference from Form 10-QSB filed November 5, 1995 (File No.
0-24275).
y Incorporated by reference from Form 8-K (dated October 1, 1998) filed on
October 14, 1997 (File No. 0-24275).
# Incorporated by reference from Form 8-K (dated November 9, 1998) filed on
December 4, 1998 (File No. 0-24275).
x Incorporated by reference from Form 8-K filed (dated November 19, 1998)
filed on December 4, 1998 (File No. 0-24275).
** Filed herewith.
(B) REPORTS ON FORM 8-K
A report on Form 8-K, dated October 1, 1998, was filed on October 14, 1998
reporting the purchase of substantially all of the assets of Global Turbine
Services, Inc. and Turbine Inspections, Incorporated; the execution of a
consignment agreement regarding certain aircraft parts inventory; the
registration rights of the shareholders who received shares as a portion of the
purchase price; and the employment of Mike Evans. Financial statements and pro
forma financial information were not required.
A report on Form 8-K, dated November 9, 1998, was filed on December 4, 1998
reporting the purchase of substantially all of the assets of Condor Flight
Spares, Inc.; the lease of the facilities where such business was operated; the
registration rights of the shareholders who received shares as a portion of the
purchase price; and the employment of Ned Angene and Martin Washofsky. Financial
statements and pro forma financial information were not required.
A report on Form 8-K, dated November 19, 1998, was filed on December 4, 1998
reporting the purchase of substantially all of the assets of American Jet
Engine Services, Inc. and the inventories of Global Air Spares, Inc. and
Atlantic Airmotive Corporation; the lease of the facilities where such
businesses were operating; the registration rights of the shareholders who
received shares as a portion of the purchase price; the appointment of Anton K.
Khoury to the Board of Directors and the employment of Anton K. Khoury and
Hanna K. Khoury. Financial statements and pro forma financial information was
filed on January 20, 1999 as an amendment to this Form 8-K.
-22-
<PAGE> 23
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
March 15, 1999 By: /s/ Karl F. Brown
------------------------------------
Karl F. Brown, Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ KARL F. BROWN Chairman of the Board and Chief Executive March 15, 1999
- --------------------------- Officer
Karl F. Brown (Principal Executive Officer)
/s/ JOSEPH E. CIVILETTO President and Chief Operating Officer March 15, 1999
- -------------------------- (Principal Operating Officer)
Joseph E. Civiletto
/s/ ELAINE T. RUDISILL Chief Financial Officer (Principal March 15, 1999
- -------------------------- Financial and Accounting Officer)
Elaine T. Rudisill
/s/ DAVID M. FURR Director March 15, 1999
- --------------------------
David M. Furr
/s/ PAMELA K. CLEMENT Director March 15, 1999
- --------------------------
Pamela K. Clement
/s/ JAMES T. COMER, III Director March 15, 1999
- --------------------------
James T. Comer, III
/s/ ANTON K. KHOURY Director March 15, 1999
- --------------------------
Anton K. Khoury
/s/ MICHAEL F. EVANS Director March 15, 1999
- --------------------------
Michael F. Evans
</TABLE>
-23-
<PAGE> 24
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONTENTS
PAGE
----
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS...................... F-2
CONSOLIDATED BALANCE SHEETS............................................. F-3
CONSOLIDATED STATEMENTS OF OPERATIONS................................... F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY......................... F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS................................... F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.............................. F-7
F-1
<PAGE> 25
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
American Aircarriers Support, Incorporated and Subsidiaries
We have audited the accompanying consolidated balance sheets of American
Aircarriers Support, Incorporated and Subsidiaries as of December 31, 1998 and
1997 and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of American
Aircarriers Support, Incorporated and Subsidiaries as of December 31, 1998 and
1997, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/ Cherry, Bekaert & Holland, L.L.P.
Charlotte, North Carolina
January 29, 1999, except for Note 9,
as to which the date is March 4, 1999
F-2
<PAGE> 26
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,150,355 $ 750,448
Receivables:
Trade and other, net of allowances of
$255,592 in 1998 and $130,000 in 1997 4,007,246 1,958,798
Affiliate 10,106 13,589
Cost and estimated earnings in excess of
billings on uncompleted contracts 710,901 --
Inventories 22,220,037 5,625,107
Prepaid expenses 180,235 30,725
--------------- -------------
Total current assets 29,278,880 8,378,667
Property and equipment, net 2,262,864 335,795
Assets held for lease 1,725,181 --
Goodwill, net of amortization 10,445,894 --
Other assets 566,374 335,000
--------------- -------------
TOTAL ASSETS $ 44,279,193 $ 9,049,462
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Revolving line of credit $ 3,250,000 $ 1,500,000
Current maturities of long-term debt 1,733,333 120,708
Notes payable to related parties -- 1,501,846
Accounts payable and accrued expenses 3,371,625 1,057,700
Accounts payable to related parties 53,700 --
Billings in excess of costs and estimated
earnings on uncompleted contracts 100,958 --
Income taxes payable 1,127,500 --
--------------- -------------
Total current liabilities 9,536,158 4,180,254
--------------- -------------
Long-term debt, net of current maturities 11,266,667 --
--------------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value;
2,000,000 shares authorized; no shares
issued or outstanding -- --
Common stock, $.001 par value; 20,000,000
shares authorized; 7,190,104 and 4,100,000
shares issued and outstanding, as adjusted at
December 31, 1998 and 1997, respectively 7,190 4,100
Additional paid-in capital 20,449,709 --
Retained earnings 3,019,469 4,865,108
--------------- -------------
Total stockholders' equity 23,476,368 4,869,208
--------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 44,279,193 $ 9,049,462
============== ============
</TABLE>
See notes to financial statements.
F-3
<PAGE> 27
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-----------------------------------------
1998 1997
--------------- ----------------
<S> <C> <C>
Net sales $26,280,926 $13,250,328
Cost of sales 15,994,418 7,946,467
------------- -------------
GROSS PROFIT 10,286,508 5,303,861
------------- -------------
Operating expenses:
Selling and marketing 1,670,896 702,809
General and administrative 1,666,443 563,981
------------- -------------
Total operating expenses 3,337,339 1,266,790
------------- -------------
INCOME FROM OPERATIONS 6,949,169 4,037,071
Other income (expense):
Interest income 95,271 80,978
Interest expense (324,746) (79,435)
Other 44,915 34,741
-------------- -------------
INCOME BEFORE INCOME TAXES 6,764,609 4,073,355
Income tax expense 1,813,000 --
------------- -------------
NET INCOME $ 4,951,609 $ 4,073,355
============ ============
Pro forma data (Unaudited):
Income before income taxes as reported $ 6,764,609 $ 4,073,355
Pro forma income tax expense 2,570,551 1,629,300
------------- -------------
Pro forma net income $ 4,194,058 $ 2,444,055
============ ============
Pro forma basic earnings per share $ 0.76 $ 0.60
=========== ============
Pro forma diluted earnings per share $ 0.76 $ 0.60
=========== ============
Pro forma weighted average shares outstanding:
Basic 5,512,533 4,100,000
============= =============
Diluted 5,517,597 4,100,000
============= =============
</TABLE>
See notes to financial statements.
F-4
<PAGE> 28
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES DOLLARS CAPITAL EARNINGS EQUITY
-------- ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1996 4,100,000 $ 4,100 $ -- $ 2,791,753 $ 2,795,853
Net income 4,073,355 4,073,355
Stockholder distributions (2,000,000) (2,000,000)
----------- ------- -------------- ------------ -------------
BALANCE, DECEMBER 31, 1997 4,100,000 4,100 -- 4,865,108 4,869,208
Net income 4,951,609 4,951,609
Distribution to S-Corp stockholders (3,046,281) (3,046,281)
Recapitalization from S-Corp to
C-Corp and establishment of
deferred tax asset 3,790,967 (3,750,967) 40,000
Issuance of common stock and warrants
in conjunction with initial public offering,
net of transaction cost 2,250,000 2,250 11,641,482 -- 11,643,732
Issuance of common stock in conjunction with
acquisitions of businesses 840,104 840 5,017,260 -- 5,018,100
----------- ------- -------------- ------------ -------------
BALANCE, DECEMBER 31, 1998 7,190,104 $ 7,190 $ 20,449,709 $ 3,019,469 $ 23,476,368
========= ====== ============= =========== ============
</TABLE>
See notes to financial statements.
F-5
<PAGE> 29
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------------------------
1998 1997
-------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,951,609 $ 4,073,355
Adjustments to reconcile net income to
cash provided by operating activities:
Provision for doubtful accounts 181,127 50,094
Depreciation and amortization 369,227 54,557
Deferred tax expense 4,000 --
Changes in operating assets and liabilities, net of acquisitions:
Receivables (558,214) (1,297,330)
Estimated costs, earnings and billings on contracts (609,943) --
Inventories (13,049,002) (3,821,412)
Prepaid expenses and other assets (665,703) (24,332)
Accounts payable and accrued expenses 2,430,635 335,351
--------------- ---------------
Net cash used in operating activities (6,946,264) (629,717)
--------------- ---------------
INVESTING ACTIVITIES
Acquisitions of businesses (10,693,396) --
Investments -- (285,000)
Capital expenditures (2,785,330) (263,235)
--------------- ---------------
Net cash used in investing activities (13,478,726) (548,235)
--------------- ---------------
FINANCING ACTIVITIES
Proceeds from bank line of credit 1,750,000 1,500,000
Proceeds from issuance of long-term debt 13,000,000 --
Proceeds from notes payable-related parties -- 810,000
Principal repayments on long-term debt (120,708) (112,287)
Principal repayments on amounts payable
to related parties (1,501,846) (42,607)
Proceeds from initial public offering 11,643,732 --
Distributions to stockholders (2,946,281) (2,000,000)
--------------- ---------------
Net cash provided by financing activities 21,824,897 155,106
--------------- ---------------
Net increase (decrease) in cash
and cash equivalents 1,399,907 (1,022,846)
Cash and cash equivalents, beginning of year 750,448 1,773,294
--------------- ---------------
Cash and cash equivalents, end of year $ 2,150,355 $ 750,448
============== ==============
</TABLE>
See notes to financial statements.
F-6
<PAGE> 30
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
American Aircarriers Support, Incorporated, a Delaware corporation and its
wholly-owned subsidiaries AAS Engine Services, Inc., AAS Landing Gear Services,
Inc., and AAS Amjet, Inc. (collectively "AAS" or the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation. Certain pro forma information has been provided in connection
with the initial public offering of securities (Note 3).
DESCRIPTION OF BUSINESS
AAS is an international supplier of aviation services including the sale,
maintenance, repair and overhaul of spare parts and engines to major commercial
and cargo airlines, maintenance and repair facilities and other parts
distributors. The company specializes in both engines and airframe parts,
primarily for Boeing, Douglas and Airbus aircraft. AAS also offers engine
management services, and maintenance, repair and overhaul ("MRO") services for
engines and landing gear at its FAA licensed facilities. The Company's
headquarters and distribution facility is located in Fort Mill, South Carolina.
The Company's FAA licensed facilities are located in Miami, Florida.
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.
As a result of the acquisitions of FFA licensed MRO facilities, the Company
maintains raw materials and work in process inventories in support of those
overhaul facilities. The cost of the work in process inventory is the direct
labor and overhead costs determined by the labor hours attributed to it.
F-7
<PAGE> 31
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ASSETS HELD FOR LEASE
The Company leases engines to the airline industry on a worldwide basis through
operating leases. Operating income is recognized on a straight-line basis over
the term of the underlying leases. The cost of the asset held for lease is
amortized, principally on a straight-line basis, to the estimated remaining net
realizable value over the lease term or the economic life of the asset.
Accumulated amortization at December 31, 1998 was $31,000.
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.
INTANGIBLE ASSETS
Goodwill represents the excess of cost over the fair value of the net assets of
businesses acquired and is amortized using the straight-line method over 30
years. The Company assesses the recoverability of goodwill whenever adverse
events or changes in circumstances or business climate indicate that expected
future undiscounted cash flows may not be sufficient to support the recorded
asset. Based upon its most recent analysis, management of the Company believes
that no material impairment of goodwill exists. Accumulated amortization at
December 31, 1998 was $87,495.
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
title and risk of ownership are transferred to the customer, which is generally
upon delivery of the engine. The 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. The
Company also warehouses and sells inventories on behalf of others under
consignment agreements. The Company records revenues on the sale of consigned
inventories upon shipment of the part. The Company exchanges rotable parts in
need of service or overhaul for new, overhauled or serviceable parts in its
inventory for a fee. Fees on exchanges are recorded when the products are
shipped.
Revenues from fixed-fee contracts for MRO sales are recognized on the
percentage-of-completion method, measured by the cost-to-cost method,
commencing when progress reaches a point where experience is sufficient to
estimate final results with reasonable accuracy.
F-8
<PAGE> 32
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
REVENUE RECOGNITION (continued)
Provisions for estimated losses on uncompleted contracts, if any, are made in
the period in which such losses are determined. Changes in job performance, job
conditions and estimated profitability, including final contract settlements,
may result in revisions to costs and income and are recognized in the period in
which the revisions are determined.
Warranties on MRO workmanship varies from six months to 10 years dependent upon
a number of factors including the type of part repaired, flight hours, and the
expected life of a part. Manufacturers' warranties for any new or replacement
parts are passed through to the customer.
The asset, "Costs and estimated earnings in excess of billings on uncompleted
contracts" represents revenues recognized in excess of amounts billed. The
liability "Billings in excess of costs and estimated earnings on uncompleted
contracts" represents billings in excess of revenues recognized.
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 all periods presented have
been determined under the provisions of SFAS No. 128, and include certain pro
forma adjustments to income and shares as discussed in Note 3.
INCOME TAXES
Prior to the reincorporation and initial public offering discussed in Note 3,
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 was generally
exempt from all federal and state income taxes as stockholders of the Company
were taxed on corporate income. In connection with the reincorporation, on May
28, 1998, the Company terminated its S-corporation income tax election.
Following the termination of the S-corporation election, the Company became
subject to federal and state income taxes. At that time, the Company adopted
the provisions of SFAS No. 109, ACCOUNTING FOR INCOME TAXES. Under SFAS No.
109, deferred tax assets or liabilities are computed based upon the difference
between the financial reporting and income tax basis of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to be realized or settled. Deferred income
taxes reflect the net tax effect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Pro forma income and earnings per share
have been determined using estimated effective federal and state income tax
rates as discussed in Note 3.
F-9
<PAGE> 33
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 1998 and 1997 approximated carrying values.
At December 31, 1998 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.
Sales to international customers have accounted for an increasing amount of net
sales in recent years. The Company anticipates that international sales will
continue to represent a material portion of the 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 1998 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.
F-10
<PAGE> 34
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ADVERTISING COSTS
The Company expenses advertising costs as they are incurred. Advertising costs
were $74,136 in 1998, and $17,437 in 1997, respectively.
SEGMENT INFORMATION
The Company is in one business segment, as a supplier of aviation services
including the sale, maintenance, repair and overhaul of spare parts and
engines, and follows the requirement of SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information."
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (SFAS No. 133). This statement addresses the accounting
for derivative instruments, including certain derivative instruments imbedded
in other contracts, and hedging activities. The Statement is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. Management
does not anticipate the adoption of the provisions of SFAS No. 133 will
significantly impact the Company's financial reporting.
NOTE 3. REINCORPORATION AND INITIAL PUBLIC OFFERING
Through an initial public offering (the "Offering") which commenced on May 28,
1998, the Company sold 2,250,000 shares of common stock (including the purchase
of 250,000 shares on July 10, 1998 by the lead underwriter through the exercise
of the over-allotment option). Immediately prior to the effective date of the
registration statement, the then existing stockholders of the South Carolina
corporation (American Aircarriers Support, Inc. or "AASINC") exchanged all
outstanding shares of AASINC for 4.1 million shares of common stock of AAS, and
AASINC merged with and into AAS (together, the "Reincorporation"). AAS was
formed for the purpose of reincorporating in Delaware and otherwise had no
operations. The authorized capital stock of AAS consists of 20,000,000 shares
of common stock and 2,000,000 shares of preferred stock. The authorized capital
stock of AASINC consisted of 100,000 shares of common stock, $1 par value. At
December 31, 1997, 100 shares were outstanding. The balance sheets, statements
of stockholders' equity, and pro forma earnings per share calculations give
effect to the stock issued in connection with the Reincorporation.
Gross proceeds of the Offering totaled $13,500,000 with expenses related to the
Offering totaling $1,856,000. As part of the Offering, the Company granted
warrants to purchase 200,000 shares of common stock at a price of $7.98 per
share to the underwriters. The warrants expire on June 2, 2003.
The proceeds of the Offering were used to repay shareholder advances, repay a
portion of the Company's line of credit, pay distributions to shareholders and
to purchase additional inventory.
F-11
<PAGE> 35
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 3. REINCORPORATION AND INITIAL PUBLIC OFFERING (CONTINUED)
In connection with the reincorporation, on May 28, 1998, the Company terminated
its S Corporation income tax election. The pro forma data on 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. 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 at a combined effective tax
rate of approximately 38 percent in 1998 and 40 percent in 1997. The following
unaudited pro forma information reflects the reconciliation between the
statutory provision for income taxes and the actual pro forma income tax
provision.
1998 1997
------ ------
Income taxes at federal statutory rate $ 2,300,000 $ 1,385,000
State taxes, net of federal benefit 223,000 203,600
Other 47,551 40,700
------------- -------------
Pro forma income taxes $ 2,570,551 $ 1,629,300
============= =============
NOTE 4. BUSINESS COMBINATIONS
On November 19, 1998, effective October 1, 1998, the Company acquired
substantially all the assets of American Jet Engine Services, Inc. ("AMJET"), a
Florida corporation, for $12.25 million consisting of $8.5 million in cash and
the issuance of 625,000 shares of the Company's common stock. Stock issued in
connection with the acquisition was valued at $6.00 per share based on the
market price of the stock near the date on which the parties agreed to the
terms of the acquisition. AMJET is an FAA certified aircraft engine
maintenance, repair and overhaul facility located in Miami, Florida.
On October 1, 1998, the Company acquired substantially all of the assets of
Global Turbine Services, Inc. and Turbine Inspections Incorporated
(collectively "Global"), two Florida corporations, for $1.1 million consisting
of $585,000 in cash and 90,104 shares of the Company's common stock. Stock
issued in the acquisition was valued at $5.75 per share based on the market
price of the stock near the date on which the parties agreed to the terms of
the acquisition. Global provides total engine management services to major
commercial and cargo airlines.
On November 9, 1998, the Company acquired substantially all of the assets of
Condor Flight Spares, Inc. ("Condor"), a Florida corporation, for $1.75 million
consisting of $1.0 million in cash and 125,000 shares of the Company's Common
Stock. Stock issued in the acquisition was valued at $6.00 per share based on
the market price of the stock near the date on which the parties agreed to the
terms of the acquisition. Condor received FAA certification to overhaul and
maintain landing gear for commercial aircraft on November 30, 1998.
The acquisitions were accounted for under the purchase method of accounting.
Accordingly, the results of operations are included in the accompanying
consolidated financial statements from the dates of acquisition. The purchase
prices, including $470,000 of acquisition costs, have been allocated to assets
acquired and liabilities assumed based on their fair values at the dates of
acquisition. The excess of the purchase price over the fair value of net assets
acquired in the AMJET acquisition of approximately $10 million has been
recorded as goodwill and is being amortized on a straight-line basis over 30
years.
F-12
<PAGE> 36
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4. BUSINESS COMBINATIONS (CONTINUED)
The following table presents unaudited pro forma combined results of operations
as if the acquisitions had occurred at the beginning of each year presented.
Such pro forma amounts are not necessarily indicative of what the actual
consolidated results of operations might have been if the acquisitions had
occurred at the beginning of 1997.
1998 1997
------- -------
Net sales $ 33,028,000 $ 19,417,000
Pro forma net income $ 4,396,000 2,757,000
Pro forma basic earnings per share $ .72 $ .57
Pro forma diluted earnings per share $ .72 $ .57
NOTE 5. TRADE RECEIVABLES AND SALES BY GEOGRAPHIC REGION
Trade receivables are shown net of the following allowances:
December 31,
---------------------------
1998 1997
------- -------
Allowance for doubtful accounts $ 225,592 $ 100,000
Reserve for sales returns and
allowances 30,000 30,000
------------- ---------------
Total accounts receivable
allowances $ 255,592 $ 130,000
============ ==============
Sales to unaffiliated customers by geographic region are as follows:
December 31,
--------------------------
1998 1997
------- -------
Domestic $ 20,269,572 $ 9,010,357
Canada 2,100,439 872,222
Europe and Middle East 3,411,192 2,512,730
Far East 432,834 820,800
Other 66,889 34,219
-------------- -------------
Total $ 26,280,926 $13,250,328
============== =============
NOTE 6. INVENTORIES
Inventories, stated at lower of cost or market, are comprised of the following:
December 31,
-------------------------
1998 1997
------- -------
Aircraft parts and complete engines $21,351,140 $5,625,107
Deposits on inventory 845,473 --
Work in process 23,424 --
------------ ------------
Total $22,220,037 $5,625,107
============ ============
F-13
<PAGE> 37
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 7. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is comprised of the following:
December 31,
------------------------
1998 1997
------- -------
Leasehold improvements $ 528,979 $ 154,353
Office furniture and equipment 398,498 155,866
Vehicles 136,049 115,657
Shop equipment 1,487,281 36,283
----------- ------------
2,550,807 462,159
Less accumulated depreciation (287,943) (126,364)
---------- ------------
Property and equipment, net $2,262,864 $ 335,795
=========== =============
NOTE 8. INVESTMENTS
During 1998 and 1997, the company made investments totaling $410,000 in two
joint venture arrangements with Global. In October 1998, the Company acquired
the remaining interest in the joint ventures in connection with the acquisition
of the assets of Global. (See note 4). Prior to October 1998, the investment
was accounted for on the equity method. Income recognized from the joint
venture through September 30, 1998 totaled $48,000.
The Company made investments of $50,000 in 1997 and $50,000 in 1996 in
nonpublic companies, which were accounted for at cost. The investment made in
1997 was in a company in which a director is a principal. In conjunction with
the initial public offering, these two investments were included as part of the
distributions, in connection with the termination of the Company's
S-Corporation status, to the then existing common stockholders. The investments
were distributed at estimated fair value, which was equivalent to carrying
value, in lieu of an equal portion of cash.
NOTE 9. LINE OF CREDIT
The Company's credit facility was initially established with a bank in June
1995. On July 13, 1998, the Company entered into an agreement with the bank for
an expanded $30 million credit facility. Under the terms of the agreement, $10
million replaced the Company's existing revolving credit line which was due to
mature September 30, 1998. The line of credit bears an annual interest rate
equal to the three-month London Interbank Offered Rate ("LIBOR") plus an amount
between 1.25% and 2.50% based upon the Company's financial performance. On
December 31, 1998, there was $3,250,000 outstanding under the revolving line of
credit bearing a LIBOR-based interest rate of 6.3%.
The remaining $20 million of the credit facility was established as the
Company's acquisition line of credit, at the same annual interest rate, plus an
unused commitment fee of between 10 and 20 basis points. The acquisition
portion of the Company's credit facility requires any used portion to be
converted to a term loan which amortizes in equal monthly installments over a
five year period. On December 31, 1998, $13 million of the acquisition portion
of the credit facility had been converted to term loans.
F-14
<PAGE> 38
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 9. LINE OF CREDIT (CONTINUED)
The credit facility matures June 30, 2000 and is collateralized by the
Company's accounts receivable and inventory. The credit facility requires the
Company to meet certain financial covenants. On December 31, 1998, the Company
was in compliance with all covenants of the credit facility. At December 31,
1998, approximately $1,900,000 of retained earnings were free of restrictions
under the most restrictive of these covenants.
In March 1999, the facility was modified to increase the revolving working
capital portion borrowing limit to $35 million, and to change the criteria of
certain debt ratios imposed under the borrowing base and principal repayment
structure.
NOTE 10. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt are summarized as follows:
December 31,
------------------------
1998 1997
------- -------
LONG-TERM DEBT
Note payable to bank originated November
1998, bearing interest at the three-
month LIBOR plus an amount between 1.25%
and 2.50% (6.3% at December 31, 1998)
on $8,700,000, payable in monthly
installments of $145,000 principal
plus interest beginning May 1, 1999
and maturing April 1, 2004. $ 8,700,000 $ --
Note payable to bank originated December
1998, bearing interest at the three-month
LIBOR plus an amount between 1.25%
and 2.50% (6.3% at December 31, 1998)
on $4,300,000, payable in monthly
installments of $71,667 principal
plus interest beginning May 1, 1999
and maturing April 1, 2004. 4,300,000 --
Other -- 120,708
--------------- ------------
13,000,000 120,708
Less current maturities (1,733,333 (120,708)
--------------- ------------
Long-term debt, less
current maturities $ 11,266,667 --
=============== ============
Maturities on long-term debt are as follows:
1999 (included in current liabilities) $ 1,733,333
2000 2,600,000
2001 2,600,000
2002 2,600,000
2003 2,600,000
Thereafter 866,667
===============
$ 13,000,000
===============
F-15
<PAGE> 39
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 10. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
December 31,
------------------------
1998 1997
------- -------
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 then existing stockholders interest
only payable for five (5) years, principal
and any unpaid interest due at
maturity on June 30, 1998. $ -- $ 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 of the existing
stockholders, payable in five (5)
equal annual installments of principal
and interest, maturity October 1998. -- 45,579
Notes payable to then 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. -- 931,267
--------- ----------------
Total notes payable to
related parties $ -- $ 1,501,846
========= ================
Interest paid was $249,779 in 1998 and $62,227 in 1997.
NOTE 11. LEASES
The Company leases its buildings and office equipment under operating leases.
Certain buildings are leased from related parties of the Company. Terms of the
related party lease agreements are described in Note 17. Operating lease
expense was $256,755 in 1998 and $83,750 in 1997. Minimum lease payments under
noncancelable operating leases with remaining terms of more than one year are
as follows:
OPERATING LEASES
Future minimum lease payments
at December 1998 TO RELATED THIRD
PARTIES PARTIES
---------- --------
1999 $ 600,173 $ 440,935
2000 481,285 432,124
2001 482,125 432,124
2002 482,975 429,388
2003 346,432 425,000
Thereafter 1,784,825 --
----------- -------------
$ 4,177,815 $ 2,159,571
============ =============
F-16
<PAGE> 40
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 12. INCOME TAXES
Prior to the Reincorporation on May 28, 1998 (see Note 3), the Company had
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, prior to May 28, 1998, the Company was generally exempt from all
federal and state income taxes as stockholders of the Company were taxed on
corporate income. As a result of the Reincorporation, the Company terminated
its S Corporation election and became subject to federal and state income taxes
at the corporate level. Net deferred tax assets of approximately $40,000 were
established for temporary differences existing at the time of the termination
of the S Corporation election.
The components of the provision for income taxes are as follows:
1998
----
Current:
Federal $ 1,561,000
State 248,000
-----------
Total 1,809,000
-----------
Deferred:
Federal 4,000
State --
-----------
Total 4,000
-----------
$ 1,813,000
===========
The reconciliation of income tax computed at the federal statutory rate and the
actual income tax provision is as follows:
1998 1997
---- ----
Income taxes at federal statutory rate $ 2,300,000 $ 1,385,000
Effect of S Corporation earnings
taxed at stockholder level (657,000) (1,385,000)
State taxes, net of federal benefit 161,000 --
Other 9,000 --
----------- ------------
Actual provision for income taxes $ 1,813,000 $ --
=========== ============
Income taxes paid were $1,530,000 in 1998 and $0 in 1997.
F-17
<PAGE> 41
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 12. INCOME TAXES (CONTINUED)
Deferred income taxes reflect the net effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. Significant components of the net
deferred tax asset as of December 31, 1998 were as follows:
1998
----
Deferred tax assets:
Reserves against accounts receivable $ 85,000
--------
Deferred tax liabilities:
Depreciation 38,000
Other 11,000
--------
Total 49,000
--------
Net deferred tax asset $ 36,000
========
NOTE 13. EARNINGS PER SHARE
The computation of earnings per share, on a pro forma basis assuming the
Company was taxed as a Subchapter C Corporation for all periods presented, is
as follows:
1998 1997
---- ----
Pro forma net income as reported $ 4,194,058 $ 2,444,055
Weighted average shares outstanding <=>5,512,533 <=>4,100,000
---------- ----------
Pro forma basic earnings per share $0 .76 $0 .60
====== ======
The computation of pro forma diluted earnings per share is as follows:
1998 1997
---- ----
Pro forma net income as reported $ 4,194,058 $ 2,444,055
----------- -----------
Weighted average shares outstanding 5,512,533 4,100,000
Effect of dilutive securities:
Options 5,064 --
Warrants -- --
----------- -----------
Diluted weighted average
shares outstanding 5,517,597 4,100,000
------------ -----------
Pro forma earnings per share $ .76 $ .60
===== =====
F-18
<PAGE> 42
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 14. COMMITMENTS AND CONTINGENCIES
The Company has employment agreements with certain key executives. The terms
extend for periods of three to five years.
Although the Company has never had any product liability claims resulting from
failure of a spare part sold or repaired by it, 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.
NOTE 15. STOCK OPTION PLAN
In February 1998, the Company adopted the 1998 Omnibus Stock Option Plan (the
"Option Plan"). An aggregate of 450,000 shares of common stock are reserved for
issuance under the Option Plan. During 1998, the Company granted stock options
to individuals who are employees, directors or consultants of the Company
totaling 393,250 shares. The options have an exercise price ranging from $6.00
to $6.60 per share, with a weighted average exercise price of $6.18 per share.
Options for 89,400 shares having a weighted average exercise price of $6.00 per
share are vested as of December 31, 1998, with the remaining options vesting
over four years. The options have terms of between five and ten years. No
options were exercised during the year.
The Company applies APB Opinion 25 and related interpretations in accounting
for its Option Plan. Accordingly, no compensation expense has been recognized.
Had compensation expense been determined based on the fair value at the grant
dates for awards under the Option Plan consistent with the methodology of SFAS
No. 123, the Company's 1998 pro forma net income and earnings per share would
have been reduced to the amounts indicated below. No compensation expense would
be recognized related to the options issued to consultants as these options
represent an expense of the Offering and as such are accounted for as a
reduction of proceeds from the Offering.
BASED ON
AS REPORTED SFAS NO. 123
----------- ------------
Pro forma net income $4,194,057 $3,989,023
Pro forma basic earnings
per share $0.76 $0.72
Pro forma diluted earnings
per share $0.76 $0.72
For purposes of determining compensation expense under SFAS 123, the fair value
of each option is measured on the grant date using the Black-Scholes
option-pricing model with the following weighted-average assumptions for the
options granted in 1998: dividend yield of 0 percent; expected volatility of 55
percent; risk-free interest rate of 5.2 percent; and expected life of 7 years.
The weighted average fair value of options granted during 1998 was $3.65.
F-19
<PAGE> 43
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 16. EMPLOYEE BENEFIT PLANS
The Company has 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 $58,264 in 1998 and $63,261 in 1997 for
the profit sharing portion.
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, 1998 and 1997 were $23,374 and $16,266,
respectively.
NOTE 17. RELATED PARTY TRANSACTIONS
The Company leases several warehouse and MRO facilities from related parties
under leases expiring at various dates through 2008. Total rent expense under
these operating leases was $137,400 in 1998 and $81,230 in 1997. Minimum lease
payments are summarized in Note 11.
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 original former stockholder is a co-founder,
officer and director of USAC. The note bore an interest rate of 7%, payable in
five equal annual installments of principal and interest, with a maturity of
October 1, 1998. The note was secured by inventory and guaranteed by one
existing stockholder. Principal and interest paid on this note during each of
the period ended December 31, 1997 was $48,780. During 1998, the Company paid
the final payment of $48,780.
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 $36,788 and $76,959 in 1998 and
1997, respectively.
In July 1993, the Company borrowed $525,000 from an original former
stockholder. The note bore 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 was guaranteed by the other original stockholder. Interest expense
recognized was $7,875 and $31,500 in 1998 and 1997, respectively. The loan and
accrued interest was repaid from the proceeds of the initial public offering.
The Company had 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 bearing an annual interest rate of 8% were paid in full on
June 12, 1998. In December 1997, the Company made distributions to the
stockholders in 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 bearing
and annual interest rate of 8% were paid at maturity on April 15, 1998.
F-20
<PAGE> 44
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 17. RELATED PARTY TRANSACTIONS (CONTINUED)
The Company made investments of $50,000 in 1997 and $50,000 in 1996 in
nonpublic companies, were accounted for at cost. The investment made in 1997
was in a company in which a director is a principal. In conjunction with the
initial public offering, these two investments were included as part of the
distributions, in connection with the termination of the Company's
S-Corporation status, to the then existing common stockholders. The investments
were distributed at estimated fair value, which was equivalent to carrying
value, in lieu of an equal portion of cash.
In connection with the acquisition of Condor, the Company had outstanding
accounts payable to related parties of $53,700 at December 31, 1998. The
accounts payable were for amounts owed to the previous owners for certain
deposits which were made prior to the acquisition.
The Company incurred legal expenses of $315,892 in 1998 and $15,985 in 1997
from a law firm in which a director is a partner. A substantial portion of the
1998 expenditures were included as transaction costs relating to the public
offering and as acquisition cost relating to company acquisitions.
F-21
<PAGE> 1
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT signed the 8th day of February, 1999 to
be effective January 21, 1999 (the "Agreement") by and between AMERICAN
AIRCARRIERS SUPPORT, INCORPORATED, a Delaware corporation (the "Company") with
principal offices at Fort Mill, South Carolina and JOSEPH E. CIVILETTO (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 Operating Officer and
President. In addition, for so long as Executive is employed by Company, he
shall agree to serve and the Company shall nominate him to a position on the
Board of Directors.
2. Position and Responsibilities. The Executive shall exert his best
efforts and devote full time and attention to the affairs of the Company.
Generally, Executive shall be responsible for the general direction and
operations of the Company, including all subsidiaries; developing strategic
activities, mergers and acquisitions; investor relations; the ability to hire
and fire personnel; and all other activities attendant to the ones described
hereto. The Executive shall be directly supervised by the Chief Executive
Officer of the Company and shall have the authority and responsibility with
respect thereto subject to the general direction, approval and control of the
Board of Directors 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 February 8, 1999 and shall
continue until February 8, 2002, (the "Initial Term"), subject to extension as
hereinafter provided or termination pursuant to the provisions set forth
hereafter. The term of Executive's employment shall be automatically extended
for an additional one-year term upon expiration of the Initial Term unless
either party hereto receives 180 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 5 hereof, unless one of the termination
provisions overrides.
<PAGE> 2
4. 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 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.
5. Compensation. Commencing on February 8, 1999, the Company shall pay
to the Executive as compensation for his services the sum of $225,000.00 per
year, payable semi-monthly. Any increases shall be in the discretion of the
Compensation Committee which shall make an annual review of Executive's
compensation. Executive shall also be eligible for a bonus in the Company's
EBITDA Incentive Compensation Plan to be adopted by the Compensation Committee
for 1999 (the "Plan") in the form substantially similar to the draft previous
provided with the assistance of the Executive. However, for 1999 only, Executive
shall be guaranteed a minimum bonus under the Plan of at least fifty percent
(50%) of Executive's base salary. The Plan shall remain in effect after 1999 and
the Executive shall be entitled to receive annual bonuses under the Plan until
such time as a new bonus plan mutually acceptable to the Executive and the
Company is established.
Separately, Company shall grant Executive an option to purchase 200,000
shares of the Company's common stock under the 1998 Stock Option Plan at an
exercise price equal to the closing price of the stock on January 21, 1999
($9.625). The options shall vest as follows: 50,000 on date of grant and 50,000
at each anniversary of the Employment Agreement. A "triggering event" as defined
below, or the death or disability of the Executive, shall immediately accelerate
and vest all outstanding options. Any additional options in the future shall be
in the discretion of the Compensation Committee.
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 either (i) the Executive elects to terminate this agreement or
(ii) 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 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
<PAGE> 3
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 Return Act of 1986. If the Company fails to pay the sum calculated
hereunder pursuant to a triggering event then the noncompete set forth in
paragraph 11(c) shall be void.
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.
6. 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
him in carrying out his 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.
Since the Executive agrees to relocate to Charlotte, North Carolina,
the Company shall reimburse Executive for reasonable relocation costs including
moving expenses for personal possessions and house hunting as well as selling
expenses for selling his home in Weston, Florida, such reimbursement not to
exceed $37,500.00.
7. Medical and Dental Coverage. Commencing February 8, 1999, 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. Any other benefits offered to personnel in the Company similar
to Executive shall also be offered to Executive upon the same terms.
8. 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 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.
<PAGE> 4
9. Vacation Time. The Executive shall be entitled each year to three
(3) weeks 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.
10. 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 six (6) months of such
continuous disability commencing with the first date of such disability. In
replacement to the foregoing, the Company intends to provide group disability
insurance which will cover the Executive. If the Company has not obtained such
coverage within 120 days of the Executive's employment, then the Company will
reimburse the Executive for the cost of disability insurance which will provide
not less than 65% of salary as a benefit.
11. 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
and its affiliated companies. Therefore, during or subsequent to his
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 11(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> 5
(c) Because of his 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
one (1) year after termination (regardless of any longer severance
payments) or expiration of his employment, he will not, directly or
indirectly, compete with the Company in its then present aviation
business.
(d) In the event a court of competent jurisdiction finds any
provision of this Section 11 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.
(e) The Company acknowledges and agrees that during the term
of this Agreement, Executive may, in his discretion, engage in other
business and investment activities in addition to those contemplated by
this Agreement, so long as (a) such activities do not violate the terms
of the noncompete provisions of paragraph 11(c) hereof, and (b)
notwithstanding such activities, the Executive devotes such time and
attention to the affairs of the Company as is reasonably necessary to
discharge his duties under this Employment Agreement.
(f) Notwithstanding anything herein to the contrary, nothing
herein shall prohibit Executive, during the term hereof or during any
period as to which paragraph 11(c) applies, from owning interests in
any public company that engages in business competitive with the
Company if his ownership interest in such company does not exceed two
(2%) percent of any class of its capital stock.
12. 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.
<PAGE> 6
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 his employment;
(b) Habitual neglect of a material duty by the Executive;
(c) Fraud on the Company, conviction of a felony involving or
against the Company, or conviction of a crime of moral turpitude that
affects the integrity and name of the Company.
13. Termination by the Executive or the Company Without Cause;
Termination by Executive With 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 the
balance of the base salary payable over the term of the contract at
regular monthly installments unless the parties negotiate a mutually
acceptable discounted lump sum. No other benefits will be provided once
this Agreement is terminated. However, if a triggering event as defined
in paragraph 5 supra occurs within six (6) months of Executive's
termination without cause, Executive shall be paid the lump sum
compensation amount due under paragraph 5.
(c) The Executive may terminate this Agreement 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, or (ii) any material diminishment in the duties and
responsibilities, working facilities, or compensation as described in
paragraphs 1, 2, 4 and 5 of this Agreement. In the event of termination
of this Agreement by the Executive for cause, the Executive shall be
paid all base salary specified herein for the remaining term of this
Agreement. The provisions of paragraph 11(c) shall only apply so long
as Executive is receiving timely payment in accordance with the
bi-weekly payroll process.
<PAGE> 7
14. 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 one hundred eighty (180) days' salary to the Executive's estate.
15. 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,
Mecklenburg County, 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
North 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 North
Carolina having jurisdiction of the matter.
16. 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 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.
(f) 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
<PAGE> 8
employment with the Company terminates shall not reduce the amount owed
him by the Company pursuant to this Agreement.
(g) In the event of any proceeding regarding the enforcement
of any provision of this Agreement to which the Company and the
Executive are adverse parties, the losing party shall reimburse the
prevailing party for all cost and expenses, including attorneys' fees
and disbursements, incurred by the prevailing party in defense or
prosecution of any such proceeding.
17. 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.
18. 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.
19. 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.
20. Effective Date. This Agreement may be executed on the dates noted
below but shall only be effective on November 19, 1998.
FOR THE COMPANY: AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
Dated 2/8/99 By /s/ Karl Brown
----------------------- ------------------------
Title: Chairman and CEO
FOR THE EXECUTIVE:
Dated 2/8/99 /s/ Joseph E. Civiletto (SEAL)
----------------------- ------------------------
JOSEPH E. CIVILETTO
<PAGE> 1
MODIFICATION AND WAIVER AGREEMENT
THIS MODIFICATION AND WAIVER AGREEMENT (the "Agreement") is made and
entered into as of the ____ day of January, 1999 between AMERICAN AIRCARRIERS
SUPPORT, INCORPORATED (the "Borrower") and NATIONSBANK, N.A. (the "Bank").
STATEMENT OF PURPOSE
The Borrower and the Bank are parties to a Loan Agreement (the "Loan
Agreement") dated July 13, 1998. The Bank has agreed to amend the Loan Agreement
and to provide for a limited waiver of the Borrowing Base Agreement as provided
herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, each to the other, the parties do hereby
agree as follows:
1. Amendment of Loan Agreement.
(a) Section 2.A. is amended to increase the Bank's commitment
to make Working Capital Loans from $10,000,000 to $15,000,000 and to
provide that the obligation of the Borrower to repay the Working
Capital Loans shall be evidenced by the promissory note of the Borrower
in the form attached hereto as Exhibit A (the "Working Capital Note")
payable to the order of the Bank.
(b) Section 6.B. of the Loan Agreement is hereby amended by
deleting the same in its entirety and inserting in lieu thereof the
following:
Lease Expenditures. Incur new obligations for the
lease or purchase of real or personal property requiring
payments in any fiscal year in excess of an aggregate of
$250,000.
2. Waiver. The aircraft engine (the "leased engine") which is the
subject of the lease between Kellstrom and Vasp Airlines (the "Kellstrom
Lease"), which leased engine and Kellstrom Lease is to be acquired by the
Borrower, will be included in the Borrowing Base and not financed under a
separate term note, subject to review and approval by Bank of the Kellstrom
Lease. If the Borrower has not sold the leased engine and Kellstrom Lease by not
later than March 18, 1999, the Borrower shall promptly grant to the Bank a
security interest in the leased engine and an assignment of the Kellstrom Lease
as additional collateral for the obligations of the Borrower to the Bank under
the Loan Agreement, and failure to do so shall constitute an event of default
under the Loan Agreement.
3. Limited Amendment. This Agreement shall not be deemed (i) to be a
waiver of, or consent to, or a modification or amendment of, any other term or
condition of the Loan Agreement or (ii) to prejudice any right or rights which
the Bank may now have or may have in
<PAGE> 2
the future under or in connection with the Loan Agreement or any other loan
document or any of the instruments or agreements referred to therein, as the
same may be amended or modified from time to time.
4. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Bank as follows:
(a) The Borrower has no defenses, offsets or counterclaims
against the Bank relating to the Loan Agreement, as modified by this
Agreement; and
(b) The Borrower has full power and lawful authority to
execute and perform this Agreement.
5. Conditions to Effectiveness. The effectiveness of this Agreement is
subject to receipt by the Bank of the following documents:
(a) The favorable opinion of counsel to the Borrower,
addressed to the Bank, as to such matters incident to the transaction
contemplated by this Agreement and in such form as the Bank shall
reasonably require.
(b) A certified copy of resolutions duly adopted by the Board
of Directors of the Borrower authorizing the execution, delivery and
performance of this Agreement and the Working Capital Note, in form and
substance satisfactory to the Bank.
(c) This Agreement and the Working Capital Note, each duly
executed.
6. Definitions. All capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Loan
Agreement.
7. Conflict of Terms. In the event of a conflict between the terms of
this Agreement and the Loan Agreement, the terms of this Agreement shall govern.
8. Counterparts. This Agreement may be executed in separate
counterparts, and said counterparts taken together shall be deemed to constitute
one and the same instrument. An executed copy of this Agreement delivered by
telecopier shall be intended to have the same effect as an originally executed
copy of this Agreement.
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed and delivered by their duly authorized officers on the day and year
first above written.
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
By: /s/ Karl Brown
-----------------------------
Name: Karl Brown
----------------------
Title: CEO
----------------------
NATIONSBANK, N.A.
By: /s/ Paul Rehkow
-----------------------------
Name: Paul Rehkow
----------------------
Title: Vice President
----------------------
2
<PAGE> 3
Promissory Note
(Acquisition Loan)
<TABLE>
<S> <C> <C> <C>
Date: December 4, 1998 [X] New Amount $4,300,000 Maturity Date: February 1, 2004
</TABLE>
================================================================================
Bank: Borrower:
NationsBank, N.A.
Banking Center:
Metrolina Commercial Region American Aircarriers Support Incorporated
NationsBank Plaza A Delaware Corporation
NC1 002-05-10, Mecklenburg County 3516 Centre Circle Drive
Charlotte, NC 28255 Fort Mill, York County, SC 29715
================================================================================
FOR VALUE RECEIVED, the undersigned Borrower unconditionally 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 Three Hundred Thousand
Dollars ($4,300,000.00), 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.
1. Rate. The Rate per annum shall be the 90-day LIBOR (London Interbank Offered
Rate), determined on a daily basis, plus the Applicable Margin. The 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.
The initial Applicable Margin shall be 1.25% and shall be subject to adjustment
based on the ratio of Borrower's (x) Consolidated Senior Funded Debt plus
Subordinated Debt to (y) EBITDA (as defined and determined in accordance with
the Loan Agreement). The calculation and any change in the Applicable Margin
shall take place and be applicable as of the last day of the immediately
preceding fiscal quarter.
<TABLE>
<CAPTION>
Consolidated Senior
Level Funded Debt to EBITDA Applicable Margin
----- --------------------- ------------------------
<S> <C> <C> <C>
A >3.00 and =<3.50 250 Basis Points ("BPS")
B >2.50 and =<3.00 225 BPS
C >2.00 and =<2.50 200 BPS
D >1.50 and =<2.00 175 BPS
E >1.00 and =<1.50 150 BPS
F <1.00 125 BPS
</TABLE>
<PAGE> 4
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).
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.
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.
5. Principal Plus Accrued Interest. For the first three months of the term of
the Note, Borrower shall pay accrued interest only payable on the first day of
each month commencing on December 1, 1998 and continuing through February 1,
1999. Thereafter, principal shall be paid in sixty consecutive equal monthly
installments of $145,000 each, plus accrued interest, commencing on March 1,
1999, and continuing on the same day of each successive month thereafter, with a
final payment of all unpaid principal and accrued interest due on February 1,
2004. If , on any payment date, accrued interest exceeds the installment amount
set forth above, Borrower will also pay such excess as and when billed.
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 00000
180 2800. 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
2
<PAGE> 5
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, or 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 such amount as may be determined
reasonable by any arbitrator or court, whichever is applicable.
8. 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.
9. 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 death of any Obligor (if an
individual); (c) the resignation or withdrawal of any partner or a material
owner/guarantor of Borrower, as determined by Bank in its sole discretion; (d)
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; (e) 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; (f) 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; (g) 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; (h) the
entry of a judgment against any Obligor which Bank deems to be of a material
nature, in Bank's sole discretion; (i) 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; (j) the determination by Bank that a
material adverse change has occurred in the financial condition of any Obligor;
or (k) the failure of Borrower's business to comply with any law or regulation
controlling its operation.
3
<PAGE> 6
10. 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, Bank's Prime Rate plus 3% 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 this 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.
Upon a default under this Note, Bank is hereby authorized at any time, at its
option and without notice or demand, 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, 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.
11. 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 Obligors to Bank
in any other respect at any other time.
12. 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.
13. 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.
14. 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.
4
<PAGE> 7
15. Controlling Document. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
16. 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, OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL, IN
THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, 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
5
<PAGE> 8
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 OR ORAL AGREEMENTS BETWEEN THE PARTIES.
American Aircarriers Support Incorporated
By: Karl Brown
------------------------------
Name:
-------------------------
Title: CEO
-------------------------
- -------------------------------------------
Attest
[Corporate Seal]
6
<PAGE> 9
This Note amends and restates but does not extinguish the obligations under
the Promissory Note Dated as of July 13, 1998 from American Aircarriers
Support Incorporated to NationsBank, N.A.
Promissory Note
<TABLE>
<S> <C> <C> <C> <C>
Date: January __, 1999 [ ] New [X] Renewal Amount $ 15,000,000.00 Maturity Date: June 30, 2000
</TABLE>
================================================================================
Bank: Borrower:
NationsBank, N.A.
Banking Center:
Metrolina Commercial Region American Aircarriers Support, Incorporated
NationsBank Plaza A Delaware Corporation
NC1 002-05-10, Mecklenburg County 3516 Centre Circle Drive
Charlotte, NC 28255 Fort Mill, York County, SC 29715
================================================================================
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 Fifteen Million Dollars ($15,000,000.00), 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.
1. Rate. The Rate shall be the 90-day LIBOR (London Interbank Offered Rate),
plus 2 percent ("Applicable Margin"), per annum. The "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 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.
The Rate of the Loan shall also be subject to adjustment based on the Borrower's
Leverage ratio as defined under the Financial Covenants in the Loan Agreement.
The calculation and any change in the Applicable Margin shall take place and be
applicable as of the last day of the immediately preceding fiscal quarter.
<TABLE>
<CAPTION>
Level Senior Funded Debt to EBITDA Applicable Margin
----------- ---------------------------- ------------------------
<S> <C> <C>
A >3.00 and =<3.50 250 Basis Points ("BPS")
B >2.50 and =<3.00 225 BPS
C >2.00 and =<2.50 200 BPS
D >1.50 and =<2.00 175 BPS
E >1.00 and =<1.50 150 BPS
F <1.00 125 BPS
</TABLE>
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).
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.
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 June 30, 2000. Interest thereon shall be paid monthly, commencing on
February 1, 1999, and continuing on the same day of each successive month
thereafter, with a final payment of all unpaid interest at the stated maturity
of this Note.
5. Revolving Feature. 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
<PAGE> 10
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.
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, or 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 such amount as may be determined reasonable by any arbitrator or
court, whichever is applicable.
8. 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.
9. 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 death of any Obligor (if an
individual); (c) the resignation or withdrawal of any partner or a material
owner/guarantor of Borrower, as determined by Bank in its sole discretion; (d)
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; (e) 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; (f) 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; (g) 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; (h) the
entry of a judgment against any Obligor which Bank deems to be of a material
nature, in Bank's sole discretion; (i) 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; (j) the determination by Bank that a
material adverse change has occurred in the financial condition of any Obligor;
or (k) the failure of Borrower's business to comply with any law or regulation
controlling its operation.
10. 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, Prime plus 3% 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 this 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. Upon a default
under this Note, Bank is hereby authorized at any time, at its option and
without notice or demand, 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, 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.
11. 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
<PAGE> 11
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 Obligors to Bank
in any other respect at any other time.
12. 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.
13. 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.
14. 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.
15. Controlling Document. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
16. 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, OR IF THERE IS REAL OR PERSONAL PROPERTY COLLATERAL, IN
THE COUNTY WHERE SUCH REAL OR PERSONAL PROPERTY IS LOCATED, 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 OR ORAL AGREEMENTS BETWEEN THE PARTIES.
Corporate Borrower
American Aircarriers Support, Incorporated
By: Karl Brown
---------------------------
Name:
---------------------------
Title: CEO
---------------------------
- ---------------------------------------------------
Attest
[Corporate Seal]
<PAGE> 1
MODIFICATION AND WAIVER AGREEMENT
THIS MODIFICATION AND WAIVER AGREEMENT (the "Agreement") is made and
entered into as of the 3rd day of March, 1999 between AMERICAN AIRCARRIERS
SUPPORT, INCORPORATED (the "Borrower") and NATIONSBANK, N.A. (the "Bank").
STATEMENT OF PURPOSE
The Borrower and the Bank are parties to a Loan Agreement dated July
13, 1998 (as heretofore amended, the "Loan Agreement"). The Bank has agreed to
further amend the Loan Agreement as provided herein.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the parties hereto, each to the other, the parties do hereby
agree as follows:
1. Amendment of Loan Agreement.
(a) Section 1 of the Loan Agreement is amended by inserting the
following definitions in proper alphabetical order:
EBITDA. EBITDA means, for any period, (a) net income of the
Borrower for such period plus (b) the sum of the following, to the
extent deducted in the determination of net income: (i) interest
expense, (ii) income and franchise taxes and (iii) amortization,
depreciation and other non-cash charges (including amortization of good
will and other intangible assets), all determined in conformity with
GAAP.
Senior Funded Debt. Senior Funded Debt means, with respect to
the Borrower at any date and without duplication, the sum of the
following calculated in accordance with GAAP: (a) all liabilities,
obligations and indebtedness for borrowed money (other than
Subordinated Debt) including but not limited to obligations evidenced
by bonds, debentures, notes or other similar instruments of the
Borrower, (b) all obligations to pay the deferred purchase price of
property or services of the Borrower, except trade payables arising in
the ordinary course of business, (c) all obligations of the Borrower as
lessee under capital leases, (d) all indebtedness of any other Person
secured by a lien on any asset of the Borrower, (e) all contingent
obligations of the Borrower, (f) all obligations, contingent or
otherwise, of the Borrower relative to the face amount of letters of
credit, whether or not drawn, and banker's acceptances issued for the
account of the Borrower and (g) all obligations incurred by the
Borrower pursuant to Hedging Agreements.
<PAGE> 2
Subordinated Debt. Subordinated Debt means all indebtedness of
the Borrower, the repayment of which is subordinated to the obligations
of the Borrower under this Agreement in form and manner satisfactory to
the Bank.
(b) Section 5.A(i) is hereby amended by deleting the same in its
entirety and inserting in lieu thereof the following:
Maintain maximum Senior Funded Debt (determined on a
consolidated basis for the Borrower and its consolidated subsidiaries)
plus Subordinated Debt to trailing four quarters EBITDA of less than
4.0 to 1.0 at all times prior to June 1, 1999 and 3.50 to 1.0 at all
times thereafter.
2. Amendment of Acquisition Loan Notes. Commencement of the
amortization of the principal balance of the Borrower's Promissory Note dated
November 16, 1998 in the principal amount of $8,700,000 shall be deferred from
March 1, 1999 to May 1, 1999, and commencement of the amortization of the
principal balance of the Borrower's Promissory Note dated December 7, 1998 in
the principal amount of $4,300,000 shall be deferred from April 1, 1999 to June
1, 1999.
3. Limited Amendment. This Agreement shall not be deemed (i) to be a
waiver of, or consent to, or a modification or amendment of, any other term or
condition of the Loan Agreement or (ii) to prejudice any right or rights which
the Bank may now have or may have in the future under or in connection with the
Loan Agreement or any other loan document or any of the instruments or
agreements referred to therein, as the same may be amended or modified from time
to time.
4. Representations and Warranties of the Borrower. The Borrower
represents and warrants to the Bank as follows:
(a) The Borrower has no defenses, offsets or counterclaims
against the Bank relating to the Loan Agreement, as modified by this
Agreement; and
(b) The Borrower has full power and lawful authority to
execute and perform this Agreement.
5. Definitions. All capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to them in the Loan
Agreement.
6. Conflict of Terms. In the event of a conflict between the terms of
this Agreement and the Loan Agreement, the terms of this Agreement shall govern.
7. Counterparts. This Agreement may be executed in separate
counterparts, and said counterparts taken together shall be deemed to constitute
one and the same instrument. An executed copy of this Agreement delivered by
telecopier shall be intended to have the same effect as an originally executed
copy of this Agreement.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have caused this instrument to be
executed and delivered by their duly authorized officers on the day and year
first above written.
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
By: Karl Brown
-------------------------
Name:
----------------------
Title: CEO
----------------------
NATIONSBANK, N.A.
By: /s/ Paul Rehkow
-------------------------
Name:
----------------------
Title: Vice President
----------------------
3
<PAGE> 1
BASIC LEASE INFORMATION
LANDLORD: Crescent Resources, Inc.
400 South Tryon Street, Suite 1300 [zip code 28202]
P.O. Box 1003 [zip code 28201-1003]
Charlotte, North Carolina
Attention: Director of Property Management
TENANT: American Aircarriers Support, Inc.
-------------------------------------------
-------------------------------------------
LEASE
EXECUTION DATE: November _6, 1998
ADDRESS OF
PREMISES: 587 Greenway Industrial Drive
Lakemont Business Park
Fort Mill, South Carolina 29715
PREMISES: Approximately 121,767 gross square feet of space in
the Building, of which 15,000 square feet is office
space and 106,767 square feet is warehouse space.
BUILDING: That certain building in the Center located at 587
Greenway Industrial Drive, in the City of Fort Mill,
South Carolina, and located on that certain tract of
land that is more particularly described and shown on
Exhibit A hereto (the "Land").
CENTER: That certain complex of land and buildings, including
the Land and the Building, and designated by Landlord
as "Lakemont Business Park"
TENANT OPERATIONS: The Premises shall be used only for office purposes
and the purposes of warehousing and distributing
aircraft parts.
LEASE TERM: The period commencing on the Lease Execution Date and
ending on the Expiration Date.
OPTION TO RENEW: One (1) five (5) year option to renew and extend the
Lease Term upon the terms and conditions stipulated
in Paragraph 2 herein.
OPTION TO PURCHASE: Upon terms and conditions stipulated in Exhibit E
hereto.
OCCUPANCY DATE: Approximately November 1, 1998, as same may be
extended pursuant to Paragraph 3 herein.
RENT
COMMENCEMENT
DATE: Payment of Minimum Rental shall commence on April 15,
1999 to allow Tenant sufficient opportunity to make
necessary tenant improvements and fully occupy the
Premises; however, Tenant shall be responsible for
Tenant's Proportionate Share of taxes, insurance and
common area maintenance expenses commencing January
1, 1999.
EXPIRATION DATE: December 31, 2003
<PAGE> 2
ESTIMATED INITIAL
ANNUAL RENTAL: Minimum Rental (Annual)*: $347,035.95
Tenant's Estimated Proportionate
Share of Taxes: $ 51,142.14
Tenant's Estimated Proportionate
Share of Insurance: $ 2,435.34
Tenant's Estimated Proportionate
Share of Common
Area Maintenance Costs: $ 24,353.40
Total Estimated Annual Rental: $424,966.83
* Minimum Rental shall be adjusted in accordance with Paragraph 4(a) herein.
SECURITY DEPOSIT: $28,919.66
ADVANCE RENTAL
PAYMENT**: None.
BROKER: Dave Fuller & Associates (Agent: T.W. Aldred)
1700 Abbey Place
Charlotte, NC 28209
LANDLORD'S INITIALS: ___FAB_______________
TENANT'S INITIALS: _____KB_____________
<PAGE> 3
TABLE OF CONTENTS
Page
----
1. Description of Premises; Purpose....................................1
2. Lease Term..........................................................1
3. Construction and Acceptance of Premises.............................1
4. Annual Rental.......................................................2
5. Alterations and Improvements by Tenant..............................4
6. Use of Premises.....................................................5
7. Taxes...............................................................5
8. Fire and Extended Coverage Insurance................................5
9. Landlord's Limited Covenant to Repair and Replace...................5
10. Tenant's Covenant to Repair.........................................6
11. Trade Fixtures and Equipment; Non-Liability for Certain Damages.....6
12. Utilities...........................................................7
13. Damage or Destruction of Premises...................................7
14. Mutual Waiver; Waiver of Subrogation................................7
15. Signs and Advertising...............................................8
16. Indemnification, Liability Insurance and Hazardous Substances.......8
17. Landlord's Right of Entry..........................................10
18. Eminent Domain.....................................................10
19. Events of Default and Landlord's Remedies..........................10
20. Subordination......................................................11
21. Assigning and Subletting...........................................12
22. Covenant of Quiet Enjoyment........................................12
23. Estoppel Certificates..............................................12
24. Protection Against Liens...........................................12
25. Force Majeure......................................................13
26. Nonwaiver..........................................................13
27. Landlord Liability.................................................13
28. Holding Over.......................................................13
29. Notices............................................................13
30. Miscellaneous......................................................14
Exhibit A - Legal Description
Exhibit B - Building Plan and Designation of Premises
Exhibit C - Description of Upfitting Work
Exhibit D - Rules and Regulations
Exhibit E - Additional Terms and Provisions
3
<PAGE> 4
[The provisions of the Basic Lease Information are hereby incorporated into and
made a part of this Lease].
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the
Lease Execution Date by and between
CRESCENT RESOURCES, INC.,
a South Carolina corporation,
hereinafter called "Landlord"; and
American Aircarriers Support, Inc.
a ____________________________________ corporation,
hereinafter called "Tenant";
W I T N E S S E T H:
In consideration of the mutual covenants and agreements contained
herein, the parties agree for themselves, their successors, and assigns, as
follows:
1. Description of Premises; Purpose. Landlord hereby leases to Tenant,
and Tenant hereby accepts and rents from Landlord, the Premises located in the
Building (as those terms are defined in the Basic Lease Information), together
with the nonexclusive right to use all parking areas, driveways, sidewalks and
other common facilities furnished by Landlord from time to time in the Building
or on the Land for the common use of tenants in the Building. The Premises are
designated on the building plan attached hereto as Exhibit B. Tenant shall use
the Premises for its Tenant Operations only and for no other purpose.
2. Lease Term. The term of this Lease (the "Lease Term") shall commence
on the Lease Execution Date and shall end at midnight on the Expiration Date,
unless extended by the exercise of the following option to renew. Tenant is
hereby granted an option to renew and extend the Lease Term for one (1)
additional period of five (5) years (the "Renewal Term") commencing on the
initial Expiration Date. Tenant may exercise its option to renew only if it is
not in default hereunder and only by giving Landlord written notice of such
exercise not less than one hundred eighty (180) days prior to the initial
Expiration Date. The foregoing renewal rights may be execised only by the
original Tenant and shall not inure to the benefit of any assignee, subtenant or
other transferee of the original Tenant. All of the terms and conditions hereof
shall apply during the Renewal Term except that (i) Tenant shall have no further
right to renew this Lease beyond the Renewal Term and (ii) Landlord shall have
no obligation to perform any work or improvements in or in respect of the
Premises.
3. Construction and Acceptance of Premises.
(a) Landlord shall proceed to construct improvements upon the Premises
in compliance with the "Description of Landlord's Work" in Exhibit C attached
hereto, with such minor variations as Landlord may deem advisable, and shall
tender the Premises to Tenant. The Premises shall be deemed to be "Ready for
Occupancy" when Landlord has substantially completed Landlord's Work, as
described in Exhibit C and obtained a Certificate of Occupancy from the
appropriate governmental authority. If the Premises are not Ready for Occupancy
prior to the Occupancy Date that is set forth in the Basic Lease Information,
Landlord shall not be deemed to be in default hereunder or otherwise liable in
damages to Tenant, nor shall the Lease Term be affected (other than as set forth
in Paragraph 3(c) herein), except that if for any reason (other than delays
caused by Tenant and Tenant's agents, employees, contractors, subcontractors or
licensees (collectively, "Tenant Delay Factors"), including, without limitation,
change orders requested by Tenant relative to the Description of Landlord's
Work) the Premises are not Ready for Occupancy within six (6) months following
the Occupancy Date that is set forth in the Basic Lease Information (provided
such six-(6) month period shall be extended relative to any delays
4
<PAGE> 5
in getting the Premises Ready for Occupancy resulting from Force Majeure
Matters, as defined herein), Tenant may, at its option, terminate this Lease by
written notice to Landlord delivered within thirty (30) days following the
expiration of such six-(6) month period, in which event neither party shall have
any further liabilities or obligations hereunder, except Landlord shall repay to
Tenant any prepaid rent (including the Advance Rental Payment, as defined
herein) or Security Deposit (as defined herein) and all indemnification
obligations herein shall survive such termination. Time is of the essence
relative to Tenant's right to terminate this Lease pursuant to this Paragraph
3(a). When the Premises are Ready for Occupancy, Tenant agrees to accept
possession thereof By accepting possession of the Premises, Tenant shall be
deemed to have accepted the same and to have acknowledged that the same fully
comply with Landlord's covenants and obligations hereunder. Tenant further
agrees that, if requested by Landlord, Tenant will furnish Landlord with a
written statement that Tenant has accepted the Premises and that Landlord has
fully complied with Landlord's covenants and obligations hereunder.
(b) If any Tenant Work is specified in Exhibit C, Tenant agrees to
proceed with due diligence to perform the work described under "Description of
Tenant's Work" in Exhibit C, all of such work to be performed in a good and
workmanlike manner, using new materials, in accordance with plans and
specifications approved by Landlord and in compliance with Exhibit C, and to
install Tenant's fixtures, furniture and equipment in the Premises. Any Tenant
Work or any other work in or with respect to the Premises performed by Tenant in
the future causing venting, opening, sealing, waterproofing or any altering of
the roof of the Building shall be performed by Landlord's roofing contractor at
Tenant's expense. Tenant shall provide Landlord with a certificate from
Landlord's roofing contractor that all such work causing venting, opening,
sealing, waterproofing or in any way altering the roof of the Building has been
performed properly. Tenant hereby holds Landlord harmless from any damage to the
Premises resulting, directly or indirectly, from Tenant's venting, opening,
sealing, waterproofing or in any other way altering the roof of the Building
unless such a certificate from Landlord's roofing contractor was delivered to
Landlord contemporaneously with the completion of such work. In the event of any
dispute as to work performed or required to be performed by Landlord or Tenant,
the certificate of Landlord's architect or engineer shall be conclusive.
(c) In the event the Premises shall be Ready for Occupancy (as defined
in Paragraph 3(a) herein) prior to the Occupancy Date that is set forth in the
Basic Lease Information, the Occupancy Date shall be the earlier of (i) the date
that is set forth as the Occupancy Date in the Basic Lease Information or (ii)
the date that Tenant occupies the Premises. In the event of a delay in the
completion of Landlord's Work beyond the Occupancy Date that is set forth in the
Basic Lease Information (as contemplated in Paragraph 3(a) herein), the term
"Occupancy Date" herein shall automatically be modified to become the actual
date the Premises shall become Ready for Occupancy and the Expiration Date shall
automatically be modified on a consistent basis (i.e., to afford the full Lease
Term, as defined in the Basic Lease Information). Provided, however, and
notwithstanding the foregoing terms and provisions to the contrary, if and to
the extent the Premises are not Ready for Occupancy on or before the Occupancy
Date set forth in the Basic Lease Information as a result of one or more Tenant
Delay Factors, there shall be no adjustment in the Occupancy Date and the
Expiration Date that are set forth in the Basic Lease Information.
4. Annual Rental. From and after January 1, 1999, and during the full
Lease Term (as the same may be extended), Tenant shall pay to Landlord, without
notice, demand, reduction, setoff or any defense, a total annual rental (the
"Annual Rental") consisting of the sum total of the Minimum Rental and Tenant's
Proportionate Share (as said terms are defined herein) of taxes, insurance
premiums and common area maintenance costs (provided, however, as set forth in
the Basic Lease Information, payment of Minimum Rental shall not commence until
the Rent Commencement Date).
(a) Minimum Rental. For the period from the Rent Commencement Date
through the Expiration Date, as the same may be extended pursuant to Paragraph
2, Tenant shall pay a minimum rental (the "Minimum Rental") at the annual rates
set forth below, in equal monthly installments, in advance on the Rent
Commencement Date and on the first day of each month thereafter during the
remainder of the Lease Term. Minimum Rental for any parital calendar month shall
be prorated on a per diem basis.
5
<PAGE> 6
(i) From April 15, 1999, (the Rent Commencement Date) through
December 31, 2000, Tenant shall pay Minimum Rental at the annual rate of Three
Hundred Forty-Seven Thousand Thirty-Five and 95/00 Dollars ($347,035.95), in
equal monthly installments of Twenty-Eight Thousand Nine Hundred Nineteen
Thousand and 66/100 Dollars ($28,919.66) each.
(ii) From January 1, 2001, through December 31, 2002, Tenant
shall pay Minimum Rental at the annual rate of Three Hundred Sixty-One Thousand
Six Hundred Forty-Seven and 99/100 Dollars ($361,647.99), in equal monthly
installments of Thirty Thousand One Hundred Thirty-Seven and 33/100 Dollars
($30,127.33) each.
(iii) From January 1, 2003, through December 31, 2003, Tenant
shall pay Minimum Rental at the annual rate of Three Hundred Seventy-Five
Thousand Forty-Two and 36/100 Dollars ($375,042.36), in equal monthly
installments of Thirty-One Thousand Two Hundred Fifty-Three and 53/100 Dollars
($31,253.53) each.
(iv) During the first year of the Renewal Term (from January
1, 2004, through December 31, 2004), if any, Tenant shall pay Minimum Rental at
the annual rate of Three Hundred Eighty-Two Thousand Three Hundred Forty-Eight
and 38/100 Dollars ($382,348.38), in equal monthly installments of Thirty-One
Thousand Eight Hundred Sixty-Two and 37/100 Dollars ($31,862.37) each.
(v) On January 1, 2005, and on January 1 of each successive
calendar year during the Renewal Term, if any, the Minimum Rental shall be
increased by two percent (2%) of the Minimum Rental payable during the next
preceding calendar year.
(b) [Intentionally deleted].
(c) Tenant's Proportionate Share. "Tenant's Proportionate Share" of the
taxes, of the insurance premiums and of common area maintenance costs (including
any assessment by a property owner's association), as described herein, shall be
determined by multiplying each such amount by a fraction, the numerator of which
is the total square footage of space in the Premises and the denominator of
which is the total square footage of space in the Building.
(1) Tenant's Proportionate Share of Taxes. Tenant shall pay an
amount equal to Tenant's Proportionate Share of any ad valorem taxes
(or any tax hereafter imposed in lieu thereof) payable for the Building
relative to the Lease Term. Tenant's Proportionate Share of taxes shall
be paid as provided in Paragraph 4(d) herein. Anything contained herein
to the contrary notwithstanding, any increase in ad valorem taxes on
the Premises as a result of alterations, additions or improvements made
by, for or on account of Tenant shall be reimbursed entirely by Tenant
to Landlord (as additional rent hereunder) within thirty (30) days
after Tenant's receipt of written demand therefor.
(2) Tenant's Proportionate Share of Insurance Premiums. Tenant
shall pay an amount equal to Tenant's Proportionate Share of any amount
of premiums charged for fire and extended coverage and liability
insurance, together with all endorsements thereto, carried by Landlord
on the Building relative to the Lease Term. Tenant's Proportionate
Share of insurance premiums shall be paid as provided in Paragraph 4(d)
herein.
(3) Tenant's Proportionate Share of Common Area Maintenance
Costs. Tenant shall pay an amount equal to Tenant's Proportionate Share
of the costs of maintaining the Building's common areas (as designated
from time to time by Landlord for the common use of tenants of the
Building) relative to the Lease Term. Common area maintenance costs
shall include, but are not limited to, the cost of grass mowing, shrub
care and general landscaping (including irrigation); the cost of
repairing, replacing and maintaining parking areas, driveways,
sidewalks, exterior lighting, common plumbing, common advertising signs
and other facilities operated with respect to the Building; the cost of
providing security for the Building and the Land; the cost of providing
fire alarm monitoring for the Building; and property management fees
and expenses. Additionally, if a property owner's association is
established for the maintenance of the common areas
6
<PAGE> 7
of the Center, any property owner's association charges allocated to
the Land and the Building shall be included in the maintenance costs
for the Land and the Building, and Tenant shall pay Tenant's
Proportionate Share thereof. Tenant's Proportionate Share of common
area maintenance costs shall be paid as provided in Paragraph 4(d)
herein. Landlord shall use good faith efforts to keep the operating and
maintenance costs in line with costs for other similarly situated first
class centers. Tenant, at its expense, shall provide its own garbage
collection, recycling and disposal.
(d) Payment of Tenant's Proportionate Share. The estimated amounts of
Tenant's Proportionate Share for taxes, insurance premiums and common area
maintenance costs for the calendar year in which the Rent Commencement Date
(i.e., the Rent Commencement Date that is set forth in the Basic Lease
Information) falls are set forth in the Basic Lease Information. For each
succeeding calendar year during the Lease Term, Landlord shall submit an
estimate of Tenant's Proportionate Share for taxes, insurance premiums and
common area maintenance costs on or before April 1 of each such succeeding
calendar year. If an estimate of Tenant's Proportionate Share of expenses for
any calendar year during the Lease Term has not been submitted on or before the
first day of any month in such calendar year, Tenant shall pay Tenant's
Proportionate Share for such month(s) at the estimated rate for the previous
calendar year, and such payment(s) shall be adjusted effective as of January 1
of such calendar year at such time as the estimate for such calendar year is
submitted, at which time the deficiency or overage (as the case may be) in the
estimated payments for the preceding months in such calendar year also shall be
collected or credited (as the case may be). Landlord shall charge, and Tenant
shall pay, the estimated Tenant's Proportionate Share of expenses on a monthly
basis or on some other periodic basis established by Landlord, payable in
advance and subject to adjustment after the end of the respective calendar year
on the basis of the actual costs incurred for such calendar year. Tenant's
Proportionate Share of estimated taxes, insurance premiums and common area
maintenance costs shall be paid in a like manner, with the monthly rental
installments being adjusted accordingly. In the event such costs actually
decrease for any such calendar year, Landlord shall reimburse Tenant for any
overage paid and the monthly rental installments for the next period shall be
reduced accordingly (but in no event below the then-current Minimum Rental).
Upon the Expiration Date of this Lease, Landlord may elect to either (i) require
Tenant to pay any unpaid estimated Tenant's Proportionate Share within thirty
(30) days after the Expiration Date, which estimate shall be made by Landlord
based upon actual and estimated costs for such year, or (ii) elect to withhold
Tenant's Security Deposit until the exact amount of Tenant's Proportionate Share
shall have been determined and paid, after which Landlord shall return any
excess Security Deposit to Tenant.
(e) Late Charge. If Tenant should fail to pay to Landlord when due any
installment of Annual Rental or other sum to be paid hereunder, Tenant shall pay
Landlord on demand a late charge of four percent (4%) of the amount due. Failure
to pay such late charge upon demand therefor shall be an Event of Default (as
defined herein) hereunder. Provision for such late charge shall be in addition
to all other rights and remedies available to Landlord hereunder or at law or in
equity and shall not be construed as liquidated damages or as limiting
Landlord's remedies in any manner, and such late charge shall accrue
automatically, regardless of whether Landlord shall have given Tenant written
notice of any such delay in payment.
5. Alterations and Improvements by Tenant. Any structural changes or
other material alterations, additions, or improvements made to the Premises by
Tenant shall be subject to the prior written consent of Landlord and shall be at
the sole cost and expense of Tenant. All such alterations, additions or
improvements shall be constructed in a good and workmanlike manner, using new
materials, in accordance with plans and specifications approved by Landlord and
in compliance with the terms of Paragraph 3(b) herein and all Applicable Laws.
As used herein, "Applicable Laws" shall mean all laws, ordinances (including
Fire and Building Codes), regulations, orders, interpretations and zoning
requirements of any governmental authority, agency or other public or private
regulatory authority (including insurance underwriters or rating bureaus) which
may be in effect from time to time and relating to the Tenant Operations, the
Premises or Tenant's business conducted therein. Additionally, Tenant covenants
and agrees that no improvements, changes, alterations, additions, maintenance or
repairs shall be made by Tenant to the Premises which might impair the
structural soundness of the Building, which might result in
7
<PAGE> 8
an overload of the weight capacity of floors in the Building, which might result
in an overload of capacity of electric lines serving the Building, or which
might interfere with electric or electronic equipment in the Building or on any
adjacent or nearby property. Upon the expiration or earlier termination of this
Lease, all alterations, additions or improvements, including, without
limitation, all walls, railings, carpeting, floor and wall coverings and other
permanent real estate fixtures (excluding, however, Tenant's trade fixtures and
equipment, as described in Paragraph 11 herein) made by, for, or at the
direction of Tenant, and upon the election of Landlord, shall either: (i) become
the property of Landlord and remain upon the Premises or (ii) be removed from
the Premises by Tenant, at Tenant's sole cost and expense.
6. Use of Premises. Tenant shall use the Premises only for the Tenant
Operations and for no other purpose and shall comply with all Applicable Laws in
connection with the use of the Premises. Tenant shall be responsible for any and
all costs and expenses associated with Tenant's compliance with all Applicable
Laws, including the cost of altering the Premises to comply with Applicable Laws
(including changes therein from time to time). Without limiting the generality
of the foregoing, Tenant shall be responsible, at Tenant's expense, for all
costs of complying with the requirements of the Americans With Disabilities Act
(as amended) (the "ADA"), including costs for alterations, (i) relative to the
Premises and, (ii) to the extent such compliance is required as a result of the
specific use made by Tenant of the Premises, relative to the exterior and common
areas and facilities of the Building. Landlord shall be responsible for
complying with the requirements of the ADA relative to the exterior and common
areas and facilities of the Building in all instances other than where such
compliance is required as a result of the specific use made of space in the
Building by any tenant in the Building. Additionally, Tenant covenants and
agrees that nothing shall be done or kept in the Premises which might result in
an overload of the weight capacity of floors in the Building, which might result
in an overload of capacity of electric lines serving the Building, or which
might interfere with electric or electronic equipment in the Building or on any
adjacent or nearby property. Tenant shall not do any act or follow any practice
relating to the Premises which shall constitute a nuisance or detract in any way
from the reputation of the Center as a first class real estate development.
Tenant's duties in this regard shall include allowing no noxious or offensive
odors, fumes, gases, smoke, dust, steam or vapors, or any loud or disturbing
noise or vibrations to originate in or emit from the Premises. If, within thirty
(30) days of demand therefor by Landlord, Tenant fails, at its expense, to make
any alterations required to be made by Tenant pursuant to this paragraph, then
Landlord shall have the right to make such alterations (including any entry
required in the Premises to make such alterations), and Tenant shall pay to
Landlord (as additional rent hereunder) all costs and expenses incurred by
Landlord relative to such alterations; and such additional rent shall be paid by
Tenant to Landlord within thirty (30) days after demand therefor by Landlord.
Additionally, Tenant shall save Landlord harmless from any penalties, fines,
costs, expenses or damages resulting from Tenant's failure to comply with the
terms and requirements of this paragraph.
7. Taxes. Tenant shall pay in a timely manner and prior to delinquency
any taxes or assessments of any nature imposed or assessed upon its trade
fixtures, equipment, machinery, inventory, merchandise or other personal
property located on the Premises and owned by or in the custody of Tenant.
Landlord shall pay all ad valorem property taxes which are now or hereafter
assessed upon the Center, the Building and the Premises, except as otherwise
expressly provided in this Lease.
8. Fire and Extended Coverage Insurance. Landlord shall maintain and
pay for fire insurance, with extended coverage, covering the Building equal to
ninety percent (90%) of the insurable value thereof (i.e., the replacement cost,
less depreciation). Provided, however, if Tenant uses the Premises for any
purpose or in any manner which causes an increase in Landlord's insurance rates,
Tenant shall pay such additional insurance premium (in addition to all other
payments due under this Lease) to Landlord as additional rent within thirty (30)
days after demand from Landlord. Tenant shall maintain and pay for all fire and
extended coverage insurance on its contents in the Premises, including trade
fixtures, equipment, machinery, merchandise or other personal property belonging
to or in the custody of Tenant.
9. Landlord's Limited Covenant to Repair and Replace. During the Lease
Term, Landlord shall be responsible for repairs or replacements to the roof,
exterior walls and structural members, including foundation and subflooring of
the Premises (except office fronts, plate glass
8
<PAGE> 9
windows, doors, door closure devices, window and door frames, nailing, locks and
hardware and painting or other treatment of interior and exterior walls, and
except for any repairs and replacements necessitated by an "Event of Tenant
Misconduct" as defined in Paragraph 16(a) herein). Landlord's efforts to repair
and replace pursuant to this paragraph shall be made within a reasonable time
after written notice from Tenant of the need for such repair or replacement to
be made. Without limiting the generality of the foregoing, with respect
particularly to any Emergency Repair, Landlord shall be obligated to commence
repair efforts within five (5) days of its receipt of notice from Tenant of the
need for such Emergency Repair and diligently prosecute such Emergency Repair to
completion ("Landlord's Emergency Repair Obligation"). As used herein,
"Emergency Repair" shall mean any repair which, if made, would cure a condition
having a significant adverse effect on Tenant's operations in the Premises. With
respect to latent or patent defects in the Premises or in the Building,
Landlord's liability shall not extend beyond one year from the date of
substantial completion of the construction of the improvements specified in the
Description of Landlord's Work set forth in Exhibit C hereto, whether or not
such defects are discovered within such one-year period. If Landlord cannot,
using due diligence, complete its repairs and replacements within two hundred
ten (210) days after written notice from Tenant and if the resulting condition
renders a material portion of the Premises untenantable for the Tenant
Operations, then, following the expiration of such two-hundred-ten- (210) day
period and continuing until such time as the repair or replacement is completed
(or is completed sufficiently so as to not render a material portion of the
Premises untenantable for the Tenant Operations), either party may terminate
this Lease effective upon thirty (30) days prior written notice, without
prejudice to Landlord's rights to receive payment from Tenant for uninsured
damages caused directly or indirectly by Tenant as stated below. If the cause of
such repairs or replacements is the result of an Event of Tenant Misconduct,
then Tenant shall not be entitled to terminate this Lease pursuant to this
paragraph, and Tenant shall pay Landlord the full amount of such cost, damage,
and expense (except as otherwise provided in Paragraph 14 herein). Furthermore,
in the event Landlord diligently pursues the completion of the required repairs
and replacements during the two-hundred-ten- (210) day period provided above but
is unable to complete such repairs and replacements prior to the expiration of
such period, such two-hundred-ten- (210) day period shall be extended for all
purposes under this paragraph (including Tenant's termination right) for such
additional, reasonable period of time as is necessary to allow Landlord to
complete such repair or replacement (provided Landlord must continue to pursue
the completion of such repair or replacement in a diligent manner). Landlord's
duty to repair or replace as prescribed in this paragraph shall be Tenant's sole
remedy and shall be in lieu of all other warranties or guaranties of Landlord,
express or implied. Furthermore, the terms of this paragraph shall have no
application to casualty events and exercises of the power of eminent domain that
affect the Building or the Land, which shall be governed by the terms and
provisions in Paragraph 13 herein and Paragraph 18 herein, respectively.
10. Tenant's Covenant to Repair. Tenant shall be responsible for the
repair, replacement and maintenance in good order and condition of all parts and
components of the Premises, other than those specified for maintenance by
Landlord herein, including, without limitation, the plumbing, wiring, electrical
system, heating system, air conditioning system, glass and plate glass,
equipment and machinery constituting fixtures located within the Premises and
shall keep all plumbing units, pipes and connections free from obstruction and
protected against ice and freezing. At the end of the Lease Term, Tenant shall
return the Premises to Landlord in as good a condition as existed at the time
all of the Landlord's Work and all of the Tenant's Work (if any) was completed
pursuant to Paragraph 3 herein, excepting only normal wear and tear, acts of God
and repairs required to be made by Landlord hereunder. Tenant's duty to maintain
the heating and air conditioning system serving the Premises shall specifically
include the duty to inspect the system, to replace filters as recommended and to
perform other recommended periodic servicing. During the entire Lease Term,
Tenant shall obtain and maintain a service contract with an independent
maintenance contractor reasonably satisfactory to Landlord to provide such
service for the heating and air conditioning system. The service contract must
include all services suggested by the applicable equipment manufacturer(s) in
the operation and maintenance manual(s) and must become effective on the
Occupancy Date. If any repairs required to be made by Tenant hereunder are not
made within thirty (30) days after written notice delivered to Tenant by
Landlord (provided no advance written notice shall be required in cases of
emergency), Landlord may, at its option, make such repairs without liability
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to Tenant for any loss or damage which may result to Tenant's stock or business
by reason of such repairs, and Tenant shall pay to Landlord immediately upon
demand, as additional rental hereunder, the cost of such repairs plus ten
percent (10%) of the amount thereof, and failure to do so shall constitute an
Event of Default hereunder.
11. Trade Fixtures and Equipment; Non-Liability for Certain Damages.
(a) So long as Tenant is not in default under this Lease, any trade
fixtures and equipment installed in the Premises at Tenant's expense shall
remain Tenant's personal property, and Tenant shall have the right at any time
during the Lease Term to remove such fixtures and equipment. Upon removal of any
fixtures or equipment, Tenant shall immediately restore the Premises to
substantially the same condition as existed at the time all of the Landlord's
Work and all of the Tenant's Work (if any) was completed pursuant to Paragraph 3
herein, ordinary wear and tear and acts of God alone excepted. Any trade
fixtures and equipment not removed by Tenant at the expiration or an earlier
termination of this Lease shall, at Landlord's option, either: (i) become the
property of Landlord or (ii) be removed by Landlord, at Tenant's expense.
(b) Landlord and Landlord's agents and employees shall not be liable to
Tenant or any other person or entity whomsoever for any injury to person or
damage to property caused by the Premises or other portions of the Center
becoming out of repair or by defect in or failure of equipment, pipes or wiring,
or broken glass, or by the backing up of drains, or by gas, water, steam,
electricity or oil leaking, escaping or flowing into the Premises, nor shall
Landlord be liable to Tenant or any other person or entity whomsoever for any
loss or damage that may be occasioned by or through the acts or omissions of
other tenants of the Center or of any other persons or entities whomsoever,
excepting only duly authorized employees and agents of Landlord. Landlord shall
not be liable to Tenant for any compensation, damages or reduction of rent by
reason of inconvenience or annoyance or loss of business arising from power
losses or shortages or from the necessity of Landlord's entering the Premises
for any of the purposes authorized in this Lease or for repairing the Premises.
Landlord's liability with respect to any defects, repairs or maintenance for
which Landlord is responsible under any provision of this Lease shall be limited
to the cost of such repairs or maintenance or the curing of such defect. Tenant
shall indemnify and hold Landlord harmless from and against any loss, cost,
expense or claims arising out of such injury or damage referred to in this
paragraph.
12. Utilities. Tenant shall pay in a timely manner and prior to
delinquency for all utilities or services related to its use of the Premises,
including electricity, gas, heat, sewer, water, telephone and janitorial
services. Landlord shall not be responsible for the stoppage or interruption of
utilities services, other than as required by its limited covenant to repair and
replace set forth herein.
13. Damage or Destruction of Premises. If the Building is so damaged by
fire or other casualty that substantial alteration or reconstruction of the
Building shall be required (whether or not the Premises shall have been damaged
by such casualty) or in the event any mortgagee of Landlord should require that
all or any portion of the insurance proceeds payable as a result of a casualty
be applied to the payment of the underlying mortgage debt, Landlord may, at its
option, terminate this Lease by notifying Tenant in writing of such termination
within sixty (60) days after the date the casualty event occurs. If the Premises
are damaged by fire or other casualty but are not rendered untenantable for
Tenant's business, either in whole or in part, and if Landlord does not
terminate this Lease pursuant to the immediately preceding sentence, Landlord
shall cause such damage to be repaired (to the extent of Landlord's Work)
without unreasonable delay and the Annual Rental shall not be abated. If by
reason of such casualty, the Premises are rendered untenantable for Tenant's
business, either in whole or in part, and Landlord does not terminate this Lease
as provided in the first sentence above in this Paragraph 13, Landlord shall
cause the damage to be repaired or replaced (to the extent of Landlord's Work)
without unreasonable delay, and in the interim, the Annual Rental shall be
equitably reduced as to such portion of the Premises as is rendered
untenantable. Any such abatement of rent shall not, however, create an extension
of the Lease Term. Provided, however, if by reason of such casualty, the
Premises are rendered substantially untenantable, and Landlord fails to give
Tenant reasonable assurances that the amount of time required to repair the
damage, using due diligence, shall not exceed two hundred ten (210) days from
the date the casualty event
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occurs, then either party shall have the right to terminate this Lease by giving
written notice of termination within sixty (60) days after the date the casualty
event occurs. Notwithstanding the other provisions of this Paragraph 13, in the
event there is a casualty loss to the Premises to the extent of fifty percent
(50%) or more of the replacement value during the last Lease Year of the Lease
Term, including any extension of the Lease Term that has then been exercised by
Tenant, either party may, at its option, terminate this Lease by giving written
notice within sixty (60) days after the date the casualty event occurs; and, in
such case, rent shall abate as of the later of (i) the date of such termination
notice or (ii) the date that Tenant vacates the Premises (which vacation of the
Premises must occur within thirty (30) days after the date of such termination
notice). Except as provided herein, there shall be no obligation of Landlord to
rebuild or repair in case of fire or other casualty, and no termination under
this Paragraph 13 shall affect any rights of Landlord or Tenant hereunder
because of prior defaults of the other party. Tenant shall give Landlord
immediate notice of any fire or other casualty in the Premises.
14. Mutual Waiver; Waiver of Subrogation. The parties mutually release
and waive unto the other, all rights to claim damages, costs or expenses for any
injury to persons (including death) or property caused by a casualty of any type
whatsoever in, on or about the Premises, the Building or the Center if the
amount of such damages, costs or expenses either (i) has been paid to such
damaged party under the terms of any policy of insurance or (ii) would have been
paid to such damaged party under the terms of any policy of insurance required
to be carried by such party hereunder if such party had actually procured such
insurance. All insurance policies carried with respect to this Lease, if
permitted under applicable law, shall contain a provision whereby the insurer
waives prior to loss all rights of subrogation against either Landlord or Tenant
(as the case may be).
15. Signs and Advertising. In order to provide architectural control
for the Center, Tenant may install, at Tenant's expense: only such exterior
signs, marquees, billboards, outside lighting fixtures and/or other decorations
on the Premises as shall have been approved in advance and in writing by
Landlord. The care and maintenance of all such approved signs shall be the sole
responsibility of Tenant. Landlord shall have the right to remove any such sign
or other decoration and fully restore the exterior of the Premises at the cost
and expense of Tenant if any such exterior work is done without Landlord's prior
written approval. Upon the expiration or earlier termination of this Lease,
Tenant shall remove any such sign or decoration and fully restore the exterior
of the Premises, at Tenant's sole cost and expense. Tenant shall not permit,
allow or cause to be used in, on or about the Premises any sound production
devices, mechanical or moving display devices, bright lights, or other
advertising media, the effect of which would be visible or audible from the
exterior of the Premises.
16. Indemnification, Liability Insurance and Hazardous Substances.
(a) Indemnification by Tenant. Tenant shall indemnify and save Landlord
harmless against any and all claims, suits, demands, actions, fines, damages and
liabilities and all costs and expenses thereof (including, without limitation,
reasonable attorneys' fees) arising out of injury to persons (including death)
or property occurring in, on or about, or arising out of, the Premises, the
Building or other areas in the Center if caused by or occasioned wholly or in
part by any willful or negligent act or omission of Tenant, its agents,
subtenants, licensees, invitees, contractors, subcontractors or employees
(collectively, an "Event of Tenant Misconduct"). Tenant shall give Landlord
immediate written notice of any such happening causing injury to persons or
property.
(b) Indemnification by Landlord. Landlord shall indemnify and save
Tenant harmless against any and all claims, suits, demands, actions, fines,
damages and liabilities and all costs and expenses thereof (including, without
limitation, reasonable attorneys' fees) arising out of injury to persons
(including death) or property occurring in, on or about, or arising out of, the
Premises, the Building or other areas in the Center if such damage or injury is
caused by any willful or negligent act or omission of Landlord, its agents or
employees.
(c) Liability Insurance. At all times during the Lease Term, Tenant
shall, at its own expense, keep in force comprehensive public liability
insurance in such amounts and with such companies as shall, from time to time,
be acceptable to Landlord (and to any mortgagee having a mortgage interest in
the Premises) and naming Landlord as an additional insured. The amounts
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of such coverage, until changed at Landlord's request, shall be $1,000,000.00
with respect to bodily injury or death of one person as a result of any one
accident and $500,000.00 with respect to damage to property. Tenant shall first
furnish to Landlord a copy of the required policy or certificate of insurance,
evidencing the required coverage and naming Landlord as an additional insured
under such policy, within five (5) days of the Lease Execution Date and
thereafter prior to each policy renewal date. Such policy also shall include
contractual liability coverage for the performance by Tenant of the indemnity
obligations of Tenant under this Lease, and such policy shall contain a
provision whereby the insurer is not allowed to cancel, fail to renew or
materially change the coverage without first giving thirty (30) days written
notice to Landlord.
(d) Presence and Use of Hazardous Substances. Tenant shall not, without
Landlord's prior written consent, keep on or around the Premises, the common
areas or facilities in or relating to the Building, the Land, or the Center, for
use, disposal, treatment, generation, storage or sale, any substances designated
as, or containing components designated as, hazardous, dangerous, toxic or
harmful, and/or any substance that is subject to regulation by any then-current
federal, state or local law, statute or ordinance and the rules and regulations
implementing them, including, but not limited to, the Resource Conservation and
Recovery Act (42 U.S.C. ss. 6901 et seq.); the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. 9601 et seq.); the Clean
Water Act (33 U.S.C. ss. 1251 et seq.); the Clean Air Act (42 U.S.C. ss. 7401 et
seq.); and the Toxic Substances Control Act (15 U.S.C. ss. 2601 et seq.) (such
substances being herein collectively referred to as "Hazardous Substances").
With respect to any such Hazardous Substance, Tenant shall:
(1) Comply promptly, timely and completely with all
governmental requirements for reporting, keeping and submitting
manifests and obtaining and keeping current identification numbers;
(2) Submit to Landlord true and correct copies of all reports,
manifests and identification numbers at the same time as they are
required to be and/or are submitted to the appropriate governmental
authorities;
(3) Within five (5) days of Landlord's request from time to
time, submit written reports to Landlord regarding Tenant's use,
storage, treatment, transportation, generation, disposal or sale of
Hazardous Substances and provide evidence satisfactory to Landlord of
Tenant's compliance with the applicable governmental laws, statutes,
ordinances, rules, regulations and requirements;
(4) Allow Landlord or Landlord's agent or representative to
enter the Premises at all times to check Tenant's compliance with all
applicable governmental laws, statutes, ordinances, rules, regulations
and requirements regarding Hazardous Substances;
(5) Comply with minimum levels, standards or other performance
standards or requirements which may be set forth or established for
certain Hazardous Substances; and if minimum standards or levels are
applicable to Hazardous Substances present on the Premises, such
standards or levels shall be established and documented by an on-site
inspection by the appropriate governmental authorities and shall be set
forth in an addendum to this Lease;
(6) Comply with all applicable governmental laws, statutes,
ordinances, rules, regulations and requirements regarding the proper
and lawful use, sale, transportation, generation, treatment and
disposal of such Hazardous Substances; and
(7) Pay to Landlord upon demand as additional rent any and all
costs incurred by Landlord and associated with Landlord's inspection of
the Premises and Landlord's monitoring of Tenant's compliance with this
Paragraph 16(d), including Landlord's attorneys' fees and costs.
The terms and provisions in this Paragraph 16(d) shall survive the expiration of
the Lease Term or the earlier termination of this Lease.
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(e) Unauthorized Releases of Hazardous Substances; Cleanup Costs;
Default and Indemnification.
(1) Tenant shall give immediate written notice to Landlord of
any release, spill, discharge or threatened discharge of any Hazardous
Substance on or at the Premises, the common areas or facilities in or
relating to the Building, the Land, the Center, or the surrounding
environment, which release, spill, discharge or threatened discharge
was not made pursuant to or in conformance with the terms of any permit
or license issued to Tenant by the appropriate governmental authority.
Such notice shall include a description of measures taken or proposed
to be taken by Tenant to contain and/or remedy the release, spill,
discharge or threatened discharge and any resultant damage to property,
persons, the Premises, the common areas or facilities in or relating to
the Building, the Land, the Center, and/or the surrounding environment.
Tenant also shall give immediate written notice to Landlord of any
private or governmental investigation relating to Hazardous Substances
on or about the Premises.
(2) At Tenant's own expense, Tenant shall promptly take all
steps necessary to contain and remedy any release, spill, discharge or
threatened discharge of Hazardous Substances on or at the Premises, the
common areas or facilities in or relating to the Building, the Land,
the Center, or the surrounding environment, and all resultant damage or
injury to property, persons, and the environment. Landlord shall have
the right, but not the obligation, to participate in and approve any
environmental assessment or remedial cleanup plan for the Premises, the
common areas or facilities in or relating to the Building, the Land and
the Center. Tenant, its employees, agents and contractors shall fully
cooperate with any and all federal, state and local governmental
officials having jurisdiction over the Premises in resolving or
addressing any situation involving the presence of Hazardous Substances
on or about the Premises.
(3) Tenant shall be fully and completely liable to Landlord
for any and all cleanup costs and any and all other charges, fees, and
penalties (civil and criminal) imposed by any governmental authority
with respect to Tenant's use, generation, handling, storage,
containment, disposal, transportation, and/or sale of Hazardous
Substances.
(4) Tenant shall indemnify, defend and save Landlord harmless
from any and all of the costs, fees, penalties and charges assessed
against or imposed upon Landlord (as well as Landlord's attorneys' fees
and costs) as a result of Tenant's use, generation, handling, storage,
containment, disposal, transportation, and/or sale of Hazardous
Substances.
(5) Upon Tenant's default under Paragraph 16(d) herein or this
Paragraph 16(e) and in addition to the rights and remedies set forth
elsewhere in this Lease, Landlord shall be entitled to the following
rights and remedies:
(A) At Landlord's option, to terminate this Lease
immediately; and
(B) To recover any and all damages associated with
the default,
including, but not limited to, cleanup costs and charges, civil and criminal
penalties and fees, loss of business and sales by Landlord and other tenants of
the Building or the Center, any and all damages and claims asserted by third
parties, and Landlord's attorneys' fees and costs.
The terms and provisions in this Paragraph 16(e) shall survive the expiration of
the Lease Term or the earlier termination of this Lease.
17. Landlord's Right of Entry. Landlord and those persons authorized
by Landlord shall have the right to enter the Premises at all reasonable times
and upon reasonable notice for the purposes of making repairs, making
connections, installing utilities, providing services to the Premises or for any
other tenant, making inspections or showing the Premises to prospective
purchasers and/or lenders. Further, during the last six (6) months of the Lease
Term, including any extended Lease Term that has then been exercised by Tenant,
Landlord and those persons
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authorized by it shall have the right, at reasonable times and upon reasonable
notice to Tenant, to show the Premises to prospective tenants. Notwithstanding
any term or provision in this Lease, including this Paragraph 17, to the
contrary, Landlord shall be entitled to enter the Premises at all times and
without any advance notice to Tenant if Landlord reasonably determines or
believes that an emergency circumstance or situation exists that requires such
entry.
18. Eminent Domain. If any substantial portion of the Premises is taken
under the power of eminent domain (including any conveyance made in lieu
thereof) or if any such taking shall materially impair the normal operation of
Tenant's business, then either party shall have the right to terminate this
Lease by giving written notice of such termination within thirty (30) days after
such taking. If neither party elects to terminate this Lease pursuant to the
immediately preceding sentence, Landlord shall repair and restore the Premises
to a tenantable condition and the Annual Rental shall be equitably reduced as to
the portion of the Premises that is taken. All compensation awarded for any
taking (or the proceeds of a private sale in lieu thereof) shall be the property
of Landlord, whether such award is for compensation for damages to Landlord's or
Tenant's interest in the Premises, and Tenant hereby assigns all of its interest
in any such award to Landlord; provided, however, Landlord shall not have any
interest in any separate award made to Tenant for loss of business, moving
expenses or the taking of Tenant's trade fixtures or equipment if a separate
award for such items is made to Tenant.
19. Events of Default and Landlord's Remedies.
(a) Upon the occurrence of any one or more of the following events
(each, an "Event of Default"; collectively, "Events of Default"), Landlord shall
be entitled to exercise any rights or remedies available in this Lease, at law
or in equity. Events of Default shall be:
(1) Tenant's failure to pay when due any rental or other sum
of money payable hereunder if not remedied within five (5) days after
written notice thereof is given to Tenant (provided, however, and
notwithstanding the foregoing to the contrary, Tenant shall not be
entitled to such notice and cure period more than two (2) times during
any given Lease Year).
(2) Failure by Tenant to perform any of the other terms,
covenants or conditions contained in this Lease if such failure is not
remedied within thirty (30) days after written notice thereof is given
to Tenant.
(3) Tenant, or any guarantor of Tenant's obligations under
this Lease (if any), becomes bankrupt or insolvent, files any debtor
proceedings, files pursuant to any statute a petition in bankruptcy or
insolvency or for reorganization, or files a petition for the
appointment of a receiver or trustee for all or substantially all of
such party's assets and such petition or appointment is not set aside
within sixty (60) days from the date of such petition or appointment or
if such party makes an assignment for the benefit of creditors or
petitions for or enters into such an arrangement.
(4) Tenant vacates, abandons, or fails to operate in the
Premises (or any substantial part thereof) or allows its leasehold
estate under this Lease to be taken under any writ of execution and
such writ is not vacated or set aside within thirty (30) days.
(b) In addition to its other remedies at law or in equity, Landlord,
upon an Event of Default by Tenant, shall have the immediate right to reenter
and remove all persons and property from the Premises and dispose of such
property as it deems fit, all without resort to legal process and without being
guilty of trespassing or being liable for any damages caused thereby; provided,
however, Landlord may undertake the foregoing actions without resort to legal
process only if such actions can be completed in a manner that does not violate
applicable laws and legal requirements and without causing a disturbance of the
peace. If Landlord reenters the Premises, either with or without legal process
(subject to the limitations in the preceding sentence), it may either terminate
this Lease or, from time to time without terminating this Lease, make such
alterations and repairs as may be necessary or appropriate to relet the
Premises, and relet the Premises upon such terms and conditions as Landlord
deems advisable, without any responsibility of Landlord whatsoever to account to
Tenant for any surplus rents collected. Tenant also shall be liable for and
shall pay to Landlord, in addition to any other sum provided to
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be paid herein, brokers' fees incurred by Landlord in connection with reletting
the whole or any part of the Premises; the costs of removing from the Premises
and storing Tenant's or other occupants' property; the costs of repairing,
altering, remodeling or otherwise putting the Premises into condition acceptable
to a new tenant or tenants, and all reasonable expenses incurred by Landlord in
enforcing or defending Landlord's rights and/or remedies under this Lease,
including reasonable attorneys' fees. No retaking of possession of the Premises
by Landlord shall be deemed as an election to terminate this Lease unless a
written notice of such intention is given by Landlord to Tenant at the time of
reentry; but, notwithstanding any such reentry or reletting without termination,
Landlord may at any time thereafter elect to terminate this Lease for such
previous default. In the event of an elected termination of this Lease by
Landlord, whether before or after reentry, Landlord may recover from Tenant
damages, including the costs of recovering the Premises, and Tenant shall remain
liable to Landlord for the total Annual Rental (which may, at Landlord's
election, be accelerated to be due and payable in full as of the Event of
Default or at any time thereafter and recoverable as damages in a lump sum) that
would have been payable by Tenant hereunder for the remainder of the Lease Term,
less the rentals actually received by Landlord from any reletting. (In the event
of any such acceleration, in determining the Annual Rental which would be
payable by Tenant subsequent to default, the Annual Rental rate for each
calendar year of the unexpired Lease Term shall be equal to the Annual Rental
rate payable by Tenant for the last calendar year prior to the default). If any
rent owing under this Lease is collected by or through an attorney, Tenant
agrees to pay Landlord's reasonable attorneys' fees to the extent allowed by
applicable law.
20. Subordination. This Lease is subject and subordinate to any and all
mortgages or deeds of trust now or hereafter placed upon the property of which
the Premises are a part, and this clause shall be self-operative, without any
further instrument necessary to effect such subordination, provided any such
lender may, at its option and without seeking or obtaining Tenant's consent,
subordinate the lien of its mortgage or deed of trust to this Lease. At the
request from time to time of Landlord or any lender that holds a mortgage or
deed of trust on the property of which the Premises are a part, Tenant shall
promptly execute and deliver to Landlord any such instrument or instruments as
Landlord or such lender may reasonably request evidencing the subordination of
this Lease to such mortgage or deed of trust. Provided, however, as a condition
to Tenant's obligation to execute and deliver any such instrument(s), the
applicable lender must agree that Tenant's rights to quiet enjoyment and
possession of the Premises under this Lease shall not be divested by foreclosure
or other default proceedings under the applicable mortgage or deed of trust so
long as Tenant shall not be in default under this Lease. Tenant shall continue
its obligations under this Lease in full force and effect, notwithstanding any
foreclosure or default proceedings by any such lender.
21. Assigning and Subletting. Tenant shall not assign, sublet,
mortgage, pledge or encumber this Lease, the Premises, or any interest in the
whole or in any portion thereof, without the prior written consent of Landlord
(which consent shall not be unreasonably withheld). If Tenant makes any such
assignment, mortgage, sublease or pledge (whether with or without Landlord's
written consent), Tenant named herein and any guarantor of Tenant's obligations
under this Lease shall nonetheless remain primarily liable for the performance
and observation of all of the terms of this Lease required to be observed or
performed by Tenant hereunder. Any rental or any fee or charge received by
Tenant in connection with any such assignment or sublease which is in excess of
the Annual Rental payable to Landlord hereunder shall be paid immediately by
Tenant to Landlord as additional rental under this Lease. In addition, Landlord
shall have the option, in its sole discretion, to terminate this Lease effective
as of the proposed effective date of any assignment or sublease, by giving
Tenant written notice thereof within thirty (30) days after Landlord's receipt
of said notice from Tenant; and in the event Tenant shall propose to sublet only
a portion of the Premises, Landlord shall have the additional option to
terminate this Lease as to that portion of the Premises proposed to be sublet.
Should Landlord not elect to so terminate this Lease in connection with any
proposed subletting or assignment, Landlord shall continue to have the right to
disapprove same (subject to the terms above). Upon any subletting or assignment
by Tenant in accordance with the terms hereof, any renewal options, expansion
options, and/or rights of first refusal granted herein shall become null and
void. Consent by Landlord to one or more assignments or sublettings shall not
operate as a waiver of Landlord's rights as to any subsequent assignments or
sublettings.
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22. Covenant of Quiet Enjoyment. Landlord represents that it has full
right and authority to lease the Premises and that Tenant shall peacefully and
quietly hold and enjoy the Premises for the full Lease Term so long as Tenant
does not default in the performance of any of the terms hereof.
23. Estoppel Certificates. Within ten (10) days after any request by
Landlord, Tenant shall deliver a written estoppel certificate addressed to
Landlord and/or any other party designated by Landlord, certifying any facts
that are then true with respect to this Lease, including, without limitation,
that this Lease is in full force and effect, that no default exists on the part
of Landlord or Tenant hereunder, that Tenant is in possession of the Premises,
that Tenant has commenced the payment of rent hereunder, and that there are no
defenses or offsets claimed by Tenant with respect to payment of rentals under
this Lease.
24. Protection Against Liens. Tenant shall do all things necessary to
prevent the filing of any mechanic's, materialmen's or other types of liens
whatsoever, against all or any part of the Premises, the Building, the Land or
the Center by reason of any claims made by, against, through or under Tenant. If
any such lien is filed against the Premises, the Building, the Land or the
Center (or any portion thereof), Tenant shall either cause the same to be
discharged of record within twenty (20) days after filing or, if Tenant, in its
discretion and in good faith, determines that such lien should be contested,
Tenant shall furnish such security as may be necessary to prevent any
foreclosure proceedings against the Premises, the Building, the Land or the
Center (or any portion thereof) during the pendency of such contest. If Tenant
shall fail to discharge such lien within said time period or fail to furnish
such security, then Landlord may, at its election and in addition to any other
right or remedy available to it, discharge the lien by paying the amount claimed
to be due or by procuring the discharge by giving security or in such other
manner as may be allowed by law. If Landlord acts to discharge or secure any
such lien as permitted herein, then Tenant shall immediately reimburse Landlord
(as additional rent) for all sums paid and all costs and expenses (including
reasonable attorneys' fees) incurred by Landlord relative to such lien, together
with interest on the total expenses and costs at the maximum lawful rate.
25. Force Majeure. Whenever a period of time is herein prescribed for
the taking of any action by Landlord, Landlord shall not be liable or
responsible for, and there shall be excluded from the computation of such period
of time, any delays due to any condition, matter or circumstance beyond the
reasonable control of Landlord (collectively, "Force Majeure Matters"; each, a
"Force Majeure Matter"), including, without limitation, the following: strikes;
defaults or failures to perform by contractors or subcontractors; lockouts; acts
of God; governmental restrictions, war or enemy action or invasion; civil
commotion; insurrection; riot; mob violence; malicious mischief or sabotage;
fire or any other casualty; adverse weather conditions or unusual inclement
weather; condemnation; unavailability of materials; failure of a governmental
instrumentality to act in a timely fashion; any litigation or other legal
proceeding which delays the approval of plans or the issuance of any grading or
building permit for construction, including, without limitation, the issuance of
an injunction enjoining such approval and/or issuance, as the case may be; any
law, order or regulation of any governmental, quasi-governmental, judicial or
military authority; or other similar cause. Without limiting the generality of
the foregoing, in the event a Force Majeure Matter affects Landlord's
construction and delivery obligation(s) relative to the Premises under this
Lease, the period of time during which Landlord may complete such construction
and delivery obligation(s) shall be extended by the same number of days as the
number of days of delay caused by such Force Majeure Matter on the critical path
of completing such construction and delivery obligation(s).
26. Nonwaiver. No course of dealing between Landlord and Tenant and no
delay or omission of Landlord in exercising any right arising from Tenant's
default shall impair such right or be construed to be a waiver of a default.
27. Landlord Liability. All obligations of Landlord hereunder will be
construed as covenants, not conditions, and all such obligations will be binding
upon Landlord only during the period of its ownership and possession of the
Building and not thereafter. The term "Landlord," under this Lease, shall mean
only the owner, for the time being, of the Building. If Landlord shall sell,
assign or transfer all or any part of its interest in the Premises or in this
Lease to a
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<PAGE> 17
successor in interest which expressly assumes the obligations of Landlord
hereunder, then the selling, assigning or transferring Landlord shall thereupon
be released and discharged from all covenants and obligations hereunder, and
Tenant shall look solely to such successor in interest for the performance of
all of Landlord's obligations hereunder. Tenant's obligations under this Lease
shall in no manner be affected by Landlord's assignment or transfer hereunder,
and Tenant shall thereafter attorn and look solely to such successor in interest
as the landlord hereunder. Notwithstanding any other provision hereof, Landlord
shall not have any personal liability hereunder. In the event of any breach or
default by Landlord in any term or provision of this Lease, Tenant agrees to
look solely to Landlord's interest in the Land and the Building; however, in no
event shall any deficiency judgment or any money judgment of any kind be sought
or obtained against Landlord.
28. Holding Over. If Tenant remains in possession of the Premises or
any part thereof after the expiration of the Lease Term, whether with or without
Landlord's acquiescence, Tenant shall be deemed only a tenant at will and there
shall be no renewal of this Lease without a written agreement signed by both
parties specifying such renewal; in addition, the monthly Minimum Rental
required to be paid under this Lease relative to any holdover period shall
automatically become one hundred fifty percent (150%) of the monthly Minimum
Rental payable immediately prior to the expiration of the Lease Term. Tenant
also shall be liable for any and all damages, direct and consequential, suffered
by Landlord as a result of any holdover without Landlord's unequivocal written
acquiescence.
29. Notices. Any notice allowed or required by this Lease shall be
deemed to have been sufficiently served if the same shall be in writing and
placed in the United States Mail, via certified mail or registered mail, return
receipt requested, with proper postage prepaid and addressed:
AS TO LANDLORD: To Landlord's address set forth in the Basic
Lease Information.
AS TO TENANT: Prior to the Occupancy Date, to Tenant's
address set forth in the Basic Lease
Information.
From and after the Occupancy Date, to the
Premises.
The addresses of Landlord and Tenant to which notices shall be directed
may be changed or added from time to time by either party giving notice to the
other in the prescribed manner.
30. Miscellaneous.
(a) Rules and Regulations. Attached hereto as Exhibit D are the rules
and regulations currently in effect with respect to the Building. Landlord shall
have the right from time to time to reasonably amend these rules and regulations
for Tenant's use of the Premises, the Building and the Land. Tenant shall abide
by and actively enforce such rules and regulations, including, without
limitation, rules and regulations governing parking of vehicles on designated
portions of the Land as to its employees, agents, invitees and licensees.
(b) Evidence of Authority. If requested by Landlord, Tenant shall
furnish appropriate legal documentation evidencing the valid existence and good
standing of Tenant and the authority of any parties signing this Lease on behalf
of Tenant to act for Tenant.
(c) Nature and Extent of Agreement. This Lease, together with all
exhibits hereto, contains the complete agreement of the parties concerning the
subject matter hereof, and there are no oral or written understandings,
representations, or agreements pertaining thereto which have not been
incorporated herein. This Lease creates only the relationship of landlord and
tenant between the parties, and nothing herein shall impose upon either party
any powers, obligations or restrictions not expressed herein. This Lease shall
be construed and governed by the laws of the state in which the Premises are
located.
(d) Severability. If any term or provision of this Lease, or the
application thereof to
17
<PAGE> 18
any person or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and enforced to the fullest extent permitted by law,
notwithstanding the invalidity of any other term or provision hereof.
(e) Binding Effect. This Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, successors and
assigns. This Lease shall not be binding on Landlord until executed by an
officer of Landlord having a title of Vice President or higher and delivered to
Tenant. No amendment or modification of this Lease shall be binding upon
Landlord unless same is in writing and executed by an officer of Landlord having
a title of Vice President or higher.
(f) Captions and Headings. The captions and headings in this Lease are
for convenience and reference only, and they shall in no way be held to explain,
modify, or construe the meaning of the terms of this Lease.
(g) Security Deposit. Tenant shall pay to Landlord on the Lease
Execution Date a sum (the "Security Deposit") equal to one month's Minimum
Rental as security for the performance of all obligations to be performed by
Tenant hereunder. The Security Deposit may be held by Landlord in such manner as
it shall elect, and Landlord shall be entitled to retain any interest which
accrues on the Security Deposit. In the event of a default by Tenant hereunder,
Landlord may, at its option, apply all or any part of the Security Deposit to
cure the default, and thereupon Tenant shall immediately redeposit with Landlord
the amount so applied in order that Landlord will always have the full Security
Deposit on hand during the Lease Term. Upon the termination of this Lease and
provided that Tenant is not in default hereunder, Landlord shall refund to
Tenant any of the remaining balance of the Security Deposit, subject to final
adjustments for payment of any rental required to be paid by Tenant under this
Lease and compliance by Tenant with all of its obligations hereunder. If the
Premises are sold, Landlord shall transfer the Security Deposit to the new
owner; and upon such transfer, Landlord shall thereupon be released from all
liability for the Security Deposit, and Tenant thereafter shall look solely to
the new owner for the Security Deposit. The terms of the immediately preceding
sentence shall apply to every transfer of the Security Deposit.
(h) Lease Review. The submission of this Lease to Tenant for review
does not constitute a reservation for or option for the Premises, and this Lease
shall become effective as a contract only upon execution and delivery by
Landlord and Tenant.
(i) Brokerage. Landlord warrants and represents to Tenant that Landlord
has not engaged or contracted with any person, firm or entity to serve or act as
a Realtor(R), broker, agent or finder, other than Broker (if any) identified in
the Basic Lease Information, for the purpose of leasing the Premises or in
regard to this Lease. Tenant warrants and represents to Landlord that Tenant has
not engaged, contracted with or dealt with any person, firm or entity (other
than Broker, if any) to serve or act as a Realtor(R), broker, agent or finder
for the purpose of leasing the Premises or in regard to this Lease. Landlord
agrees to be solely responsible for the payment of any commission to Broker (if
any) relating to this Lease pursuant to a separate agreement between Landlord
and Broker (if any). Tenant shall and does hereby indemnify and hold harmless
Landlord from and against any claim for any consulting fee, finder's fee,
commission, or like compensation, including reasonable attorneys' fees in
defense thereof, payable in connection with this Lease and asserted by any party
arising out of any act or agreement by Tenant, excluding the commission payable
by Landlord to Broker (if any) as described above. Landlord shall and does
hereby indemnify and hold harmless Tenant from and against any claim for any
consulting fee, finder's fee, commission, or like compensation, including
reasonable attorneys' fees in defense thereof, payable in connection with this
Lease and asserted by any party arising out of any act or agreement by Landlord
(including the commission payable by Landlord to Broker, if any, as described
above).
(j) Memorandum of Lease. Upon the request of either party, the other
party shall join in the execution of a memorandum of this Lease (a "Memorandum")
in recordable form. Either party may record the Memorandum in the appropriate
land record office, at its own expense. However, neither party shall record this
Lease (or any portion thereof) without the written consent of the other party.
18
<PAGE> 19
(k) Advance Rental Payment. [Intentionally deleted.]
(l) Landlord's Consent. Whenever this Lease requires Landlord's consent
to or approval of any item or matter, Landlord may condition such consent or
approval on payment or reimbursement by Tenant of all costs and expenses
incurred by Landlord in connection with reviewing and responding to such item or
matter.
(m) Survival of Obligations. Notwithstanding any term or provision in
this Lease to the contrary, any liability or obligation of Landlord or Tenant
arising during or accruing with respect to the Lease Term shall survive the
expiration or earlier termination of this Lease, including, without limitation,
obligations and liabilities relating to (i) rental payments, (ii) the condition
of the Premises and the removal of Tenant's property, and (iii) indemnity and
hold harmless provisions in this Lease.
(n) Confidentiality. Tenant shall not disclose the terms of this Lease
to any third party except (i) legal counsel to Tenant, (ii) any assignee of
Tenant's interest in this Lease or any sublessee of Tenant relative to the
Premises (or any portion thereof), (iii) as required by applicable law or by
subpoena or other similar legal process, or (iv) for financial reporting
purposes.
(o) Attorneys' Fees. In the event either party defaults in the
performance of any of the terms of this Lease and the other party employs
attorney(s) in connection therewith, the defaulting party agrees to pay the
prevailing party's reasonable attorneys' fees (calculated at such attorneys'
reasonable and customary hourly rates and without regard to the amount in
controversy) and costs of litigation.
(p) Time of Performance. Except as expressly otherwise herein provided,
with respect to all required acts of Tenant, time is of the essence of this
Lease.
(q) Real Estate Investment Trust. During the Lease Term, should a real
estate investment trust become Landlord hereunder, all provisions of this Lease
shall remain in full force and effect except as modified by this Paragraph
30(g). If Landlord in good faith determines that its status as a real estate
investment trust under the provisions of the Internal Revenue Code of 1986, as
heretofore or hereafter amended, will be jeopardized because of any provision of
this Lease, Landlord may request reasonable amendments to this Lease and Tenant
will not unreasonably withhold, delay or defer its consent thereto, provided
that such amendments do not (a) increase the monetary obligations of Tenant
pursuant to this Lease or (b) in any other manner adversely affect Tenant's
interest in the Premises.
(r) Additional Terms and Provisions. The additional terms and
provisions, if any, set forth on Exhibit E attached to this Lease are
incorporated herein by reference. If there is no Exhibit E attached to this
Lease, there are no such additional terms and provisions. If there is an Exhibit
E attached to this Lease, the additional terms and provisions set forth thereon
shall control if in conflict with any of the terms and provisions of this Lease.
IN WITNESS WHEREOF, the parties have caused this Lease to be duly
executed under seal as of the Lease Execution Date pursuant to authority duly
given.
LANDLORD:
CRESCENT RESOURCES, INC.
[CORPORATE SEAL]
/s/ Henry Lomas Jr By: /s/ Fred A. Bryer
- ------------------------ -------------------------------
Secretary President
- ------------------------ -------------------------------
19
<PAGE> 20
TENANT:
AMERICAN AIRCARRIERS SUPPORT, INC.
[CORPORATE SEAL]
/s/ Elaine T. Rudisill By: /s/ Karl Brown
- ------------------------ -------------------------------
Asst. Secretary President
- ------------------------ -------------------------------
20
<PAGE> 21
EXHIBIT A
to
Lease Agreement
Description of Land and Building
The Land is located partially in North Carolina and partially in South
Carolina and consists of that certain parcel of land bounded (i) on the west by
the centerline of Stateline Drive, (ii) on the north by the centerline of
Greenway Industrial Drive, (iii) on the east by the centerline of Southstate
Drive (private), and (iv) on the south by the northerly line of the property
owned by B & D Distribution, Inc. (Black & Decker) and that line extended to
Stateline Drive. The Land is sometimes referred to as Tract 3-A and is described
and shown as such on subdivision plats of a portion of Lakemont Industrial Park
recorded in the York County, South Carolina public registry (Plat Book 122, Page
116) and Mecklenburg County, North Carolina.
The Land is subject to the rights-of-way for Stateline Drive, Greenway
Industrial Drive and Southstate Drive and shall be subject to Landlord's
reservation of a right-of-way for the road located substantially as shown as
Southstate Drive on the map attached hereto as Exhibit B, and Tenant shall have
the right to use, for ingress and egress to and from the Land that portion of
the right-of-way shown as Southstate Drive located beyond the boundary of the
Land, substantially as shown on Exhibit B. Landlord and Tenant agree to share
equally the cost of improving and maintaining Southstate Drive in its present
location.
A map showing generally the location of the Land and Building is
attached hereto as Exhibit B.
A-21
<PAGE> 22
EXHIBIT B
to
Lease Agreement
Building Plan and Designation of Premises
[TO BE ATTACHED]
B-22
<PAGE> 23
EXHIBIT C
to
Lease Agreement
Description of Upfitting Work
A. Description of Landlord's Work.
Landlord shall deliver the Premises to Tenant on the Occupancy Date,
"broom clean," "AS-IS,"in substantially the same condition as they
exist on the Lease Execution Date, except that Landlord shall, as
"Landlord's Work," cause the heating, ventilating and air conditioning,
plumbing, and electrical systems to be in good working order on the
Occupancy Date. The Building shall conform to the specifications
attached to this Exhibit C.
B. Description of Tenant's Work.
Tenant shall, at its expense, promptly install all fixtures and
equipment and perform, as "Tenant's Work" all other work necessary or
appropriate for Tenant's Operations.
C-23
<PAGE> 24
EXHIBIT D
to
Lease Agreement
Rules and Regulations
1. Restricted Uses. Neither the Premises nor any part of the common areas
of the Building, the Land or the Center shall be used by Tenant for any
one or more of the following uses:
(a) Agriculture or any related use, including any roadside stand
for the display and sale of agricultural products and any use
which involves the raising, breeding, or keeping of any
animals or poultry;
(b) Processing or slaughter of livestock, swine, poultry or other
animals;
(c) Manufacture of leather goods;
(d) Manufacture of explosives or explosive agents;
(e) Manufacture, sale, rental, repair or storage of heavy
equipment, buses, trucks, trailers, automobiles, recreational
vehicles and mobile or trailer homes;
(f) Unscreened outdoor storage, outdoor fabrication or outdoor
handling of any machinery, parts, material, supplies or
products;
(g) Residential uses;
(h) Overnight parking of campers, mobile homes, boats, trailers or
motor homes;
(i) Erecting and maintaining structures of a temporary nature,
except that during the period of construction of improvements
to the Premises, Tenant's contractors or subcontractors may be
permitted to erect or maintain such temporary structures upon
Landlord's prior written approval;
(j) Jails, prisons, labor camps, penal, detention or correction
facilities or farms;
(k) Cemeteries or mausoleums;
(1) Mining, including the extraction, processing and removal of
sand, gravel, stone, minerals or clay;
(m) Any land fills, any hazardous waste disposal or storage
facilities and any incinerators;
(n) Racetracks, raceways and drag strips; and
(o) Massage parlors, topless night clubs or similar business
operations.
2. Nuisances. Tenant shall not cause any unclean, unhealthy, unsightly or
unkempt condition to exist in the Premises or in the common areas of
the Building, the Land or the Center. Tenant shall not use the Premises
or any portion of the common areas of the Building, the Land or the
Center, in whole or in part, for the deposit, storage or burial of any
property or thing that will cause the above-mentioned areas to appear
to be in an unclean or untidy condition or that will be obnoxious to
the eye, nor shall Tenant allow any substance, thing, or material to be
kept, utilized or carried out in the Premises or the common areas of
the Building, the Land or the Center that will emit foul or obnoxious
odors, fumes, smoke or dust or that will cause any vibration or noise
or other condition that will or might disturb the peace, quiet, safety,
comfort, or serenity of the occupants of the Building or the Center. No
noxious, offensive or illegal trade or activity shall be carried out in
the Premises or in the common areas of the Building, the Land or the
Center, nor shall anything be done tending to cause embarrassment,
discomfort, annoyance, or nuisance to any person using any portion of
the Building, the Land or the Center.
D-24
<PAGE> 25
3. Restricted Actions on Common Areas of the Building, the Land and the
Center. Tenant shall not cause or allow any cutting of vegetation,
dumping, digging, filling, destruction or other waste to be committed
on the common areas of the Building, the Land or the Center. Tenant
shall not cause any obstruction of, or allow or cause anything to be
kept or stored on, altered, constructed or planted in, or removed from
the common areas of the Building, the Land or the Center, without
Landlord's prior written consent.
4. Sign Display. All signage will be coordinated by Landlord throughout
the Center for uniformity and attractiveness. The size, shape, design,
lighting, materials and location of all signs shall conform to the
uniform signage plan for the Center. Tenant shall not cause any sign,
tag, label, picture, advertisement or notice to be displayed,
distributed, inscribed, painted or affixed by Tenant on any part of the
Building, the Land, the Center or the Premises without the prior
written consent of Landlord. Landlord shall have the right, at Tenant's
sole cost and expense, to remove all unapproved signs installed by or
on behalf of Tenant, without notice to Tenant.
5. Drives and Parking Areas. All parking shall be within the boundaries of
the Land and within marked parking spaces. There shall be no on-street
parking and at no time shall Tenant obstruct drives and loading areas
intended for the joint use of all tenants of the Building. The drives
and parking areas on the Land are for the joint use of all tenants of
the Building unless specifically marked. Truck traffic and parking will
be restricted to areas designated by Landlord. Tenant, its employees,
agents and invitees shall comply with reasonable parking rules and
regulations as they may be posed and distributed from time to time.
Tenant is responsible for controlling all of its truck traffic in
accordance with the restrictions and regulations imposed by Landlord.
6. Storage and Trash Disposal. No materials, supplies or equipment
belonging to Tenant shall be stored in any area of the Building, the
Land or the Center, except inside the Premises. Trash disposal is
confined to the receptacles provided by Tenant in a location approved
by Landlord and no trash receptacles may be placed in any other
location in the Premises, in the Building, on the Land or in the
Center.
7. Locks. No additional locks shall be placed on the doors of the Premises
by Tenant. If Tenant changes any existing locks, Tenant shall
immediately furnish Landlord with two keys to such new locks. Landlord
will, without charge, furnish Tenant with two keys for each lock
existing upon the entrance door when Tenant assumes possession of the
Premises, with the understanding that, at the termination of the Lease,
the keys shall be returned.
8. Improvements, Contractors and Service Maintenance. Tenant shall not
make any improvements to the exterior of the Building or the Center and
Tenant shall not make any structural changes or other material
alterations, additions or improvements to the Premises without the
prior written consent of Landlord. Tenant will refer all of Tenant's
contractors, contractors' representatives and installation technicians
rendering any service on or to the Premises to Landlord for Landlord's
approval and supervision before performance of any service. This
provision shall apply to all work performed in the Premises, including
installation of electrical devices and attachments and installations of
any nature affecting floors, walls, woodwork, trim, windows, ceilings,
equipment or any other physical portion of the Premises, the Building
or the Center.
9. Regulations for Operation and Use. Tenant shall not place, install or
operate in the Premises or in any part of the Building, the Land or the
Center any engine, stove or machinery, nor shall Tenant conduct any
mechanical or cooking operations therein, nor place or use in or about
the Premises or any part of the Building, the Land or the Center any
explosives, gasoline, kerosene, oil, acids, caustics or any other
flammable, explosive or hazardous material, without the prior written
consent of Landlord.
10. Window Coverings. Windows facing the Building exterior shall at all
times be wholly clear and uncovered (except for such blinds or curtains
or other window coverings as Landlord may provide or approve) so that a
full unobstructed view of the interior of the Premises may be had from
the exterior of the Building.
D-25
<PAGE> 26
11. No Violations of Fire Laws or Health Code. Tenant shall not do or
permit anything to be done in the Premises, or bring or keep anything
therein, which will obstruct or interfere with the rights of other
tenants in the Building or the Center or in any other way injure or
annoy them or conflict with any laws relating to fires, or with any
regulations of the Fire Department or with any insurance policy upon
the Building or the Center, or any part thereof, or conflict with any
of the rules and ordinances of the Board of Health.
12. No Violations of Laws. Tenant shall promptly and at its expense execute
and comply with all laws, rules, orders, ordinances, including all
applicable zoning ordinances, and regulations of the City, County,
State or Federal Government, and of any department or bureau of any of
them and of any other governmental authority having jurisdiction over
the Premises, affecting Tenant's occupancy of the Premises or Tenant's
business conducted therein.
13. No Use of Roof. Neither Tenant, nor Tenant's servants, employees or
agents shall go upon the roof of the Building without the written
consent of Landlord.
14. No Canvassing. Canvassing, soliciting and peddling in and about the
Building, the Land and the Center is prohibited.
15. No Loud Musical Devices. Tenant shall not operate or permit to be
operated any musical or sound producing instrument or device inside or
outside the Premises which may be heard outside the Premises or by
other tenants in the Building or the Center.
16. Use of Washrooms. Tenant shall not use the washrooms, restrooms, and
plumbing fixtures of the Premises or the Building, and appurtenances
thereto, for any purposes other than the purposes for which they were
constructed, and Tenant shall not deposit any sweepings, rubbish, rags,
or other improper substances therein. If Tenant or Tenant's servants,
employees, agents, contractors, jobbers, licensees, invitees, guests or
visitors cause any damage to such washrooms, restrooms, plumbing
fixtures or appurtenances, such damage shall be repaired, at Tenant's
expense, and Landlord shall not be responsible therefor.
18. No Unpleasant Odors. Tenant shall not cause or permit any unpleasant
odors to emanate from the Premises, or otherwise interfere, injure or
annoy in any way other tenants in the Building or the Center, or
persons conducting business with them.
19. Disposal of Crates. When conditions are such that Tenant must dispose
of crates, boxes, etc. on the sidewalk or parking areas on the Land, it
will be the responsibility of Tenant to dispose of same only between
the hours of 5:45 p.m. until 7:15 a.m.
20. No Food Distribution. No prepared food and/or beverages shall be
distributed from the Premises, but, notwithstanding the provisions of
Paragraph 9 hereof or this Paragraph 19, Tenant may prepare coffee and
similar beverages and warm typical luncheon items for the consumption
of Tenant's employees and invitees.
21. Location of Improvements. Tenant will not locate furnishings or
cabinets adjacent to mechanical or electrical access panels or over air
conditioning outlets in the Premises so as to prevent operating
personnel from servicing such units as routine or emergency access may
require. Tenant shall be responsible for any cost associated with
moving such furnishings for Landlord's access to such mechanical or
electrical access panels or air conditioning outlets.
22. Modifications. Landlord shall have the right from time to time to make
any and all such reasonable modifications and additions to these Rules
and Regulations as may be necessary for the safety, care, quiet
enjoyment and cleanliness of the Building, the Land and the Center.
Tenant agrees to abide by these Rules and Regulations and any
reasonable modifications and additions as are hereafter adopted by
Landlord, including, but not limited to, modifications made by Landlord
as a result of any changes in the city zoning ordinance.
D-26
<PAGE> 27
EXHIBIT E
to
Lease Agreement
Additional Terms and Provisions
1. Option to Purchase.
(a) At Tenant's request and for good and valuable
consideration, including Tenant's execution of this Lease, Landlord hereby
grants to Brown Enterprises, Inc. ("Brown") the right and option to purchase the
following real property (the "Property") upon the terms and conditions specified
herein:
Parcel 1. All of that certain parcel of land described in
Exhibit A to this Lease and referred to herein as the "Land," together with the
Building and all other improvements located thereon, containing approximately
7.75 acres and sometimes referred to as Tract 3-A on plats recorded in the
public registries of York County, South Carolina, and Mecklenburg County, North
Carolina (collectively, "Parcel 1").
Parcel 2. All of that certain parcel of land located in York
County, South Carolina, described and shown as Tract 4-C on the subdivision plat
of a portion of Lakemont Industrial Park recorded in Plat Book 122, Page 116, of
the York County, S.C. public registry ("Parcel 2").
(b) The purchase price (the "Purchase Price") for Parcel 1 is
Four Million and 00/100 Dollars ($4,000,000.00) and for Parcel 2, the product of
Seventy-Five Thousand and 00/100 Dollars ($75,000.00) times the number of gross
acres (rounded to the nearest 1/1000 acre) contained in Parcel 2, as determined
by survey to be prepared by a registered land surveyor or engineer at Brown's
expense prior to closing.
(c) Brown may exercise its option to purchase Parcel 1, only,
but shall not be entitled to exercise its option to purchase Parcel 2 unless it
also exercises its option to purchase Parcel 1 for simultaneous closings.
(d) The option to purchase may be exercised only if Tenant is
not in default under this Lease and only by Brown's giving written notice of
exercise to Landlord by 5:00 p.m., June 30, 1999.
(e) If Brown duly exercises its option to purchase, the
Closing shall occur on or before August 31, 1999, at a time and place mutually
acceptable to the parties.
(f) The Purchase Price shall be paid at Closing in United
States currency by way of federal wire transfer or other immediately available
funds.
(g) The Property shall be conveyed to Brown in an "AS-IS,"
condition and "WITH ALL FAULTS" as of the date of Closing.
(h) At Closing, Landlord shall convey the Property to Brown by
special warranty deeds (in forms sufficient under the laws of the State of North
Carolina and South Carolina with respect to those portions of the Property
located in those states), free and clear of all liens, encumbrances, leases and
restrictions except for this Lease, the Declaration of Covenants, Conditions and
Restrictions for Lakemont Industrial Park, utility easements, rights of way and
restrictions existing at the date hereof and such other easements, rights of
way, restrictions and other title exceptions created after the date hereof that
do not materially adversely affect the value of the Property (the "Permitted
Exceptions").
(i) Except for the limited title warranty stated above,
Landlord makes no other warranty, express, implied or statutory, and expressly
disclaims any implied or express warranty of merchantability or fitness for a
particular purpose. Without limiting the generality of the foregoing, Landlord
disclaims any warranty with respect to the condition of the Property or its
conformance to or compliance with any zoning, building, environmental or other
similar law, ordinance, regulation or order of any governmental authority having
jurisdiction over the Property or any portion thereof.
E-27
<PAGE> 28
(j) Landlord shall pay for the revenue stamps on, and
preparation of, the special warranty deeds, and for any boundary survey
necessary to refine the legal description of the Land. Brown shall pay for the
cost of recording the special warranty deeds and any due diligence costs and
expenses incurred by it, including title examination and insurance and
environmental investigation. Each party shall pay its own attorney fees and any
other costs and expenses that it may incur in connection with the transaction.
(k) All ad valorem real property taxes and other governmental
assessments and impositions shall be prorated on a calendar year basis to the
date of Closing, regardless of the fiscal years of the taxing authorities.
(l) At Closing, Landlord shall execute and deliver the special
warranty deeds, an owner's and contractors' affidavit in form required by
Brown's title insurer, a FIRPTA affidavit in form complying with law so that
withholding will not be required and such other and further documents as may be
customary and reasonably required to consummate the closing.
(m) At closing, Landlord shall assign all of its right, title
and interest in and to this Lease to Brown, and Brown shall assume all of
Landlord's obligations and duties under the Lease. All income and operating
expenses with respect to the Property shall be prorated between Landlord and
Brown as of the date of Closing. Landlord shall transfer to Brown the Security
Deposit paid by Tenant to Landlord pursuant to paragraph 30(g) of the Lease.
(n) As provided generally in paragraph 27 of the Lease,
Landlord shall have no further obligations to Tenant under this Lease after the
transfer of Parcel 1 to Brown.
E-28
<PAGE> 1
AGREEMENT TO TERMINATE SUBTENANT'S RIGHT OF
OCCUPANCY UNDER SUBLEASE AGREEMENT
This Agreement To Terminate Subtenant's Right of Occupancy Under Sublease
Agreement (this "Agreement") is entered into effective as of this 1st day of
October, 1998 (the "Effective Date"), by and among SHASTA AVIATION CORP.,
d.b.a. CRESCENT HELICOPTERS ("Sublessor"), GLOBAL TURBINE SERVICES, INC.
("Sublessee") and AMERICAN AIRCARRIERS SUPPORT, INCORPORATED ("Assignee").
RECITALS
A. Effective December 3, 1997, the Sublessor and Sublessee entered into the
Sublease Agreement attached hereto and incorporated herein as Exhibit A
(the "Sublease") for the premises described therein (the "Premises").
B. Tenant accepted the condition of the Premises and has been in continuous
occupation of the Premises since the effective date of the Sublease.
C. Tenant is selling its assets to Assignee, and has requested Sublessor to
consent to the assignment of the Sublease to Assignee, and to release
Sublessee from the continuing obligation to pay rent under the Sublease.
D. Sublessor is not in default under the Sublease. Sublessee is current on
payment of rent under the Sublease.
E. Sublessor desires to release Sublessee from its obligation to pay rent
under the Sublease, subject to the terms and conditions contained in this
Agreement.
F. Assignor desires to assume the Sublessee subject to the terms and
conditions contained in this Agreement and the Sublease.
AGREEMENT
In consideration of the above recitals and the mutual promises contained
in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. RELEASE OF SUBLESSOR. Sublessee hereby releases Sublessor from any
and all conditions, covenants and obligations of Sublessor under the Sublease
and agrees not to institute any action or suit in law or equity against
Sublessor or to institute, prosecute or in any way aid in the institution or
prosecution of any claim, demand, action or cause of action against Sublessor
arising out of the Sublease or the Premises.
<PAGE> 2
2. ASSUMPTION BY ASSIGNEE. Assignee hereby assumes the Sublease and
all of Sublessee's obligations under the same as of the Effective Date hereof,
and accepts the terms and conditions of the Sublease. Assignee agrees to begin
paying rent no later than the Effective Date.
3. SECURITY DEPOSIT. Sublessor acknowledges Sublessee's assignment of
the security deposit to Assignee, which shall continue to be subject to the
terms and conditions described in the Sublease. The Parties acknowledge that
Sublessor shall retain the security deposit in satisfaction of Assignor's
requirement to provide a security deposit under the Sublease.
4. VACATION OF PREMISES. Sublessee agrees to remove any personal
assets or assets not being sold to Assignee no later than the Effective Date.
5. INDEMNITY. Sublessee shall indemnify, defend and hold the
Sublessor harmless from and against any and all claims, losses, damages,
injuries, liabilities and all costs, including attorneys fees, court costs and
expenses and liabilities incurred in or from any such claim, arising from
Sublessee's use or occupancy of the Premises during the term of the Sublease as
modified by this Agreement, or arising from any act, negligence or the failure
to act of Sublessee, or any of its agents, contractors, employees, invitees or
guests. Sublessee, upon notice from sublessor, shall defend Sublessor at
Sublessee's expense by counsel reasonably satisfactory to Sublessor. Sublessee,
as a material part of the consideration of Sublessor, hereby waives all claims
in respect thereof against Sublessor.
6. CONDITIONS PRECEDENT TO RELEASE OF SUBLESSEE. Sublessor's release
of Sublessee's obligation to pay rent under the Sublease, as further described
in this Section 6 of this Agreement, is expressly conditioned upon and subject
to satisfaction of the following conditions:
(a) Assignee assuming the Sublease and all obligations thereof
after the date hereof.
7. RELEASE OF SUBLESSEE. Subject to Sublessee's compliance with the
covenants and conditions contained in this Agreement and the satisfaction of
the conditions contained in Section 6, and except as to the following
conditions, effective as of the Effective Date, the Sublessor hereby releases
Sublessee from any further obligation(s) to pay rent or to reimburse sublessor
for operating, maintenance and common area operating expenses that relate to
the period after such date.
Sublessee is not released from its covenants under the Sublease other than
for the payment of rent and the reimbursement or payment of operating,
maintenance and common area maintenance expenses. Sublessee is not released
from any other covenants under the Sublease, including, but not limited to,
payment for claims relating to environmental contamination of the Premises,
claims for payment for work performed on the Premises, claims relating to
Sublessee's use or occupancy of the Premises, or Sublessee's failure to
properly maintain the Premises, which claims arose during the term of the
Sublease.
<PAGE> 3
8. ATTORNEYS' FEES. In the event of any controversy, claim or action being
filed or instituted between the parties to this Agreement to enforce the terms
and conditions of this Agreement or arising from the breach of any provision
hereof, the prevailing party will be entitled to receive from the other party
all costs, damages, and expenses, including reasonable attorneys' fees, incurred
by the prevailing party, whether or not such controversy or claim is litigated
or prosecuted to judgment, including all costs and reasonable attorneys fees
incurred as a result of any appeal. The prevailing party will be that party who
was awarded judgment as a result of trial or arbitration, or who receives a
payment of money from the other party in settlement of claims asserted by that
party.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and once so executed by all parties thereto, each such counterpart
shall be deemed to be an original instrument but all such counterparts together
shall constitute but one agreement.
10. SURVIVAL. The terms and provisions hereof shall survive the termination
of the Lease and shall remain in full force and effect thereafter.
11. BINDING EFFECT. This Agreement and shall be for the benefit of and bind
the parties hereto and their respective heirs, legal representatives, successors
and assigns.
12. FURTHER ACTS. Except as otherwise provided herein, in addition to the
acts and deeds recited herein and contemplated to be performed, executed and/or
delivered by the parties, the parties hereby agree to perform, execute and/or
deliver or cause to be performed, executed and/or delivered any and all such
further acts, deeds and assurances as any party hereto may reasonably require to
consummate the transaction contemplated hereunder.
13. ENTIRE AGREEMENTS. This Agreement and the other documents to be
executed by the parties hereunder, embody the entire agreement relative to the
subject matter hereof, and there are no oral agreements existing relative to
the subject matter hereof which are not expressly set forth herein or in the
documents to be executed hereunder and covered hereby, and in the case of any
conflicts between any such documents, this Agrement shall control. This
Agreement may be modified only in writing when signed by all the parties hereto.
14. WAIVER. No covenant, term or condition or the breach thereof shall be
deemed waived, except by written consent of the party against whom the waiver is
claimed, and any waiver of the breach of any covenant, term or condition shall
not be deemed to be a waiver of any other covenant, term or condition herein.
Acceptance by a party of any performance by another party after the time the
same shall have become due shall not constitute a waiver by the first party of
the breach or default of any such covenant, term or condition unless otherwise
expressly agreed to by the first party in writing.
15. INCORPORATION OF RECITALS. The foregoing recitals are incorporated into
and made an integral part of this Agreement.
<PAGE> 4
EXECUTED effective the date first set forth above.
SUBLESSOR
SHASTA AVIATION CORP.,
an Idaho corporation
By: /s/ Dean H. Shealy
------------------------------------
Dean H. Shealy, President
SUBLESSEE
GLOBAL TURBINE SERVICES, INC.,
a ___________________ corporation
By: /s/ Mike Evans
------------------------------------
Its: President
------------------------------------
ASSIGNEE
AMERICAN AIR CARRIERS SUPPORT, INCORPORATED,
a Delaware corporation
By: Karl Brown
------------------------------------
Its: President
------------------------------------
<PAGE> 5
SUBLEASE AGREEMENT
THIS AGREEMENT, entered into on October 1, 1997 by and between SHASTA AVIATION
CORP., dba CRESCENT HELICOPTERS, hereinafter called the SUBLESSOR, and GLOBAL
TURBINE SERVICES INC., hereinafter called SUBLESSEE or TENANT:
WITNESSETH
1. AGREEMENT TO LEASE:
Subject to the approval of Broward County, Florida, a political
subdivision of the State of Florida, SUBLESSOR does this day lease unto
SUBLESSEE, and said SUBLESSEE, does hire and take as tenant under said
SUBLESSOR, that portion of SUBLESSEES premises known as the NORTHEAST and
NORTHWEST HANGARS, including concrete pad and land to the south of the two
Hangars together with designated tie downs and other land and open areas
as shown on Exhibit "A" attached hereto and incorporated herein by
reference. The SUBLESSEE Premises specifically excludes the Jet Fuel
Facility including ingress and egress thereto, and land east of the
north/south taxiway to the west of the NORTHWEST HANGAR as shown on
Exhibit "A".
2. MASTER LEASE:
SUBLESSEE hereby acknowledges that the Premises and SUBLESSOR'S rights
thereto are subject to the Master Lease with Broward County, a copy of
which is on file in the offices of Broward County Aviation Department,
Division of Airports and SUBLESSOR'S offices, and SUBLESSEE hereby
represents that it is familiar with the provisions of same and said Master
Lease is incorporated herein by reference. SUBLESSEE acknowledges that (a)
it will comply with each and every provision of the Master Lease in
accordance with the terms hereof as such provisions relate to the
Premises, except as such provisions are supplemented or amended by this
Sublease Agreement; (b) any and all rights and reservations of Broward
County under the Master Lease as such rights or reservations may apply to
the leased Land described in the Master Lease or SUBLESSOR shall likewise
apply to the Premises and SUBLESSEE under this Sublease Agreement; and (c)
any remedy which Broward County may have against SUBLESSOR or the leased
premises under the Master Lease shall become a remedy of SUBLESSOR and
Broward County against SUBLESSEE and the Premises under this Sublease
Agreement. The foregoing shall in no manner limit SUBLESSOR's right to
require SUBLESSEE to comply with SUBLESSEE's obligations under this
Sublease Agreement or SUBLESSEE's obligations, as limited by this
Agreement, under the Master Lease.
3. LEASE TERM:
The term of this Lease is for FOUR (4) years commencing December 15, 1997
and continuing through December 14, 2001, subject to and conditioned upon
the approval of Broward County Florida, and the fulfillment of all terms
and conditions of this lease. Furthermore, the SUBLESSOR does hereby grant
SUBLESSEE an additional TWO YEAR NINE AND ONE HALF MONTHS Option to Lease
said premises commencing December 15, 20001 and continuing through
September 30, 2004, at the rental amounts specified below. Such option to
be exercised by SUBLESSEE providing SUBLESSOR notice
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<PAGE> 6
in writing of intent to exercise the option no later than 180 days prior to
the end of the initial lease term (December 14, 2001).
RENTAL AMOUNT:
The agreed total base annual rental amount for year one shall be $96,000 or
$8,000 per month plus any applicable sales or use tax or other sums imposed
by law on such payments. It is recognized that, for purposes of any rental
increases imposed on SUBLESSOR by Broward County, SUBLESSEE shall occupy
50% of the total premises leased by SUBLESSOR and will be responsible to
pay, as additional rent, 50% of any such Broward County imposed rental
increase. Therefore, 50% of the final rent increase resulting from the
revaluation of the premises in August 1997, which is currently being
negotiated with Broward County (estimated to be between $500 and $2,200 per
month), will be added to the base monthly rent of $8,000 retroactive to
December 15, 1997. It is further agreed that 50% of any rent increase
resulting from the re-evaluation of the premises by Broward County as of
August 2002 will be added to the then monthly rental rate paid by SUBLESSEE
during the option period if said option has been exercised by SUBLESSEE. In
addition, at the time of percentage Consumer Price Index (CPI) increases
(if any) imposed by Broward County on SUBLESSOR, SUBLESSEE'S annual rental
amount will be increased by a dollar amount equal to 50% of that CPI
percentage increase. Base monthly rent will also increase beginning the
second year (December 15, 1998) as well as at the beginning of each year
thereafter including each option year by an amount of $500 per month. All
rents are due monthly in advance on the first calendar day of each month
payable to: CRESCENT HELICOPTERS, 7750 Pines Blvd., Pembroke Pines, FL
33024. The first lease payment due December 15, 1997 will be for both the
first and last month's base lease payments amounting to $16,000. A 10%
penalty fee will be incurred by the SUBLESSEE for any payments not received
by the SUBLESSOR by the seventh calendar day of the applicable month.
5. DEPOSIT:
Receipt is hereby made in the amount of $8,500 from SUBLESSEE. Upon
acceptance of this lease, such deposit shall belong to the SUBLESSOR and
applied as a Security Deposit for the period of said Lease. Said Security
Deposit shall secure the performance of the SUBLESSEE'S obligation
hereunder and shall constitute a fund from which any liens incurred by
SUBLESSEE or damages caused by SUBLESSEE and suffered by SUBLESSOR shall be
paid. Any Deposit remaining upon termination shall be returned to the
SUBLESSEE. SUBLESSEE shall not have the right to apply the Security Deposit
in payment of monthly rent.
6. LESSEE'S OBLIGATIONS:
(A) SUBLESSEE herein to the absolute and complete exclusion of
SUBLESSOR herein, shall be solely responsible for the
performance of any and all maintenance upon the interior and
exterior of premises including maintenance and repair of the
tie down areas, maintenance of the landscaping, cutting grass
areas including grass around tie down areas, the payment of
any and all liability, fire and personal property insurance
premiums, and 100% of said hangar's metered utilities. In
addition, tenant A shall pay 50% of the water bill which is a
joint use water bill for the entire premises.
(B) SUBLESSEE shall be solely responsible for the maintenance and
repair of all equipment, doors, windows, electrical, plumbing
and HVAC equipment and any and all other related equipment.
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<PAGE> 7
(G) SUBLESSEE shall accept the premises in "as is" condition including
acknowledgment by SUBLESSEE of an acceptable Phase II environmental
inspection having been completed on the premises as of __________
199_, a copy of which is attached and as such made a part of this
lease. SUBLESSEE shall also be responsible for any and all
improvements to the premises, with any improvement costing more than
$1,000 requiring the written approval of SUBLESSOR. All SUBLESSEE
improvements shall at the end of the lease term become the property of
the SUBLESSOR unless said improvements are removed by SUBLESSEE and
the premises are put back to it's original condition as determined
solely by SUBLESSOR.
7. SUBLESSOR'S OBLIGATIONS:
(A) SUBLESSOR shall be responsible for the maintenance on the roof,
exterior structural walls and foundation of any buildings located on
the Premises.
8. SUB-LETTING:
SUBLESSEE shall not assign this lease nor sublet the premises, or any part
thereof, without the written consent of the SUBLESSOR, nor shall SUBLESSEE
allow the premises, or any part thereof, to be used for any other purpose
than is legally permitted by Broward County or any other governing body.
9. PERSONAL PROPERTY:
All personal property placed or moved into the premises above described by
the SUBLESSEE, shall be at risk of the SUBLESSEE or OWNER thereof, and the
SUBLESSOR shall not be liable for any damage to said personal property, or
to the SUBLESSEE, or to any other party for any reason whatsoever.
10. COMPLIANCE WITH RULES AND REGULATIONS:
SUBLESSEE shall promptly comply with all statutes, ordinances, rules,
orders, regulations and requirements of the Federal, State and Local
Governments, Broward County Aviation Department, and of any and all of
their departments, bureaus and agencies applicable to said premises.
11. COMPLIANCE WITH RULES AND REGULATIONS: NON-PAYMENT OF RENT, RIGHT OF
RE-ENTRY:
(A) Time shall be of the essence within the terms and conditions of this
Lease. THE PROMPT PAYMENT OF THE RENT FOR SAID PREMISES UPON THE DATES
NAMED, AND THE FAITHFUL OBSERVANCE OF THE RULES AND REGULATIONS AND
TERMS OF THIS LEASE ARE THE CONDITIONS UPON WHICH THIS LEASE IS MADE
AND ACCEPTED. Any material failure on the part of the SUBLESSEE herein
to comply with the terms, conditions, rules or regulations now in
existence, or which may be hereinafter required by Broward County,
Florida, to whom this Lease is subservient, or the failure to pay rent
within Seven calendar days after the same is due and payable, shall,
at the option of the SUBLESSOR, work a forfeiture of this said
contract and of all rights of the SUBLESSEE hereunder, and, thereupon,
the SUBLESSOR, it's agent or attorneys, shall have the right to enter
said premises and remove therefrom all persons and/or personal
property located therein, forcibly or otherwise.
(B) If the SUBLESSEE shall abandon or vacate the subject premises before
the end of the term of this Lease, or any extension thereof, or if
said SUBLESSEE shall suffer the rent or any other sums of money due
SUBLESSOR to be in arrears, then, and in such event, the SUBLESSOR.
3
<PAGE> 8
may, at its option, forthwith cancel this Lease or SUBLESSOR may enter
said premises by force or otherwise, without being liable in any way
therefor, and relet the premises with or without any furniture, tools,
or equipment, that may be therein, at such price and upon such terms
and for such duration of time as the SUBLESSOR may determine, and
revive the rent therefor, applying the same to the payment of the rent
or other moneys due by these presents, and if the full rental or other
sums of money due SUBLESSOR herein provided shall not be realized by
SUBLESSOR over and above the expenses to the SUBLESSOR in such
releting, the said SUBLESSEE shall pay any deficiency.
12. ATTORNEY'S FEES AND COSTS:
The parties hereto agree, jointly and severally, to pay to the prevailing
party a reasonable attorney's fee, suit costs, and all other costs
connected with the enforcement of any and all terms of this Lease
Agreement.
13. TIMELY PAYMENT OF RENT, UTILITIES, TAXES AND INSURANCE.
(A) SUBLESSEE agrees that they will pay all charges for rent, insurance,
utilities etc. on said premises, and should said charges herein
provided for at any time become due and unpaid for a period of Seven
(7) Calendar days after the same shall become due and owing, the
SUBLESSOR may, at its option, consider the said SUBLESSEE to be
tenants at sufferance and shall have the right to immediately reenter
upon said premises and the entire rent for the remainder of this Lease
Agreement shall be at once due and payable and may forthwith be
collected by distress and otherwise, plus reasonable attorney's fees
and any other costs and expenses connected with the enforcement of the
terms and conditions of any portion of this Lease Agreement.
(B) SUBLESSEE agrees that they will pay any and all applicable sales
taxes, personal property taxes, which may be levied against the
property herein now or in the future during the course of this Lease
Agreement or any extension thereof.
14. RIGHT OF INSPECTION AND ENTRY:
The SUBLESSOR, or any of its agents, shall have the right to enter said
premises during all reasonable hours to examine the same, to make such
repairs, additions or alterations as may be deemed necessary for the
safety, comfort or preservation thereof, of said building, or to exhibit
said premises, and to put or keep upon the doors thereof a notice "FOR
RENT" at any time the SUBLESSEE is in default of this sublease agreement
as well as within 180 days before the expiration of this Sublease.
15. ACCEPTANCE AND RETURN OF PREMISES:
SUBLESSEE hereby accepts the premises in the condition they are in at the
beginning of this Lease and agrees to maintain said premises in at least
the same condition, order and repair as they are at the time commencement
of said term, excepting only reasonable wear and tear.
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<PAGE> 9
16. LIMITATION OF LANDLORD'S LIABILITY:
SUBLESSOR shall not be liable for any damages or injury by any cause, which
may be sustained by the SUBLESSEE herein or any persons or for any other
damage or injury resulting from carelessness, negligence or improper
conduct on the part of any other tenant or agent, or employee, or entity.
17. DEFAULT AND REMEDIES:
A. DEFAULT. The occurrence of any of the following shall constitute a
material default and breach of this Lease by SUBLESSEE:
(1) Any failure by SUBLESSEE to pay Minimum Rent or Percentage Rent or
any other monetary sums required to be paid hereunder, where such
failure continues for three (3) days after written notice by
SUBLESSOR to SUBLESSEE:
(2) The failure to occupy or the abandonment or vacation of the
Premises by SUBLESSEE;
(3) The repudiation of this Lease by SUBLESSEE, any action by
SUBLESSEE which renders performances by SUBLESSEE of its
obligations under this Lease impossible, or any action by
SUBLESSEE which demonstrates an intent by SUBLESSEE not to perform
an obligation under this Lease or not to continue with the
performance of obligations under this Lease;
(4) A failure by SUBLESSEE to observe and perform any other provisions
of this Lease to be observed or performed by SUBLESSEE, where such
failure continues for fifteen (15) days after written notice
thereof by SUBLESSOR to SUBLESSEE; provided, however, that if the
nature of the default is such that the same cannot reasonably be
cured within said fifteen (15) day period, SUBLESSEE shall not be
deemed to be in default if SUBLESSEE shall within such period
commence such cure and thereafter diligently prosecute the same to
completion;
(5) The making by SUBLESSEE of any general assignment or general
arrangement for the benefit of creditors, the filing by or against
SUBLESSEE of a petition to have SUBLESSEE adjudged bankrupt or of
a petition for reorganization or arrangement under any law
relating to bankruptcy (unless, in the case of a petition filed
against SUBLESSEE, the same is dismissed within sixty (60) days),
the appointment of a trustee or receiver to take possession of
substantially all of SUBLESSEE'S assets or of SUBLESSEE'S interest
in this Lease, where possession is not restored to SUBLESSEE
within thirty (30) days, or the attachment, execution or other
judicial seizure of substantially all of SUBLESSEE'S assets
located at the Premises or of SUBLESSEE'S interest in this Lease,
where such seizure is not discharged within thirty (30) days.
B. NOTICE. SUBLESSEE shall pay SUBLESSOR the sum of One Hundred and
No/100ths dollars ($100.00) in addition to any other obligations
hereunder for the cost of sending each Notice to Default.
C. REMEDIES. In the event of any such material default or breach by
SUBLESSEE, SUBLESSOR may at any time thereafter, without limiting
SUBLESSOR in the exercise of any right of remedy at law or in equity
which SUBLESSOR may have by reason of such default or breach:
(1) Maintain this Lease in full force and effect and recover the Rent
and other monetary charges as they become due (or alternatively,
if SUBLESSOR exercises the right to accelerate the Rent due
hereunder as set forth in Section 17D below, recover all Rent and
other monetary charges due as a result of acceleration), without
terminating SUBLESSEE'S right to possession irrespective of
whether SUBLESSEE shall have
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<PAGE> 10
abandoned the Premises. In the event SUBLESSOR elects not to
terminate this Lease, SUBLESSOR shall nevertheless have the right
to attempt to re-let the Premises at such rent and upon such
conditions and for such a term, and to do all acts necessary to
maintain or preserve the Premises as SUBLESSOR deems reasonable
and necessary without being deemed to have elected to terminate
this Lease, including removal of all persons and property from
the Premises; such property may be removed and stored in a public
warehouse or elsewhere at the cost of and for the account of
SUBLESSEE, and if SUBLESSEE does not pay for storage, then sold
at public auction; the proceeds of such sale shall first be
applied to payment of the expenses of such sale, second to
amounts due SUBLESSOR and the balance, if any, to SUBLESSEE. In
the event any re-letting occurs, SUBLESSEE'S right to possession
of the Premises under this Lease shall terminate automatically
upon the new SUBLESSEE taking possession of the Premises, but
SUBLESSEE shall nevertheless be responsible for damages, more
particularly described in Sections 17C.(2)a through 17C.(2)e.
Notwithstanding that SUBLESSOR fails to elect to terminate the
Lease initially, SUBLESSOR may at any time during the term of
this Lease elect to terminate this Lease by virtue of such
previous default of SUBLESSEE.
(2) Terminate SUBLESSEE'S right to possession by any lawful means
and SUBLESSEE shall immediately surrender possession of the
Premises to SUBLESSOR. In such event SUBLESSOR shall be entitled
to recover from SUBLESSEE all damages incurred by SUBLESSOR by
reason of SUBLESSEE'S default, including without limitation
thereto the following:
a.) the worth at the time of award of any unpaid Rent which
had been earned at the time of such termination; plus
b.) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after
termination until the time of award exceeds, the amount
of such rental loss that could have been reasonably
avoided; plus
c.) the amount by which the unpaid Rent for the balance of
the term after the time of award exceeds the amount of
such rental loss that could be reasonably avoided; plus
d.) any other amount necessary to compensate SUBLESSOR for
all the detriment proximately caused by SUBLESSEES
failure to perform its obligation under this Lease or
which in the ordinary course of events would be likely to
result therefrom including costs and expenses incurred by
SUBLESSOR in making the Premises ready for a new
SUBLESSEE; plus
e.) at SUBLESSOR'S election, such other amounts in addition
to or in lieu of the foregoing as may be permitted from
time to time by applicable law of the State where the
Premises are located. Upon any such re-entry, SUBLESSOR
shall have the right to make any reasonable repairs,
alterations or modifications to the Premises, which
SUBLESSOR in its sole discretion deems reasonable and
necessary. As used in Section 17C.(2)a. above, the "worth
at the time of award" is computed by allowing interest at
the rate of one percent (1%) per month from the date of
default. The term Rent, means the rent to be paid
pursuant to Paragraph 4 and all other monetary sums
required to be paid by SUBLESSEE pursuant to the terms of
this Lease.
D. ACCELERATION OF RENT. In the event of any such material default or
breach by SUBLESSEE, SUBLESSOR may, at its election and without
limiting SUBLESSOR'S other rights and remedies, accelerate the payment
of all Rent and other monetary sums payable by
6
<PAGE> 11
SUBLESSEE for the balance of the term and upon any such elections
such sums shall be immediately due and payable in full.
E. SPECIAL DAMAGES. In addition to the damages for breach of this
Lease described in Paragraph 17C. and 17D. SUBLESSEE agrees that
SUBLESSOR shall be entitled to receive from SUBLESSEE any and all
costs in connection with SUBLESSEE'S default hereunder, including
without limitation, administrative costs of SUBLESSOR associated
with SUBLESSEE'S default, costs of repairing and/or remodeling the
Premises for new SUBLESSEES and leasing commissions for any leasing
agent engaged to re-let the Premises.
F. LATE CHARGES. SUBLESSEE hereby acknowledges that late payment by
SUBLESSEE to SUBLESSOR of Rent and other sums due hereunder will
cause SUBLESSOR to incur costs not contemplated by this Lease, the
exact amount of which are unknown and will be extremely difficult
to ascertain other than such late charges which may be imposed on
SUBLESSOR by the terms of any mortgage or trust deed covering the
Premises. Accordingly, if any installment of Rent or any other sums
due from SUBLESSEE shall not be received by SUBLESSOR or
SUBLESSOR'S designee within seven (7) days after such amount shall
be due, SUBLESSEE shall pay to SUBLESSOR in addition to any late
charges incurred by SUBLESSOR under any mortgage or deed of trust
covering the Premises, a late charge equal to ten percent (10%) of
the amount(s) past due and additionally all such installments of
Rent or other sums due shall bear interest from the seventh day
forward at the rate of One percent (1%) per month until paid in
full. The parties hereby agree that such late charges represents
fair and reasonable estimate of the costs SUBLESSOR will incur by
reason of late payment by SUBLESSEE. Acceptance of such late charge
by SUBLESSOR shall in no event constitute a waiver of SUBLESSEE'S
default with respect to such overdue amount, nor prevent SUBLESSOR
from exercising any of the rights and remedies granted hereunder.
G. DEFAULT BY SUBLESSOR. SUBLESSOR shall not be in default unless
SUBLESSOR fails to perform obligations required of SUBLESSOR within
a reasonable time, but in no event later that thirty (30) days
after written notice by SUBLESSEE to SUBLESSOR and to the holder of
any mortgage or deed of trust covering the Premises furnished to
SUBLESSEE in writing, specifying wherein SUBLESSOR has failed to
perform such obligations; provided, however, that if the nature of
SUBLESSOR'S obligation is such that more than thirty (30) days are
required for performance, then SUBLESSOR shall not be in default if
SUBLESSOR commences performance within such thirty (30) day period
and thereafter diligently prosecutes the same to completion;
provided, further, that in the event that SUBLESSOR has defaulted
in the payments of a monetary obligation and SUBLESSEE has advanced
monies to pay such obligation. SUBLESSOR shall pay SUBLESSEE
interest on such monies advanced at a rate of one percent (1%) per
month until paid in full.
H. BANKRUPTCY.
(1.) CHAPTER 7. In the event that SUBLESSEE shall become a
debtor in a case filed under Chapter 7 of the Bankruptcy
Code, and SUBLESSEE'S trustee or SUBLESSEE shall elect to
assume this Lease for the purpose of assigning the same
or otherwise, such election and assignment may be made
only if the provisions of Sections 17H.(2), 17H.(3), and
17H.(5) are satisfied. If SUBLESSEE or SUBLESSEE'S
trustee shall fail to elect to assume this Lease within
sixty (60) days after the filing of such petition or such
additional time as provided by the court within such 60-
day period, this Lease shall be deemed to have been
rejected. Immediately thereupon SUBLESSOR shall be
entitled to possession of the Premises without further
obligation to SUBLESSEE or SUBLESSEE'S trustee and this
Lease, upon the election of SUBLESSOR, shall terminate
but SUBLESSOR'S right to be compensated for
7
<PAGE> 12
damages (including, without limitation, damages pursuant to this
Paragraph 17) in any such proceeding shall survive whether or
not the Lease is terminated.
(2.) CHAPTER 11. In the event that SUBLESSEE shall become a debtor in
a case filed under Chapter 11 of the Bankruptcy Code, or in a
case filed under Chapter 7 of the Bankruptcy Code which is
converted to Chapter 11, SUBLESSEE'S trustee or SUBLESSEE, as
debtor-in-possession, must elect to assume this Lease within
sixty (60) days from the date of the filing of the petition
under Chapter 11 or conversion thereto, or SUBLESSEE'S trustee
or the debtor-in-possession shall be deemed to have rejected
this Lease. Immediately thereupon SUBLESSOR shall be entitled to
possession of the Premises without further obligation to
SUBLESSEE or SUBLESSEE'S trustee and this Lease, upon the
election of SUBLESSOR, shall terminate, but SUBLESSOR'S right to
be compensated for damages (including, without limitation,
damages pursuant to this Paragraph 17) in any such proceeding
shall survive whether or not the Lease is terminated.
Should SUBLESSEE'S trustee, or SUBLESSEE or debtor-in-
possession elect to assume this lease, it can do so only if:
a.) SUBLESSEE'S trustee or the debtor-in-possession has cured
all defaults under this Lease, or has provided SUBLESSOR
with Assurance (as defined below) that it will cure all
defaults susceptible of being cured by the payment of money
on the date of such assumption, and that it will cure all
other defaults under this Lease which are susceptible of
being cured by the performance of any act within fifteen
(15) days from the date of such assumption.
b.) SUBLESSEE'S trustee or the debtor-in-possession has
compensated or has provided SUBLESSOR with Assurance that
within ten (10) days from the date of such assumption that
it will compensate SUBLESSEE for any actual pecuniary loss
incurred by SUBLESSEE arising from the default of
SUBLESSEE, SUBLESSEE'S trustee, or the debtor-in-possession
indicated in any statement of actual pecuniary loss sent
by SUBLESSOR to SUBLESSEE'S trustee or the
debtor-in-possession.
c.) SUBLESSEE'S trustee or the debtor-in-possession has
provided SUBLESSOR with Assurance of future performance of
each of the obligations under this Lease of SUBLESSEE,
SUBLESSEE'S trustee or the debtor-in-possession, and if
SUBLESSEE'S trustee or the debtor-in-possession has
provided such assurance, SUBLESSEE'S trustee or the
debtor-in-possession shall also deposit with, or provide
Assurance as defined below to SUBLESSOR, as security for
the timely payment of Rent hereunder, an amount equal to
six (6) monthly installment payments of the Rent, provided
all terms and provisions of this Lease shall have been
complied with. The obligations imposed upon SUBLESSEE'S
trustee or the debtor-in-possession by this paragraph shall
continue with respect to SUBLESSEE or any assignee of this
Lease after the completion of bankruptcy proceedings.
d.) Such assumption will not breach or cause a default under
any provision of any other lease, mortgage, financing
agreement or other agreement by which SUBLESSOR is bound
relating to the Premises. For purposes of this Paragraph
17H, SUBLESSOR and SUBLESSEE acknowledge that "Assurance"
shall mean no less than: SUBLESSEE'S trustee or the
debtor-in-possession has and will continue to have
sufficient unencumbered assets after the payment of all
secured obligations and administrative expenses to assure
SUBLESSOR that sufficient funds will be available to
fulfill the obligations of SUBLESSEE under this Lease and
there shall have been deposited with SUBLESSOR, or the
Bankruptcy Court
8
<PAGE> 13
shall have entered an order segregating sufficient cash
payable to SUBLESSOR and/or SUBLESSEE'S trustee or
debtor-in-possession shall have been granted a valid and
perfected first lien and security interest and/or mortgage
in property of SUBLESSEE, SUBLESSEE'S trustee of the
debtor-in-possession, acceptable as to value and kind to
SUBLESSOR, to secure to SUBLESSOR the obligation of
SUBLESSEE'S trustee or the debtor-in-possession to cure
the defaults under this Lease, monetary and/or
non-monetary, within the time periods set forth above.
(3). SUBSEQUENT PETITIONS. In the event that this Lease is assumed in
accordance with Paragraph 17H(2) and thereafter SUBLESSEE is
liquidated or files or has filed against it a subsequent petition
under Chapter 7 or Chapter 11 or the Bankruptcy Code, SUBLESSOR
may, at it's option, terminate this Lease and all rights of
SUBLESSEE hereunder by giving SUBLESSEE notice of its election to
so terminate within thirty (30) days after the occurrence of
either of such events.
(4). ADEQUATE ASSURANCES. If SUBLESSEE'S trustee or the
debtor-in-possession has assumed the Lease pursuant to the terms
and provisions of Sections 17H(1), 17H(2) and 17H(3) for the
purposes of assigning (or thereafter elects to assign) this
Lease, this Lease may be so assigned only if the proposed
assignee has provided adequate assurance of future performances
of all of the terms, covenants and conditions of this Lease to be
performed by SUBLESSEE. SUBLESSOR shall be entitled to receive
all cash proceeds of such assignment. As used herein, "adequate
assurance of future performance" shall mean and include all such
requirements as set forth in Section 365 of Title II, U.S. Code
(as may be amended) are met, and further that no less than each
of the following conditions has been satisfied.
a). The proposed assignee has furnished SUBLESSOR with either
(i) a current financial statement audited by a certified
public accountant indicating a net worth and working capital
in amounts which SUBLESSOR reasonably determines to be
sufficient to assure the future performance by such assignee
of SUBLESSEE'S obligations under this Lease, or (ii) a
guarantee or guarantees, in form and substance satisfactory
to SUBLESSOR, from one or more persons with a net worth which
SUBLESSOR reasonable determines to be sufficient to secure
the SUBLESSEE'S obligations hereunder, and has also furnished
information with respect to the proposed assignee's
management ability, expertise and experience in SUBLESSEE'S
business and SUBLESSOR has reasonably determined that the
proposed assignee has the management expertise and experience
to operate the business conducted on the Premises.
b). SUBLESSOR has obtained all consents or waivers from others
required under any lease, mortgage, financing arrangement or
other agreement by which SUBLESSOR is bound, in order to
permit SUBLESSOR to consent to such assignment without
violating the terms of any such agreement.
c). The proposed assignment will not release or impair any
guaranty of the obligations of SUBLESSEE (including the
proposed assignee) under this Lease.
(5). USE AND OCCUPANCY CHARGES. When, pursuant to the Bankruptcy
Code, SUBLESSEE'S trustee or the debtor-in-possession shall be
obligated to pay reasonable use and occupancy charges for the use
of the Premises, such charges shall not be less than the Base
Rent plus Broward County valuation rental increase, CPI
increases, and other charges due hereunder. No acceptance by
SUBLESSOR of said use and occupancy charges, or of Rent hereunder
shall constitute a waiver of any of the provisions of this
Paragraph 17H, or any of SUBLESSOR'S rights thereunder.
9
<PAGE> 14
(6) NO TRANSFER IN BANKRUPTCY WITHOUT CONSENT. Neither the whole nor
any portion of SUBLESSEE'S interest in this Lease or its estate
in the Premises shall pass to any trustee, receiver, or assignee
for the benefit of creditors, or any other person or entity, or
otherwise by operation of law under the laws of any state having
jurisdiction of the person or property of SUBLESSEE unless the
requirements and conditions of this Paragraph 17H, are truly met
or unless SUBLESSOR shall have otherwise consented to such
transfer in writing. No acceptance by SUBLESSOR of installment
payments or Rent or any other payments from any such trustee,
receiver, assignee, person or other entity shall be deemed to
constitute such consent by SUBLESSOR nor shall it be deemed a
waiver of SUBLESSOR'S rights under this Paragraph 17H including
the right to terminate this Lease for any transfer of
SUBLESSEE'S interest under this Lease without such consent.
18. PERSONS AND PARTIES BOUND HEREBY:
This contract shall be binding upon the SUBLESSOR, it's heirs,
administrators or legal representatives, and of the SUBLESSEE, individually
or corporately, jointly and severally.
19. TIME OF PERFORMANCE HEREUNDER:
It is understood and agreed by and between the parties hereto that time is
of the essence of this contract and this applies to all terms and
conditions contained herein.
20. NOTICE:
It is understood and agreed by and between the parties hereto that written
notice mailed or hand delivered to the premises leased hereunder shall
constitute sufficient notice to the SUBLESSEE to comply with the terms of
this Lease Agreement. As to the SUBLESSOR, all notices shall be sent to:
Crescent Helicopters, 7750 Pines Blvd., Pembroke Pines, FL 33024.
21. CHARGES AS RENT:
It is understood and agreed by and between the parties hereto that any
charges against the SUBLESSEE by the SUBLESSOR for services or for work
done on the premises by order of the SUBLESSEE or otherwise accruing under
this contract shall be considered as rent due and shall be included in
any lien for rent due and unpaid.
22. REQUIRED INSURANCE:
SUBLESSEE, at it's sole expense, shall maintain a Comprehensive General
Liability Insurance Policy in an amount not less that $1,000,000 and
listing Crescent Helicopters, and Larry D. Stevens and Dean H. Shealy, as
"ADDITIONAL INSURED". SUBLESSEE shall also maintain fire and extended
coverage insurance upon the Premises and any contents owned by SUBLESSOR
in an amount equal to no less than 100% of the replacement cost. Such
insurance shall include standard extended coverage, vandalism, malicious
mischief, and water damage coverage and shall name Broward County,
SUBLESSOR and any mortgagee of SUBLESSOR as additional insured and co-loss
payee thereunder. Evidence of the above insurance must be delivered to
SUBLESSOR prior to occupancy. SUBLESSEE
10
<PAGE> 15
will continue to provide SUBLESSOR with satisfactory evidence that such
insurance is maintained throughout the SUBLESSEE term.
23. WASTE DISPOSAL:
SUBLESSEE shall not suffer the disposal of any human or chemical waste in,
on or about the demised premises except in approved containers, or fashion,
and in areas specifically approved by Landlord for such purpose. All
government requirements relative to the storage and disposal of hazardous
chemicals, fuel, oil, etc., shall be strictly adhered to at all times.
24. MAINTENANCE OF GROUNDS:
SUBLESSEE, at their sole expense, shall maintain the demised premises,
including lawn and shrubbery, in at least as good condition as the same
presently exists.
25. USE:
SUBLESSEE shall occupy the premises for Aircraft Service and Maintenance
only. Any other use must be approved by Crescent Helicopters and Broward
County Aviation Dept. SUBLESSEE is expressly restricted from conducting any
helicopter activities on the premises including but not limited to
equipment and parts sales, charters and contracts. SUBLESSEE is also
restricted from performing any aircraft or aircraft parts stripping and/or
painting activities on the Premises. Restrictions on SUBLESSEE activities
as specified above also apply to anyone subletting or renting from
SUBLESSEE.
26. HOLD HARMLESS:
SUBLESSEE shall indemnify and hold forever harmless SUBLESSOR and Broward
County, against any and all claims of every kind or character arising out
of the acts or omissions of SUBLESSOR, its directors, officers, agents, or
employees or failure of SUBLESSOR to perform or comply with any of the
terms hereof or otherwise caused by SUBLESSOR, its directors, officers,
agents, or employees on said premises (except to the extent that such
claims may be attributable to the negligence or willful misconduct of the
agents or employees of SUBLESSOR) whether such claims shall arise from or
be based upon injuries to persons (including death) or damage to property
provided SUBLESSEE shall give SUBLESSOR prompt notice of any claims, damage
or loss, or action in respect thereto, and an opportunity reasonably to
investigate and defend against any claim or action based upon alleged
negligent conduct of SUBLESSOR, its duly authorized director, officers,
agents or employees.
27. BINDING EFFECT:
The party executing this Sublease Agreement on behalf of SUBLESSOR and
SUBLESSEE respectively has the authority to bind the respective parties to
this Sublease Agreement.
28. ENTIRE AGREEMENT:
The foregoing constitutes the entire agreement between the parties and may
be modified only by a writing signed by both parties.
11
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have executed this instrument for the
purpose expressed, the day and year above written.
<TABLE>
<S> <C>
SUBLESSOR: SUBLESSEE:
- ---------- ----------
SHASTA AVIATION CORPORATION GLOBAL TURBINE SERVICES, INC.
DBA CRESCENT HELICOPTERS
BY: BY:
--------------------------------------------- --------------------------------------------
NAME: DEAN H. SHEALY NAME:
------------------------------------------
TITLE: President TITLE:
-----------------------------------------
Signed, sealed and delivered in the presence of: Signed, sealed and delivered in the presence of:
- ------------------------------------------------ ------------------------------------------------
Witness Witness
</TABLE>
In Witness whereof, the parties have made and executed this Agreement:
BROWARD COUNTY through its BOARD OF COUNTY COMMISSIONERS, signing by and
through its Chairman or Vice Chairman, _______________________, authorized to
execute same by Board Action on the ______ day of _______________, 1996.
GLOBAL TURBINE SERVICES, INC., signing by and through its ____________________
duly authorized to execute same and SHASTA AVIATION, dba CRESCENT HELICOPTERS,
signing by and through its ____________________ duly authorized to execute same.
COUNTY
------
<TABLE>
<S> <C>
ATTEST: BROWARD COUNTY, through its
BOARD OF COUNTY COMMISSIONERS
- ----------------------------------------- ----------------------------------------
County Administrator and Ex-Officio Clerk day of , 1996
--------- ----------------
of the Board of County Commissioners Approved as to form by Office of County Attorney
of Broward County, Florida Broward County, Florida
</TABLE>
12
<PAGE> 1
STATE OF FLORIDA
COUNTY OF MIAMI-DADE LEASE OF REAL PROPERTY
THIS AGREEMENT, effective the 17th day of December, 1998, by and
between CONDOR PROPERTIES OF MIAMI II, INC., hereinafter referred to as
"Lessor", and AAS LANDING GEAR SERVICES, INC., a Florida corporation,
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 as a
plating facility;
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, located at 1550 NW 108 Avenue,
Miami, Florida 33172, 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 on Schedule 1.02 hereto.
Section 1.03 - Zoning and Other Restrictions. Lessor warrants that the
Demised Premises and all improvements thereon are currently being used in
compliance with existing zoning. Lessor further warrants that no other
restrictions exist that would inhibit Lessee's use of the Demised Premises.
Further Lessor warrants that no other party has any rights to the Demised
Premises, either for possession or acquisition thereof.
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 thereto attaching and belonging, to the
Lessee, its successors and assigns, with a quiet and undisturbed possession to
Lessee, for an initial term of ten (10) years from the date hereof ("Initial
Term"). This lease shall be automatically extended for two additional five (5)
year periods (the "Renewal Term") upon the same terms and conditions as apply
herein unless
<PAGE> 2
either party provides written notice of termination to the other party at least
ninety (90) days prior to termination.
Section 1.05 - Use. The Lessee covenants that its use of the Demised
Premises shall be limited to a plating facility (or such other uses as the
parties agree) and that it will not 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 permitted 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 Six Thousand Nine Hundred Thirty-Seven
Dollars and 66/100 ($6,937.66) per month ($83,252.00 per year based on 12,808
square feet x $6.50 per foot), payable in advance on the first day of each month
commencing on the effective date of this Agreement. Rent shall increase at the
rate of one percent (1%) per year during the Initial Term and any Renewal Terms.
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 when due shall, after ten (10) days
written notice, 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.
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
<PAGE> 3
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 on demand, together with interest thereon 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 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 and Repairs. As between the Lessor and the
Lessee, the Lessee shall pay or cause to be paid all non-structural repair and
maintenance 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, or acts of the Lessor.
The Lessor agrees to maintain the premises and structure in a good
state of repair during the term of this lease and, further, specifically agrees
that Lessor shall be responsible for: (1) major repairs to the utility systems
of the demised premises including, but not necessarily limited to, the
following: heating and air conditioning systems, sewer, water, electric, and
plumbing; (2) all non-structural and structural maintenance and repair to the
roof, exterior walls, and structural components; and (3) replacement or
modification of the electrical system or plumbing system as
<PAGE> 4
necessary to bring the demised premises into compliance with applicable building
codes. In the event the Lessor fails to make the repairs, replacements or
modifications, or to perform the maintenance described herein, the Lessee shall
have the right to terminate this lease upon thirty (30) days written notice sent
by first class mail to the Lessor.
Section 3.07 - Alterations and Improvements. The Demised Premises may
not be altered or changed without the written consent of the Lessor and the
Lessee shall not attach anything whatsoever to the Demised Premises that might
damage the Demised Premises or that might be a permanent attachment to the
Demised Premises without the written consent of Lessor. The consent of Lessor
shall not be unreasonably withheld. The costs of any such alterations or
improvements approved by Lessor shall be borne by the Lessee and shall remain
upon and be surrendered with the Demised Premises; provided, however, that any
trade fixtures installed by Lessee may be removed by Lessee at the expiration of
the term of this Lease, or of any renewal, provided that the Lessee is not in
default under the terms hereof and provided further that any damage occasioned
by any such removal shall be paid by Lessee.
Section 3.08 - 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 3.09 - 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.
Section 3.10 - 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.
<PAGE> 5
Section 3.11 - 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 3.12 - Liability and Property Insurance. Lessor shall, during
the term of this lease, maintain adequate fire and casualty liability insurance
coverage on the Demised Premises in solvent, mutual or stock companies or
company, insuring both the Lessor and Lessee, in an amount and form reasonably
acceptable to the parties.
Lessee shall, during the demised term, maintain adequate personal
property insurance insuring all equipment, trade fixtures, fixtures, inventory
and other personal property located on the Demised Premises. Lessee shall
maintain throughout the term of this lease adequate general liability insurance
coverage on the Demised Premises in solvent, mutual or stock companies or
company, insuring both the Lessor and the Lessee, in an amount and form
reasonably acceptable to the parties.
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
term hereby granted, peaceably and quietly have, hold and enjoy the Demised
Premises pursuant to the terms hereof.
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. ss.9601(14), Section 311 of
the Federal Water Pollution Control Act, 33 U.S.C. ss.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. ss.6903, 42 U.S.C. ss.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. ss.1317(1)(a); (d) a "hazardous
air pollutant" under Section 112 of the Clean Air Act, 42 U.S.C. ss.7412, as now
or hereafter amended; (e) a "hazardous material" under the Hazardous Material
Transportation Act, 49 U.S.C. ss.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
<PAGE> 6
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 not limited to, asbestos,
polychorinated biphenyls (PCBs), petroleum and petroleum based derivatives and
urea formaldehyde.
Section 5.02 - Representations and Warranties Lessor represents and
warrants to Lessee that (i) to the best knowledge of Lessor, any handling,
transportation, storage, treatment or use of Toxic or Hazardous Substances that
has occurred on the Demised Premises to date has been in compliance with all
applicable federal, state, and local laws, regulations and ordinances, and (ii)
to the best knowledge of Lessor, no leak, spill, release, discharge, emission or
disposal of Toxic or Hazardous Substances has occurred on the Demised Premises
to date and the soil, groundwater, and soil vapor on or under the Demised
Premises is free of Toxic or Hazardous Substances as of the date the term of
this Lease commences. Lessor shall be responsible for any required cleanup or
liability brought about by actions or inactions of any parties prior to Lessee's
possession of the Demised Premises. A Limited Phase II Environmental Assessment
was conducted on the Demised Premises June 17, 1998. Lessor has provided Lessee
with the Limited Phase II Environmental Assessment Report dated June 17, 1998.
Lessor had any and all recommended cleanups recommended by the Limited Phase II
Environmental Assessment Report performed prior to Lessee's possession of the
Demised Premises.
Section 5.03 - Indemnities
(a) Lessor's Indemnity. Lessor agrees to indemnify, defend (with
counsel satisfactory to Lessee) and hold Lessee 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 a breach of the environmental warranties made
by Lessor above or to the presence, release or disposal of Toxic or Hazardous
Substances on or from the Demised Premises except where such presence, release
or disposal results from any act or omission of Lessee during its occupancy of
the Demised Premises. Such indemnity shall include, without limitation, 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 before Lessee occupies the Demised Premises or the
Lease Term commences;
(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 during Lessee's occupancy of the Demised Premises or after the
lease term commences by Lessor.
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,
<PAGE> 7
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 Lessor 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.
(b) Lessee's Indemnity 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
ARTICLE VI
EMINENT DOMAIN
Section 6.01 - Eminent Domain. If more than twenty-five percent (25%)
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 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 7.01 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;
(c) The filing or execution or occurrence of
<PAGE> 9
(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).
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.
<PAGE> 10
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.
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.
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.
<PAGE> 11
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. 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.
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.
<PAGE> 12
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:
Condor Properties of Miami, Inc.
Attn: Ned Angene
6929 NW 46 Street
Miami, Florida 33166
With a Copy to:
Christopher J. Dawes
Haley, Sinagra & Perez, P.A.
100 South Biscayne Boulevard, Suite 800
Miami, FL 33131
To the Lessee by Communication addressed to:
AAS Landing Gear Services, Inc.
Attn: Karl F. Brown
P. O. Box 7566
Charlotte, NC 28241
<PAGE> 13
With a Copy to:
David M. Furr
Gray, Layton, Kersh, Solomon,
Sigmon, Furr & Smith, P.A.
Post Office Box 2636
Gastonia, NC 28053-2636
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 permitted 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 permitted
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> 14
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 AND ACCESS TO DEMISED PREMISES
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. Lessor shall have access to the Demised
Premises so that Lessor may enter other parts of the building (i.e. Section B
and Section C). Since the driveway is a common driveway used by all tenants of
the building, Lessee shall not do anything whatsoever to prevent other tenants
access to the driveway.
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> 15
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 Florida and shall be construed, interpreted, and
enforced pursuant to the laws of the State of Florida.
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
REQUEST TO SIGN LANDLORD WAIVER
Lessor agrees to any reasonable request to execute a landlord waiver in
favor of any lending institution of Lessee.
ARTICLE XXIII
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:
ATTEST: CONDOR PROPERTIES OF MIAMI II, INC.
____________________________ By /s/ Ned Agene
-----------------------------
[SEAL]
LESSEE:
ATTEST: AAS LANDING GEAR SERVICES, INC.
____________________________ By /s/ Karl Brown
-----------------------------
<PAGE> 16
STATE OF FLORIDA
COUNTY OF ______________
I, ____________, Notary Public, do hereby certify that ______________,
personally appeared before me this day, who being by me duly sworn, says that he
is the _______ President of CONDOR PROPERTIES OF MIAMI II, 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
_______________, acknowledged the said writing to be the act and deed of said
corporation.
WITNESS, my hand and notarial seal, this _____ day of ______________,
1999.
____________________
Notary Public
My Commission Expires:
______________________
STATE OF NORTH CAROLINA
COUNTY OF ______________
I, ____________, Notary Public, do hereby certify that ______________,
personally appeared before me this day, who being by me duly sworn, says that he
is the _______President of AAS LANDING GEAR SERVICES, 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 _______________,
acknowledged the said writing to be the act and deed of said corporation.
WITNESS, my hand and notarial seal, this _____ day of _______, 1999.
____________________
Notary Public
My Commission Expires:
______________________
<PAGE> 17
EXHIBIT A
RE: SECTION 1.01, LEASE OF REAL PROPERTY EFFECTIVE THE 17TH DAY OF DECEMBER,
1998, BETWEEN AND AMONG CONDOR PROPERTIES OF MIAMI II, INC. AND AAS LANDING GEAR
SERVICES, INC.
Description of Demised Premises
<PAGE> 18
DRAWN BY AND RETURN TO: David M. Furr
P. O. Box 2636
Gastonia, NC 28053
STATE OF FLORIDA
COUNTY OF MIAMI-DADE
MEMORANDUM OF LEASE
THIS MEMORANDUM OF LEASE, made as of the 17th day of December, 1998, by
and between CONDOR PROPERTIES OF MIAMI II, INC. (hereinafter called "Lessor")
and AAS LANDING GEAR SERVICES, INC. (hereinafter called "Lessee");
W I T N E S S E T H:
WHEREAS, Lessor has heretofore leased to Lessee certain premises
hereinafter described by Lease effective December 17, 1998; and
WHEREAS, said Lease provides in Article XXI for the recordation of a
short form of said Lease setting forth the legal description of the property
leased and the terms of such lease; and
WHEREAS, the parties hereto desire to execute this Memorandum of Lease
in full compliance with the said Article XXI of said Lease.
NOW, THEREFORE, in consideration of the premises, the sum of One Dollar
in hand paid, receipt of which is hereby acknowledged, and the mutual covenants
herein contained and contained in the aforesaid Lease, the parties agree as
follows:
1. Description of Demised Premises. That property subject to the
aforesaid Lease is that certain real property described on Exhibit "A" attached
hereto and incorporated by reference.
2. Term and Renewal Option. The initial term of the Lease is ten (10)
years from the date of said Lease (the "Term").
3. Ratification. All of the terms, provisions and conditions and every
clause contained in said Lease dated December 17, 1998, including those referred
to in this Memorandum of Lease, are hereby ratified and confirmed, and the same
remain in full force and effect.
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Memorandum of
Lease as of the day and year first above written.
LESSOR:
CONDOR PROPERTIES OF MIAMI II, INC.
By /s/ Ned Angeau
-----------------------------
ATTEST:
_________________
[SEAL]
LESSEE:
AAS LANDING GEAR SERVICES, INC.
By /s/ Karl Brown
-----------------------------
ATTEST:
_________________
Secretary
[SEAL]
<PAGE> 20
STATE OF FLORIDA
COUNTY OF ________________
I, _______, Notary Public, do hereby certify that _______, personally
appeared before me this day, who being by me duly sworn, says that he is the
____ President of CONDOR PROPERTIES OF MIAMI II, 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 _______, acknowledged the
said writing to be the act and deed of said corporation.
WITNESS, my hand and notarial seal, this ___ day of ____________, 1999.
_______________________
Notary Public
My Commission Expires:______________
STATE OF NORTH CAROLINA
COUNTY OF ________________
I, _______, Notary Public, do hereby certify that _______, personally
appeared before me this day, who being by me duly sworn, says that he is the
____ President of AAS LANDING GEAR SERVICES, 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 _______, acknowledged the
said writing to be the act and deed of said corporation.
WITNESS, my hand and notarial seal, this ___ day of ____________, 1999.
_______________________
Notary Public
My Commission Expires:______________
<PAGE> 21
EXHIBIT A
<PAGE> 1
EXHIBIT 11
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(Unaudited)
<TABLE>
<CAPTION>
Year Year
Ended Ended
December 31, December 31,
1998 1997
----------- ------------
<S> <C> <C>
Pro forma data:
Net income as reported $ 6,764,609 $ 4,073,355
Pro forma income tax expense 2,570,551 1,629,300
----------- -----------
Pro forma net income $ 4,194,058 $ 2,444,055
=========== ===========
Pro forma basic earnings per share $ 0.76 $ 0.60
======== ========
Pro forma diluted earnings per share $ 0.76 $ 0.60
======== ========
Pro forma weighted average shares outstanding:
5,512,533 4,100,000
============= =============
Diluted 5,517,597 4,100,000
============= =============
</TABLE>
<PAGE> 1
EXHIBIT 21
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
LIST OF SUBSIDIARIES OF REGISTRANT
AAS ENGINE SERVICES, INC.
AAS LANDING GEAR SERVICES, INC.
AAS AMJET, INC.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,150,355
<SECURITIES> 0
<RECEIVABLES> 4,973,739
<ALLOWANCES> 255,592
<INVENTORY> 22,220,037
<CURRENT-ASSETS> 29,278,880
<PP&E> 2,550,807
<DEPRECIATION> 287,943
<TOTAL-ASSETS> 44,279,193
<CURRENT-LIABILITIES> 9,536,158
<BONDS> 0
0
0
<COMMON> 7,190
<OTHER-SE> 23,469,178
<TOTAL-LIABILITY-AND-EQUITY> 44,279,193
<SALES> 26,280,926
<TOTAL-REVENUES> 26,280,926
<CGS> 15,994,418
<TOTAL-COSTS> 3,337,339
<OTHER-EXPENSES> (44,915)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (229,476)
<INCOME-PRETAX> 6,764,609
<INCOME-TAX> 1,813,000
<INCOME-CONTINUING> 4,951,609
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,951,609
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
</TABLE>
