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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, 1999
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 [ ]
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. [X]
As of March 17, 2000, there were 7,210,304 shares of the registrant's common
stock outstanding and the aggregate market value of the 2,698,272 shares of
common stock (the registrant's only common equity) held by non-affiliates was
$30,692,844 based on the closing sale price of the common stock on the Nasdaq
National Market(R) on such date.
DOCUMENTS INCORPORATED BY REFERENCE:
The information required by Part III of this Annual Report on Form 10-KSB is
incorporated by reference to the registrant's proxy statement if filed with the
SEC by May 1, 2000. If the proxy statement is not filed by that date, the
information required by Part III of this Annual Report on Form 10-KSB will be
filed with the SEC as an amendment to this Annual Report on Form 10-KSB by May
1, 2000. Certain exhibits listed in Part IV of this Annual Report on Form 10-KSB
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"), founded in 1985,
provides integrated aviation maintenance, repair and overhaul services including
spare parts for commercial airlines, cargo operators and maintenance and repair
facilities worldwide. AAS offers engine and aircraft management services,
maintenance, repair and overhaul of flight controls, landing gear systems and
jet engines at its FAA licensed facilities, and, as of February 2000, heavy
maintenance for complete aircraft. AAS is one of the few companies that
specialize in both engine and airframe components and spare parts and also
provides aviation services that include:
o sale, lease or exchange of all major airframe and engine
components and spare parts;
o complete FAA and JAA (a consortium of European civil aviation
regulatory authorities) certified maintenance, repair and
overhaul ("MRO") services for engines, landing gear and flight
control surfaces;
o engine and aircraft management, insurance claims assistance
and other services; and
o as of February 2000, FAA certified heavy maintenance and
modification for both narrow and wide body aircraft.
Until the fourth quarter of 1998, substantially all of the revenues of
AAS were derived from the sale of the following products:
o Pratt & Whitney JT8 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 late 1998, AAS began to implement an acquisition strategy aimed
primarily at expanding its redistribution sales capabilities by acquiring
complementary businesses, including companies providing aviation services,
specialized MRO services and heavy maintenance of the complete aircraft. The
objective of AAS is to be a full service "one stop" supplier of products and
services for customers. AAS has acquired substantially all of the assets of the
following businesses that were, at the time of acquisition, conducting the
business indicated:
o Global Turbine Services, Inc. ("GTI") and its affiliate
Turbine Inspections, Inc. ("TII"), an engine management
service;
o Condor Flight Spares, Inc. ("Condor"), a redistributor of
landing gear parts and applicant for FAA certification to
operate a MRO facility specializing in landing gear;
o American Jet Engine Services, Inc. ("Amjet"), an FAA certified
MRO facility specializing in jet engines;
o Global Air Spares, Inc. ("GASI") and Atlantic Airmotive
Corporation ("AAC"), both Amjet affiliates engaged in jet
engine and engine parts redistribution;
o Complete Controls, Inc. ("CCI"), an FAA certified MRO facility
specializing in flight control surfaces such as flaps, slats
and rudders; and
o Santa Barbara Aerospace ("SBA"), an FAA certified facility
specializing in independent provision of aircraft heavy
maintenance and modification.
GTI and TII were initially operated by AAS in Pembroke Pines, Florida
as AAS Engine Services, Inc. In 1999, the name AAS Engine Services, Inc. was
changed to Aviation Services, Inc. ("Aviation Services") and in January 2000,
its operations were relocated to corporate headquarters in South Carolina.
Amjet, GASI and AAC are now operated as AAS Amjet, Inc. ("AAS Amjet")
headquartered in Miami, Florida. Condor operates as AAS Landing Gear Services,
Inc. ("AAS Landing Gear") and is also headquartered in Miami, Florida. CCI
operates in Tucson, Arizona as AAS Complete Controls, Inc. ("AAS Complete
Controls"). The assets acquired from the prior operations of SBA are being
utilized by AAS Aircraft Services, Inc. ("AAS Aircraft Services") in
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San Bernardino, California. Unless otherwise indicated, the term AAS in this
Annual Report on Form 10-KSB includes these five entities, AAS Technologies,
Inc. ("AAS Technologies"), a subsidiary recently created to jointly develop
certain technology solutions (collectively, the "Affiliated Companies") and AAS.
AAS was incorporated in June 1985 in the State of South Carolina under
the name Aviation Alloys, Inc. 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 principal executive office of AAS is
located at 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
Management believes the annual worldwide market for aircraft components
and parts is approximately $11 billion, of which approximately $1.7 billion is
the estimated market for redistributed aircraft components and spare parts.
Management also believes that the annual worldwide market for aircraft
maintenance, repair and overhaul services is approximately $30 billion and
expects that market to grow to approximately $36 billion by 2005. Approximately
$4.5 billion of the estimated $30 billion current market is commercial airframe
MRO services being provided in North America and 65% of those MRO services are
being performed by the airlines' own facilities. The remaining 35% is being
outsourced to independent MRO facilities such as those operated by AAS.
According to the 1999 Boeing Report, global air travel is projected to increase
approximately 63% by the year 2008, and the number of passenger and cargo
aircraft in service will increase approximately from 12,600 to 19,100 in that
same time period and to 28,400 in 2018. The aviation sales and service provider
market is expected to continue to grow due to the number of aircraft that will
require parts and service to meet the projected growth in the passenger and
cargo airline industry. To meet the demand for aircraft, operators are expected
to keep older aircraft in operation for a longer period of time. The 1999 Boeing
Report estimates that two-thirds of the 12,600 aircraft in use in 1998 will
still be in service in 2018. The primary market for redistribution sales and
maintenance, repair and overhaul services will be these older aircraft.
Accordingly, as an increased number of older commercial aircraft are kept in
service, the demand for components and spare parts and MRO services to keep
these aircraft in service also increases.
The air passenger and air freight industries are highly competitive. In
addition to the increasing aviation activity that in turn increases the demand
for aviation services, the trends that management believes favor independent
providers such as AAS include the following:
o Aircraft operators and MRO facilities are purchasing more components
and spare parts from redistributors rather than from new parts
manufacturers as redistributors are generally able to offer comparable
parts quicker and cheaper than manufacturers;
o Price sensitive aircraft operators are increasingly outsourcing
inventory management and parts leasing rather than purchasing and
stocking parts, because outsourcing and leasing allow operators to
reduce capital requirements for inventories and costs associated with
managing inventories, increase the utilization of third-party service
providers and take advantage of just-in-time inventory management;
o Consolidation among parts providers and MRO service providers has
increased as aircraft operators decrease the number of providers to
reduce administrative costs, satisfy increased governmental regulatory
scrutiny, streamline buying decisions and assure quality; and
o Airlines tend to prefer to use well-capitalized fully integrated parts
and service suppliers that are capable of providing improved
documentation and traceability, particularly through sophisticated
information systems, larger inventories, more timely service and
turn-around, higher standards of quality control and, most importantly,
"one stop shopping" or integrated solutions for supply, maintenance,
repair and overhaul of aircraft components and spare parts.
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BUSINESS STRATEGY
AAS's strategy is to enhance its position as a leading international
aviation service provider. In 1999, AAS focused on integrating its acquisitions
and building its infrastructure for growth. AAS's strategy for 2000 is to
further expand the service component of its business through internal growth and
the pursuit of additional acquisitions or joint ventures that have complementary
businesses. The MRO service business is highly complementary to AAS's
traditional parts distribution business and offers substantial economies of
scale. And the timely availability of AAS's extensive parts inventory enhances
its MRO service operations and allows AAS to better service its MRO customers.
AAS also expects to continue taking a larger market share in existing product
lines through focused marketing and customer support programs that maximize
cross-selling opportunities and through development of an innovative internet
marketing solution. AAS also plans to further expand its inventory and rotable
exchange pools to include additional aircraft and engine types.
In accordance with its strategy to expand the service component of its
business through internal growth, AAS is spending in excess of $11.5 million in
expanding and equipping facilities to increase the capacity of its existing MRO
services. To further expand its services offered, it recently purchased
substantially all of the assets used in the operation of an FAA certified
facility that had specialized in heavy maintenance and modification of the
complete narrow and wide body aircraft. AAS leased the facilities used for these
services from the San Bernardino International Airport Authority and commenced
operations as AAS Aircraft Services in February 2000.
AAS is an industry leader in technology, having recently implemented an
innovative document-imaging program for its inventory traceability that keeps
records in accordance with strict industry standards. AAS intends to leverage
its knowledge of the industry into expanded uses of technology. In February
2000, AAS created AAS Technologies, Inc. as a wholly owned subsidiary to enter
into a technology partnering agreement with SupplyAccess(TM) for the joint
development of an internet-based business-to-business ("B2B") distribution model
for aviation parts and service. Traditionally, parts have been listed, without
prices, on one of two legacy electronic listing systems. AAS recognized that
there was a substantial market for real-time inventory and price listings in a
business-to-business internet-based marketplace and that a B2B solution would
substantially improve the supply chain by linking sellers, whether third party
distributors or OEM manufacturers, with users, such as air carriers and overhaul
service providers. AAS Technologies is working with SupplyAccess(TM) to develop
and market a business-to-business e-Procurement solution for the aerospace
industry similar to those solutions already developed for the information
technology industry and applied to numerous other industries.
OPERATIONS
The principal source of AAS's revenues and operating income growth
in fiscal 1999 has been provided by the vertical integration of new services
with, and expansion of, its redistribution capabilities. AAS can now provide
aviation services at its FAA and JAA certified maintenance, repair and overhaul
facilities that specialize in engines, landing gear and flight control surfaces;
asset management programs that provide engine management, aircraft fleet
management and insurance consultation; supply chain management solutions; and,
as of February of this year, FAA certified heavy maintenance and modification
services for both narrow and wide body aircraft.
Revenues from redistribution capabilities are derived from the sale of
engines, engine components and spare parts and airframe components and spare
parts in the redistribution market. AAS generates these revenues primarily from
purchasing engines, engine components and spare parts and airframe components
and spare parts, having necessary repairs made by certified repair facilities
(including its own facilities when applicable), then selling those products from
its extensive inventory. AAS also derives revenue from consignment sales and
exchange transactions. AAS has 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 beginning to lease complete engines and
airframe parts rather than maintain spare engine and airframe pools.
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.
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PRODUCTS
Complete Engines. AAS has historically concentrated on the Pratt &
Whitney JT8 series engines and, to a lesser extent, General Electric CFM56
engines. 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 MD80 and DC-9 aircraft. The CFM56 is used to
power aircraft including Boeing 737- 300, -400 and -500 aircraft,
McDonnell-Douglas DC-8 aircraft 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-1 through -17 ceased in 1987. However,
the JT8D-200 is still currently in production and management expects
approximately 80 new engines will be produced in 2000. Although the JT8D-1
through -17 is no longer produced, 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, completes the necessary repairs in its own certified 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.
Engine Components and Spare Parts. Inventory of engine components and
spare parts consists of over 250,000 total items, most of which were obtained by
the purchase and disassembly of complete engines. Generally, engine components
and spare parts are purchased in "as removed" condition and therefore require
repair or overhaul by a certified repair facility prior to being returned to
service on an aircraft.
Airframe Components and Spare Parts. Inventory of airframe components
and spare parts consists primarily of rotables for Boeing, McDonnell-Douglas and
Airbus aircraft. Through the purchases of rotable inventories and components and
the disassembly of complete aircraft, AAS supports the entire aircraft. After
purchase, and disassembly if required, the components and spare parts are
inspected and repairs are commissioned as required. AAS has a broad selection of
over 200,000 total individual airframe components and spare parts in inventory.
Landing Gear Components and Spare Parts. Inventory of landing gear
components and spare parts consists of over 200,000 total items. Generally,
landing gear components and spare parts are purchased in "as removed" condition
and therefore require repair or overhaul by a certified repair facility prior to
being returned to service on an aircraft.
Controls Components and Spare Parts. Inventory relating to flight
controls consists of over 160,000 total items. Generally, flight control
surfaces are purchased in "as removed" condition and therefore require repair or
overhauled by a certified repair facility prior to being returned to service on
an aircraft.
SERVICES
Each of AAS's acquisitions have enabled AAS to expand the services that
it offers to its customers. Services now include engine maintenance, repair and
overhaul; landing gear maintenance, repair and overhaul, flight control surface
maintenance, repair and overhaul; aviation services, and, as of February 2000,
heavy maintenance and modification for both narrow and wide body aircraft.
Engine Maintenance, Repair and Overhaul. Through its FAA and JAA
certified repair facility operated as AAS Amjet in Miami, Florida, AAS provides
complete engine overhaul and component repair services, specializing in JT8D and
JT3D engines. AAS is able to offer its customers reduced down time through AAS
engine leasing programs. Current capacity is approximately 40 engine overhauls
per year in two engine bays and is focused primarily on JT8 engines. AAS is
adding a new facility that will have capacity to service approximately 200
engines per year and will be able to service multiple engine types. The higher
capacity will enable AAS to enter into long-term contracts and to attract
business from larger customers that need several engines serviced at
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the same time. The Company is investing approximately $4.7 million in this
facility and equipment which is expected to open this year.
Landing Gear Maintenance, Repair and Overhaul. Through its FAA and JAA
certified repair facility operated as AAS Landing Gear in Miami, Florida, AAS
provides complete landing gear overhaul and component repair services for both
narrow-body and wide-body aircraft. AAS is one of only five non-airline overhaul
facilities in the United States that overhauls wide-body landing gear. AAS also
offers exchange gear programs for B747 passenger, B747 freighter, B737, B757,
B727, B707, L1011, DC-9 and DC-10 aircraft. AAS is in the process of
establishing a new plating facility and a machine shop in Florida. AAS is
investing approximately $5.0 million in this facility and it is expected to open
in the second quarter of this year.
Flight Control Surface Maintenance, Repair and Overhaul. Through its
FAA and JAA certified repair station operated as AAS Complete Controls in
Tucson, Arizona, AAS offers flight control surfaces such as flaps, slats and
rudders for exchange. The repair station specializes in repairs for Boeing 727,
737, 747, McDonnell- Douglas MD80 and Airbus A300, A310, A320 and A340 aircraft.
AAS is one of approximately 10 repair stations worldwide to have a licensing
agreement with Airbus. AAS believes it has one of the largest exchange pools of
flight control surfaces in the world. Expansion of the flight control surface
repair facility in Tucson was completed in February 2000. The expansion enables
AAS Complete Controls to approximately triple its capacity for repair and
overhaul. The Company invested approximately $3.5 million in this facility and
equipment.
Aviation Services Through Aviation Services, Inc., AAS provides total
aviation powerplant management services and aircraft fleet management for
leasing companies and small fleet operators/owners, and services including
borescoping, trend monitoring, engine condition analysis and valuation. AAS also
offers services such as F.O.D. (foreign object damage ) investigations and
claims administration. Through a strategic alliance with BAX Global, a
subsidiary of the Pittson BAX Group, AAS can also provide additional services,
including integrated supply chain management, with BAX Global providing
logistics support and warehouse management and AAS providing parts and technical
support.
Heavy Maintenance and Modification. In February 2000, AAS purchased the
assets used in the operation of an FAA certified facility that had specialized
in heavy maintenance and modification of the narrow and wide body aircraft. AAS
leased the facilities used for these services, approximately 600,000 square feet
of shop and hanger space, from the San Bernardino International Airport
Authority and commenced operations as AAS Aircraft Services in February 2000.
Services offered at this facility include Schedule "A", "B", "C" and "D" level
inspections, block overhauls and repairs, corrosion prevention and control
programs and exterior stripping and painting. The level of inspection and the
services performed at each level vary depending upon the individual aircraft
operator's FAA-certified maintenance program. The "C" and "D" level inspections
are quite comprehensive and will usually take several weeks to complete,
depending upon the scope of the services to be performed. Modification services
include painting, interior refurbishing and reconfiguration of passenger
seating, installation of passenger amenities, cargo conversions and avionics
installations.
AAS supports a wide range of service capabilities through these
facilities and entities. In addition, AAS generally has established parts
inventory in each of these specialty areas to permit immediate availability of
ready- to-use parts for customers.
INVENTORY
AAS has been rapidly expanding its core parts business by broadening
its inventory through acquisition of engines, components and spare parts for a
variety of wide and narrow body aircraft. Historically, AAS focused on 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.
The Boeing 737 aircraft has been in production since the early 1960s and the JT8
series of engines is the most widely used engine in commercial aviation. AAS has
expanded its complete engine, engine components and spare parts inventory, and
the range of higher-margin avionics and instrumentation products. AAS has also
expanded its product lines by adding engines such as the CFM56, JT9D, CF6 and
PW4000 engines used in Boeing 747 and 767 aircraft, the McDonnell-
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Douglas DC-10 aircraft, the Airbus A300, A310 and A320 aircraft, and the engine
components and spare parts and airframe components and spare parts for those
same wide-body aircraft.
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 complete 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, companies sell inventory because
they retire an aircraft type from their fleet, institute an inventory reduction
program, downsize operations or dissolve a business. 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, resulting in higher gross
margins on sales of such components and spare parts. When AAS acquired the
assets of certain of the Affiliated 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 aircraft, 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 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 that are uneconomical for the seller to
perform.
AAS acquires aircraft for disassembly if it expects to 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 few years. AAS catalogues all of the
thousands of components and spare parts on an aircraft that is to be
disassembled by using either computerized data base 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 with all of their relevant information
including each part's repair history, into its computer data base. By entering
the data into the data base as soon as the aircraft is purchased, AAS sales
personnel are able to begin marketing efforts as soon as the purchase is
completed. AAS has frequently concluded sales of engines or components and spare
parts, subject to repair completion, prior to disassembly and delivery of the
engines and components and spare parts to AAS, or in some cases prior to making
repairs or while repairs are ongoing. Pre-selling allows AAS to recover a
significant amount of its investment within a short time from the date of the
aircraft purchase.
SALES AND MARKETING
AAS has developed a sales and marketing program that 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
listing systems and a presence on the Internet. AAS also advertises in select
industry publications and management attends a number of industry conferences
and trade shows in order to acquaint potential customers with AAS and its
capabilities.
As a means of generating exposure to existing and potential customers,
AAS has listed its inventory in both of the listing systems, the Inventory
Locator Service ("ILS") and the Air Transport Association's Airline Inventory
Redistribution System ("AIRS"). 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 that have the desired inventory available. However,
neither the ILS nor AIRS lists price information relating to a particular
component or spare part or provides a direct link to sellers. AAS believes that
there is a substantial market for real-time inventory and price listings and
that a business-to-business Internet-based marketplace would substantially
improve the supply chain
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by linking sellers directly with users. Acting on that belief, AAS formed AAS
Technologies in February 2000 to work with SupplyAccess(TM) to develop and
market a business-to-business e-Procurement solution with real-time inventory,
price listings and direct access to sellers.
AAS markets its maintenance, repair and overhaul services and its
aviation services to customers purchasing aircraft components and spare parts,
and markets its aircraft components and spare parts to customers of MRO and
aviation services. AAS also utilizes the services of four sales agents
specializing in international sales. Each sales agent has extensive experience
with the requirements of aircraft operators and other customers and sells both
the products and the services offered by AAS. 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.
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.
AAS also maintains a website on the Internet that can be located at
http://www.a-a-s.com. The website is designed to create new channels of sales
and marketing and contains information concerning products and services
available through AAS and its Affiliated Companies. Management expects that in
2000 the website will become capable of accommodating e-commerce sales
transactions and allowing customers to submit orders directly to AAS entirely
over the Internet. Through its investment in SupplyAccess(TM) as described
above, AAS will be assisting with the development of an Internet based market
between aerospace parts buyers and sellers.
CUSTOMERS
Domestic sales and service accounted for approximately 69% and
international sales and service approximately 31% of AAS revenues in 1999.
Customers include over 724 domestic and international commercial passenger and
cargo airlines, maintenance and repair facilities and other redistributors. In
1999, no customer accounted for over 10% of net revenues. In a given period, a
substantial portion of the net revenues of AAS may be attributable to a small
number of customers due to the sales price of engines.
US Airways, Southwest Airlines, Continental, Air France, British
Airways and America West are among AAS's passenger airline customers and freight
airline customers include Airborne Express, DHL and Emery.
SUPPLIERS AND VENDORS
AAS's suppliers and vendors are as diverse as its customer base,
ranging from OEM's such as Pratt and Whitney and Boeing to airlines such as
Continental and US Airways. AAS purchases all its parts and repair services
under separate purchase orders and has no long-term commitments with any vendor.
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
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standards and procedures and has implemented a total quality assurance program.
In 1996, the FAA issued an advisory circular (the "Advisory Circular") 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 the Airline Suppliers
Association ("ASA"), the FAA recognized quality assurance organization that
performed the initial quality assurance audit for accreditation of AAS. In 1998,
the ASA found that AAS meets the requirements of it's Quality System Standard
"ASA-100" and accredited AAS. AAS is 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, accreditation is very
valuable 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
that 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 a system.
An important factor in the aircraft redistribution market and the MRO
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. AAS utilizes electronic data scanning and storage
techniques to maintain complete copies of all documentation. Documentation
required includes, where applicable, (i) a maintenance release from a certified
repair facility signed and dated by the certified airframe and/or power plant
mechanic who repaired the component or spare part and an inspection to certify
that the proper methods, materials and workmanship were used, (ii) a "tear-down"
report detailing the discrepancies and corrective actions taken during the last
shop repair, and (iii) an invoice or purchase order from an approved source.
WARRANTIES
AAS provides no warranties with the aircraft components and spare parts
it sells. It provides a pass-through to its customers of any warranty rights it
receives from a third party maintenance and repair facility. If repairs are made
by one of its own MRO facilities, AAS will directly warrant those repairs as
applicable. 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. Flight control surface repairs are generally warranted for
up to 3 years , depending upon the repair and aircraft maintenance is usually
warranted for up to 90 days. 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. Specific regulations
vary from country to country, but are generally designed to ensure that all
aircraft and aircraft equipment are continuously maintained in proper condition
to ensure safe operation of aircraft and to meet environmental standards.
While the FAA does not regulate the redistribution business, the
products AAS sells to its customers must be accompanied by documentation that
enables the customers to comply with the regulatory requirements applicable to
those customers. Demonstration of compliance with applicable FAA and
manufacturing standards is required prior to installation of a component or
spare part on an aircraft. Before aircraft components and spare parts may be
installed in an aircraft, they must:
o meet standards of condition established by the appropriate
regulatory agencies;
o be traceable to sources deemed acceptable by regulatory
agencies; and
o be accompanied by documentation that enables the customer to
comply with the regulatory requirements applicable to them.
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<PAGE> 10
Regulations also dictate the monitoring, inspection, maintenance and
repair procedures and schedules for the various types of aircraft, engines and
aircraft components and spare parts we sell. In addition, regulations require
that repair procedures be performed only by certified repair facilities. AAS
Amjet, AAS Landing Gear, AAS Complete Controls and AAS Aircraft Services are
certified by the FAA, by the JAA or similar foreign regulatory authorities, and,
in some cases, by original equipment manufacturers, and must maintain their
certification to perform maintenance, repair and overhaul services. Personnel at
repair facilities must also be certified or licensed by the appropriate
authority to perform maintenance, repair and overhaul services. Certified repair
operations are periodically inspected and must comply with all regulations to
maintain certification. Any failure to maintain certification of our repair
facilities would adversely impact the results of our operations. Accordingly,
AAS only utilizes certified repair facilities, including its own, to repair and
certify the products it sells and maintains the quality assurance program
described above to provide customers with required compliance documentation.
The FAA's noise emission standards for older aircraft and the FAA's
Aging Aircraft Program Plan (the "Aging Aircraft Program") required that all
aircraft engines classified as "stage 2" were to either have had hush-kits
installed to meet the certain FAA noise emission standards or be phased out of
operation in the United States as of December 31, 1999. The European Union has
the same type of requirement except the operative date is 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. These requirements 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. Many 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
these standards.
AAS's operations are also subject to extensive, and frequently
changing, federal, state and local environmental laws and substantial related
regulation by government agencies, including the United States Environmental
Protection Agency (the "EPA") and the United States Occupational Safety and
Health Administration. Among other matters, these regulatory authorities impose
requirements that regulate the operation, handling, transportation and disposal
of hazardous materials generated during the normal course of its operations,
govern the health and safety of employees and require AAS to obtain and maintain
permits in connection with its operations. Because our plating operation and our
aircraft painting operation use a number of hazardous materials and generate a
significant volume of hazardous waste, those operations increase the compliance
burden and compound the risk that AAS may encounter a material environmental
problem in the future.
MANAGEMENT INFORMATION SYSTEMS
AAS has made significant investments of time and money in computer
systems and document imaging tracking systems. AAS spent the last two years
developing a proprietary information system to enhance its position as a leader
in its industry. AAS's new integrated financial, sales and inventory system also
provides sales and quote information, inventory interchangeability,
documentation through electronic data scanning and document image storage
technology for rapid retrieval of inventory traceability, pricing, market
availability and customer demographics. AAS will continue to invest in
technology to fully integrate its maintenance, repair and overhaul facilities
with its recently implemented system.
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 $200 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
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<PAGE> 11
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 aviation services market is highly competitive and fragmented. AAS
competes against a few well-capitalized companies offering a broad range of
products and services, and numerous small competitors serving distinct market
niches. According to the Airline Suppliers Association ("ASA") there are
approximately 2,500 redistributors of airline spare parts. As a result of
industry consolidation, management expects that a number of the smaller
redistributors will either be acquired or will have difficulty competing in the
changing aircraft industry. Customers in need of aircraft parts can access a
computer-generated listing of the inventory of suppliers, as well as the
inventories of aircraft manufacturers, original manufacturers of components and
spare parts and even other airline inventories. In addition, AAS competes
against the internal MRO services of airline and air freight companies.
Management believes that reliable inventories, the ability to provide a broad
array of products and services, timeliness, quality, service, price and
integrated "one-stop" shopping are the key competitive factors in the industry.
AAS's primary competitors are The AGES Group, Aviation Sales Company, Aviall,
Inc., Aviation Distributors, Inc., AVTEAM, Inc., First Aviation Services, Inc.,
International Airline Support Group, Inc., Kellstrom Industries, Inc. and The
Memphis Group, AAR Corp., Avborne, Aviation Group, Inc., Banner Aerospace, B.F.
Goodrich Company, Hawker Pacific Aerospace, Triumph Group, Inc., and Willis
Lease Finance Corporation.
EMPLOYEES
At December 31, 1999, AAS had 447 full-time employees and 4 part-time
employees. Of these, 15 are principally engaged in management, 40 are engaged in
sales and marketing, 217 are repair technicians or certified mechanics, 6 are
engineers and the remainder are engaged in operations, accounting and
administration. None of the employees of AAS are subject to collective
bargaining agreements. Management believes employee relations are excellent.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
This Annual 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
growth strategy, events, conditions and financial trends and other risks or
uncertainties detailed in this Annual Report on Form 10-KSB and in other SEC
filings made by AAS. 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. AAS does not
undertake any obligation to revise these forward- looking statements to reflect
future events or circumstances. The forward-looking statements and associated
risks set forth in this Annual Report on Form 10-KSB may include or relate to,
among other things, the factors set forth below as well as those discussed
elsewhere in this Annual Report on Form 10-KSB.
Decreased demand for air travel and increases in fuel prices could
affect our business. Our customers include major commercial passenger and cargo
airlines, other maintenance and repair facilities and other redistributors
located throughout the world. The demand for parts and service is driven
primarily FAA requirements that aircraft and parts be serviced at scheduled
intervals of flying hours. Accordingly, the demand for parts and service is a
function of the level of air traffic. Because a substantial portion of business
and personal travel is discretionary, the airline industry tends to have
decreased demand for travel during a general economic downtown. The consequence
of decreased demand is generally adverse financial results for the airline
industry.
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<PAGE> 12
Adverse financial results tend to cause downward pressure on prices for aircraft
components and spare parts and increased credit risks for suppliers. The price
of aviation fuel also affects our business. Older aircraft, which account for
most of our aircraft components and spare parts and maintenance and repair
business, consume more fuel than newer, more fuel efficient aircraft. When the
price of fuel increases, the economics of purchasing newer aircraft to replace
older aircraft become more feasible. A decrease in older aircraft usage may
decrease the demand for our aircraft components and spare parts and our
services. A decrease in demand could affect our profitability.
New regulations may diminish sales of components and spare parts for
older aircraft and we have historically relied on those sales for a significant
portion of our revenues The Federal Aviation Agency has promulgated regulations
governing noise emission standards for older aircraft and implemented an Aging
Aircraft Program Plan. Older aircraft must install hush-kits to meet 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 make structural modifications for
airframe fatigue and to implement corrosion prevention and control programs.
Although those regulations further increase the costs of maintaining older
aircraft, we believe that the cost of acquiring new replacement aircraft is
substantially greater than the cost of updating older aircraft to comply with
these requirements. However, if these regulations or other regulations enacted
in the future lead to a significant decline by aircraft operators in the use of
aircraft or engines for which we carry a significant amount of parts inventory,
our revenues would decrease and we could be forced to make financial statement
adjustments in our inventory.
Any significant increase in the availability of aircraft components and
spare parts in the marketplace could affect the sales and prices of our aircraft
components and spare parts. Some aircraft components and spare parts of older
aircraft can be used on newer aircraft. If a significant number of older
aircraft are taken out of service and disassembled, the availability of those
interchangeable aircraft components and spare parts could cause us to reduce the
prices of aircraft components and spare parts in our inventory. Aircraft
manufacturers may also develop new parts to be used interchangeably with parts
in our inventory, that could also cause us to reduce the prices of our
inventory. Any significant price reductions would affect our revenues and profit
margins.
Our failure to purchase inventory at acceptable prices or to
successfully identify customer demand could force us to sell excess inventory at
discounted prices. We purchase engines and aircraft components and spare parts
inventory from third parties. The availability of inventory is often the
determining factor in sales of aircraft components and spare parts. Our success
will depend upon our identification of potential sources of inventory, including
bulk purchases and purchases of entire aircraft for disassembly, and effecting
timely purchases at acceptable terms and prices. We must also anticipate
customer demand for the various types of engines, engine components, and
aircraft components and spare parts. If we are unable to purchase engines or
components and spare parts inventory, or we are unable to make purchases at
reasonable prices, our sales may be depressed. If we cannot accurately predict
our customers' needs or our customers' needs change significantly, we might have
to take write-downs associated with excess inventory.
Our financial results may be affected by the expansion of the types of
inventory we carry. We have historically purchased and sold aircraft components
and spare parts for Boeing 737 aircraft, a narrow-body aircraft, and the Pratt &
Whitney JT8 engine series. We have entered the wide-body aircraft market by
adding to our inventory aircraft components and spare parts for the Boeing 767
and the McDonnell-Douglas DC-10 and engines used to power wide-body aircraft,
including the General Electric CF6, the Pratt & Whitney JT9 and PW4000 engine
series. We also acquired inventory from each of the Affiliated Companies that
provide MRO services. Our previous experience in managing inventory may not
sufficiently enable us to effectively manage inventories for additional aircraft
and engine types. We may also misjudge market prices or demand for our new
inventories. If we are unable to manage our new inventories effectively, we
could be forced to liquidate our excess inventories at discounted prices that
would negatively affect our sales and margins.
The aviation industry is highly regulated and noncompliance with
regulations for any reason could be detrimental to our business. The aviation
industry is highly regulated in the United States by the FAA and in other
countries by similar regulatory agencies, such as the JAA. Specific regulations
vary from country to country, but are generally designed to ensure that all
aircraft and aircraft equipment are continuously maintained in proper condition
to ensure safe operation of aircraft and to address environmental concerns.
Neither our aircraft
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<PAGE> 13
components and spare parts business nor our asset and supply chain management
services are directly regulated by these agencies, but customers who use our
aircraft components and spare parts and MRO facilities, including our own, are
extensively regulated.
Regulations dictate the monitoring, inspection, maintenance and repair
procedures and schedules for the various types of aircraft, engines and aircraft
components and spare parts we sell. In addition, regulations require that repair
procedures be performed only by certified repair facilities utilizing certified
technicians. AAS Amjet, AAS Landing Gear, AAS Complete Controls and AAS Aircraft
Services are certified by the FAA and all but AAS Aircraft Services are JAA
certified. Personnel at repair facilities must also be certified or licensed by
the FAA to perform maintenance, repair and overhaul services. Certified repair
operations are periodically inspected and must comply with all regulations to
maintain certification. Any failure to maintain certification of our repair
facilities would adversely impact the results of our operations.
Our operations are also subject to extensive, and frequently changing,
federal, state and local environmental laws and substantial related regulation
by government agencies, including the United States Environmental Protection
Agency and the United States Occupational Safety and Health Administration.
Among other matters, these regulatory authorities impose requirements that
regulate the operation, handling, transportation and disposal of hazardous
materials generated during the normal course of our operations, govern the
health and safety of our employees and require us to obtain and maintain permits
in connection with our operations. In addition, we could become liable for the
cost of removal or remediation of certain hazardous substances released on or in
one of our facilities without regard to whether we knew of, or caused, the
release of such substances.
The extensive regulatory framework to which we are subject imposes
significant compliance burdens and costs. In the future, regulatory agencies
could adopt new regulations that could be more stringent than those now
existing. These new regulations could have negative effects on our business,
financial condition or results of operations. We cannot provide any assurance
that our prior activities or those of a company we acquire did not create a
material problem for which we could be responsible or that our future operations
will not result in material environmental liability and thereby materially and
adversely affect our financial condition and results of operations.
We use third party repair and overhaul services over which we have no
control. In addition to our own repair operations, we use third-party certified
repair facilities to perform necessary repair and overhaul services. We have no
direct control over the quality of repair services performed by these
third-party repair facilities. It is possible that airframe or engine components
and spare parts could be designated as airworthy by a repair facility, be sold
by us and placed on an aircraft, and subsequently be determined to be unsafe, in
need of further repair or defective. If that occurred, the FAA could take
action, including the grounding of the aircraft. In addition, the customer could
demand a replacement component or spare part. Any quality control issue could
damage our reputation in the industry and adversely affect our business
operations.
The loss of senior management or other key personnel with experience or
licensing in the aviation services industry or our failure to attract and retain
qualified personnel could harm our business. Our ability to operate our business
successfully could be jeopardized if we lose the services of any of the members
of our senior management team, including management of the Affiliated Companies,
and we were unable to find and hire a capable successor. We also must retain the
services of the key personnel and certified or licensed technicians in each of
our repair facilities. Intense competition in the airline certified repair
business may make it more difficult to hire or retain qualified personnel that
we must have to maintain our FAA licenses for our repair facilities.
Our operating results may fluctuate and the value of our stock may be
adversely affected. Our operating results may fluctuate significantly from
quarter-to-quarter due to many factors, some of which are out of our control.
Factors that could affect operating results in any quarter include:
o the timing and size of orders and the payment of orders,
particularly from significant customers;
o the timing and type of inventory purchases, such as bulk
purchases or purchases of aircraft for disassembly; and
o the mix of our inventory.
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We currently have a limited number of long-term commitments from our
customers so we have to anticipate future orders, adjust our inventory and
estimate our revenues based on our customers' historic purchasing patterns and
on discussions with them as to their future requirements. If our operating
results are below the expectations of public market analysts or investors, the
price of our common stock could decline.
We face financial risks associated with our growth by acquisition
strategy that could affect our profitability, working capital or operating
results or could dilute stockholders' equity. We intend to continue to pursue
acquisitions that complement our existing business. Some of the financial risks
associated with acquisitions, any of which could negatively impact our
profitability, working capital and operating results, are that:
o we may be unable to identify suitable complementary companies
or, if identified, to negotiate their acquisition at
reasonable prices;
o the costs of acquisitions, including the amortization of
goodwill and other intangible assets, could negatively impact
our operating results and profitability;
o we may fail or be unable to discover liabilities for which we
could be liable as a successor operator;
o if we use our common stock as part of the acquisition price,
the acquisition may be dilutive to our stockholders and the
issuance of additional common stock may cause the market price
of our common stock to decline;
o if we use cash funds as part of the acquisition price, the
funds available for working capital and other business
opportunities are decreased; and
o if we borrow additional funds to use as part of the
acquisition price, our financial condition may be viewed less
favorably.
We may be unable to successfully integrate acquired companies and that
failure could materially affect our operations. We have expended substantial
managerial, operating, financial and other resources to integrate the operations
of our Affiliated Companies into our existing operations. We expect to expend
similar resources to integrate the operations of any companies that we acquire
in the future. Our success will depend on our integration ability and the
ability to retain the key employees of acquired companies. If the historical
operations, revenue and earnings levels of our acquired companies cannot be
sustained or improved, our results of operations could be negatively affected.
In addition, if we have to fund working capital requirements of acquired
companies, working capital available for our currently existing operations would
decrease. And finally, if we are unable to successfully integrate our acquired
companies, we may experience operating inefficiencies, which could reduce our
profitability.
Our strategy to grow by increasing our leasing business may not be
successful which could be detrimental to our operations. One of our growth
strategies is to increase market share by leasing to third parties aircraft
components and spare parts, as well as complete aircraft and engines. Aircraft
components and spare parts leases are typically used by smaller passenger or
cargo carriers to reduce capital expenditures, and leasing to smaller carriers
could increase the risk of financial default by the lessee. The success of our
leasing operation depends on:
o the return at the end of the lease term of the leased
components and spare parts, aircraft or engines in marketable
condition;
o the continued re-lease of components and spare parts, aircraft
and engines on favorable terms on a timely basis;
o our ability, at the end of the lease term, to sell the
components and spare parts, aircraft or engines at favorable
prices, or to realize sufficient value from components and
spare parts obtained from the disassembly of aircraft or
engines;
o the collection of lease payments when due; and
o the repossession of our components and spare parts, aircraft
or engines if the lessee defaults in payments.
The occurrence of any of these factors could be detrimental to our
leasing operations. If our leasing business is unsuccessful, our revenues may be
impacted.
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We depend upon financing transactions to implement our growth
strategies and we may be unable to obtain future financing. We have financed our
operations through a combination of equity and debt financing transactions. We
completed our initial public offering of common stock in May 1998 and as of
December 31, 1999, we had borrowed $54.8 million from our credit facility. We
were eligible to make additional borrowings on the line of credit depending on
our eligible borrowing base, which includes the liquidation value of our
inventory and substantially all of our receivables. We were also eligible to
borrow to pay for certain capital expenditures. The funds from these financing
transactions were used primarily to purchase the assets of the acquired
companies and to finance our growth. In December 31, 1999, the credit facility
was amended to allow for $1 million additional funds to be available under our
present credit facility. The amendment is effective until we issue up to $25
million in subordinated debt. Subsequent to December 31, 1999, we borrowed $3
million in a private bridge loan to finance our participation in a joint venture
with SupplyAccess(TM) for the development of an internet-based distribution
model for parts sales and have entered into a non-binding agreement to issue $25
million in subordinated debt to an institutional investor in order to repay the
bridge loan, repay a portion of our line of credit and fund future working
capital requirements.
Our ability to enter into future financing transactions depends on our
future operating performance, which could be affected by economic, financial,
competitive and other factors beyond our control, many of which are discussed in
other risk factors in this Annual Report on Form 10-KSB. In addition, there are
risks associated with debt financing. Using a substantial portion of our cash
flow from operations to make our principal and interest payments reduces the
funds available for our operations and for other business opportunities. We may
be unable to obtain additional financing to support our growth or may be limited
in the amount available because of our level of indebtedness. If we are not able
to service our indebtedness or to obtain financing to support our growth or to
obtain financing on terms favorable to us, we will be forced to adopt an
alternative strategy that could include actions such as reducing or delaying
planned acquisition and expansion activity, selling assets or restructuring or
refinancing indebtedness. We do not know if these strategies could be effected
on satisfactory terms, if at all.
Our lenders impose restrictions on us that could limit our flexibility
in making business decisions. Our Credit Agreement and our agreement with the
purchaser of our senior subordinated notes impose restrictions on our ability to
enter into certain transactions or to incur additional debt and require us to
maintain specific financial ratios. The restrictions could limit our ability to
pay dividends, prepay our indebtedness, sell our assets or engage in mergers and
acquisitions. In addition, our lender could declare an event of default if we
don't comply with all of our restrictions and covenants. Any event of default,
if not cured or waived, could allow our lender to demand immediate payment that
would adversely impact our business and operations.
A portion of our revenue is derived from sales to international
customers and as a result we face additional financial and regulatory risks.
Sales to international customers accounted for approximately 28% and 23% of our
net revenue in the 1999 and 1998 fiscal years, respectively, and we expect that
international sales will continue to represent a material portion of our net
revenues in future periods. International sales have inherent risks, including:
o variations in local economies;
o fluctuating exchange rates if our international sales were to
be denominated in a currency other than U.S. dollars in future
periods;
o greater difficulty in accounts receivable collection;
o changes in tariffs and other trade barriers;
o adverse foreign tax consequences; and
o burdens of complying with a variety of foreign laws,
particularly aviation related laws.
Any of these factors could reduce our sales and profitability and
adversely affect our business.
If we were required to defend or were found liable under any
significant product liability claim, our financial condition would be adversely
impacted and our reputation would be damaged. Our business exposes us to
possible claims for personal injury, death or property damage and we could be
named as a defendant in a lawsuit if a component or spare part sold, repaired or
leased by us failed or malfunctioned and a catastrophic accident occurred. No
lawsuit has ever been filed against us based upon a product liability theory and
we currently maintain product liability insurance in an amount we believe is
consistent with industry practice. In the future, we
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<PAGE> 16
may be unable to obtain product liability insurance coverage or it may only be
available at an unacceptable cost. Our financial condition and results of
operations could decline if we were required to defend or were held liable under
a product liability claim and we had no insurance or indemnification or our
insurance was insufficient to cover the claim. Any claim against us could harm
our reputation in the aircraft components and spare parts industry that, in
turn, could result in less sales and revenues.
We may be unable to compete successfully with our competitors and the
value of your investment may decline as a result. The aircraft components and
spare parts redistribution market and the aircraft services market are both
highly competitive. Many of the companies with which we compete are
significantly larger and many have greater financial and marketing resources
than we do. We also compete with smaller regional niche competitors and a broad
array of other suppliers, including aircraft manufacturers, airlines and
aircraft services companies. Our goal is to distinguish ourselves from our
competitors by becoming a full service supplier capable of providing integrated
solutions and "one stop shopping" to our customers. We cannot assure you that we
will be able to distinguish ourselves from our competitors or compete
successfully in this market.
Our anti-takeover provisions, the right to issue preferred stock and
our stock ownership could negatively impact our stockholders. Our certificate of
incorporation and bylaws contain anti-takeover provisions that may discourage a
change of control transaction. In addition, the vesting of options and the
expiration of any restriction periods on stock awards under the option plan may
be accelerated in some change of control transactions. These provisions, as well
as the issuance of preferred stock and the existence of the anti-takeover
provisions in our certificate of incorporation might discourage third parties
from trying to acquire us. As a result, our stockholders may not receive an
attractive offer that might increase the value of their investment.
Our officers, directors and their affiliates own or control the voting
of approximately 62% of our outstanding common stock. If they act together, they
can control most matters submitted to stockholders, including the election of
directors and matters such as acquisitions, mergers or changes in our
capitalization. They could also delay or prevent a change of control or
otherwise discourage a potential acquirer from attempting to gain control of us.
This could result in a material adverse effect on the market price of our common
stock or prevent our shareholders from realizing a premium over the market
prices for their shares of common stock.
ITEM 2. DESCRIPTION OF PROPERTIES
The following sets forth certain information with respect to the
facilities currently leased or owned by AAS. In addition to the amounts shown
for rent of leased facilities, 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 PAYMENT LESSOR TERMINATION
-------- ------- ------- ------ -----------
<S> <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.
1574 NW 108 Avenue 11,000 78,000 Prime West Properties, December 17, 2008
Miami, Florida 33172(5) Inc.
</TABLE>
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<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C>
1582 NW 108 Avenue 11,000 78,000 Prime West Properties, N/A
Miami, Florida 33172(6) Inc
13945 S.W. 139th Street 15,000 63,900 Anton K. Khoury Month to Month
Miami, Florida 33186(7)
7980-88 N.W. 56th Street 12,000 62,622 Hanna K. Khoury Month to Month
Miami, Florida 33166(8)
12401 Taft Avenue 52,000 77,000 Maxus Leasing Group May 31, 2000
Cleveland, Ohio 44108(9)
2822 NW 72 Avenue 7,600 48,000 Industrial Affiliates Month to Month
Miami, Florida 33122(10)
#23 Beacon Station at Gran Park 146,000 933,000 Gran Central December 31, 2010
NW 100 St. and 108th Avenue Corporation
Miami, Florida (11)
850 E. Teton, Ste 8 40,000 114,000 Tucson Airport December 31, 2005
Tucson, Arizona 85706(12) Authority
7001 S. Park 75,600 209,000 Tucson Airport December 31, 2005
Tucson, Arizona 85706(13) Authority
255 S. Leland Norton Way 600,000 1,140,000 San Bernardino Internat'l February 14, 2010
San Bernardino, California 92408(13) Airport Authority
</TABLE>
- -------------------
(1) Until mid February 1999, 6,000 square feet of this facility were used for
corporate headquarters and approximately 19,000 square feet were 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 remaining 106,000 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.
(5) Substantially all of this facility will be used as a plating facility and
machine shop for AAS Landing Gear.
(6) Substantially all of this facility will be used as a plating facility and
machine shop for AAS Landing Gear.
AAS purchased this facility from Condor Properties of Miami, Inc. in March
2000 for consideration of a promissory note for $353,000 and assumption of
the existing mortgage of $450,000 to Prime West, Inc.
(7) 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.
(8) Substantially all of this facility is used for the repair services
performed by AAS Amjet. Hanna K. Khoury is a former officer of AAS Amjet
and is the brother of Anton Khoury.
(9) Temporary lease of landing gear plating facility.
(10) Substantially all of this facility is used for inventory storage by AAS
Amjet.
(11) New AAS Amjet repair facility expected to be ready for operations in 2000.
(12) Substantially all of these facilities are used for the repair services
performed by AAS Complete Controls.
(13) This facility, opened in February 2000, is used for the repair services
performed by AAS Complete Controls.
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<PAGE> 18
(14) Substantially all of this facility is used for the heavy maintenance and
modification services performed by AAS Aircraft Services.
ITEM 3. LEGAL PROCEEDINGS
AAS is not a party to any material legal proceedings, however, it is
involved in claims and lawsuits incidental to its business operations. In the
opinion of management, the ultimate resolution of these claims and lawsuits will
not have a material adverse effect on the financial condition, financial results
of operations or cash flows of AAS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted during the fourth quarter of fiscal 1999 to a
vote of security holders through the solicitation of proxies or otherwise.
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<PAGE> 19
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of AAS is quoted on the Nasdaq National Market 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,
1999. 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 $ 6.250 $ 6.000
Third Quarter 6.250 4.250
Fourth Quarter 9.750 4.500
FISCAL YEAR 1999
- ----------------
First Quarter 12.000 8.250
Second Quarter 10.125 7.375
Third Quarter 9.063 7.375
Fourth Quarter 9.000 6.938
On March 17, 2000, the closing sale price of the common stock was
$11.375 and there are approximately 39 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 in 1998, 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.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion should be read in conjunction with the
financial statements (and notes thereto) appearing elsewhere in this Annual
Report on Form 10-KSB.
OVERVIEW
AAS, founded in 1985, provides integrated aviation maintenance, repair
and overhaul services including spare parts for commercial airlines, cargo
operators and maintenance and repair facilities worldwide. AAS offers engine and
aircraft management services, maintenance, repair and overhaul of flight
controls, landing gear systems and jet engines at its FAA licensed facilities,
and, as of February 2000, heavy maintenance for complete aircraft.
Until late 1998, substantially all of the AAS's revenues were derived
from the sale of Pratt & Whitney JT8 and General Electric CFM56 engines, engine
components and spare parts primarily for these two types of engines, and
airframe components and spare parts primarily for Boeing, McDonnell-Douglas and
Airbus aircraft.
In late 1998, AAS began to implement an acquisition strategy aimed
primarily at expanding our redistribution sales capabilities by acquiring
complementary businesses, particularly businesses involved in maintenance,
repair and overhaul services. The goal was to become a full service "one stop"
supplier of both products and services for customers. Since October 1, 1998, the
Company has acquired substantially all of the
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<PAGE> 20
assets, including inventory, of certain of the Affiliated Companies. The
material financial terms of each of the asset purchase transactions are set
forth below.
GTI and TII. In October 1998, substantially all of the assets of GTI
and TII were acquired for a purchase price $1.1 million and assumption of
accounts payable of $0.3 million. The purchase price was comprised of $0.6
million in cash and $0.5 million in stock.
Condor. In November 1998, 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 in cash and $0.75 million in common stock.
Condor received half of the cash payment in early November 1998 and the other
half of the cash payment and the shares of common stock later that November upon
the date on which it received FAA certification to overhaul and maintain landing
gear for commercial aircraft.
Amjet. In November 1998, AAS acquired substantially all of the assets
of Amjet for a purchase price of $12.5 million and assumption of selected
liabilities. The purchase price was comprised of approximately $8.6 million
cash, $3.8 million in common stock and adjustments of approximately $0.1 million
credited to AAS. In addition, we acquired the inventories of two affiliated
companies, GASI and AAC, for an aggregate purchase price of $2.5 million cash.
Complete Controls. In April 1999, AAS acquired substantially all of the
assets of CCI for $0.6 million comprised of cash, the issuance of a promissory
note and assumption of certain liabilities.
In February 2000, AAS purchased the assets used in the operation of an
FAA certified facility that had specialized in heavy maintenance and
modification of the narrow and wide body aircraft. AAS leased the facilities
used for these services, approximately 600,000 square feet of shop and hanger
space, from the San Bernardino International Airport Authority and commenced
operations as AAS Aircraft Services in February 2000.
Also in February, AAS created AAS Technologies, Inc. as a wholly owned
subsidiary . AAS then made an equity investment of $2 million in
SupplyAccess(TM) for the joint development of an internet based B2B e-
Procurement solution for the aerospace industry.
RESULTS OF OPERATIONS
Operating results 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, the mix of aircraft
engines and components and spare parts contained, at any time, in inventory or
sold during any period, the availability of quality, trained service labor and
the availability of repair materials. A large portion the operating expenses are
relatively fixed. Since AAS typically does not obtain long-term purchase orders
or commitments from its customers, it must anticipate the future volume of
business based upon the historic purchasing patterns of its customers and upon
discussions with customers as to their future requirements. Cancellations,
reductions or delays by a customer or group of customers could have a material
adverse effect on the business, financial condition and results of operations of
AAS.
All of the acquisitions have been accounted for under the purchase
method of accounting. As a result, revenues since the last quarter of 1998
include revenues from the operations of AAS Amjet, Aviation Services and AAS
Landing Gear. Revenues since the second quarter of 1999 include revenues from
the operations of AAS Complete Controls.
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<PAGE> 21
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items included in the statements
of operations:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Net sales .............................. 100.0% 100.0% 100.0%
Cost of sales .......................... 59.9 60.9 60.0
----- ----- -----
Gross profit ........................... 40.1 39.1 40.0
Selling and marketing .................. 7.7 6.4 5.3
General and administrative ............. 9.5 6.3 4.3
----- ----- -----
Operating income ....................... 22.9 26.4 30.4
Interest and other income (expense), net (5.8) (.7) .3
----- ----- -----
Income before taxes .................... 17.1 25.7 30.7
Income taxes ........................... 6.6 9.8(1) 12.3(2)
----- ----- -----
Net income after taxes ................. 10.5% 15.9%(1) 18.4%(2)
===== ===== =====
</TABLE>
- -------------
(1) See Note 12 to the Financial Statements for information on the calculation
of pro forma provision for federal and state income tax in 1996, 1997 and
1998.
(2) Financial statements for 1997 include a pro forma provision for federal
and state income tax.
Comparison of Years Ended December 31, 1999 and 1998
Net revenues (gross revenues, net of allowances for returns) for 1999
increased approximately $33.6 million, or 128.1% to $59.9 million from $26.3
million in 1998. The increase in revenues in 1999 was attributable to the
continued demand for the broad range of products and services offered by AAS, as
well as revenues from the operations of AAS Amjet, AAS Landing Gear and Aviation
Services for a full fiscal year in 1999 as opposed to revenues only after they
were acquired in the fourth quarter in 1998. AAS Complete Controls was acquired
in April 1999 and accordingly, 1998 revenues do not include any revenue
attributable to AAS Complete Controls and 1999 revenues include only nine months
of revenues from the operations of AAS Complete Controls.
Prior to the acquisitions of the MRO service companies, the Affiliated
Companies had nominal revenues. Approximately $20.3 million of the increase in
net revenues for 1999 was derived from these service companies and $13.3 million
of the increase in net revenues was generated through internal growth. These
increases were primarily driven by an increased demand for engine, landing gear,
and flight control surface overhaul and repair capabilities, as well as, the
additional demand for after-market spare parts. AAS operates in one business
segment, as a supplier of aviation services, and consequently does not separate
entities for reporting purposes. Sales and service to international customers
increased $12 million, to $18 million in 1999 as compared to $6.0 million in
1998; as a percentage of net sales, international sales of aircraft components
and spare parts increased to 31% of net sales in 1999 from 23% of net sales in
1998.
Cost of sales and service totaled $35.9 million in 1999, a $19.9 million
or 124.5% increase from $16.0 million in 1998. As a percentage of net sales,
cost of sales and service decreased 1.0%. 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 $24.0 million in 1999 from $10.3 million in 1998, and as a
percentage of net sales, gross profit increased to 40.1% in 1999 from 39.1 % in
1998. This increase was attributable to higher than expected gross profit
margins on products and services as well as continued improvements in
efficiencies in the service product lines.
Selling and marketing expenses increased $2.9 million, or 176.4 %, to $4.6
million in 1999 from $1.7 million in 1998. This increase is primarily due to
increased sales staff and the corresponding compensation expense, outside sales
office expense, higher commissions paid to agents on higher sales, sales related
travel and advertising costs. As a percentage of net sales, selling and
marketing expenses increased to 7.7% in 1999 from 6.4% in 1998.
General and administrative expenses increased $4.0 million, or 243.3 %, to
$5.7 million in 1999 from $1.7 million in 1998. This increase is primarily due
to our heavy investment in growth and building our infrastructure
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<PAGE> 22
and the majority of the increase in expenses is attributable to the
approximately $3.8 million of general and administrative expenses associated
with the operations and integration of the service companies. In 1999, we had
increased occupancy charges, such as rent and depreciation, for the entire year
for our relocated and expanded corporate offices and warehouse as well as the
additional facilities required in the expansion of the MRO operations of the
acquired MRO companies. The Company also had increased compensation expense
associated with the employment of the principals and employees of acquired
companies for an entire year. Insurance and professional fees associated with
operating as a public entity also increased in 1999. As a percentage of net
revenues, general and administrative expenses increased to 9.5% in 1999 from
6.3% in 1998.
Net other expense increased to $3.5 million in 1999 as compared to $0.2
million in 1998. Interest expense on higher levels of indebtedness, coupled with
a general increase in interest rates, lead to an increase of approximately $3.1
million , from $0.2 million in 1998 to net interest expense of $3.3 million in
1999. During 1999, approximately $0.1 million of deferred financing fees were
written off. The one-time charge was a result of the change in our credit
arrangements with the Company's principal lender.
As a result of the above, net income before taxes increased $3.4 million,
or 51.5%, to $10.2 million in 1999 from $6.8 million in 1998. Net income after
the provision for income tax expense of $4.0 million was $6.3 million ($0.86 per
diluted share) for 1999. The Company only became subject to federal and state
income taxes on May 8, 1998 when the election to be taxed as an S Corporation
was terminated in connection with our initial public offering. Actual net income
after income tax expense of $1.8 million was $5.0 million in 1998. However, to
allow comparisons, pro forma federal and state income taxes in 1998 were assumed
to reflect the reconciliation between the statutory provision for income taxes
and the actual pro forma income tax provision. Based on this assumption, the
Company would have incurred pro forma income taxes of $2.6 million in 1998,
resulting in pro forma net income of $4.2 million in 1998 ($0.76 per pro forma
diluted share).
Comparison of Years Ended December 31, 1998 and 1997
Net sales 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 accounted for approximately 72% of the
total $13.1 million increase. Sales associated with the Affiliated Companies
that were 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 1997.
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%. The primary components of cost of sales were product costs, freight
charges and certain labor and overhead expenses. Gross profit increased to $10.3
million in 1998 from $5.3 million in 1997, but 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 increased repair and
overhaul operations, which added direct labor and overhead expenses to the cost
of sales.
Selling and marketing expenses increased $1.0 million, or 137.7%, to $1.7
million in 1998 from $0.7 million in 1997. Outside sales office expense,
commissions on increased sales volumes, additional sales personnel compensation,
sales related travel and advertising costs, and increased sales expenses
relating to the Affiliate Companies we acquired in 1998 were all factors in the
increase. Selling and marketing expenses increased, as a percentage of net
sales, 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 $0.6 million in 1997. The primary reasons for the
significant increase were the added compensation expense associated with the
employment of the principals and employees of the Affiliated Companies we
acquired during the fourth quarter and the additional charges such as rent and
depreciation associated with the facilities of those Affiliated Companies. Also
included in 1998 expenses are increased occupancy charges associated with the
addition of new corporate offices and warehouse space and professional fees and
insurance premiums associated with operating as
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<PAGE> 23
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 $0.2 million in 1998 as compared to net other
income of $0.4 million in 1997. Although interest income and other income
increased by approximately $0.03 million in 1998, primarily from investment of
the public offering proceeds, interest expense on higher levels of indebtedness
outstanding under our line of credit increased approximately $0.2 million.
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. The Company was not
subject to federal and state income taxes in 1997 and only became subject to
such taxes on May 28, 1998 when the election to be taxed as an S corporation was
terminated in connection with our 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, the Company 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.
LIQUIDITY AND CAPITAL RESOURCES
The primary sources of liquidity prior to completion of the May 1998
initial public offering were cash flows from operating activities, borrowings
under a line of credit and advances from our two founders. The Company requires
capital to purchase inventory, to fund product servicing, service facilities
expansion and for normal operating expenses and for general working capital
purposes.
The Company currently maintains a five-year revolving credit agreement
("Credit Agreement") with Bank of America (formerly NationsBank, N.A.) that was
established in May 1999 in order to fund working capital. Of the $100 million
available under the Credit Agreement, $10 million is available as a capital
expenditure loan facility to fund equipment purchases. The Credit Agreement
replaced an existing $35 million revolving line of credit with NationsBank, N.A.
that was repaid using proceeds under the Credit Agreement. Principal amounts
outstanding under the Credit Agreement bear interest on a variable rate basis at
various interest rates tied to either the London Interbank Offered Rate
("LIBOR") or the prime rate, depending on certain indebtedness ratios. The terms
of the Credit Agreement also provides for a facility non-use fee of 3/8% per
annum on the unused portion of the facility. In conjunction with entering into
the new Credit Agreement, deferred financing fees of $0.1 million associated
with the previous line of credit were written off. The Credit Agreement, of
which $51.3 million and $3.5 million were outstanding under the revolver and
capital expenditure loan facility, respectively, at December 31, 1999, contains
customary events of default and restrictive covenants that, among other matters,
require us to maintain certain financial ratios. As of December 31, 1999, the
Company was in compliance with all of the restrictive covenants, with the
exception of the tangible net worth covenant, which has subsequently been waived
by the bank. The amount of credit available under the Credit Agreement at any
given time is determined by an availability calculation, based on the eligible
borrowing base, as defined in the Credit Agreement, that includes our
outstanding receivables and inventories, with certain exclusions. The Credit
Agreement is secured by substantially all of the Company's assets and the
capital expenditure loan facility is secured by all of the property and
equipment funded by that facility. The capital expenditure loan facility may be
drawn down through May 2000 at which time it converts into a term loan
amortizing over the remaining term of the Credit Agreement.
For the year ended December 31, 1999, operating activities used cash of
$29.1 million, primarily for increases in inventory and accounts receivable,
that were partially offset by increases in accounts payable and accrued
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<PAGE> 24
expenses. Net cash used in investing activities during the year ended December
31, 1999 was $9.5 million, reflecting the purchase of fixed assets as well as
increased acquisition costs that were incurred in connection with the purchase
of the assets of Complete Controls, Inc. on April 1, 1999. Net cash provided by
financing activities during the same period was $36.5 million, consisting of
borrowings under the Credit Agreement offset by the repayment of previously
outstanding debt.
Capital expenditures were approximately $10.1 million in 1999. The
expenditures were primarily for equipment purchases, leasehold improvements
necessary for the expansion of our MRO facilities and included $0.3 million of
capital expenditures acquired in the purchase of Complete Controls, Inc. At
December 31, 1999, there were outstanding commitments to acquire machinery and
equipment of approximately $0.5 million that will be funded in 2000 using the
capital expenditure loan facility under the Credit Agreement. The Company has
invested or will invest approximately $4.7 million in our new AAS Amjet engine
facility and equipment for that facility, $3.5 million in our additional flight
control surface repair facility operated by AAS Complete Controls and equipment
for that facility, and $5.2 million in the new plating facility and machine shop
for AAS Landing Gear.
As of December 31, 1999, the principal sources of liquidity included cash
and cash equivalents of $0.1 million, net accounts receivable of $19.9 million,
and up to $38.7 million (determined by an availability calculation based on the
eligible borrowing base) and $6.5 million of borrowings still available under
the working capital line and capital expenditure loan facility, respectively, of
the Credit Agreement. There was working capital of $7.2 million and long-term
debt of $9.6 million outstanding at December 31, 1999.
In December 1999, the existing credit facility was amended to allow for an
additional amount of $1.0 million, in excess of the availability established by
the borrowing base calculation, to be available to the Company until additional
subordinated debt could be obtained. Total unutilized availability, as
established by the borrowing base calculation and this amendment, was $1.0
million at December 31, 1999.
In March, the Company signed a commitment letter to issue up to $25
million in subordinated debt to an unaffiliated institutional investor, subject
to a due diligence review. The debt will not be convertible to equity but it
will be accompanied by warrants exercisable to purchase less than 5% of our
fully diluted outstanding common stock at an exercise price slightly discounted
from the market price of our stock.
Due to the Company's continued expansion, existing cash balances, accounts
receivable and amounts available under the Credit Agreement may not be
sufficient to meet future capital requirements. As a result, the Company may
need to increase its capital base in order to meet its growth objectives. There
can be no assurance that such additional capital will be available on a timely
basis or at acceptable terms.
RECENT DEVELOPMENTS
In accordance with our growth strategy, in February 2000 two new
Affiliated Companies were created, one to implement another acquisition to
enhance our service capabilities and the other to participate in a joint venture
to create a solution that we expect to enhance parts sales. The acquisition
involved the purchase of assets used in the operation of a facility that was FAA
certified to provide heavy maintenance and modification services. The assets
were purchased for $2.3 in cash and notes and the Company entered into a lease
of the facilities previously used for these services from the San Bernardino
International Airport Authority. The second expansion move was to enter into a
technology partnering agreement with SupplyAccess(TM) for the joint development
of an Internet-based distribution model for parts sales. The Company borrowed $3
million from an unaffiliated private investor to fund our participation in the
development and marketing of this business-to-business e-Procurement solution
for the aerospace industry. Both principal and interest on the loan are due at
the earlier of one hundred twenty days from the closing or the funding of a
subordinated debenture offering in the minimum amount of $10 million. The loan
is evidenced by an unsecured, subordinated promissory note that bears interest
at 9.5% per annum and is secured by the personal guaranty of our founder and
CEO. The bridge lender also received an option to purchase 25,000 shares of our
common stock at $8.00 per share for a four year period. The option has customary
anti-dilution provisions and the holder has certain registration rights.
In February, the Company entered into an agreement to exchange $621,000,
classified on the Company's balance sheet as accounts receivables from
affiliates, for 69,000 shares of common stock which were issued to the related
party in connection with acquisition of one of our Affiliated Companies. The
Company intends to resell those shares for the same amount. The agreement also
calls for the Company to register the remaining shares held by the related party
or assist with a private placement of those shares. The Company also purchased a
facility from the related party for $363,000 and assumption of the $450,000
mortgage on that facility and entered into a new lease for another facility
previously subleased from the related party.
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<PAGE> 25
INFLATION
Although the Company cannot accurately anticipate the effect of inflation
on operations, it is not believed that inflation has had, or is likely in the
foreseeable future to have, a material effect on results of operations or
financial condition. Increases in fuel costs due to inflation may adversely
affect demand for used aircraft, thereby decreasing demand for aircraft
components and spare parts.
SEASONALITY
The Company's revenues are not generally seasonable as the demand for
components and spare parts and service is driven primarily by regulations. Parts
must be serviced or replaced at scheduled intervals and inspections,
maintenance, repair and overhaul must be performed in accordance with safety
regulation schedules generally related to flying time and cycles.
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 137, Note 2
- - Segment Information in the accompanying financial statements regarding
Statements of Financial Accounting Standards No. 131 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.
YEAR 2000 ISSUES
Management of the Company was cognizant of the issues associated with the
programming code in existing computer systems and devices that utilize microchip
processors as the year 2000 approached. In the ordinary course of business,
non-compliant hardware and software was replaced in all of our facilities with
systems that were Year 2000 ready. The Company also contracted for the
development of a proprietary system to replace the information system used in
tracking and processing inventory. The total cost we expended to address issues
associated with the replacement of the old system was approximately $1.1 million
during 1999 and approximately $.2 million during 1998. As these expenditures
were for new information and operational systems, approximately $1.3 million was
capitalized through 1999.
As of March 7 , 2000, the Company had not experienced, nor expects to
experience, any disruption related to Year 2000 problems in the operation of our
systems. To the best of management's knowledge, none of the Company's material
suppliers, vendors and financial institutions had experienced any failures or
disruptions in their computer systems caused by Year 2000.
Although most Year 2000 related problems should have become evident on
January 1, 2000, some problems may arise later. Management does not expect any
material adverse effects from any remaining Year 2000 issues that could arise
nor does we anticipate expending any additional funds on Year 2000 compliance
issues.
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<PAGE> 26
ITEM 7. FINANCIAL STATEMENTS
INDEX
PAGE
Report of Independent Certified Public Accountants........ F-2
Consolidated Balance Sheets .............................. F-4
Consolidated Statements of Operations..................... F-5
Consolidated Statements of Stockholders' Equity........... F-6
Consolidated Statements of Cash Flows..................... F-7
Notes to Consolidated Financial Statements................ F-8
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.
Early in 1999, the Board of Directors determined that AAS should
consider retaining an accounting firm with a national presence in view of the
growth of AAS and the geographic diversity of recent acquisitions. AAS solicited
proposals from various accounting firms meeting that criteria. The firm which
had acted as the independent public accountants for AAS for the prior three
fiscal years, was not asked to submit a proposal. The Audit Committee approved
the solicitation of proposals and made a recommendation to the Board of
Directors as to the selection of new accountants. On April 12, 1999, the Board
of Directors approved the recommendation for the appointment of Arthur Andersen
LLP as its new independent accountants to audit the financial statements for the
fiscal year ending December 31, 1999 and engaged such firm.
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 on June 14, 2000. The information called for by items 9
through 12 above will be included in that proxy statement and is incorporated
herein by reference. If the proxy statement is not filed with the SEC by May 1,
2000, then the information required by items 9 through 12 will be filed as an
amendment to this Annual Report on Form 10-KSB by May 1, 2000.
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<PAGE> 27
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
<TABLE>
<CAPTION>
SB
EXHIBIT NO. DOCUMENT ITEM
- ----------- -------- ----
<S> <C> <C> <C>
* 2.1 Form of Agreement and Plan of Exchange among American Aircarriers Support, Inc., 2
a South Carolina corporation, American Aircarriers Support, Incorporated, a Delaware
corporation, and Messrs. Karl F. Brown and Herman O. Brown, Jr.
& 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.
xx 2.5 Asset Purchase Agreement among American Aircarriers Support, Incorporated, 2
American Aircarriers Support Acquisition IV Corp., Complete Controls, Inc., Micah
Chapman and Frank Zambo.
* 3.1.2 Certificate of Incorporation of American Aircarriers Support, Incorporated as filed on 3
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.
& 4.2 Registration Rights between American Aircarriers Support, Incorporated and M. Mike 4
Evans.
# 4.3 Registration Rights Agreement between American Aircarriers Support, Incorporated 4
and Condor Flight Spares, Inc.
x 4.4 Registration Rights Agreement between American Aircarriers Support, Incorporated 4
and American Jet Engine Services, Inc.
* 10.1.1 Employment Agreement, dated January 31, 1998, by and between Karl F. Brown and 10
American Aircarriers Support, Incorporated.
* 10.1.2 Employment Agreement, effective January 1, 1998, by and between Elaine T. Rudisill 10
and American Aircarriers Support, Incorporated.
x 10.1.6 Executive Employment Agreement between American Aircarriers Support, 10
Incorporated and Anton K. Khoury.
** 10.1.8 Executive Employment Agreement between American Aircarriers Support, 10
Incorporated and Joseph E. Civiletto.
xx 10.1.8 Employment Agreement between American Aircarriers Support, Incorporated and 10
Micah Chapman.
</TABLE>
-27-
<PAGE> 28
<TABLE>
<CAPTION>
SB
EXHIBIT NO. DOCUMENT ITEM
- ----------- -------- ----
<S> <C> <C> <C>
xx 10.1.9 Employment Agreement between American Aircarriers Support, Incorporated and 10
Frank Zambo.
* 10.2 Form of Indemnification Agreement between American Aircarriers Support, 10
Incorporated and each officer and director of American Aircarriers Support,
Incorporated.
++ 10.3.2 1998 Omnibus Stock Option Plan, as amended. 10
## 10.4 Loan and Security Agreement, dated May 25, 1999, among American Aircarriers 10
Support, Incorporated, NationsBank, N.A., as agent, and certain financial institutions.
* 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 American 10
Aircarriers Support, Incorporated.
* 10.4.3 Continuing and Unconditional guaranty, dated June 29, 1995, from Karl F. Brown to 10
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 American 10
Aircarriers Support, Incorporated.
* 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 American 10
Aircarriers Support, Incorporated.
* 10.4.10 Continuing and Unconditional Guaranty, dated April 9, 1998, from Karl F. Brown to 10
NationsBank, N.A.
+ 10.4.11 Loan (Credit Facility) Agreement, dated July 13, 1998, between NationsBank, N.A. 10
and American Aircarriers Support, Incorporated.
** 10.4.12 Modification to the Credit Facility, dated January 1999, between NationsBank, N.A. 10
and American Aircarriers Support, Incorporated.
** 10.4.13 Modification to the Credit Facility, dated March 3, 1999, between NationsBank, N.A. 10
and American Aircarriers Support, Incorporated.
o 10.4.14 Promissory Note and Option Agreement issued by AAS Technologies, Inc. to O'H 10
Rankin Properties
o 10.4.15 Amendment to Loan and Security Agreement, dated May 25, 1999, among American 10
Aircarriers Support, Incorporated, NationsBank, N.A., as agent, and certain financial
institutions.
</TABLE>
-28-
<PAGE> 29
<TABLE>
<CAPTION>
SB
EXHIBIT NO. DOCUMENT ITEM
- ----------- -------- ----
<S> <C> <C> <C>
o 10.4.16 Amendment to Loan and Security Agreement, dated May 25, 1999, among American 10
Aircarriers Support, Incorporated, NationsBank, N.A., as
agent, and certain financial institutions.
o 10.4.17 Amendment to Loan and Security Agreement, dated May 25, 1999, among American 10
Aircarriers Support, Incorporated, NationsBank, N.A., as
agent, and certain financial institutions.
* 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 Support, 10
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.
xx 10.5.10 Lease Agreement between Complete Controls Inc. and Tucson Airport Authority, Inc. 10
xx 10.5.11 Lease Agreement between Complete Controls Inc. and Tucson Airport Authority, Inc. 10
o 10.5.12 Lease Agreement between AAS-Complete Controls, Inc. and Tucson Airport 10
Authority, Inc.
o 10.5.13 Lease Agreement between AAS-AMJET and Gran Central Corporation 10
o 10.5.14 Lease Agreement between AAS-Complete Controls, Inc. and Tucson Airport 10
Authority, Inc.
o 10.5.15 First Amendment to Lease between Tucson Airport Authority and AAS Complete
Controls, 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.
* 10.8 Voting Trust Agreement, dated February 23, 1998 among Herman O. Brown, Jr., 10
David M. Furr, as Trustee, and American Aircarriers Support, Incorporated.
* 10.9.1 Consignment Agreement between American Aircarriers Support, Incorporated and M. 10
Mike Evans.
o 21. Subsidiaries of the Registrant. 21
o 23.1 Consent of Cherry, Bekaert & Holland, L.L.P., independent certified public 23
accountants.
o 27 Financial Data Schedule
</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, 1998 (File No.
0-24275).
& Incorporated by reference from Form 8-K (dated October 1, 1998) filed on
October 14, 1998 (File No. 0-24275).
# Incorporated by reference from Form 8-K (dated November 9, 1998) filed on
December 4, 1998 (File No. 0-24275).
-29-
<PAGE> 30
x Incorporated by reference from Form 8-K (dated November 19, 1998) filed on
December 4, 1998 (File No. 0- 24275).
** Incorporated by reference from Form 10-KSB filed March 16, 1999 (File No.
0-24275).
## Incorporated by reference from Form 10-QSB filed August 12, 1999 (File No.
0-24275).
xx Incorporated by reference from Form 8-K (dated April 1, 1998) filed on
September 17, 1999 (File No. 0-24275).
++ Incorporated by reference from Registration Statement on Form S-8 (File No.
333-18831).
o Filed herewith.
(b) REPORTS ON FORM 8-K
A report on Form 8-K, dated April 1, 1999, was filed on September 17,
1999 reporting the purchase of substantially all of the assets of Complete
Controls, Inc.; the lease of the facilities at the Tucson International Airport
from where such business was operating as well as an additional building at that
location; and the employment by AAS Complete Controls of Micah Chapman as
President and Frank Zambo as Vice President.
-30-
<PAGE> 31
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 29, 2000 By: /s/ Karl F. Bown
---------------------------------------
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 29, 2000
- ------------------------------- Officer (Principal Executive Officer)
Karl F. Brown
/s/ Joseph E. Civiletto Chief Operating Officer and President March 29, 2000
- ------------------------------- (Principal Operating Officer)
Joseph E. Civiletto
/s/ Elaine T. Rudisill Chief Financial Officer (Principal March 29, 2000
- ------------------------------- Financial and Accounting Officer)
Elaine T. Rudisill
/s/ David M. Furr Director March 29, 2000
- -------------------------------
David M. Furr
/s/ Pamela K. Clement Director March 29, 2000
- -------------------------------
Pamela K. Clement
/s/ James T. Comer, III Director March 29, 2000
- -------------------------------
James T. Comer, III
/s/ Anton K. Khoury Director March 29, 2000
- -------------------------------
Anton K. Khoury
</TABLE>
<PAGE> 32
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONTENTS
PAGE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS................................... F-2
CONSOLIDATED BALANCE SHEETS................................................ F-4
CONSOLIDATED STATEMENTS OF OPERATIONS...................................... F-5
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY............................ F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS...................................... F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS................................. F-8
F-1
<PAGE> 33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
American Aircarriers Support, Incorporated and Subsidiaries:
We have audited the accompanying consolidated balance sheet of American
Aircarriers Support, Incorporated and Subsidiaries (a Delaware corporation) as
of December 31, 1999 and the related consolidated statements of operations,
stockholders' equity and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 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, 1999, and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Arthur Andersen LLP
Charlotte, North Carolina
March 29, 2000
F-2
<PAGE> 34
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 sheet of American
Aircarriers Support, Incorporated and Subsidiaries as of December 31, 1998 and
the related consolidated statement of operations, stockholders' equity and cash
flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit 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 the results
of their operations and their cash flows for the year then ended in conformity
with generally accepted accounting principles.
Cherry, Bekaert and Holland, L.L.P.
Charlotte, North Carolina
January 29, 1999, except for Note 9,
as to which the date is March 4, 1999
F-3
<PAGE> 35
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
1999 1998
-------- -------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 91 $ 2,150
Receivables:
Trade and other, net of allowances of $366 at December 31, 1999
and $256 at December 31, 1998 18,843 4,007
Affiliate 631 10
Cost and estimated earnings in excess of billings on uncompleted
contracts, net 981 610
Inventories 60,068 22,220
Prepaid expenses 825 181
-------- -------
Total current assets 81,439 29,178
Property and equipment, net 11,787 2,263
Assets under capital lease, net 7,547 --
Assets held for lease, net 633 1,725
Goodwill and acquisitions costs, net of amortization 10,520 10,446
Deferred financing fees 1,595 85
Other assets 343 481
-------- -------
$113,864 $44,178
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Revolving line of credit $ 51,288 $ 3,250
Current maturities of long-term debt 347 1,733
Capital lease obligations - current portion 965
Accounts payable and accrued expenses 20,300 3,270
Accounts payable to related parties -- 54
Notes payable to related parties - current portion 168 --
Income taxes payable 1,159 1,128
-------- -------
Total current liabilities 74,227 9,435
Long-term debt, net of current maturities 3,121 11,267
Capital lease obligations - long-term portion 6,371 --
Notes payable to related parties - long-term portion 88 --
Deferred income taxes 316 --
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 shares issued and outstanding at December 31, 1999 and 1998 7 7
Additional paid-in capital 20,450 20,450
Retained earnings 9,284 3,019
-------- -------
Total stockholders' equity 29,741 23,476
-------- -------
$113,864 $44,178
======== =======
</TABLE>
The accompanying notes to Consolidated Financial
Statements are an integral part of these Balance Sheets.
F-4
<PAGE> 36
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1999 1998
-------- --------
<S> <C> <C>
Net revenues $ 59,946 $ 26,281
Cost of sales and service 35,903 15,995
-------- --------
GROSS PROFIT 24,043 10,286
-------- --------
Operating Expenses:
Selling and marketing 4,618 1,671
General and administrative 5,720 1,666
-------- --------
Total operating expenses 10,338 3,337
-------- --------
INCOME FROM OPERATIONS 13,705 6,949
Other (expense) income:
Interest expense, net (3,360) (229)
Write off of deferred financing fees (99) --
Other income -- 45
-------- --------
INCOME BEFORE INCOME TAXES 10,246 6,765
Provision for income taxes 3,981 1,813
-------- --------
NET INCOME $ 6,265 $ 4,952
======== ========
PRO FORMA DATA (UNAUDITED):
Income before income taxes as reported $ -- $ 6,765
Pro forma income tax expense -- 2,571
-------- --------
Pro forma net income $ -- $ 4,194
======== ========
Earnings per share and pro forma basic
earnings per share $ 0.87 $ 0.76
======== ========
Earnings per share and pro forma diluted
earnings per share $ 0.86 $ 0.76
======== ========
Weighted average shares outstanding and pro
forma weighted average shares
outstanding:
Basic 7,190 5,513
======== ========
Diluted 7,324 5,518
======== ========
</TABLE>
The accompanying notes to Consolidated Financial
Statements are an integral part of these Statements.
F-5
<PAGE> 37
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES DOLLARS CAPITAL EARNINGS EQUITY
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 4,100 $ 4 $ -- $ 4,865 $ 4,869
Net income -- -- -- 4,952 4,952
Distribution to S-corp stockholders -- -- -- (3,047) (3,047)
Recapitalization from S-corp to
C-corp and establishment of
deferred tax asset -- -- 3,791 (3,751) 40
Issuance of common stock and warrants
in conjunction with initial public
offering, net of transaction cost 2,250 2 11,642 -- 11,644
Issuance of common stock in
conjunction with acquisitions of
businesses 840 1 5,017 -- 5,018
-------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1998 7,190 7 20,450 3,019 23,476
Net income 6,265 6,265
-------- -------- -------- -------- --------
BALANCE, DECEMBER 31, 1999 7,190 $ 7 $ 20,450 $ 9,284 $ 29,741
======== ======== ======== ======== ========
</TABLE>
The accompanying notes to Consolidated Financial
Statements are an integral part of these Statements.
F-6
<PAGE> 38
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
1999 1998
-------- --------
<S> <C> <C>
Operating activities
Net income $ 6,265 $ 4,952
Adjustments to reconcile net income to cash used in operating activities:
Depreciation and amortization 1,388 369
Provision for uncollectible accounts 110 181
Deferred tax expense 352 4
Increase in trade and other receivables (15,567) (558)
Increase in costs and estimated earnings in excess of billing on
uncompleted contracts, net (371) (610)
Increase in inventories (37,848) (13,049)
Increase in prepaid expenses (644) (666)
Decrease in other assets 138 --
Increase in accounts payable and accrued expenses 17,028 2,431
Decrease in accounts payable to related parties (54) --
Decrease in income taxes payable (4) --
-------- --------
Net cash used in operating activities (29,207) (6,946)
-------- --------
INVESTING ACTIVITIES
Capital expenditures (10,064) (2,785)
Change in assets held for lease 1,043 --
Acquisition of businesses (438) (10,694)
-------- --------
Net cash used in investing activities (9,459) (13,479)
-------- --------
FINANCING ACTIVITIES
Net borrowings on revolving line of credit 48,038 1,750
(Repayment) issuance of long-term debt, net (9,532) 12,879
Issuance of notes payable to related parties, net 256
Principal repayments on amounts payable to related parties, net -- (1,502)
Repayment of capital lease obligations (336) --
Increase in deferred financing fees (1,819) --
Net proceeds from initial public offering -- 11,644
Distributions to stockholders -- (2,946)
-------- --------
Net cash provided by financing activities 36,607 21,825
-------- --------
Net (decrease) increase in cash and cash equivalents (2,059) 1,400
Cash and cash equivalents, beginning of year 2,150 750
-------- --------
Cash and cash equivalents, end of year $ 91 $ 2,150
======== ========
</TABLE>
The accompanying notes to Consolidated Financial
Statements are an integral part of these Statements.
F-7
<PAGE> 39
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 Aviation Services, Inc., AAS Landing Gear Services,
Inc., AAS Amjet, Inc. and AAS Complete Controls, 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 aircraft 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 and Tucson,
Arizona. Subsequent to December 31, 1999, the Company opened an aircraft
maintenance facility in San Bernardino, California.
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 and cash equivalents for
1998 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 certain bulk purchases or through whole aircraft
purchases, cost is determined based upon an allocation by management of the bulk
purchase price to the majority of the individual components based upon a
pro-rated percent of manufacturers list price. The balance of the components
F-8
<PAGE> 40
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Inventories (continued)
are assigned to cost 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.
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, 1999 and 1998 was $50,000 and $31,000,
respectively.
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 eight 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 for assets acquired prior to 1999 and 20 years for assets acquired in
1999. 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 of
goodwill at December 31, 1999 and 1998, respectively, was $453,126 and $87,495.
Deferred financing fees represents the cost of refinancing the Company's credit
facility and is amortized using the straight-line method over the term of the
facility. Deferred financing fees of $98,874 associated with the Company's
previous credit facility were written off during 1999. Accumulated amortization
of deferred financing fees at December 31, 1999 and 1998, was $209,956 and
$23,112, respectively.
F-9
<PAGE> 41
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 long-term 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.
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 vary 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 and is netted
with the aforementioned asset for presentation purposes on the accompanying
consolidated balance sheets.
Earnings Per Share
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 supersedes 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. 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.
F-10
<PAGE> 42
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 approximated carrying values.
At December 31, 1999 and 1998, 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.
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 customers' 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
F-11
<PAGE> 43
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentrations of Credit Risk (continued)
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 1999 and 1998, none of the Company's customers accounted for more than 10% of
net revenues. Currently, the Company believes that it has no customer, the loss
of which would have a material adverse effect on the Company's results of
operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Advertising Costs
The Company expenses advertising costs as they are incurred. Advertising costs
were $167,210 in 1999, and $74,136 in 1998.
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. In June 1999,
the FASB issued SFAS No. 137 which delayed the effective date of SFAS No. 133
until fiscal quarters of all fiscal years beginning after June 15, 2000.
Management does not anticipate the adoption of the provisions of SFAS No. 133
will significantly impact the Company's financial reporting.
F-12
<PAGE> 44
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Reclassifications
Certain amounts in the 1998 financial statements have been reclassified in order
to conform with 1999 presentation.
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 purchase additional inventory.
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 for the year ended 1998 provides information as if the Company had
been treated as a C-Corporation for income tax purposes. 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. 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
----
Income taxes at federal statutory rate $ 2,300,000
State taxes, net of federal benefit 223,000
Other 47,551
-----------
Pro forma income taxes $ 2,570,551
===========
F-13
<PAGE> 45
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 4. BUSINESS COMBINATIONS
Effective April 1, 1999, the Company completed the acquisition of Complete
Controls, Inc. ("CCI"), an Arizona corporation, now operating as AAS Complete
Controls Inc., for a purchase price of $600,000, reduced by an agreed-upon
working capital adjustment, and the assumption of certain liabilities. The
purchase price consisted of $150,000 in cash and promissory notes for the
balance of the purchase price, payable over two years, issued to the prior
owners. CCI is a FAA-certified maintenance, repair and overhaul facility
specializing in flight control surfaces. Flight control surfaces include the
flaps, slats and rudders of an aircraft.
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, now operating as AAS Amjet Inc., 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, now operating as Aviation Services Inc.,
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, now operating as
AAS Landing Gear Services Inc., 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 $518,000 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. The excess of the purchase price over the fair value of the
net assets acquired in the CCI acquisition of approximately $347,000 has been
recorded as goodwill and is being amortized on a straight line basis over 20
years.
F-14
<PAGE> 46
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 the year in which the
acquisition was made. 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 each year presented.
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Pro forma net revenues $ 60,529,000 $ 33,028,000
Pro forma net income $ 6,152,000 $ 4,396,000
Pro forma basic earnings per share $0.86 $0.72
===== =====
Pro forma diluted earnings per share $0.84 $0.72
===== =====
</TABLE>
NOTE 5. TRADE RECEIVABLES AND SALES BY GEOGRAPHIC REGION
Trade receivables are shown net of the following allowances:
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ -----------
<S> <C> <C>
Allowance for doubtful accounts $ 325,592 $ 225,592
Reserve for sales returns and allowances 40,000 30,000
------------ -----------
Total accounts receivable allowances $ 365,592 $ 255,592
============ ===========
</TABLE>
Sales to unaffiliated customers by geographic region are as follows:
December 31,
1999 1998
----------- -----------
Domestic $41,539,272 $20,269,572
Canada 2,795,076 2,100,439
Europe and Middle East 6,082,844 3,411,192
Far East 6,436,665 432,834
Latin America 2,606,411 --
Other 485,538 66,889
----------- -----------
Total $59,945,806 $26,280,926
=========== ===========
F-15
<PAGE> 47
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 6. INVENTORIES
Inventories, stated at lower of cost or market, are comprised of the following:
December 31,
1999 1998
----------- -----------
Aircraft parts $34,701,026 $11,795,079
Complete engines 15,096,888 9,556,061
Deposits on inventory 603,219 845,473
Work in process 9,666,771 23,424
----------- -----------
Total $60,067,904 $22,220,037
=========== ===========
NOTE 7. PROPERTY AND EQUIPMENT
Property and equipment, stated at cost, is comprised of the following:
December 31,
1999 1998
------------ ------------
Shop equipment $ 2,570,496 $ 1,258,350
Office furniture and equipment 1,640,954 398,498
Leasehold improvements 1,436,604 528,979
Software 1,278,920 228,931
Vehicles 236,169 136,049
------------ ------------
7,163,143 2,550,807
Less accumulated depreciation (745,941) (287,943)
Construction in progress 5,369,720 --
------------ ------------
Property and equipment, net $ 11,786,922 $ 2,262,864
============ ============
As of December 31, 1999 Construction in progress included approximately $140,000
of capitalized interest.
NOTE 8. INVESTMENTS
During 1998 the company made investments totaling $175,000 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.
F-16
<PAGE> 48
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 9. LINE OF CREDIT
The Company's credit facility was initially established in June 1995. On July
13, 1998, the Company entered into an agreement with a 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 bore 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%. This credit facility was amended in March
1999 to permit borrowings of up to $35 million, $15 million for working capital
and $20 million for acquisitions.
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.
Effective May 25, 1999, the Company entered into a five-year revolving credit
agreement and capital expenditure loan facility ("Credit Agreement") with Bank
of America (the "agent") and other financial institutions (the "lenders"). The
Credit Agreement provides a line of credit up to $100 million, of which $10
million is designated as the Capital Expenditure Loan Facility. The Credit
Agreement replaced the existing $35 million line of credit, which was repaid in
full from the proceeds of the new facility. The Company also wrote off deferred
financing fees of $98,874 associated with the previous line of credit. Principal
amounts outstanding under the Credit Agreement bear interest on a variable rate
basis at various interest rates tied to either the LIBOR or the prime rate,
depending on certain indebtedness ratios. The terms of the Credit Agreement also
provide for a facility non-use fee of 3/8% per annum on the unused portion of
the facility. The Credit Agreement, of which $51.3 million and $3.5 million were
outstanding under the revolver and capital expenditure loan facility,
respectively, at December 31, 1999, contains customary events of default and
restrictive covenants that, among other matters, require the Company to maintain
certain financial ratios. As of December 31, 1999, the Company was in compliance
with all of the restrictive covenants, with the exception of the tangible net
worth covenant, which has subsequently been waived by the bank. The amount of
credit available to the Company under the agreement at any given time is
determined by an availability calculation, based on the eligible borrowing base,
as defined in the credit agreement which includes the Company's outstanding
receivables and inventories, with certain exclusions. Total unutilized borrowing
availability as of December 31, 1999, pursuant to the Credit Agreement, as
amended, was $1.0 million and $6.5 million on the revolver and capital
expenditure line, respectively. The Credit Agreement is secured by substantially
all of the Company's assets and the capital expenditure loan facility is secured
by all of the equipment funded by the facility. The capital expenditure loan
facility may be drawn down through May 2000, at which time it converts into a
term loan amortizing over the remaining term of the Credit Agreement.
F-17
<PAGE> 49
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 10. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt are summarized as follows:
<TABLE>
<CAPTION>
December 31,
1999 1998
------------ ------------
<S> <C> <C>
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
Capital expenditure loan payable to bank originated May 1999, bearing interest
at 8.5% at December 31, 1999, payable in quarterly installments of principal on
the first day of each fiscal quarter, based on a five year level amortization,
beginning on July 1, 2000. Interest is payable monthly. Upon the sale, transfer
or other disposition of any item of equipment financed with the proceeds of the
loan, the Company is obligated to prepay the portion of the loan made against
such item of equipment 3,467,705 --
------------ ------------
3,467,705 13,000,000
Less current maturities (346,771) (1,733,333)
------------ ------------
Long-term debt, less current maturities $ 3,120,934 $ 11,266,667
============ ============
Maturities on long-term debt are as follows:
2000 $ 346,771
2001 693,541
2002 693,541
2003 693,541
2004 1,040,311
------------
$ 3,467,705
============
</TABLE>
F-18
<PAGE> 50
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 10. NOTES PAYABLE AND LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
December 31,
1999 1998
---------- -----------
<S> <C>
Notes payable to related parties
Notes payable to prior owners of Complete Controls, Inc.
originated April 1999, bearing interest at 6%, payable in
eight (8) quarterly installments of principal and interest,
maturity April 2001 256,564 --
---------- -----------
Total notes payable to related parties $ 256,564 $ --
========== ===========
</TABLE>
Interest paid was $3,208,319 in 1999 and $249,779 in 1998. Interest paid in 1999
includes approximately $2.86 million related to the Company's credit facility
(including the capital expenditure line), $326,000 related to capital lease
obligations (see note 11), and $22,000 of other interest.
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 $1,870,462 in 1999 and $256,755 in 1998. 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 31, 1999 To Related Third
Parties Parties
------------- -------------
2000 $ 414,120 $ 1,243,378
2001 414,120 974,887
2002 377,870 927,820
2003 276,720 930,058
2004 276,720 378,811
Thereafter 1,083,820 -
------------- -------------
$ 2,843,370 $ 4,454,954
============= =============
F-19
<PAGE> 51
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 11. LEASES (CONTINUED)
Capital Leases
- --------------
The company has leased two shipsets of landing gear, in different
configurations, and other equipment which are accounted for as capital leases.
Assets recorded under capital leases at
December 31, 1999
Landing gear $ 3,700,000
Landing gear 3,950,000
Equipment 22,381
------------
7,672,381
Less accumulated depreciation (125,196)
------------
$ 7,547,185
============
Capital lease obligations at
December 31, 1999
<TABLE>
<S> <C>
Capital lease obligation for landing gear, payable to First Capital, originated
August 1999, bearing interest at 11.5%, payable in monthly installments of
$70,652 (principal and interest). After 5 years the Company is obligated to
either purchase the gear for 25% of the original price which is considered a
bargain purchase option, or extend the lease for an additional 2 years. $ 3,520,626
Capital lease obligation for landing gear, payable to BancBoston, originated
September 1999, bearing interest at 11.6%, payable in monthly installments of
$75,607 (principal and interest). After 5 years the Company is obligated to
either purchase the gear for 25% of the original price, which is considered a
bargain purchase option, or extend the lease for an additional 2 years. 3,797,792
Capital lease obligation for equipment payable to Safeline Leasing, originated
June 1999, bearing interest at 9.2%, payable in 36 monthly installments
of $329 (principal and interest). 8,301
Capital lease obligation for telephone equipment payable to American Express
Equipment Finance, originated March 1999 bearing interest at 17.2%, payable in
60 monthly installments of $296 (principal and interest). 9,300
-----------
$ 7,336,019
===========
</TABLE>
F-20
<PAGE> 52
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 11. LEASES (CONTINUED)
Capital Leases (continued)
- --------------
Future minimum lease payments
at December 1999
2000 $ 964,652
2001 1,082,949
2002 1,212,457
2003 1,358,569
2004 2,717,392
------------
$ 7,336,019
============
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:
1999 1998
---------- ----------
Current:
Federal $3,138,000 $1,561,000
State 491,000 248,000
---------- ----------
Total 3,629,000 1,809,000
---------- ----------
Deferred:
Federal 298,000 4,000
State 54,000 --
---------- ----------
Total 352,000 4,000
---------- ----------
$3,981,000 $1,813,000
========== ==========
F-21
<PAGE> 53
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 12. INCOME TAXES (CONTINUED)
The reconciliation of income tax computed at the federal statutory rate and the
actual income tax provision is as follows:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Income taxes at federal statutory rate $ 3,586,000 $ 2,300,000
Effect of S-Corporation earnings taxed at stockholder level -- (657,000)
State taxes, net of federal benefit 354,000 161,000
Other 41,000 9,000
----------- -----------
Actual provision for income taxes $ 3,981,000 $ 1,813,000
=========== ===========
</TABLE>
Income taxes paid were $2,466,000 in 1999 and $1,530,000 in 1998.
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 (liability) asset as of December 31, 1999 and 1998 were as follows:
1999 1998
--------- ---------
Deferred tax assets:
Reserves against accounts receivable $ 127,000 $ 85,000
--------- ---------
Deferred tax liabilities:
Depreciation (426,000) (38,000)
Other (17,000) (11,000)
--------- ---------
Total (443,000) (49,000)
--------- ---------
Net deferred tax (liability) asset $(316,000) $ 36,000
========= =========
F-22
<PAGE> 54
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 13. EARNINGS PER SHARE
The provisions of SFAS No. 128 have been adopted in determining basic and
diluted EPS for 1999 and pro forma basic and diluted EPS for 1998. The weighted
average number of shares outstanding for 1998 has been retroactively restated to
give effect to the shares issued in the reincorporation in Delaware (Note 3).
The computation of earnings per share, on a pro forma basis assuming the Company
was taxed as a Subchapter C Corporation for 1998, is as follows:
<TABLE>
<CAPTION>
Pro forma
1999 1998
---------- -------------
<S> <C> <C>
Net income $6,265,271 $ 4,194,058
Weighted average shares outstanding 7,190,104 5,512,533
Basic and pro forma basic earnings per share $ 0.87 $ 0.76
========== =============
</TABLE>
The computation of diluted earnings per share and 1998 pro forma diluted
earnings per share is as follows:
<TABLE>
<CAPTION>
Pro forma
1999 1998
---------- ----------
<S> <C> <C>
Net income $6,265,271 $4,194,058
========== ==========
Weighted average shares outstanding 7,190,104 5,512,533
Effect of dilutive securities:
Options 116,325 5,064
Warrants 17,968 --
---------- ----------
Diluted weighted average shares outstanding 7,324,397 5,517,597
========== ==========
Diluted and pro forma diluted earnings per share $ 0.86 $ 0.76
========== ==========
</TABLE>
F-23
<PAGE> 55
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 one 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 1999 and 1998, the Company granted stock
options to individuals who are employees, directors or consultants of the
Company totaling 251,500 and 393,250 shares, respectively. The options have an
exercise price ranging from $6.00 to $10.75 per share, with a weighted average
exercise price of $7.60 per share. Options for 528,574 shares having a weighted
average exercise price of $7.26 per share are vested as of December 31, 1999,
with the remaining options vesting over four years. The options have terms of
between five and ten years. No options were exercised during 1999.
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 1999 net income and earnings per share and 1998 pro forma net
income and earnings per share would have been reduced to the amounts indicated
below. No compensation expense has been 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.
<TABLE>
<CAPTION>
Pro Forma
1999 Pro Forma 1998
1999 Based on 1998 Based on
As Reported SFAS No. 123 As Reported SFAS No. 123
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Income $ 6,265,271 $ 5,453,493 $ 4,194,058 $ 3,989,023
Basic earnings per share $ 0.87 $ 0.76 $ 0.76 $ 0.72
============= ============= ============= =============
Diluted earnings per share $ 0.86 $ 0.74 $ 0.76 $ 0.72
============= ============= ============= =============
</TABLE>
F-24
<PAGE> 56
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 15. STOCK OPTION PLAN (CONTINUED)
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
years 1999 and 1998 respectively: dividend yield of 0 percent for both years;
expected volatility of 70.9 percent and 55 percent; risk-free interest rate of
7.0 percent and 5.2 percent; and expected life of 7 years for both years.
The weighted average fair value of options granted during 1999 and 1998 was
$7.94 and $3.65, respectively.
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 a contribution to the plan of $51,605 in
1999 for the 401(k) portion and contributed $58,264 in 1998 for the profit
sharing portion. No contributions were made in 1999 for the profit sharing
portion and no contributions were made in 1998 for the 401(k) matching portion.
Until September 30, 1999, the Company had a medical reimbursement plan covering
substantially all of its employees that paid 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, 1999 and 1998 were
$39,047 and $23,374, respectively. This plan was terminated on September 30,
1999.
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 $653,094 in 1999 and $137,400 in 1998. Minimum lease
payments are summarized in Note 11.
In April 1999, in connection with the Company's purchase of CCI, the Company
issued a promissory note to the former owners of Complete Controls, Inc. in the
principal sum of $337,117. The note bears interest at 6% and is payable in eight
equal quarterly installments of principal plus interest on the first day of each
quarter beginning July 1, 1999 and ending April 1, 2001.
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 of the Company 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. During 1998, the Company paid the final payment of
$48,780.
F-25
<PAGE> 57
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 17. RELATED PARTY TRANSACTIONS (CONTINUED)
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 $60,730 and $36,788 in 1999 and
1998, 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 in 1998. 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. Notes payable
totaling $121,267 bearing an annual interest rate of 8% were paid in full on
June 12, 1998. Notes payable totaling $810,000 bearing an annual interest rate
of 8% were paid at maturity on April 15, 1998.
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 $237,851 in 1999 and $315,892 in 1998
from a law firm in which a director of the Company 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.
NOTE 18. SUBSEQUENT EVENTS
In February 2000 the Company created two new affiliated companies, one to
implement another acquisition to enhance its service capabilities and the other
to participate in a joint venture to create a solution that the Company expects
to enhance part sales. The acquisition involved the purchase of assets used in
the operation of a facility that was FAA certified to provide heavy maintenance
and modification services. The assets were purchased for $2.3 million in cash
and notes payable. The Company entered into a lease of the
F-26
<PAGE> 58
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
NOTE 18. SUBSEQUENT EVENTS (CONTINUED)
facilities previously used for these services from the San Bernardino
International Airport Authority. The second expansion move was to enter into a
technology partnering agreement with SupplyAccessTM for the joint development of
an internet-based distribution model for parts sales. The Company borrowed $3.0
million from an unaffiliated private investor to fund the participation in the
development and marketing of this business-to business e-Procurement solution
for the aerospace industry and an equity investment in a document imaging
company. Principal and interest on the loan are due at the earlier of 120 days
from the closing or the funding of a subordinated debenture offering in the
minimum amount of $10 million. The loan is evidenced by an unsecured,
subordinated promissory note that bears interest at 9.5 % per annum and is
secured by the personal guaranty of the Company's founder and CEO. The bridge
lender also received an option to purchase 25,000 shares of common stock at
$8.00 per share for a four year period. The option has customary anti-dilution
provisions and the holder has certain registration rights.
F-27
<PAGE> 1
EXHIBIT 10.4.14
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER
SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION.
PROMISSORY NOTE
$3,000,000.00 January ____ , 2000
Charlotte, North Carolina
For value received AAS TECHNOLOGIES, INC., a South Carolina corporation
(the "Company"), promises to pay to O'H RANKIN PROPERTIES or its assigns (the
"Holder") the aggregate principal sum of Three Million Dollars ($3,000,000.00)
with interest on the outstanding principal amount from the date hereof at the
rate of nine and one-half percent (9-1/2%) per annum.
This note (the "Note") is issued pursuant to the terms of that certain
Subscription Agreement dated as of January ____, 2000 between Holder and the
Company. The Note shall be due and payable at the earlier of one hundred twenty
(120) days from date hereof or the funding of a Subordinated Debenture Offering
of American Aircarriers Support, Incorporated in the amount of at least
$_____________.
All payments of interest and principal shall be made in lawful money of
the United States of America and shall be made to the Holder. All payments shall
be applied first to accrued interest, and thereafter to principal.
The Company shall have the right to pay all or any part of the unpaid
principal balance (including accrued interest, if any) of this Note at any time
without penalty. Any and all prepayments with respect to this Note shall be
applied first to payment of accrued interest as of the date of such prepayment
and the balance, if any, shall be applied in reduction of the unpaid principal.
The occurrence of any one or more of the following events shall
constitute an "Event of Default" hereunder:
(a) The Company fails to pay any principal of or interest on
this Note within ten days after such payment is due;
(b) The filing by the Company of any voluntary petition
seeking liquidation, reorganization, arrangement, readjustment
of debts or for any other relief under the federal Bankruptcy
Code or under any other act or law pertaining to insolvency or
debtor relief, whether state or federal;
<PAGE> 2
(c) The filing against the Company of any involuntary petition
seeking liquidation, reorganization, arrangement, readjustment
of debts or for any other relief under the federal Bankruptcy
Code or under any other act or law pertaining to insolvency or
debtor relief, whether state or federal, and such petition is
not dismissed within 90 days of the date of filing;
(d) A custodian, trustee, receiver or assignee for the benefit
of creditors is appointed or takes possession of any of the
Company's assets; or
(e) Any representation or warranty of the Company set forth in
the Subscription Agreement being untrue as of the date hereof
or any breach by the Company of any of its covenants or
obligations to Holder under the Subscription Agreement.
During the continuance of any Event of Default, the Holder may, upon
delivery of written notice to the Company at its principal executive office,
declare the remainder of the debt evidenced hereby at once due and payable,
whereupon such amounts shall become immediately due and payable.
In the event that this Note is not paid as and when due, the Company
hereby agrees to pay, in addition to all principal and interest hereunder, all
costs of collection of the holder hereof, including reasonable attorneys' fees.
The Company hereby waives demand, notice, presentment, protest and
notice of dishonor.
This Note is to be governed and construed in accordance with the laws
of the State of North Carolina.
If any one or more of the provisions of this Note shall for any reason
be held to be invalid, illegal or unenforceable, in whole or in part or in any
respect, or if any one or more of the provisions of this Note operate or would
hereafter operate to invalidate this Note, then such provision or provisions
shall be deemed null and void and shall not affect any other provisions of this
Note and the remaining provisions of this Note shall remain operative and in
full force and effect and shall in no way be affected or prejudiced thereby.
AAS TECHNOLOGIES, INC.
By:______________________________
Name:____________________________
Title:___________________________
<PAGE> 3
GUARANTY
The undersigned guarantees the payment, when due, to any holder hereof, of all
amounts from time to time owing pursuant to the Promissory Note set forth
hereinabove, and the payment, upon demand, of the entire amount owing thereunder
in the event of default in payment by maker making said Promissory Note. The
undersigned waives notice of acceptance of this guaranty, acknowledges himself
as fully bound by all provisions of said Promissory Note and contract, and
expressly agrees to pay all amounts thereunder, upon demand without requiring
any action or proceeding against maker. If suit is brought to enforce this
Guaranty Agreement, the undersigned agrees to pay reasonable attorneys' fees of
any holder hereof. The undersigned herewith adopts as his seal the word "(SEAL)"
appearing above, beside or near his signature below.
(SEAL)
----------------------------------------
KARL F. BROWN
<PAGE> 4
OPTION AGREEMENT
OPTION AGREEMENT, dated as of January ____, 2000, by and between O'H
RANKIN PROPERTIES, a North Carolina Limited Partnership (the "Optionee"), on the
one hand, and AMERICAN AIRCARRIERS SUPPORT, INCORPORATED, a Delaware corporation
("AAS") on the other.
WHEREAS, effective as of December __, 1999, the Optionee and AAS
entered into a Subscription Agreement pursuant to which, among other things, the
Optionee is to receive the right (the "Option") to purchase up to 25,000 shares
of Common Stock, par value $.001 per share (the "Option Shares") of AAS pursuant
to the terms of an option agreement; and
WHEREAS, this option agreement (the "Option Agreement") constitutes the
option agreement described in the Subscription Agreement;
NOW, THEREFORE, in consideration of the agreements set forth below, the
parties hereto agree as follows:
1. The Option. Subject to the terms and conditions hereof, the Optionee
is hereby granted the Option, at any time or from time to time commencing on the
date of this Option Agreement and at or before 5:00 P.M., Eastern Time, on
December 31, 2005 (such four-year period hereinafter the "Option Exercise
Period"), but not thereafter, to subscribe for and purchase any or all of the
Option Shares for a price of $8.00 per Option Share purchased (the "Option
Exercise Price"). If the rights represented hereby shall not be exercised during
the Option Exercise Period, this Option shall become and be void without further
force or effect, and all rights represented hereby shall cease and expire.
2. Exercise of Option. During the Option Exercise Period, the Optionee
may exercise this Option upon presentation and surrender of this Option and upon
payment of the Option Exercise Price for the Option Shares to be purchased to
AAS at the principal office of AAS. Upon exercise of this Option, the form of
election hereinafter provided must be duly executed and the instructions for
registration of the Option Shares acquired by such exercise must be completed
and delivered with this Option to AAS. If this Option is exercised in part, the
Optionee shall be required to exercise this Option with respect to a minimum of
5,000 shares of Common Stock upon each such exercise in part. In the event of
the exercise of this Option in part only, AAS shall cause to be delivered to the
Optionee a new Option of like tenor to this Option in the name of the Optionee
evidencing the right of the Optionee to purchase the number of Option Shares
purchasable hereunder as to which this Option has not been exercised. On
exercise of this Option, unless (i) AAS receives an opinion from counsel
satisfactory to it that such a legend is not required in order to assure
compliance with the Securities Act of 1933, as amended (the "1933 Act"), or any
applicable state
<PAGE> 5
securities laws, or (ii) the Option Shares are registered under the 1933 Act,
each certificate for Option Shares issued hereunder shall bear a legend reading
substantially as follows:
These securities have not been registered under the Securities Act of
1933, as amended, and may be offered and sold only if registered
pursuant to the provisions of that Act or if, in the opinion of counsel
to the seller, an exemption from registration thereunder is available,
the availability of which must be established to the satisfaction of
AAS.
The foregoing legend may be removed with respect to any Option Shares
sold upon registration or sold pursuant to an exemption from registration,
including the exemption for sales made in accordance with Rule 144 promulgated
under the 1933 Act, provided AAS receives an opinion from counsel satisfactory
to it that such legend may be removed.
Nevertheless, AAS shall extend to the Optionee the right after the
Closing Date to have included on a registration statement filed by AAS (other
than on Form S-4, S-8 or any successor form) during a five (5) year period
commencing on the Closing Date the Option Shares, if exercised, provided all
25,000 Options have been exercised.
3. Assignment. Subject to the terms contained herein, this Option may
be assigned by the Optionee in whole or in part by execution by the Optionee of
the form of assignment attached hereto, (i) in the sole discretion of the
Optionee, to an affiliate of the Optionee, or (ii) with the prior written
consent of AAS, to any other party. In the event of any permitted assignment,
AAS, upon request and upon surrender of this Option by the Optionee at the
principal office of AAS accompanied by payment of all transfer taxes, if any,
payable in connection therewith, shall transfer this Option on the books of AAS.
If the permitted assignment is in whole, AAS shall execute and deliver a new
Option or Options of like tenor to this Option to the appropriate assignee
expressly evidencing the right to purchase the aggregate number of Option Shares
purchasable hereunder; and if the permitted assignment is in part, AAS shall
execute and deliver to the appropriate assignee a new Option or Options of like
tenor expressly evidencing the right to purchase the portion of the aggregate
number of Option Shares as shall be contemplated by any such permitted
assignment, and shall concurrently execute and deliver to the Optionee a new
Option of like tenor to this Option evidencing the right to purchase the
remaining portion of the Option Shares purchasable hereunder which have not been
transferred to the assignee.
4. Transfer of Option. The Optionee, by acceptance hereof, agrees that,
before any transfer is made of all or any portion of this Option, the Optionee
shall give written notice to AAS at least 15 days prior to the date of such
proposed transfer, which
2
<PAGE> 6
notice shall specify the identity, address and affiliation, if any, of such
transferee. No such transfer shall be made unless and until AAS has received an
opinion of counsel for AAS or for the Optionee stating that no registration
under the 1933 Act or any state securities law is required with respect to such
disposition or a registration statement has been filed by AAS and declared
effective by the Securities and Exchange Commission covering such proposed
transfer and the Option and/or the Option Shares have been registered under
appropriate state securities laws. Any transfer of this Option shall be subject
to the same restrictions set forth in Section 3 hereof, that is, the Optionee
may transfer this Option to an affiliate in its sole discretion, and any other
transfer shall be subject to the prior written consent of AAS.
5. Share Dividends, Reclassification. Reorganization Provisions.
(a) If, prior to the expiration of this Option by exercise or by its
terms, AAS shall issue any of its Common Stock as a share dividend or subdivide
the number of outstanding shares of Common Stock into a greater number of shares
then, in either of such cases, the Option Exercise Price per share purchasable
pursuant to this Option in effect at the time of such action shall be
proportionately reduced and the number of Option Shares purchasable pursuant to
this Option shall be proportionately increased; and conversely, if AAS shall
reduce the number of outstanding shares of Common Stock by combining such shares
into a smaller number of shares then, in such case, the Option Exercise Price
per share purchasable pursuant to this Option in effect at the time of such
action shall be proportionately increased and the number of Option Shares at
that time purchasable pursuant to this Option shall be proportionately
decreased. If AAS shall, at any time during the life of this Option, declare a
dividend payable in cash on its Common Stock and shall at substantially the same
time offer to its shareholders a right to purchase new Common Stock from the
proceeds of such dividend or for an amount substantially equal to the dividend,
all Common Stock so issued shall, for the purpose of this Option, be deemed to
have been issued as a share dividend. Any dividend paid or distributed upon
Common Stock in shares of any other class of securities convertible into Common
Stock shall be treated as a dividend paid in Common Stock to the extent that
Common Stock is issuable upon the conversion thereof.
(b) If, prior to the expiration of this Option by exercise or by its
terms, AAS shall be recapitalized by reclassifying its outstanding Common Stock,
or AAS or a successor corporation shall consolidate or merge with or convey all
or substantially all of its or any successor corporation's property and assets
to any other corporation or corporations (any such corporation being included
within the meaning of the term "successor corporation" used above in the event
of any consolidation or merger of any such corporation with, or the sale of all
or substantially all of
3
<PAGE> 7
the property of any such corporation, to another corporation or corporations),
the Optionee shall thereafter have the right to purchase, upon the basis and
upon the terms and conditions and during the time specified in this Option, in
lieu of the Option Shares theretofore purchasable upon the exercise of this
Option, such shares, securities or assets as may be issued or payable with
respect to, or in exchange for, the number of Option Shares theretofore
purchasable upon the exercise of this Option had such recapitalization,
consolidation, merger or conveyance not taken place and, in any such event, the
rights of the Optionee to an adjustment in the number of Option Shares
purchasable upon the exercise upon this Option as herein provided shall continue
and be preserved in respect of any shares, securities or assets which the
Optionee becomes entitled to purchase.
(c) If: (i) AAS shall take a record of holders of its Common Stock for
the purpose of entitling them to receive a dividend payable otherwise than in
cash, or any other distribution in respect of the Common Stock (including cash),
pursuant to, without limitation, any spin-off, split-off, or distribution of
AAS's assets; or (ii) AAS shall take a record of the holders of its Common Stock
for the purpose of entitling them to subscribe for or purchase any shares of any
class or to receive any other rights; or (iii) in the event of any
classification, reclassification or other reorganization of the securities which
AAS is authorized to issue, consolidation or merger by AAS with or into another
corporation, or conveyance of all or substantially all of the assets of AAS; or
(iv) in the event of any voluntary or involuntary dissolution, liquidation or
winding up of AAS; then, and in any such case, AAS shall mail to the Optionee,
at least 15 days prior thereto, a notice stating the date or expected date on
which a record is to be taken for the purpose of such dividend, distribution or
rights, or the date on which such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up, as the case may be, will be effected. Such notice shall also specify
the date or expected date, if any is to be fixed, as to which holders of Common
Stock of record shall be entitled to participate in such dividend, distribution
or rights, or shall be entitled to exchange their Common Stock or securities or
other property deliverable upon such classification, reclassification,
reorganization, consolidation, merger, conveyance, dissolution, liquidation or
winding up, as the case may be.
(d) If AAS, at any time while this Option shall remain unexpired and
unexercised in whole or in part, shall sell all or substantially all of its
property, dissolve, liquidate or wind up its affairs, the Optionee may
thereafter receive upon exercise hereof, in lieu of each Option Share which it
would have been entitled to receive, the same kind and amount of any securities
or assets as may be issuable, distributable or payable upon any such sale,
dissolution, liquidation or winding up with respect to
4
<PAGE> 8
each share of Common Stock of AAS purchased upon exercise of this Option.
6. Reservation of Shares Issuable on Exercise of Option. At all times
during the Option Exercise Period, AAS will reserve and keep available out of
its authorized Common Stock, solely for issuance upon the exercise of this
Option, such number of shares of Common Stock and other securities as from time
to time may be issuable upon exercise of this Option.
7. Request to Transfer Agent. On exercise of all or any portion of this
Option, AAS shall, within ten days of the receipt of good and clean funds for
the purchase of any or all of the Option Shares, advise its Transfer Agent and
Registrar of the required issuance of the number of Option Shares and the names
in which such Option Shares are to be registered pursuant to the exercise form
attached hereto. AAS shall also execute and deliver any and all such further
documents as may be requested by the Transfer Agent and Registrar for the
purpose of effecting the issuance of Option Shares upon payment therefor by the
Optionee or any assignee.
8. Loss Theft Destruction or Mutilation. Upon receipt by AAS of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the ownership of and the loss, theft, destruction or mutilation of this Option,
and the purchase by the Optionee of a lost security bond (or, if acceptable to
AAS, the provision of a satisfactory indemnity from the Optionee) in an amount
equal to or exceeding the total value of the Option Shares to be purchased
hereunder, AAS will execute and deliver, in lieu thereof, a new Option of like
tenor.
9. Optionee Not a Shareholder. The Optionee or any other holder of this
Option shall, as such, not be entitled by reason of ownership of this Option to
any rights whatsoever of a shareholder of AAS.
10. Transfer Taxes. The Optionee or its assignee(s) will pay all taxes
in respect of the issue or transfer of this Option or the Option Shares issuable
upon exercise hereof.
11. Mailing of Notice. All notices and other communications from AAS to
the Optionee or from the Optionee to AAS shall be mailed by first class,
certified mail, postage prepaid, or sent by receipt confirmed facsimile
transmission, to the address furnished to each party in writing by the other
party.
12. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon exercise of this Option. With respect to
any fraction of a share called for upon the exercise hereof, AAS shall issue to
the Optionee at no extra cost another whole share for any fraction which is
one-half or greater, and the Optionee shall forfeit the fractional share that is
less than one-half of a share.
5
<PAGE> 9
13. Common Stock Defined. Whenever reference is made in this Option to
the issue or sale of Common Stock, the term "Common Stock" shall mean the voting
Common Stock of AAS of the class authorized as of the date hereof and any other
class of stock ranking on a parity with such Common Stock.
14. Registration Rights. The Optionee and AAS acknowledge the inclusion
of certain registration rights between the parties which provide, among other
things, for certain registration rights which are for the benefit of the
Optionee and any assignee(s). AAS's agreements with respect to the registration
rights will continue in effect regardless of the exercise or surrender of this
Option by either the Optionee or any assignee(s).
15. Payment for Option. Upon the execution and delivery of this Option
Agreement, together with the legal opinion and certificates of AAS described
below, the Optionee shall deliver to AAS good funds in the amount of
$200,000.00, which is the Purchase Price for the shares underlying this Option
Agreement.
16. Opinion of Legal Counsel. As a condition to the execution and
delivery of this Option Agreement by the parties and the payment by Optionee of
the Purchase Price specified in Section 15, AAS shall deliver to Optionee an
opinion of its legal counsel to the following effect:
(i) AAS is a corporation duly organized, validly existing and in good
standing under the laws of Delaware. AAS has all corporate power and authority
necessary to engage in the business in which it is presently engaged and to
execute, deliver and perform its obligations under this Option Agreement.
(ii) Execution and delivery of the Option Agreement and the
consummation of the transactions contemplated thereby have been duly and validly
authorized by all necessary action, corporate or otherwise, by AAS. This Option
Agreement is a legal, valid and binding obligation of AAS, enforceable against
AAS in accordance with their terms except as enforcement may be limited by
general equitable principles or bankruptcy, insolvency or similar laws affecting
creditors' rights generally. AAS has all requisite power and authority to
execute, deliver and perform this Option Agreement.
(iii) There are no preemptive rights to acquire AAS's Common Stock or
Preferred Stock.
(iv) The Option Shares, when issued in accordance with the terms and
conditions of this Option Agreement, will be duly authorized, validly issued,
fully paid and nonassessable and will be free and clear of any adverse claim,
security interest, lien, pledge, option, encumbrance or restriction whatever;
provided, however, that the Option Shares will be "restricted securities"
6
<PAGE> 10
as such term is defined under the 1933 Act (unless registered for sale as
described herein and the certificates representing the Option Shares will
contain a legend to reflect such status; and provided further that the
Optionee's status as an "affiliate" as defined under the 1933 Act may subject
the Buyer to certain restrictions as provided in the 1933 Act, the 1934 Act, or
the rules and regulations thereunder.
(v) The offer and sale of the Options are exempt from the registration
requirements of Section 5 of the 1933 Act. The offer and sale of the Option
Shares, when issued in accordance with all terms and conditions of the Option
Agreement, will be exempt from the registration requirements of Section 5 of
this 1933 Act.
(vi) Except as disclosed in the Subscription Agreement, such counsel is
not aware of any pending or threatened action, suit, proceeding or investigation
before any court or any public, regulatory, or governmental agency, authority or
body, involving AAS or any of its existing officers or directors and such
counsel do not know of any legal matter or government proceedings regarding AAS.
17. Governing Law. This Option shall be governed by, and construed in
accordance with, the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties have executed this Option Agreement on
the day and year first above written.
AAS:
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED
By:____________________________
Print Name:____________________
Title:_________________________
OPTIONEE:
O'H RANKIN PROPERTIES
By:_____________________________
Print Name:_____________________
Title:__________________________
7
<PAGE> 11
FORM TO BE USED TO EXERCISE OPTION:
EXERCISE FORM
The undersigned hereby elects irrevocably to exercise the within Option
and to purchase __________ shares (minimum purchase of 5,000 shares) of Common
Stock of American Aircarriers Support, Incorporated, called for hereby, and
hereby makes payment of $______________ (at the rate of $8.00 per share) in
payment of the Option Exercise Price pursuant hereto. Please issue the shares as
to which this Option is exercised in accordance with the instructions given
below.
------------------------------
Signature
Signature Guaranteed
Date:_____________________________________________________
INSTRUCTIONS FOR REGISTRATION OF SHARES:
Register Shares in name of:____________________________________
(Print)
Address:_______________________________________________________
--------------------------------------------------------------
FORM TO BE USED TO ASSIGN OPTION:
ASSIGNMENT
For value received ___________________________ does hereby sell, assign and
transfer unto ______________________________ the right to purchase
______________________ shares of Common Stock of American Aircarriers Support,
Incorporated, evidenced by the within Option, and does hereby irrevocably
constitute and appoint American Aircarriers Support, Incorporated and/or its
Transfer Agent as attorney to transfer the same on the books of American
Aircarriers Support, Incorporated with full power of substitution in the
premises.
----------------------------------
Signature
Signature Guaranteed
8
<PAGE> 12
Date:______________________________________________________
NOTICE: The signature to the form to exercise or form to assign must correspond
with the name as written upon the face of the within Option in every particular
without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank, other than a savings bank, or by a trust company or by a
firm having membership on a registered national securities exchange.
9
<PAGE> 13
THE UNSECURED SUBORDINATED PROMISSORY NOTE (THE "NOTE") AND ASSOCIATED OPTIONS
(THE "OPTIONS") OF THE COMPANY ARE OFFERED HEREBY SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS
SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. IN MAKING AN INVESTMENT DECISION,
INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE NOTE AND OPTIONS OFFERED
HEREBY HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION
OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT
CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT OR ANY OTHER
DOCUMENT DELIVERED HEREWITH. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SUBSCRIPTION AGREEMENT
January ___, 2000
AAS Technologies, Inc.
Post Office Box 7566
Charlotte, NC 28241
Ladies and Gentlemen:
Subject to the terms and provisions hereof, the undersigned investor
(the "Investor") hereby subscribes for and agrees to purchase from AAS
Technologies, Inc., a South Carolina corporation (the "Company"), for aggregate
consideration of $3,000,000.00 the following: (i) an unsecured, subordinated
promissory note in the principal amount of $3,000,000.00 in the form attached
hereto as Exhibit "A" (the "Note"); and (ii) Options to purchase 25,000 shares
of common stock of American Aircarriers Support, Incorporated, the parent of the
Company, at $8.00 per share in the form set forth in the Option Agreement (the
"Option Agreement") attached hereto as Exhibit "B". The Note (which shall accrue
interest at nine and one-half percent (9-1/2%) per annum) shall be due and
payable at the earlier of one hundred twenty (120) days from the date hereof or
the funding of a Subordinated Debenture Offering of American Aircarriers
Support, Incorporated in the amount of at least $_____________.
In connection with this subscription, the Investor hereby represents
and warrants to, and covenants and agrees with, the Company as follows:
<PAGE> 14
(a) The Investor acknowledges that this offering and sale of the Note
and the Options (this "Offering") is intended to be exempt from registration
under the Securities Act of 1933, as amended (the "Securities Act"), the North
Carolina Securities Act and all other applicable state securities laws.
(b) The Investor has been furnished with and read the business plan of
the intended use of the $3,000,000.00. The Investor has been furnished all of
the materials relating to the Company and this Offering that have been
requested. The Investor has been afforded an opportunity to ask questions of,
and receive answers from, management of the Company in connection with this
Offering. The Investor has not been furnished with any oral or written
representation in connection with the Offering by the Company (or any of its
officers, employees, directors, shareholders, agents or affiliates) that it has
relied on that is not contained in the Articles of Incorporation or this
Agreement.
(c) The Investor (i) has obtained, in the Investor's judgment,
sufficient information to evaluate the merits and risks of an investment in the
Company, and (ii) has sufficient knowledge and experience in financial and
business matters to evaluate the merits and risks associated with such
investment and to make an informed investment decision with respect thereto.
(d) The Investor's Note and the Options are being acquired for its own
account for investment and not for the benefit or account of any other person or
entity and not with a view to, or in connection with, any resale or distribution
thereof. The Investor will not sell or otherwise transfer the Investor's Note or
any underlying interest therein without registration under the Securities Act
and applicable state securities laws or an exemption therefrom. The Investor
fully understands and agrees that the Investor must bear the economic risk of
the Investor's investment in the Note and the Options for an indefinite period
of time because, among other reasons, the Note and the Options have not been
registered under the Securities Act or under the securities laws of any states,
and, therefore, are "restricted securities" and cannot be resold, pledged,
assigned or otherwise disposed of unless they are subsequently registered under
the Securities Act and under the applicable securities laws of such states or an
exemption from such registration is otherwise available. The Investor
understands that the Company is not under any obligation to register the Note on
behalf of the Investor or to assist the Investor in complying with any exemption
from registration under the Securities Act or applicable state securities laws.
The Investor understands that the Company may require, as a condition to
registering the transfer of the Note, an opinion of counsel satisfactory to the
Company to the effect that such transfer does not violate such registration
requirements.
<PAGE> 15
The Investor also understands that the Note is unsecured and
subordinate to all other debts of the Company, except that the Note shall be
pari passu with the indebtedness of any other capital investor in the current
round of the Company. Further, the Note only accrues interest until its maturity
date.
(e) The Investor has determined that the Note and the Options are a
suitable investment for it and has adequate means to provide for the Investor's
current cash needs and possible contingencies, and the Investor's financial
condition is such that the Investor can afford to bear all risks associated with
the purchase of the Note. The Investor hereby acknowledges that an investment in
the Note is subject to a high degree of risk, lacks liquidity and that the
Investor has the financial capacity to hold the Note purchased hereby for an
indefinite period and that the Investor could bear a complete loss of the
Investor's investment therein. Investor understands that interest will only
accrue on the Note until its maturity.
(f) The Investor first learned of the investment in the Note and the
Options in the State of North Carolina and intends that the state securities law
of such state alone govern its purchase of the Note.
(g) If the Investor is a corporation, partnership, limited liability
company, trust, estate or other entity, (i) it is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and (ii) the execution, delivery and performance by it of this Agreement are
within its powers, have been duly authorized by all necessary action on its
behalf, require no action by or in respect of, or filing with, any governmental
body, agency or official and do not contravene, or constitute a default under,
any provision of applicable law or regulation or of its certificate of
incorporation or other comparable organizational documents or any agreement,
judgment, injunction, order, decree or other instrument binding upon it.
(h) If the Investor is a natural person, the execution, delivery and
performance by such person of this Agreement are within such person's legal
right and power, require no action by or in respect of, or filing with, any
governmental body, agency, or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
such person.
(i) The Investor is an "accredited investor" within the meaning of Rule
501 under the Securities Act of 1933, as amended.
(j) This Agreement constitutes a valid and binding agreement of the
Investor enforceable against it in accordance with its terms.
<PAGE> 16
(k) By accepting the investment described herein, the Company hereby
represents and warrants to Investor that each of the representations and
warranties attached hereto as Exhibit "C" are true and correct as of the date of
closing of the investment, except as may otherwise be set forth on the Schedule
of Exceptions set forth on Exhibit "D".
(l) This Agreement shall be binding upon and inure to the benefit of
the parties and their successors, assigns, heirs, estates, executors,
administrators and personal representatives. Neither this Agreement nor any
right, remedy, obligation or liability arising hereunder or by reason hereof
shall be transferable or assignable by the Investor (including pursuant to
termination, liquidation, dissolution or death) without the prior written
consent of the Company. Any transfer or assignment made in violation of this
subsection (l) shall be entirely null and void.
(m) This Agreement shall be governed by and construed in accordance
with the laws of the State of North Carolina, without regard to its principles
of conflict of laws.
Upon your acceptance of this subscription, and against your receipt of
the purchase price for the Note described above, please deliver the Note
registered in the name of the undersigned and deliver written confirmation
thereof to the undersigned.
Very truly yours,
Name:
O'H RANKIN PROPERTIES
By__________________________________
Address:
------------------------------------
------------------------------------
Tax ID Number:
<PAGE> 17
------------------------------------
Amount of Note: $3,000,000.00
ACCEPTED:
AAS TECHNOLOGIES, INC.
By_____________________________________
<PAGE> 18
EXHIBIT "B"
Company Representation and Warranties
(a) Organization, Good Standing And Qualification. The Company and its
parent are corporations duly organized and validly existing under, and by virtue
of, the laws of the States of Delaware and South Carolina respectively and are
in good standing under such laws. Each subsidiary of the Company and its parent
are duly organized and validly existing under the laws of the jurisdiction of
its organization and is in good standing under such laws. Each of the Company
and its parent and each subsidiary of the Company or its parent (each, a
"Company Entity") has all requisite corporate power to own and operate its
properties and assets and to carry on its business as presently conducted and as
proposed to be conducted. Except as set forth in Schedule (a) of the Schedule of
Exceptions, each Company Entity is qualified to do business as a foreign entity
in each jurisdiction in which such qualification is presently required, except
where failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), results of operations, business, assets or
prospects of the Company and its subsidiaries taken as a whole (a "Material
Adverse Effect").
(b) Legal Power. The Company will have on the closing date all
requisite legal power to execute and deliver this Agreement, the Note and the
Options, to sell and issue the Note and the Options under this Agreement and to
carry out and perform its obligations under the terms of the Agreement and the
Note and the Options.
(c) Subsidiaries. Other than as set forth on (c) of the Schedule of
Exceptions, the Company has never had, nor does it presently have, any
subsidiaries, nor has it owned, nor does it presently own, whether directly or
indirectly owned, any capital stock or other proprietary interest, directly or
indirectly, in any corporation, association, trust, partnership, joint venture
or other entity.
(d) Capitalization. All outstanding securities of the Company were
issued in compliance with the registration or qualification provisions of all
applicable federal and state securities laws.
(e) Authorization; Binding Obligations. All action on the part of the
Company and its parent, its directors, officers and shareholders necessary for
the authorization, execution, delivery and performance of this Agreement by the
Company, the authorization, issuance and delivery of the Note and Options
pursuant hereto and the performance of the Company's obligations under this
Agreement and the Note and Options have been taken or will be taken prior to the
<PAGE> 19
Closing. This Agreement and the Note and Options constitute valid and binding
obligations of the Company enforceable in accordance with their terms except as
the enforceability thereof may be subject to the effect of (i) any applicable
bankruptcy, insolvency, reorganization or other law relating to or affecting
creditors' rights generally, (ii) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
and (iii) limitation upon rights to indemnity.
(f) No Conflict. No Company Entity is, or will by virtue of entering
into and performing the Subscription Agreement and the transactions contemplated
thereunder be, in violation of any term of its articles of incorporation,
by-laws or any term or provision of any material mortgage, indenture, contract,
agreement, instrument, judgment or decree to which it is a party or by which it
is bound, and is not, and will not by virtue of entering into and performing the
Subscription Agreement and the transactions contemplated hereunder be, in
violation of any order, statute, rule or regulation applicable to the Company.
(g) Litigation. Except as set forth in (g) of the Schedule of
Exceptions, there is no civil, criminal or administrative action, suit, claim,
notice, hearing, inquiry, proceeding or investigation at law or in equity by or
before any court, arbitrator or similar panel, governmental instrumentality or
other agency now pending or, to the best knowledge of the Company, threatened
against any Company Entity or the assets or the business of any Company Entity.
No Company Entity is subject to any order, writ, injunction or decree of any
court of any federal, state, municipal or other domestic or foreign governmental
department, commission, board, bureau, agency or instrumentality.
(h) Governmental Consent, Etc. No consent, approval or authorization of
or designation, declaration or filing with any United States federal or state
governmental authority on the part of the Company is required in connection with
the valid execution and delivery of the Agreement, or the offer or issuance of
the Note or the consummation of any other transaction contemplated thereby,
except (a) the filing of a Notice of Sale of Securities Pursuant to Regulation D
or Section 4(6) with the Securities and Exchange Commission under the Securities
Act of 1933, as amended (the "Securities Act"); and (b) the filing of a copy of
such Notice with the North Carolina Securities Administrator and/or such other
filings as may be required under other applicable Blue Sky laws, which filings,
if required, will be accomplished in a timely manner prior to or promptly upon
completion of the closing, as applicable.
(i) Offerings Exempt. Subject to the accuracy of the representations of
Investor set forth herein, the offer and issuance of the Note and Options
pursuant to this Agreement constitute transactions exempt from the registration
under the Securities Act and all applicable state securities or Blue Sky laws.
All securities
<PAGE> 20
issued by the Company prior to the Closing have been issued in transactions
exempt from registration under the Securities Act and all applicable state
securities or Blue Sky laws.
(j) Certain Transactions. Since its date of organization, no Company
Entity has (a) declared or made any payment or distribution to its members or
redeemed or purchased any of its interests or securities, (b) sold, transferred
or leased to third parties any of its material assets except in the ordinary
course of business, (c) canceled or compromised any material debt or any claim
or waived or released any right of material value, suffered any physical damage
or destruction or loss materially and adversely affecting its properties,
operations or business, (d) made any loans or advances to any persons other than
immaterial amounts (both individually and in the aggregate) in the ordinary
course of business or (e) entered into any material transaction other than as
listed on (j) of the Schedule of Exceptions or in the ordinary course of
business nor has any Company Entity agreed to any of the foregoing other than
with respect to transactions relating to this Agreement.
(k) Title To Properties And Assets; Liens, Etc. Each Company Entity has
good and marketable title to its properties and assets, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) those resulting from taxes which have not
yet become delinquent, (ii) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and (iii) those that have otherwise arisen in the
ordinary course of business. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in good
operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. The Company is in substantial compliance
with all material terms of each lease to which it is a party or is otherwise
bound.
(l) Intellectual Property. To the best of the Company's knowledge (but
without having conducted any special investigation or patent search), the
Company Entities have sufficient legal rights to all patents, copyrights, trade
secrets, information, proprietary rights and processes (collectively
"Proprietary Information") necessary for their business as now conducted without
any conflict with or infringement of the rights of others. Except as set forth
in Schedule (l) of the Schedule of Exceptions, there are no outstanding material
options, licenses, or agreements of any kind relating to the foregoing, nor is
any Company Entity bound by or a party to any material options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes of any other person or entity. No Company Entity has
received any written communications alleging that any Company Entity has
violated or infringed or that any Company
<PAGE> 21
Entity would, by conducting its business as proposed, violate or infringe any of
the patents, trademarks, service marks, trade names, copyrights or trade secrets
or other proprietary rights of any other person or entity.
(m) No Defaults. Except as set forth in Schedule (m) of the Schedule of
Exceptions, each Company Entity has, in all material respects, performed all
obligations required to be performed by it to date and is not in default under
any of the contracts, loans, notes, mortgages, indentures, licenses, security
agreements, agreements, leases, documents, commitments or other arrangements to
which it is a party or by which it is otherwise bound, except for such defaults
which in the aggregate would not have a Material Adverse Effect, and no event or
condition has occurred which, with the lapse of time or the giving of notice, or
both, would constitute such a default.
(n) Related-Party Transactions. Except for indebtedness for salaries,
bonuses or consulting fees or as set forth in Schedule (n) of the Schedule of
Exceptions or disclosed in its public filings, no employee, officer, manager or
member of any Company Entity or member of his or her immediate family is
indebted to any Company Entity, nor is any Company Entity indebted (or committed
to make loans or extend or guarantee credit) to any of them. To the best of the
Company's knowledge, none of such persons has any direct or indirect ownership
interest in any firm or corporation with which any Company Entity is affiliated
or with which any Company Entity has a business relationship, or any firm or
corporation that competes with any Company Entity, except that employees,
officers, managers or members of any Company Entity and members of their
immediate families may own stock in publicly traded companies that may compete
with a Company Entity.
(o) Compliance with Laws; Permits. Except as provided in Schedule (o)
of the Schedule of Exceptions, each Company Entity (a) is not in violation of
any federal, state, local and foreign laws, rules, ordinances, codes, consents,
authorizations, registrations, regulations, decrees, directives, judgments and
orders (including all such laws, rules, ordinances, etc. relating to pollution,
contamination, protection of the environment, human health or safety, health or
safety of employees, sanitation, and any matters relating to emissions,
discharges, releases or threatened releases, of hazardous substances) materially
applicable to it and its business, except where such violations, individually or
in the aggregate, would not have a Material Adverse Effect and (b) has all
federal, state, local and foreign governmental licenses, permits and
qualifications necessary in the conduct of its business as currently conducted,
such licenses, permits and qualifications are in full force and effect, except
to the extent the lack of which, individually or in the aggregate, would not
have a Material Adverse Effect, and no violations (other than violations notice
of which has not been received by the Company) have been recorded in respect of
any such licenses,
<PAGE> 22
permits and qualifications, and no proceeding is pending or, to the best
knowledge of the Company, threatened to revoke or limit any such license, permit
or qualification.
(p) Brokers Or Finders. No Company Entity has entered into any
agreement or arrangement giving rise to any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with the
transactions contemplated by this Agreement.
(q) Disclosure. This Agreement and all certificates, instruments or
written statements furnished or made available to the Investor by or on behalf
of the Company in connection with this Agreement, taken as a whole, and
including any corrective materials furnished or made available to the Investor
prior to the date hereof, do not contain any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statements
contained herein and therein not misleading; provided, however, that to the
extent any such certificate, instrument or written statement has been prepared
by a person other than a Company Entity or employee thereof, to the best
knowledge of the Company, such certificate, instrument or written statement does
not contain any untrue statement or a material fact or omit to state a material
fact necessary to make the statements contained therein not misleading.
<PAGE> 23
SCHEDULE OF EXCEPTIONS
(a) None
(c) None
(g) None
(j) None
(l) None
(l) None
(l) None
<PAGE> 1
EXHIBIT 10.4.15
FIRST AMENDMENT AND WAIVER TO
LOAN AND SECURITY AGREEMENT
THIS FIRST AMENDMENT AND WAIVER TO Loan and Security Agreement (the
"Amendment") is made and entered into effective as of the ___ day of November,
1999, by and among BANK OF AMERICA, N.A., formerly NationsBank, N.A., as agent
for the lenders party to the Loan Agreement (as hereafter defined) from time to
time (the "Agent"), the financial institutions party to the Loan Agreement (the
"Lenders"), AMERICAN AIRCARRIERS SUPPORT, INCORPORATED, a Delaware corporation
("AAS"), and the Subsidiaries of AAS party hereto as borrowers (together with
AAS, the "Borrowers").
W I T N E S S E T H :
WHEREAS, the Agent, the Lenders and the Borrowers entered into that
certain Loan and Security Agreement, dated May 25, 1999 (as amended from time to
time, the "Loan Agreement"), pursuant to which the Agent and the Lenders agreed
to extend certain financial accommodations to the Borrowers; and
WHEREAS, the Borrowers have requested that the Agent and the Lenders
amend certain provisions of the Loan Agreement and waive the existing violation
of Section 11.1(c) of the Loan Agreement; and
WHEREAS, the Agent and the Lenders are willing to provide such
amendments and waiver on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and legal sufficiency of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise expressly
defined herein shall have the respective meanings given to such terms in the
Loan Agreement.
2. The Loan Agreement is amended by deleting the reference to "75%" set
forth in each of clauses (b)(iv), (b)(v) and (b)(vi) of the definition of
"Borrowing Base" in SECTION 1.1 and replacing each such reference with "85%".
3. The Loan Agreement is amended by deleting the definition of "Special
Purpose Subsidiary" in SECTION 1.1 and replacing it with the following:
<PAGE> 2
"Special Purpose Subsidiary" means a Wholly-Owned domestic
Subsidiary of any Borrower or Subsidiary Guarantor, formed pursuant to
and subject to the terms and conditions of SECTION 9.15, for the
purpose of obtaining favorable financing terms from a lender for the
purchase or maintenance of one or more Special Purpose Subsidiary
Assets.
4. The Loan Agreement is amended by deleting SECTION 9.15 and
substituting the following in lieu thereof:
SECTION 9.15. Formation of Special Purpose
Subsidiaries. Comply with the following with respect to the formation
and maintenance of any Special Purpose Subsidiary: (a) no third-party
lender shall finance the purchase of a Special Purpose Subsidiary Asset
unless the Lenders have been provided with the opportunity to finance
the Borrowers' acquisition or maintenance of the Special Purpose
Subsidiary Asset and the Required Lenders have declined to do so on
terms at least as favorable as those offered by such third-party
lender; (b) no Special Purpose Subsidiary shall be formed by any
Borrower or any Special Purpose Subsidiary during the occurrence or
continuation of an Event of Default; (c) in the event the Special
Purchase Subsidiary Indebtedness is repaid in full or the Special
Purpose Subsidiary Guaranty is collected by the lender financing the
Special Purchase Subsidiary, the Borrowers or the Subsidiary Guarantor
shall advise the Agent of such fact and shall execute and deliver such
transfer documents, lien releases, Mortgage Supplements, and other
documents requested by the Agent so that the Special Purchase
Subsidiary Asset will be owned by a Borrower or Subsidiary Guarantor
and subject to the Security Interest; and (d) in the event any Special
Purpose Subsidiary Asset is sold or otherwise transferred from the
Special Purpose Subsidiary, the net proceeds from such sale or other
disposition (after repayment of any Special Purpose Subsidiary
Indebtedness with respect to such Special Purpose Subsidiary Asset)
shall be distributed to the Parent of such Special Purpose Subsidiary.
5. The Loan Agreement is amended by deleting SECTION 11.1(C) and
replacing it with the following:
(c) Minimum Consolidated Fixed Charge Coverage Ratio. Permit
the ratio of (i) the Consolidated EBITDA of the Borrowers and their
Consolidated Subsidiaries other than any Special Purpose Subsidiaries,
minus Unfunded Capital Expenditures, dividends and cash taxes paid by
the Borrowers and their Consolidated Subsidiaries other than any
Special Purpose Subsidiaries to (ii) the Consolidated Fixed Charges of
the Borrowers and their Consolidated Subsidiaries other than any
Special Purpose Subsidiaries, to be less than 1.5 to 1 as of September
30, 1999 or December 31, 1999, measured on a fiscal year-to-date basis,
or to be less than 2.0 to 1 as of any fiscal quarter ending thereafter,
measured for the immediately preceding four fiscal quarters.
6. The Loan Agreement is amended by deleting clause (e) of SECTION 11.2
and replacing it with the following:
(e) Special Purpose Subsidiary Indebtedness in an amount not
to exceed $15,000,000 in the aggregate for all Special Purpose
Subsidiaries at any one time, and
-2-
<PAGE> 3
7. The Loan Agreement is amended by deleting SECTION 11.5 and replacing
it with the following:
SECTION 11.5. Capital Expenditures. Make or incur any
Capital Expenditures, except that the Borrowers and their Subsidiaries
in the aggregate may make or incur Capital Expenditures in the 1999
fiscal year in an amount not to exceed, in the aggregate, $10,000,000,
and the Borrowers and their Subsidiaries in the aggregate may make or
incur Capital Expenditures in any subsequent fiscal year in an amount
not to exceed in the aggregate for any such fiscal year $2,500,000.
8. The parties hereto acknowledge that the Borrowers are in default
under SECTIONS 11.1(C) of the Loan Agreement for the fiscal quarter ending on
June 30, 1999 (the "Specified Default"). In reliance upon the representations,
warranties, agreements and covenants of the Borrowers set forth herein and in
the Loan Agreement, as amended hereby, the Agent and the Lenders agree to waive
the Specified Default. However, the Agent and the Lenders reserve all of their
rights and remedies at all times with respect to any Default or Event of
Default, other than the Specified Default, whether presently existing or
occurring hereafter.
9. As amended hereby, the Loan Agreement shall be and remain in full
force and effect.
10. The Borrowers agree to pay on demand all costs and expenses of the
Agent in connection with the preparation, execution and delivery of this
Amendment, including, without limitation, the fees and out-of-pocket expenses of
legal counsel to the Agent.
11. To induce the Agent and each Lender to enter into this Amendment,
the Borrowers hereby (a) represent and warrant that, as of the date hereof, and
after giving effect to the terms hereof, there exists no Default or Event of
Default, and (b) acknowledge and agree that no right of offset, defense,
counterclaim, claim, causes of action or objection in favor of the Borrowers
against the Agent or any Lender exists arising out of or with respect to any of
the Secured Obligations or any of the Loan Documents.
12. To induce the Agent and the Lenders to enter into this Amendment
and grant the accommodations set forth herein, each Obligor agrees that (a)
except as expressly set forth herein, neither the Agent nor any Lender has
agreed to (and has no obligation whatsoever to discuss, negotiate or agree to)
any other restructuring, modification, amendment, waiver or forbearance with
respect to the Secured Obligations or the Loan Agreement, (b) no understanding
with respect to any other restructuring, modification, amendment, waiver or
forbearance with respect to the Secured Obligations or the Loan Agreement shall
constitute a legally binding agreement or contract, or have any force or effect
whatsoever, unless and until reduced to writing and signed by authorized
representatives of each party hereto, and (c) the execution and delivery of this
Amendment has not established any course of dealing between the parties hereto
or created any obligation or agreement of the Agent or any Lender with respect
to any future restructuring, modification, amendment, waiver or forbearance with
respect to the Secured Obligations or the Loan Agreement.
13. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
-3-
<PAGE> 4
14. This Amendment shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties hereto.
15. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Georgia, other than its laws respecting choice of
law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-4-
<PAGE> 5
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders have
caused this Amendment to be duly executed by their authorized officers in
several counterparts, all as of the date first above written.
BORROWERS:
American Aircarriers Support, Incorporated
By: /s/ Joseph E. Civiletto
--------------------------------------------
Name: Joseph E. Civiletto
------------------------------------------
Title: President
------------------------------------------
AAS Engine Services, Inc.
By: /s/ Joseph E. Civiletto
--------------------------------------------
Name: Joseph E. Civiletto
------------------------------------------
Title: President
------------------------------------------
AAS Landing Gear Services, Inc.
By: /s/ Joseph E. Civiletto
--------------------------------------------
Name: Joseph E. Civiletto
------------------------------------------
Title: President
------------------------------------------
AAS Complete Controls, Inc.
By: /s/ Joseph E. Civiletto
--------------------------------------------
Name: Joseph E. Civiletto
------------------------------------------
Title: President
------------------------------------------
AAS-Amjet, Inc.
By: /s/ Joseph E. Civiletto
--------------------------------------------
Name: Joseph E. Civiletto
------------------------------------------
Title: President
------------------------------------------
<PAGE> 6
LENDERS:
BANK OF AMERICA, N.A., formerly NationsBank,
N.A.
By: /s/ Byron J. Turner III
--------------------------------------------
Name: Byron J. Turner III
----------------------------------------
Title: Vice President
---------------------------------------
NATIONAL BANK OF CANADA, a Canadian
chartered bank
By: /s/ Dan Shaw /s/ C. Collie
--------------------------------------------
Name: Dan Shaw Charles Collie
-----------------------------------------
Title: AVP VP & Mgr
----------------------------------------
THE CIT GROUP / CREDIT FINANCE, INC.
By: /s/ Jay Nomina
--------------------------------------------
Name: Jay Nomina
-----------------------------------------
Title: Vice President
----------------------------------------
AGENT:
BANK OF AMERICA, N.A., formerly
NationsBank, N.A.
By: /s/ Byron J. Turner III
--------------------------------------------
Name: Byron J. Turner III
----------------------------------------
Title: Vice President
---------------------------------------
<PAGE> 7
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of November, 1999, before me, the undersigned, a
Notary Public in and for the State of _____________, County of ____________,
Joseph E. Civiletto personally appeared, personally known to me or proved to me
on the basis of satisfactory evidence to be the President of each of American
Aircarriers Support, Incorporated, AAS Engine Services, Inc., AAS-Amjet, Inc.,
AAS Landing Gear Services, Inc. and AAS Complete Controls, Inc., who, being by
me first duly sworn, stated that:
1. He executed the foregoing First Amendment and Waiver to Loan and
Security Agreement on behalf of such corporations pursuant to their
by-laws or resolutions of their boards of directors, said execution
taking place in the State of South Carolina, County of York; and
2. He has this day delivered the foregoing instrument to Bank of America,
N.A. at Fulton County, Georgia.
Signature of Borrowers' Officer:
By: /s/ Joseph E. Civiletto
-------------------------------------
Name: Joseph E. Civiletto
Sworn to and subscribed before me this ____ day of November, 1999:
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 8
AFFIDAVIT REGARDING DELIVERY
On this the ____ day of November, 1999, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of Fulton, Byron J. Turner
III personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be a Vice President of Bank of America, N.A., who,
being by me first duly sworn, stated that Bank of America, N.A., as Agent, has
received delivery of the foregoing First Amendment and Waiver to Loan and
Security Agreement in the State of Georgia, County of Fulton.
/s/ Byron J. Turner III
-----------------------------------
Signature of Officer of Agent
Sworn to and subscribed before me this ____ day of November, 1999:
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 1
EXHIBIT 10.4.16
SECOND AMENDMENT TO LOAN
AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment")
is made and entered into as of the 21 day of December, 1999, by and among the
financial institutions party to the below-described Loan Agreement (the
"Lenders"), BANK OF AMERICA, N.A., formerly NationsBank, N.A., as agent for the
Lenders (the "Agent"), AMERICAN AIRCARRIERS SUPPORT, INCORPORATED, a Delaware
corporation ("AAS"), and the Subsidiaries of AAS party hereto as borrowers
(together with AAS, the "Borrowers").
W I T N E S S E T H :
WHEREAS, the Agent, the Lenders and the Borrowers entered into that
certain Loan and Security Agreement, dated as of May 25, 1999 (as amended from
time to time, the "Loan Agreement"), pursuant to which the Agent and the Lenders
agreed to extend certain financial accommodations to the Borrowers; and
WHEREAS, the Agent, the Lenders and the Borrowers desire to amend the
Loan Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1. All capitalized terms used herein and not otherwise expressly
defined herein shall have the respective meanings given to such terms in the
Loan Agreement.
2. Subject to the provisions of SECTION 5.3 of the Loan Agreement and
the maximum principal amount of the Revolving Credit Facility, each Lender
hereby agrees severally (but not jointly) to make Overadvances, on a Ratable
basis, of up to $1,000,000 in aggregate outstanding principal amount to the
Borrowers to and including the earlier of (a) March 31, 2000, and (b) the
funding of the Subordinated Indebtedness described below (the "Overadvance
Termination Date"), at which time all Overadvances outstanding shall be repaid
in full. As used herein, "Overadvance" shall mean, as of any date of
determination, the amount by which the outstanding principal balance of
Revolving Credit Loans exceeds the Borrowing Base, without regard to the minimum
Availability required at such time pursuant to SECTION 11.17 of the Loan
Agreement. Each Borrower acknowledges and agrees that all Overadvances
constitute Secured Obligations under the Loan Agreement and are secured by the
Collateral. Accordingly, the Agent reserves the right to (and, upon the written
request of the Required Lenders, shall) immediately declare all Overadvances due
and payable and to immediately terminate the Borrowers' right to receive
<PAGE> 2
Overadvances prior to the Overadvance Termination Date upon the occurrence of an
Event of Default or upon any Borrower's failure to comply with the terms and
provisions of this Amendment. All Overadvances shall constitute Prime Rate
Revolving Credit Loans under the Loan Agreement, and nothing contained in this
Amendment shall require any Lender to make Revolving Credit Loans in excess of
such Lender's Commitment.
3. The effectiveness of this Amendment is expressly conditioned upon
the receipt by the Agent of (a) a fully executed copy of this Amendment, and (b)
a fully executed engagement letter or similar agreement (in form and substance
acceptable to the Agent) between a financial institution acceptable to the Agent
and AAS with respect to Subordinated Indebtedness to be incurred by AAS. The
Agent shall notify AAS and the Lenders in writing of the receipt of such an
acceptable engagement letter or similar agreement, and this Amendment shall
become effective on the date the Agent sends such notice.
4. To and including the Overadvance Termination Date, (a) the Agent and
the Lenders hereby agree to waive the requirements of SECTION 11.17 of the Loan
Agreement, and (b) the Agent, the Lenders and the Borrowers agree that SECTION
4.7(D)(I) shall be of no force and effect.
5. As amended hereby, the Loan Agreement shall be and remain in full
force and effect.
6. To induce the Agent and each Lender to enter into this Amendment,
the Borrowers agree to pay to the Agent (a) for the Ratable benefit of the
Lenders, a fee of $15,000 on the date hereof, and (b) on demand all costs and
expenses of the Agent in connection with the preparation, execution and delivery
of this Amendment, including, without limitation, the fees and out-of-pocket
expenses of legal counsel to the Agent. Such fees are constitute compensation
for services and are not, nor shall they be deemed to be, interest or a charge
for the use of money.
7. To induce the Agent and each Lender to enter into this Amendment,
the Borrowers hereby (a) represent and warrant that, as of the date hereof, and
after giving effect to the terms hereof, there exists no Default or Event of
Default, and (b) acknowledge and agree that no right of offset, defense,
counterclaim, claim, causes of action or objection in favor of the Borrowers
against the Agent or any Lender exists arising out of or with respect to any of
the Secured Obligations or any of the Loan Documents.
8. To induce the Agent and the Lenders to enter into this Amendment and
grant the accommodations set forth herein, each Obligor agrees that (a) except
as expressly set forth herein, neither the Agent nor any Lender has agreed to
(and has no obligation whatsoever to discuss, negotiate or agree to) any other
restructuring, modification, amendment, waiver or forbearance with respect to
the Secured Obligations or the Loan Agreement, (b) no understanding with respect
to any other restructuring, modification, amendment, waiver or forbearance with
respect to the Secured Obligations or the Loan Agreement shall constitute a
legally binding agreement or contract, or have any force or effect whatsoever,
unless and until reduced to writing and signed by authorized representatives of
each party hereto, and (c) the execution and delivery of this Amendment has not
-2-
<PAGE> 3
established any course of dealing between the parties hereto or created any
obligation or agreement of the Agent or any Lender with respect to any future
restructuring, modification, amendment, waiver or forbearance with respect to
the Secured Obligations or the Loan Agreement.
9. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
10. This Amendment shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties hereto.
11. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Georgia, other than its laws respecting choice of
law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-3-
<PAGE> 4
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders have
caused this Amendment to be duly executed by their authorized officers in
several counterparts, all as of the date first above written.
BORROWERS:
American Aircarriers Support, Incorporated
By: /s/ J. E. Civiletto
--------------------------------------
Joseph E. Civiletto
President
AAS Engine Services, Inc.
By: /s/ J. E. Civiletto
--------------------------------------
Joseph E. Civiletto
President
AAS Landing Gear Services, Inc.
By: /s/ J. E. Civiletto
--------------------------------------
Joseph E. Civiletto
President
AAS Complete Controls, Inc.
By: /s/ J. E. Civiletto
--------------------------------------
Joseph E. Civiletto
President
<PAGE> 5
AAS-Amjet, Inc.
By: /s/ Joseph E. Civiletto
--------------------------------------
Joseph E. Civiletto
President
LENDERS:
BANK OF AMERICA, N.A., formerly
NationsBank, N.A.
By: /s/ Byron J. Turner III
--------------------------------------
Byron J. Turner III
Vice President
NATIONAL BANK OF CANADA, a Canadian
chartered bank
By: /s/ Dan Shaw /s/ C Collie
--------------------------------------
Name: Dan Shaw Charles Collie
Title: AVP VP & Manager
THE CIT GROUP / CREDIT FINANCE, INC.
By: /s/ Jay Nomina
--------------------------------------
Name: Jay Nomina
Title: Vice President
<PAGE> 6
AGENT:
BANK OF AMERICA, N.A., formerly
NationsBank, N.A.
By: /s/ Byron J. Turner III
--------------------------------------
Byron J. Turner III
Vice President
<PAGE> 7
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the 21st day of December, 1999, before me, the undersigned, a
Notary Public in and for the State of South Carolina, County of York, Joseph E.
Civiletto personally appeared, personally known to me or proved to me on the
basis of satisfactory evidence to be the President of each of American
Aircarriers Support, Incorporated, AAS Engine Services, Inc., AAS-Amjet, Inc.,
AAS Landing Gear Services, Inc. and AAS Complete Controls, Inc., who, being by
me first duly sworn, stated that:
1. He executed the foregoing Second Amendment to Loan and Security
Agreement on behalf of such corporations pursuant to their by-laws or
resolutions of their boards of directors, said execution taking place
in the State of South Carolina, County of York;
and
2. He has this day delivered the foregoing instrument to Bank of America,
N.A. at Fulton County, Georgia.
Signature of Borrowers' Officer:
By: /s/ Joseph E. Civiletto
---------------------------------
Name: Joseph E. Civiletto
Sworn to and subscribed before me this 21st day of December, 1999:
/s/ Angela C. Gaskins
- ----------------------------------
Notary Signature
My Commission Expires:
Nov. 26, 2006
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 8
AFFIDAVIT REGARDING DELIVERY
On this the 27th day of December, 1999, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of Fulton, Byron
J. Turner III personally appeared, personally known to me or proved to me on the
basis of satisfactory evidence to be a Vice President of Bank of America, N.A.,
who, being by me first duly sworn, stated that Bank of America, N.A., as Agent,
has received delivery of the foregoing Second Amendment to Loan and Security
Agreement in the State of Georgia, County of Fulton.
/s/ Byron J. Turner III
---------------------------------------------
Signature of Officer of Agent
Sworn to and subscribed before me this 27th day of December, 1999:
/s/ ? ? Bean
- ----------------------------------
Notary Signature
My Commission Expires:
5/5/00
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 1
EXHIBIT 10.4.17
THIRD AMENDMENT TO LOAN
AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO LOAN AND SECURITY AGREEMENT (this "Amendment")
is made and entered into as of the 21st day of January, 2000, by and among the
financial institutions party to the below-described Loan Agreement (the
"Lenders"), BANK OF AMERICA, N.A., formerly NationsBank, N.A., as agent for the
Lenders (the "Agent"), AMERICAN AIRCARRIERS SUPPORT, INCORPORATED, a Delaware
corporation ("AAS"), and the Subsidiaries of AAS party hereto as borrowers
(together with AAS, the "Borrowers").
W I T N E S S E T H :
WHEREAS, the Agent, the Lenders and the Borrowers entered into that
certain Loan and Security Agreement, dated as of May 25, 1999 (as amended from
time to time, the "Loan Agreement"), pursuant to which the Agent and the Lenders
agreed to extend certain financial accommodations to the Borrowers; and
WHEREAS, the Agent, the Lenders and the Borrowers desire to amend the
Loan Agreement as set forth herein.
NOW, THEREFORE, in consideration of the foregoing premises, and other
good and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:
1 All capitalized terms used herein and not otherwise expressly defined
herein shall have the respective meanings given to such terms in the Loan
Agreement.
2. The Loan Agreement is amended by inserting the following new
definitions of "AAS Technologies", "AAS Technologies Indebtedness" and "AAS
Technologies Investment" in appropriate alphabetical order in SECTION 1.1:
"AAS Technologies" means AAS Technologies, Inc., a South
Carolina corporation and wholly-owned Subsidiary of AAS; for all
purposes under this Agreement, AAS Technologies constitutes a Special
Purpose Subsidiary.
"AAS Technologies Indebtedness" means the Indebtedness of AAS
Technologies, not to exceed $3,000,000 at any time outstanding, owing
to O'H Rankin Properties pursuant to that certain subordinated
Promissory Note of AAS
<PAGE> 2
Technologies in favor of O'H Rankin Properties dated January ___, 2000,
provided that none of the Collateral or other assets of any Borrower
shall serve as security for such Indebtedness.
"AAS Technologies Investment" means, collectively, (a) the
purchase by AAS Technologies of a portion of the capital stock of
Supply Access, Inc. for not more than $3,000,000, (b) the purchase by
AAS Technologies of a portion of the capital stock of Dynamic Imaging,
Inc. for not more than $500,000, and (c) any other Investments by AAS
Technologies which are approved in advance by the Agent and the
Required Lenders from time to time.
3. The Loan Agreement is amended by deleting the definitions of
"Special Purpose Subsidiary Asset" and "Special Purpose Subsidiary Indebtedness"
in SECTION 1.1 and substituting the following in lieu thereof:
"Special Purpose Subsidiary Asset" means (a) with respect to
AAS Technologies, the capital stock of Supply Access, Inc., the capital
stock of Dynamic Imaging, Inc., or any other Investments of AAS
Technologies approved in advance by the Agent and the Required Lenders
from time to time which are acquired via the AAS Technologies
Investment, and (b) with respect to any Special Purpose Subsidiary
other than AAS Technologies, an item of Inventory, along with the lease
agreement relating to such asset.
"Special Purpose Subsidiary Indebtedness" means (a) with
respect to AAS Technologies, the AAS Technologies Indebtedness, and (b)
with respect to any Special Purpose Subsidiary other than AAS
Technologies, Purchase Money Indebtedness and Capitalized Lease
Obligations incurred by a Special Purpose Subsidiary from a lender for
the purpose of financing a Special Purpose Subsidiary Asset, which
Indebtedness or Capitalized Lease Obligations shall be secured only by
the Special Purpose Subsidiary Asset.
4. The Loan Agreement is amended by deleting SCHEDULES 6.1(B) and (C)
thereto and substituting SCHEDULES 6.1(B) and (C) attached hereto in lieu
thereof.
5. Following the initial formation of AAS Technologies on or prior to
the date of this Amendment, no Borrower shall make any additional contribution
to the capital of or other payment or transfer of funds to or on behalf of AAS
Technologies; provided, however, (a) AAS may sell options with respect to 25,000
shares of its capital stock to O'H Rankin Properties pursuant to that certain
Option Agreement between AAS and O'H Rankin Properties dated as of January ___,
2000; and (b) upon the receipt of not less than $10,000,000 in proceeds from the
issuance of Subordinated Indebtedness (net of underwriting discounts and
commissions and other reasonable costs associated therewith) by the Borrowers,
the Borrowers shall use up to $3,100,000 of such proceeds to repay the principal
and interest of all outstanding AAS Technologies Indebtedness; provided,
<PAGE> 3
nothing contained in this clause (b) shall be construed to permit any Borrower
to incur any Indebtedness, including Subordinated Indebtedness, except as
provided for in the Loan Agreement.
6. No Borrower shall issue a Special Purpose Subsidiary Guaranty or any
other Guaranty on behalf of AAS Technologies.
7. Upon the repayment in full of all outstanding AAS Technologies
Indebtedness, whether pursuant to Paragraph 5 of this Amendment or otherwise,
the Borrowers shall promptly cause (a) AAS Technologies to become a Borrower
under the Loan Agreement pursuant to SECTION 9.11 thereof, and all assets of AAS
Technologies (including, without limitation, all stock of Supply Access, Inc.
owned by AAS Technologies) shall become subject to the Security Interest, which
shall be a perfected, first-priority Lien; or (b) ownership of all assets of AAS
Technologies (including, without limitation, all stock of Supply Access, Inc.
owned by AAS Technologies) to be transferred to a Borrower and become subject to
the Security Interest, which shall be a perfected, first-priority Lien.
8. The effectiveness of this Amendment is expressly conditioned upon
the receipt by the Agent of true and correct copies of all agreements,
promissory notes and other documentation with respect to the AAS Technologies
Investment and the AAS Technologies Indebtedness, certified to the Agent and the
Lenders by an officer of AAS.
9. As amended hereby, the Loan Agreement shall be and remain in full
force and effect.
10. The Borrowers agree to pay to the Agent on demand all reasonable
costs and expenses of the Agent in connection with the preparation, execution
and delivery of this Amendment, including, without limitation, the fees and
out-of-pocket expenses of legal counsel to the Agent.
11. To induce the Agent and each Lender to enter into this Amendment,
the Borrowers hereby (a) represent and warrant that, as of the date hereof, and
after giving effect to the terms hereof, there exists no Default or Event of
Default, and (b) acknowledge and agree that no right of offset, defense,
counterclaim, claim, causes of action or objection in favor of the Borrowers
against the Agent or any Lender exists arising out of or with respect to any of
the Secured Obligations or any of the Loan Documents.
12. To induce the Agent and the Lenders to enter into this Amendment
and grant the accommodations set forth herein, each Obligor agrees that (a)
except as expressly set forth herein, neither the Agent nor any Lender has
agreed to (and has no obligation whatsoever to discuss, negotiate or agree to)
any other restructuring, modification, amendment, waiver or forbearance with
respect to the Secured Obligations or the Loan Agreement, (b) no understanding
with respect to any other restructuring, modification, amendment, waiver or
forbearance with respect to the Secured Obligations or the Loan Agreement shall
constitute a legally binding agreement or contract, or have
<PAGE> 4
any force or effect whatsoever, unless and until reduced to writing and signed
by authorized representatives of each party hereto, and (c) the execution and
delivery of this Amendment has not established any course of dealing between the
parties hereto or created any obligation or agreement of the Agent or any Lender
with respect to any future restructuring, modification, amendment, waiver or
forbearance with respect to the Secured Obligations or the Loan Agreement.
13. This Amendment may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which, when so
executed and delivered, shall be deemed to be an original and all of which
counterparts, taken together, shall constitute but one and the same instrument.
14. This Amendment shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties hereto.
15. This Amendment shall be governed by, and construed in accordance
with, the laws of the State of Georgia, other than its laws respecting choice of
law.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 5
IN WITNESS WHEREOF, the Borrowers, the Agent and the Lenders have
caused this Amendment to be duly executed by their authorized officers in
several counterparts, all as of the date first above written.
BORROWERS:
American Aircarriers Support,
Incorporated
By: /s/ Elaine T. Rudisill
------------------------------------
Elaine T. Rudisill
Assistant Secretary
AAS Engine Services, Inc.
By: /s/ Elaine T. Rudisill
------------------------------------
Elaine T. Rudisill
Assistant Secretary
AAS Landing Gear Services, Inc.
By: /s/ Elaine T. Rudisill
------------------------------------
Elaine T. Rudisill
Assistant Secretary
AAS Complete Controls, Inc.
By: /s/ Elaine T. Rudisill
------------------------------------
Elaine T. Rudisill
Assistant Secretary
<PAGE> 6
AAS-Amjet, Inc.
By: /s/ Elaine T. Rudisill
------------------------------------
Elaine T. Rudisill
Assistant Secretary
LENDERS:
BANK OF AMERICA, N.A., formerly
NationsBank, N.A.
By: /s/ Byron J. Turner III
------------------------------------
Byron J. Turner III
Vice President
NATIONAL BANK OF CANADA, a Canadian
chartered bank
By: /s/ C Collie
------------------------------------
Name: Charles Collie
------------------------------
Title: VP & Manager
------------------------------
By: /s/ Dan Shaw
------------------------------------
Name: Dan Shaw
------------------------------
Title: AVP
------------------------------
THE CIT GROUP / CREDIT FINANCE, INC.
By: /s/ Jay Nomina
------------------------------------
Name: Jay Nomina
------------------------------
Title: VP
------------------------------
<PAGE> 7
AGENT:
BANK OF AMERICA, N.A., formerly
NationsBank, N.A.
By: /s/ Byron J. Turner III
------------------------------------
Byron J. Turner III
Vice President
<PAGE> 8
NOTARY JURAT FOR EXECUTION OF
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the 21st day of January, 2000, before me, the undersigned, a
Notary Public in and for the State of North Carolina, County of Mecklenburg,
Elaine T. Rudisill personally appeared, personally known to me or proved to me
on the basis of satisfactory evidence to be the Assistant Secretary of each of
American Aircarriers Support, Incorporated, AAS Engine Services, Inc.,
AAS-Amjet, Inc., AAS Landing Gear Services, Inc. and AAS Complete Controls,
Inc., who, being by me first duly sworn, stated that:
1. She executed the foregoing Third Amendment to Loan and Security
Agreement on behalf of such corporations pursuant to their by-laws or
resolutions of their boards of directors, said execution taking place
in the State of North Carolina, County of Mecklenburg; and
2. She has this day delivered the foregoing instrument to Bank of America,
N.A. at Fulton County, Georgia.
Signature of Borrowers' Officer:
By: /s/ Elaine T. Rudisill
-------------------------------
Name: Elaine T. Rudisill
Sworn to and subscribed before me this 21st day of January, 2000:
/s/ Judy B. Martin
- ----------------------------------
Notary Signature
My Commission Expires:
December 14, 2002
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 9
AFFIDAVIT REGARDING DELIVERY
On this the 25th day of January, 2000, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of Fulton, Byron
J. Turner III personally appeared, personally known to me or proved to me on the
basis of satisfactory evidence to be a Vice President of Bank of America, N.A.,
who, being by me first duly sworn, stated that Bank of America, N.A., as Agent,
has received delivery of the foregoing Second Amendment to Loan and Security
Agreement in the State of Georgia, County of Fulton.
/s/ Byron J. Turner III
-----------------------------------
Signature of Officer of Agent
Sworn to and subscribed before me this 25th day of January, 2000:
/s/ ? ? Beam
- ----------------------------------
Notary Signature
My Commission Expires:
5/5/00
- ---------------------------------
[Affix Notarial Seal]
<PAGE> 1
EXHIBIT 10.5.12
850 E. TETON
INDUSTRIAL SUBLEASE
EFFECTIVE DATE: January 1, 2000
PARTIES AND ADDRESSES:
"AUTHORITY": Tucson Airport Authority, Inc.,
an Arizona nonprofit corporation
7005 S. Plumer Avenue
Tucson, Arizona 85706
"TENANT": AAS-Complete Controls, Inc.
an Arizona Corporation
850 E. Teton Rd. Suite 8
Tucson, Arizona 85706
EXHIBITS: Exhibits lettered A, B and C are
annexed to this Sublease and
incorporated herein by this
reference.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
RECITALS ...............................................................1
COVENANTS AND CONDITIONS.............................................................1
ARTICLE I - PREMISES.....................................................1
1.1 Premises...........................................................1
1.2 Access.............................................................1
1.3 Security...........................................................1
1.4 Parking............................................................1
1.5 Entry Upon Premises................................................2
ARTICLE II - TERM.........................................................2
2.1 Initial Term.......................................................2
2.2 Extensions.........................................................2
ARTICLE III - RENT AND DEPOSITS ...........................................2
3.1 Base Rent..........................................................2
3.2 Commencement of Rental Obligation..................................2
3.3 Late Fees..........................................................3
3.4 Security Deposit...................................................3
ARTICLE IV - USE OF PREMISES..............................................3
4.1 Purposes...........................................................3
4.2 Indemnity..........................................................4
4.3 Dangerous Conditions...............................................4
4.4 Alterations........................................................4
4.5 Utilities..........................................................4
A. Tenant's Responsibilities.................................4
B. Authority's Rights and Responsibilities...................4
4.6 Maintenance and Repair.............................................5
A. Tenant....................................................5
B. Authority.................................................5
ARTICLE V - INSURANCE AND CASUALTY.......................................5
5.1 Insurance Required.................................................5
5.2 Deductible.........................................................6
5.3 Modification of Requirements.......................................6
5.4 Certificates.......................................................6
5.5 Additional Insurance...............................................7
5.6 Additional Insureds................................................7
5.7 Waiver of Subrogation..............................................7
5.8 Insurance by Authority.............................................7
5.9 Casualty to Premises...............................................7
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI - TAXES........................................................7
6.1 Tenant's Responsibility............................................7
6.2 Protest............................................................8
ARTICLE VII - RULES, REGULATIONS AND LAWS..................................8
7.1 Compliance with all Applicable Laws................................8
7.2 Non-Discrimination.................................................8
A. Non-Discrimination Covenants..............................8
B. Non-Compliance............................................9
C. Subleases.................................................9
7.3 Compliance with FAR Part 77........................................9
7.4 FAR Part 107; Airport Access......................................10
7.5 State and Federal Aviation Regulations............................10
7.6 Exclusive Rights Prohibited.......................................10
7.7 Environmental Laws................................................10
A. Definitions..............................................10
B. Superfund................................................11
C. Compliance...............................................11
(i) Compliance with Environmental Laws Generally....11
(ii) Cleanup.........................................11
(iii) Governmental Submittals.........................12
(iv) Information Sharing.............................12
(v) Change in Use of Premises.......................12
D. Indemnity................................................12
E. Subtenants...............................................13
ARTICLE VIII - SUPERIOR RIGHTS.............................................13
8.1 Agreements with United States.....................................13
8.2 Rights of Government During War or National Emergency.............13
8.3 Rights of Authority...............................................14
8.4 Agreements with City of Tucson....................................14
8.5 Superfund Consent Decree..........................................14
8.6 Abatement of Obligation to Construct or Rebuild...................15
ARTICLE IX - RESERVATION OF AVIGATION EASEMENT...........................15
9.1 Easement..........................................................15
9.2 Structures; Elevation Limit.......................................15
9.3 Purposes..........................................................15
ARTICLE X - ASSIGNMENT AND SUBLEASE.....................................16
10.1 Consent of Authority..............................................16
10.2 Continuing Responsibility of Tenant...............................16
</TABLE>
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<TABLE>
<S> <C>
10.3 Subject to this Sublease..........................................16
ARTICLE XI - DEFAULTS AND REMEDIES.......................................16
11.1 Default by Tenant.................................................16
11.2 Remedies of Authority.............................................17
A. Termination..............................................17
(i) Damages.........................................18
(ii) Credit..........................................18
B. Reentry Without Termination..............................18
(i) Reentry.........................................18
(ii) Reletting.......................................19
(iii) Credit..........................................19
11.3 Remedies Cumulative...............................................19
11.4 No Waiver.........................................................19
11.5 Notice............................................................20
11.6 Interest..........................................................20
ARTICLE XII - TERMINATION BY TENANT.......................................20
12.1 Termination Events................................................20
12.2 Cure..............................................................20
12.3 No Waiver.........................................................21
ARTICLE XIII - SURRENDER OF POSSESSION, CONDITION OF PREMISES..............21
13.1 Surrender.........................................................21
13.2 Good Condition....................................................21
13.3 Removal of Property...............................................21
ARTICLE XIV - MISCELLANEOUS...............................................21
14.1 Notification Of Changes...........................................21
14.2 Successors and Assigns Bound......................................21
14.3 Article Headings..................................................21
14.4 Severability......................................................22
14.5 Applicable Law....................................................22
14.6 Construction of Sublease..........................................22
14.7 Costs and Attorneys' Fees.........................................22
A. Authority's Review.......................................22
B. Enforcement of Rights....................................22
14.8 Notices...........................................................23
A. To Authority.............................................23
B. To Tenant................................................23
C. Timing...................................................23
D. Change in Address........................................23
14.9 Authority to Execute..............................................23
</TABLE>
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<PAGE> 5
RECITALS
A. Authority has leased from the City of Tucson, a municipal corporation,
the airport known as Tucson International Airport located in Pima
County, State of Arizona (the "Airport").
B. Tenant is the Tenant under that certain Industrial Sublease dated
January 1, 1998 (the "Original Sublease") pursuant to which Tenant
leases from Authority approximately 41,900 square feet in "hangar one"
(the "Building") of the Tucson Industrial Center located on the
Airport, at 850 E. Teton, Tucson, Arizona. The Original Sublease
expires December 31, 1999.
C. Tenant desires to continue leasing the premises from Authority under
the terms and conditions herein.
COVENANTS AND CONDITIONS
ARTICLE I - PREMISES
1.1 PREMISES
Authority does hereby demise and let on to Tenant, for its exclusive
use and occupancy, and Tenant does hereby lease from Authority,
APPROXIMATELY THIRTY EIGHT THOUSAND FOUR HUNDRED (38,400) SQUARE FEET
IN THE NORTH END OF HANGAR ONE, AND APPROXIMATELY TWO THOUSAND (2,000)
SQUARE FEET ON THE EAST SIDE OF THE BUILDING, AND THREE THOUSAND FIVE
HUNDRED (3,500) SQUARE FEET OF OFFICE SPACE DIRECTLY EAST OF HANGAR ONE
as shown on Exhibit A (the "Premises"), subject to the further terms of
this Lease Agreement.
1.2 ACCESS
Tenant shall be granted the right of reasonable or necessary access to
the Premises. Authority reserves the right to designate the location of
such access and to change its location from time to time as the
Authority deems reasonably necessary and appropriate, so long as any
such modification does not materially diminish the ability of Tenant to
access the Premises as needed and as is available to Tenant at the time
of commencement of the Lease.
1.3 SECURITY
Tenant is responsible for securing Tenant's Premises, and neither the
Authority nor its agents or employees will be responsible for any loss
of or damage to Tenant's possessions while stored on the Premises.
1.4 PARKING
Tenant shall be entitled to utilize the parking areas associated with
the Building in common with other tenants of the Building. The
Authority reserves the right, but shall not be obligated, to assign
specific parking spaces to tenants.
<PAGE> 6
1.5 ENTRY UPON PREMISES
Authority may enter upon the Premises subleased exclusively to Tenant
hereunder at any reasonable time in an emergency or upon 24 hours
written notice, for any purpose necessary, incidental to or connected
with the exercise of its governmental functions. Authority shall, in
addition, have the right to enter upon the Premises and perform any
actions necessary or appropriate in connection with any environmental
investigation or remediation, including but not limited to testing,
investigation, and cleanup of waste in drains
ARTICLE II - TERM
2.1 INITIAL TERM
The initial term of the Sublease shall be for a period of five (5)
years beginning on the Effective Date hereof (the "Initial Term").
2.2 EXTENSIONS
The term hereof shall be deemed to be automatically extended on each of
the first five anniversaries of the Effective Date hereof, for an
additional one-year period, unless the Authority, at least ninety (90)
days prior to such date, notifies Tenant that the Authority does not
elect to so extend the term. The intent of this provision is to
automatically extend the term of this Sublease each year (unless
otherwise elected by Authority) so that a remaining term of
approximately 5 years is maintained, for a possible maximum total term
of (10) years.
ARTICLE III - RENT AND DEPOSITS
3.1 BASE RENT
Tenant covenants and agrees to pay Authority rent from the Effective
Date of this Sublease in an amount equal to NINE THOUSAND ONE HUNDRED
FOURTEEN DOLLARS AND NO CENTS ($9,114.00) per month with four percent
increases annually beginning with the start of year three as set forth
on the rent schedule attached as Exhibit B. Monthly rent is due and
payable to Authority in advance. Rent payments shall be delivered to
Authority's Property Manager who is currently Tucson Industrial
Centers, Inc., located at 850 E. Teton, Suite 1, Tucson, AZ 85706, or
such other person as directed by Authority in writing.
3.2 COMMENCEMENT OF RENTAL OBLIGATION
The first monthly payment, prorated to reflect the partial month for
which it is paid, shall be due on the Effective Date hereof and
subsequent installments shall be due on the first day of each
succeeding calendar month thereafter during the term of this Sublease.
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<PAGE> 7
3.3 LATE FEES
If any rent or any other sum due from the Tenant shall not be received
within SEVEN (7) DAYS after such amount shall be due, Tenant shall pay
a late fee equal to FIVE PERCENT (5%) of such overdue amount.
Acceptance of such late fees shall in no event constitute a waiver of
Tenant's default with respect to such overdue amount nor prevent
Authority from exercising any of the other right and remedies granted
hereunder.
3.4 SECURITY DEPOSIT
Simultaneously with the entry into this Sublease by the parties hereto,
the Tenant shall deposit with Authority, $5,000 which shall be retained
by Authority as security for the Tenant's payment of the Rent and
performance of all of its other obligations under the provisions of
this Lease, and shall not be deemed to represent payment of any rent.
On the occurrence of an Event of Default (as defined in Section 11.1
hereinbelow), Authority shall be entitled, at its sole discretion, (a)
to apply any or all of such sum in payment of (i) any Rent due and
unpaid, (ii) any expense incurred by Authority in curing any such
default, and/or (iii) any damages incurred by Authority by reason of
such default (including, by way of example rather than by limitation,
reasonable attorney's fees), in which event the Tenant shall,
immediately on its receipt of a written demand there for from
Authority, pay to Authority a sum equaling the amount so applied, so as
to restore the security deposit to its original amount; and /or (b) at
Authority's election, to retain any or all of such sum not otherwise
applied pursuant to the provisions of clause (a) of this sentence in
liquidation of any or all damages suffered by Authority by reason of
such default. On the termination of this Sublease, any of such sum
which is not so applied or retained shall be returned to Tenant. Such
sum shall not bear interest while being held by Authority.
ARTICLE IV - USE OF PREMISES
4.1 PURPOSES
The Premises shall not, without prior written consent of Authority, be
used for any purpose other than or in addition to storage and repair of
Airplane parts and Interior components. The prior written consent of
the Authority shall not be unreasonably withheld should the Tenant
propose a change in use of the Premises consistent with the zoning and
any other applicable restrictions pertaining to the subject Premises.
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<PAGE> 8
4.2 INDEMNITY
Tenant agrees to fully indemnify and save and hold harmless Authority
and the City of Tucson from and against all claims, fines, damages,
penalties, actions and all expenses, including reasonable attorneys'
fees incidental to the investigation and defense thereof, related to or
arising out of the fault or negligence of or violation of law by
Tenant, its agents, employees or subtenants in the use, occupancy, or
maintenance of the Premises by any of them.
4.3 DANGEROUS CONDITIONS
Tenant agrees to exercise reasonable care when using the Premises and
all improvements thereon to discover and promptly remedy any conditions
that may pose an unreasonable risk of harm to members of the general
public or that may constitute a violation of law. If an unsafe,
defective or dangerous condition, or violation of the law is
discovered, Tenant warrants that no one other than Tenant and Authority
employees, agents and representatives will be admitted to the Premises
and no property belonging to any party other than Tenant and Authority
will be transported to, collected at or stored upon the Premises until
the unsafe, defective or dangerous condition, or violation of law is
corrected.
4.4 ALTERATIONS
Tenant shall not construct or substantially alter or modify any
buildings, structures, or other improvements on the Premises without
the Authority's prior written approval of its plans and specifications,
which approval may not be unreasonably withheld.
In the event that Tenant makes any improvements or modifications to the
Premises, Tenant shall promptly pay all suppliers and contractors and
will not cause or permit any lien to be filed against either the
Premises or the Tenant's interest in the Premises or this Lease. In the
event that any such lien is filed, Tenant will promptly cause such lien
to be removed.
4.5 UTILITIES
A. TENANT'S RESPONSIBILITIES:
Tenant shall pay for all utility services supplied to it or
its subtenants on the Airport.
B. AUTHORITY'S RIGHTS AND RESPONSIBILITIES:
Notwithstanding the execution of this Sublease, Authority
retains the right to the continued use of such utility lines
and services as are presently on the Premises and the right to
repair the same when necessary. Authority shall conduct such
repairs in such manner and at such times as to not
unreasonably interfere with Tenant's operations.
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<PAGE> 9
4.6 MAINTENANCE AND REPAIR
A. TENANT:
(1) Tenant shall, at no expense to Authority, maintain
the Premises in a neat, clean, safe condition and in
a manner that is compatible with the rest of the
Building and in compliance with all applicable laws,
rules, regulations and orders. Tenant shall be
responsible for all minor repairs and maintenance.
(2) General combustible storage shall not exceed 12 feet
in height.
(3) Aisle separation shall be between 4 feet to 8 feet
wide. (Width to be determined by Fire Department and
classification of commodities being stored).
(4) Must have stable storage piles (No leaning stacks).
B. AUTHORITY:
Subject to Section 5.9 the Authority shall be responsible for
all structural repairs in the Premises and the Building,
unless necessitated by any negligence or willful misconduct of
Tenant or Tenant's subtenants, employees, agents, invitees or
guests. Notwithstanding the above, the Authority shall not be
required to replace major building systems (such as HVAC). In
the event that failure of any major building system renders
the Premises unsuitable for Tenant's operation, and the
Authority elects not to replace the system, and the Authority
determines that the system cannot be repaired economically,
Tenant may elect to repair or replace the system at its
expense, or may elect to terminate this Lease.
ARTICLE V - INSURANCE AND CASUALTY
5.1 INSURANCE REQUIRED
Tenant shall obtain and maintain in full force, with a company or
companies authorized to transact the business of insurance in the State
of Arizona and of sound and adequate financial responsibility, selected
by Tenant and acceptable to Authority, comprehensive insurance policy
(either as part of any other policy or policies carried by Tenant, or
separately) providing for the protection of the Authority and the City
of Tucson and officers, directors, agents and employees of either of
them, against:
(1) general liability, including all direct or contingent
loss or liability for damages for bodily injury,
personal injury, death or damage to property,
including loss of use thereof, occurring on or in any
way related to the Premises or occasioned by reason
of occupancy by and the operations of
5
<PAGE> 10
Tenant upon, in and around the Premises, with limits
of $1,000,000 per occurrence for personal injury or
death or damage to property, with coverage at least
as broad as that provided by INSURANCE SERVICES
OFFICE COMMERCIAL GENERAL LIABILITY COVERAGE form
CG0001 (Occurrence Form), and such policy or policies
shall cover all of Tenant's operations on the entire
Premises, including but not limited to any elevators
and escalators therein and any sidewalks, streets or
other public ways adjoining the Premises; and
(2) automobile liability covering owned, non-owned,
leased and hired vehicles with combined single limits
of no less than $250,000 per occurrence.
5.2 DEDUCTIBLE
The deductible for any policy required hereunder shall not exceed
$5,000.
5.3 MODIFICATION OF REQUIREMENTS
Authority may adjust or increase liability insurance amounts and
requirements as Authority deems reasonably necessary, or as may be
required because of changes in the insurance requirements imposed by
Authority's insurer or by applicable law. Tenant shall comply with such
adjustments or increases within such reasonable time period as is
requested by Authority.
5.4 CERTIFICATES
Upon or prior to the commencement of the term of this Sublease and at
least annually thereafter Tenant shall furnish to Authority
certificates of insurance showing the amount and type of the insurance
then in effect that is required to be procured and maintained by it
hereunder and stating the date and term of the policies evidencing such
insurance. Tenant shall, upon request, supply Authority with certified
copies of all applicable insurance policies, riders, endorsements and
declaration pages. Certificates evidencing any renewal, replacement or
extension of any or all of the insurance required hereunder, or of
renewals, replacements or extensions of such renewals, replacements or
extensions, shall be delivered by Tenant to Authority not less than
thirty (30) days prior to the expiration of any policy of insurance
renewed, replaced or extended by the insurance represented by any such
certificate. Each policy of insurance required hereunder shall provide
for not less than thirty (30) days notice to Authority and Tenant
before such policy may be canceled.
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<PAGE> 11
5.5 ADDITIONAL INSURANCE
The provisions of this Sublease as to insurance required to be procured
and maintained shall not limit or prohibit, or be construed as limiting
or prohibiting, Authority or Tenant from obtaining any other or greater
insurance with respect to the Premises or improvements thereon or the
use and occupancy thereof that either or both of them may wish to
carry, but in the event Authority or Tenant, as the case may be, shall
procure or maintain any such insurance not required by this Sublease,
the cost thereof shall be at the expense of the party procuring or
maintaining the same.
5.6 ADDITIONAL INSUREDS
All insurance required by this Article shall be procured and maintained
in the name of Tenant and shall add Authority and the City of Tucson as
additional insureds as their interests appear.
5.7 WAIVER OF SUBROGATION
Each party hereto waives all claims for recovery from the other party
for any loss or damage to any of its property on the Premises insured
under valid and collectible insurance policies to the extent of any
recovery collected from such policies. The parties agree that all
material insurance policies shall be endorsed with a clause which
waives subrogation against the other party.
5.8 INSURANCE BY AUTHORITY
Authority may, upon written notice to Tenant, in the event that Tenant
fails to timely provide proof of insurance as required by Section 5.4
above, procure and maintain any or all of the insurance required of
Tenant under this Article. In such event, all costs of such insurance
procured and maintained by Authority on behalf of Tenant shall be the
responsibility of Tenant and shall be fully reimbursed to Authority
within ten (10) business days after Authority advises Tenant of the
cost thereof.
5.9 CASUALTY TO PREMISES
Authority may, but shall not be required to, maintain insurance against
loss or damage to the Premises or the Building, but shall have no
obligation to repair the Premises or the Building in the event of
casualty or damage thereto. In the event that any such casualty renders
the Premises unsafe or untenantable, this Sublease shall terminate
unless Authority notifies Tenant, within 45 days of the date of the
casualty, that Authority intends to repair the Premises, in which event
this Sublease shall remain in full force and effect, although rent
shall abate while the Premises are unusable.
ARTICLE VI - TAXES
6.1 TENANT'S RESPONSIBILITY
Tenant shall pay before delinquency any and all taxes levied or
assessed against the Premises, any levied or assessed against or by
reason of personal property located in, on or about the Premises, any
levied or assessed because of Tenant's right to possession of the
Premises and improvements thereon, all applicable taxes levied or
assessed by any government body as the result of Tenant's operations
and all taxes which may be levied or assessed as the result of rentals
payable under this Sublease. All such taxes and assessments for partial
years shall be apportioned and adjusted on a time basis. Authority
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<PAGE> 12
shall, within five (5) days of receipt, forward to Tenant any notices
received from the collecting agency regarding the collection or amount
of such taxes.
6.2 PROTEST
Tenant shall have the right at its own cost and expense to contest the
amount or validity of any such tax or assessment and to bring or defend
any actions involving the amount or validity of any such tax or
assessment in its own name or in the name of Authority; provided that,
if unsuccessful, Tenant shall pay and discharge any such tax or
assessment so contested, together with any penalties, fines, interest,
costs and expenses, including reasonable attorneys' fees, that may
result from any such action by Tenant.
ARTICLE VII - RULES, REGULATIONS AND LAWS
7.1 COMPLIANCE WITH ALL APPLICABLE LAWS
Tenant and all persons operating under the rights granted hereby shall
observe and obey all reasonable and lawful rules and regulations with
respect to the use of the Airport which have been or may in the future
be adopted by Authority and shall further abide by all applicable laws,
statutes, ordinances, rules, orders, and regulations of all governing
bodies which are now in effect or which may hereafter be put into
effect.
7.2 NON-DISCRIMINATION
A. NON-DISCRIMINATION COVENANTS
(1) The Tenant for himself, his heirs, personal
representatives, subtenants, successors in interest,
and assigns, as a part of the consideration hereof,
does hereby covenant and agree, as a covenant running
with the land, that in the event improvements are
constructed, maintained, or otherwise operated on the
Premises for a purpose for which a Department of
Transportation ("DOT") program or activity is
extended or for another purpose involving the
provision of similar services or benefits, Tenant
shall maintain and operate such improvements and
services in compliance with all other requirements
imposed pursuant to Title 49, Code of Federal
Regulations, DOT, Subtitle A, Office of the
Secretary, Part 21, Nondiscrimination in
Federally-Assisted Programs of the Department of
Transportation-Effectuation of Title VI of the Civil
Rights Act of 1964, and as said Regulations may be
amended.
(2) The Tenant for himself, his personal representatives,
successors in interest, and assigns, as a part of the
consideration hereof, does hereby covenant and agree,
as a covenant running with the land that: (1) no
person on the grounds of race, color, or national
origin shall be excluded from participation in,
denied the benefits of, or be otherwise subjected to
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discrimination in the use of said improvements, (2)
that in the construction of any improvements on,
over, or under such land and the furnishing of
services thereon, no person on the grounds of race,
color, or national origin shall be excluded from
participation in, denied the benefits of, or
otherwise be subject to discrimination, (3) that
Tenant shall use the Premises in compliance with all
other requirements imposed by or pursuant to Title
49, Code of Federal Regulations, Department of
Transportation, Subtitle A, Office of the Secretary,
Part 21, Non-discrimination in Federally-Assisted
Programs of the Department of
Transportation-Effectuation of Title VI of the Civil
Rights Act of 1964, and as said Regulations may be
amended.
(3) Tenant shall furnish its accommodations and/or
services on a fair, equal and not unjustly
discriminatory basis to all users thereof and it
shall charge fair, reasonable and not unjustly
discriminatory prices for each unit or service,
PROVIDED THAT Tenant may be allowed to make
reasonable and nondiscriminatory discounts, rebates
or other similar type of price reductions to volume
purchasers.
(4) Tenant assures that it will undertake an affirmative
action program as required by 14 CFR Part 152,
Subpart E, to insure that no person shall on the
grounds of race, creed, color, national origin, or
sex be excluded from participating in any employment
activities covered in 14 CFR Part 152, Subpart E.
Tenant assures that it will require that its covered
sub organizations provide assurances from their sub
organizations, as required by 14 CFR Part 152,
Subpart E, to the same effort.
B. NON-COMPLIANCE
Non-compliance with an provision of this Section shall
constitute a material breach hereof and in the event of such
non-compliance Authority shall have the right to terminate
this Sublease and the estate hereby created without liability
therefore or at the election of Authority or the United
States, either or both shall have the right to judicially
enforce these provisions.
C. SUBLEASES
Tenant agrees that it shall insert the provisions of this
Section in any sublease by which Authority grants a right or
privilege to any person, firm or corporation to render
accommodations and/or services to the public on the Premises
herein subleased.
7.3 COMPLIANCE WITH FAR PART 77
Tenant shall comply with the notification and review requirements
covered in Part 77 of the Federal Aviation Regulations in connection
with any improvements or modification or alteration of improvements on
the Premises.
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7.4 FAR PART 107; AIRPORT ACCESS
Tenant and all persons operating under the rights granted hereunder
shall comply with Part 107 of the Federal Aviation Regulations with
respect to aircraft operations and airport security at the Airport.
Tenant shall at all times take all reasonable steps to control, police
and regulate the use of the Premises and of the Airport premises to
prevent unauthorized persons and the general public from obtaining
access to the Airport. Such steps by Tenant shall include, but not be
limited to, steps requested by Authority and those required under
Federal Regulations. Tenant must secure the Premises so that there is
no inadvertent or purposeful unauthorized entry in or upon the Airport
by people, vehicles, or animals.
7.5 STATE AND FEDERAL AVIATION REGULATIONS
Tenant will conduct its operations and activities on the Airport so as
to conform to all applicable regulations of the Federal Aviation
Administration and the Aeronautics Division of the Arizona Department
of Transportation.
7.6 EXCLUSIVE RIGHTS PROHIBITED
It is understood and agreed that nothing herein contained shall be
construed to grant or authorize the granting of an exclusive right
within the meaning of Section 49 U.S.C. 40103(e).
7.7 ENVIRONMENTAL LAWS
Tenant, at its own expense, shall ensure that Tenant and Tenant's
agents, employees, invitees, and sublessee comply with all present and
hereafter enacted Environmental Laws, and any amendments thereto,
affecting Tenant's operation on the Premises.
A. DEFINITIONS
(1) "Environmental Laws" means any laws, regulations and
ordinances (whether enacted by the local, state,
federal government, or by the Authority) now in
effect or hereafter enacted that deal with the
regulation or protection of the environment
(including the ambient air, ground water, surface
water, and land use, including sub-strata land), or
with the generation, storage, disposal or use of
chemicals or substances that could be detrimental to
human health or the environment.
(2) "Extremely Hazardous Substances" means any substance
or material designated by the United States
Environmental Protection Agency as an "extremely
hazardous substance" under Section 302(a)(2) of the
Superfund Amendment and Reauthorization Act ("SARA")
(42 U.S.C. ss. 11002(a)(2)).
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(3) "Hazardous Material" means all substances, materials
and wastes that are, or that become, regulated under,
or that are classified as hazardous or toxic under
any environmental law (including, but not limited to,
Extremely Hazardous Substances and Toxic Chemicals).
(4) "Release" means any releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing, or dumping.
B. SUPERFUND
The parties acknowledge that the subject Premises is located
within a Superfund designated site. The Landlord shall not
hold the Tenant liable hereunder for any responsibility
arising out of any environmental issues and/or liability
issues existing prior to the date of the commencement of the
Original Lease. Tenant shall not be liable or responsible
hereunder for any prior or existing conditions relating to
environmental issues regarding the Premises. Any liability
and/or responsibility of the Tenant hereunder pertaining to
the Premises shall be limited to any actions or events in
violation of the provisions of this section arising subsequent
to the date of Tenant's occupancy of the Premises.
C. COMPLIANCE
(i) Compliance with Environmental Laws Generally. Tenant shall
not cause or permit any Hazardous Material to be used,
generated, manufactured, produced, stored, brought upon,
or released, on, under or about the Premises, or
transported to and from the Premises, by Tenant, its
agents, employees, contractors, invitees, sublessees or
any third party in violation of any Environmental Law,
provided that, in no circumstances shall Tenant cause or
permit any Extremely Hazardous Substance or Toxic Chemical
to be used, generated, manufactured, produced, stored,
brought upon, or Released, on, under or about the
Premises, or transported to and from the Premises.
(ii) Cleanup. Without limiting the foregoing, if the presence
of any Hazardous Material on, under or about the Premises
caused or permitted by Tenant results in any contamination
of the Premises, Tenant shall promptly take all actions at
its sole cost and expense as are necessary to return the
Premises to the condition existing prior to the
introduction of any such Hazardous Material to the
Premises; provided that Authority's approval of such
actions shall first be obtained, which approval shall not
be unreasonably withheld so long as such actions would not
potentially have any material adverse effect on the
Premises. In the event Tenant shall fail timely to
commence or cause to be commenced or fail diligently to
prosecute to completion such actions as are necessary to
return the Premises to the conditions existing prior to
the introduction of any Hazardous Material to the
Premises, Authority may, but
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shall not be obligated to, cause such action to be
performed, and all costs and expenses (including,
without limitation, attorneys' fees) thereof or
incurred by Authority in connection therewith shall
be paid by Tenant.
(iii) Governmental Submittals. Tenant shall, at Tenant's own
cost and expense, make all submissions to, provide all
information to, and comply with all requirements of any
governmental authority having jurisdiction (the
"Government") under the Environmental Laws. Should the
Government determine that a site characterization, site
assessment and/or a cleanup plan be prepared or that a
cleanup should be undertaken because of any release of
hazardous materials at the Premises which occur during the
term of this Sublease, then Tenant shall, at Tenant's own
cost and expense, prepare and submit the required plans
and financial assurances, and carry out the approved plans
in accordance with all requirements of the Government.
(iv) Information Sharing. Tenant shall provide to Tucson
Airport Authority a copy of any and all information,
reports, and applications submitted to the Government as
described in Paragraph X.6B.(4), whether such submittal is
routine or in response to a release or threatened release
of any Hazardous Material, and whether the impetus for
such submittal is generated by Tenant, or by an inquiry or
action by the Government or another third party. At no
cost or expense to Authority, Tenant shall promptly
provide all information requested by Authority to
determine the applicability of the Environmental Laws to
the Premises, or to respond to any governmental
investigation or to respond to any claim of liability by
third parties which is related to environmental
contamination. Tenant shall immediately notify Authority
of any correspondence or communication from any
governmental entity regarding the application of
Environmental Laws to the Premises or Tenant's operation
of the Premises.
(v) Change in Use of Premises. Tenant shall immediately notify
Authority of any changes in Tenant's operation on the
Premises that will change or has the potential to change
Tenant's or Authority's obligations or liabilities under
the Environmental Laws.
D. INDEMNITY
Tenant shall indemnity, defend and hold harmless Authority,
its successors and assigns, its employees, agents and
attorneys from and against any and all liability, loss,
damage, expense, penalties and costs (including legal and
investigation fees or costs) arising from or related to any
claim or action for injury, liability, breach or warranty or
representation, or damage to persons or property and any and
all claims or actions brought by any party or governmental
body, alleging or arising in connection with (i) contamination
of, or adverse effects on, the environment
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<PAGE> 17
(whether known, alleged, potential, or threatened), or (ii)
alleged or potential violation of any Environmental Law or
other statute, ordinance, rule, regulation, judgment or order
of any government or judicial entity which are brought as a
result (whether in part or in whole) of any activity or
operation on or Release from the Premises (caused by any
person or entity other than Authority) during the term of this
Sublease or any previous sublease of the Premises by Tenant or
its owners or related entities. This obligation includes but
is not limited to all costs and expenses related to
investigation and/or cleaning up the Premises and all land,
soil, and underground or surface water as required under the
law. Tenant's obligations and liabilities under this paragraph
shall continue so long as Authority bears any liability or
responsibility under the Environmental Laws for any action
that occurred on the Premises during the term of the Sublease.
This indemnification of Authority by Tenant includes, without
limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial,
removal or restoration work required by any federal, state, or
local governmental agency or political subdivision because of
Hazardous Material located on the Premises or present in the
soil or ground water on, under or about the Premises. The
parties agree that Authority's right to enforce Tenant's
Promise to indemnify is not an adequate remedy at law for
Tenant's violation of any provision of this paragraph;
Authority shall have all the rights and remedies set forth in
this Sublease as well as all other rights and remedies
provided by law.
E. SUBTENANTS
Tenant shall insert the provisions of this section in any
lease agreement or contract by which it grants a right or
privilege to any person, firm or corporation under this
Sublease.
ARTICLE VIII - SUPERIOR RIGHTS
8.1 AGREEMENTS WITH UNITED STATES
This Sublease shall be subordinate to the provisions and requirements
of any existing or future agreement between Authority and the United
States, relative to the development, operation or maintenance of the
Airport. In the event that the Authority, after the date of this
Sublease, enters into an agreement with the United States that
materially limits Tenant's rights to use and occupy the Premises
hereunder, the Authority will give Tenant notice and a copy of the
agreement.
8.2 RIGHTS OF GOVERNMENT DURING WAR OR NATIONAL EMERGENCY
This Sublease and all the provisions hereof shall be subject to
whatever right the United States Government now has or in the future
may have or acquire, affecting the control, operation, regulation and
taking over of the Airport or the exclusive or non-exclusive use of the
Airport by the United States during the time of war or national
emergency.
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<PAGE> 18
Tenant and Authority recognize that during the time of war or national
emergency the City of Tucson, owner of the Airport, has the right to
enter into agreements with the United States government for military or
naval use of part or all of the Airport. If any such agreement is
executed by the City of Tucson, the provisions of this Sublease,
insofar as they are inconsistent with the provisions of any agreement
so made by the City of Tucson with the United States government, shall
be subject to the terms of such agreement and Tenant shall have no
claim against Authority or the City of Tucson for any loss or damage
sustained by Tenant because of the making of such agreement by the City
of Tucson. In such event, however, the amounts, if any, payable from
the City of Tucson or the United States for improvements placed on the
Premises by Tenant shall be paid to Tenant if this Sublease is in
effect at the time of such taking.
8.3 RIGHTS OF AUTHORITY
Authority reserves the right to further develop or improve the landing
area of the Airport as it sees fit, regardless of the desires or view
of Tenant and without interference or hindrance.
Authority reserves the right, but shall not be obligated to Tenant, to
maintain and keep in repair the landing area of the Airport and all
publicly-owned facilities of the Airport, together with the right to
direct and control all activities of Tenant in this regard.
8.4 AGREEMENTS WITH CITY OF TUCSON
This Sublease is subject to the existing lease between Authority and
the City of Tucson and to the provisions of any existing or future
agreement between the City of Tucson and Authority.
8.5 SUPERFUND CONSENT DECREE
The Premises are part of a site, as more particularly defined in the
below-described Consent Decree (the "Site"), that is the subject of
that certain Civil Action No. 99--313 TUC WDB, United States of America
v. Tucson Airport Authority, City of Tucson, United States Air Force,
General Dynamics Corp., McDonnell Douglas Corporation, in the United
States District Court for the District of Arizona, brought pursuant to
Sections 106 and 107 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. ss.ss.9606 and 9607. The
United States Environmental Protection Agency ("EPA") has selected
certain remedial actions to be carried out on the Site (including the
Premises) pursuant to that certain "Record of Decision, Tucson
International Superfund Site, Tucson, Arizona, Airport Property - Soils
and Shallow Groundwater Zone, Burr-Brown Property - Soils, Former
West-Capt Property - Soils" signed on September 30, 1997 (the "ROD").
The City, the Authority and certain other parties (collectively, the
"Settling Defendants") and EPA have entered into that certain Consent
Decree, which was lodged with the United States District Court in the
above-
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<PAGE> 19
described action on June 17, 1999 (the "Consent Decree"), which grants
EPA certain access, enforcement, and other rights with respect to the
Site, and imposes on Settling Defendants certain obligations regarding
implementation of the remedial action selected in the ROD. This
Sublease is subject to the Consent Decree and the rights and
obligations of the parties thereto, including the obligation of
Settling Defendants to undertake the remedial actions described therein
with respect to the Site, and the right of the EPA to access the Site
to inspect and enforce compliance with the Consent Decree.
8.6 ABATEMENT OF OBLIGATION TO CONSTRUCT OR REBUILD
Inasmuch as this Sublease contains certain provisions concerning
repairs, replacement and rebuilding of damaged or destroyed buildings,
construction of buildings, quiet enjoyment and other related causes
applicable to the parties to this Sublease, and inasmuch as the
Premises constitute a portion of a public Airport, it is agreed that
the parties hereto shall not be required to repair, replace, rebuild or
construct any building or portion of any building so long as the
obligated party is prevented from so doing by action of the United
States government or any agency or department thereof.
ARTICLE IX - RESERVATION OF AVIGATION EASEMENT
9.1 EASEMENT
There is hereby reserved to Authority for the use and benefit of
aircraft using the Airport a right of flight for the passage of
aircraft in the airspace above the uppermost surface of the Premises,
together with the right to cause such noise as may be inherent in the
operation of any aircraft now known or hereafter used for navigation of
or flight in said airspace, or landing at, or taking off from, or
operating on the Airport.
9.2 STRUCTURES; ELEVATION LIMIT
Tenant, by accepting this Sublease, expressly agrees for itself, its
successors and assigns that it will not erect nor permit the erection
of any structure or object, nor permit the growth of any tree on the
Premises above the mean sea level elevation of 2460 feet. In the event
the aforesaid covenants are breached, Authority reserves the right to
enter upon the Premises and to remove the offending structure or object
and cut the offending tree, all of which shall be at the expense of
Tenant.
9.3 PURPOSES
Tenant, by accepting this Sublease agrees for itself, its successors
and assigns that it will not make use of the Premises in any manner
which might interfere with the landing and taking off of aircraft from
the Airport or otherwise constitute a hazard. In the event the
aforesaid covenant is breached, Authority reserves the right to enter
upon the Premises and cause the abatement of such interference at the
expense of Tenant.
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<PAGE> 20
ARTICLE X - ASSIGNMENT AND SUBLEASE
10.1 CONSENT OF AUTHORITY
Tenant shall not sublease the Premises or any portion thereof, or
assign or sell this Sublease or any interest therein without first
obtaining written consent from Authority which consent shall not be
unreasonably withheld. For this purpose, any change in ownership or
control of Tenant shall be considered an assignment of rights
hereunder. Tenant shall furnish the Authority with a copy of any
sublease or assignment entered into with respect to this Sublease or
the Premises or any portion thereof.
10.2 CONTINUING RESPONSIBILITY OF TENANT
If it is a complete assignment or sublease of the entire Premises it
shall be in writing and provide that the subtenant or assignee assumes
and agrees to perform all of the terms, covenants and agreements which
Tenant has agreed to perform under this Sublease, and that Tenant's
subtenant or assignee shall become jointly and severally liable with
Tenant, or any successor in interest of Tenant, for the performance of
the terms and covenants of this Sublease. A sublease for less than the
entire Premises shall be in writing and shall recite that it is subject
and subordinate to all the terms and provisions of this Sublease.
Neither the execution of such sublease or assignment, the Authority's
consent to the same, nor the acceptance of rent by Authority from
Tenant's subtenant or assignee shall release or in any manner affect
Tenant's liability to Authority hereunder.
10.3 SUBJECT TO THIS SUBLEASE
Any sublease between Tenant and a subtenant shall be in writing and
shall provide that said sublease is subject to all the provisions of
this Sublease.
ARTICLE XI - DEFAULTS AND REMEDIES
11.1 DEFAULT BY TENANT
Tenant shall be in default under this Sublease upon the occurrence of
any of the following "Events of Default":
A. Tenant shall fail to pay when due any installment of
rent payable pursuant to this Sublease and such
failure shall continue unremedied for a period of ten
(10) days; provided that Tenant shall not be entitled
to the benefit of more than one (1) grace period of
ten (10) days under this paragraph A(1) within any
calendar year.
B Tenant or any of Tenant's agents, employees, guests,
invitees, or subtenants, shall use Premises for any
unlawful or illegal purpose or for any purpose other
than those permitted under Section 4.1.
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<PAGE> 21
C. Tenant shall fail to observe or perform any other
covenant, agreement or obligation hereunder and such
failure shall not be remedied within thirty (30) days
(or such additional time as is reasonably required in
the opinion of Authority to correct any such failure,
if Tenant has instituted corrective action and is
diligently pursuing the same) after Authority shall
have given Tenant written notice specifying which
covenant, agreement or obligation Tenant has failed
to observe or perform; provided that Tenant shall not
be entitled to the benefit of more than two (2) grace
periods of thirty (30) days (or more if permitted)
under this paragraph within any calendar year.
D. There is commenced by or against Tenant any case
under the Bankruptcy Code (Title 11 of the United
States Code) or any other bankruptcy, arrangement,
reorganization, receivership, custodianship or
similar proceeding under any federal, state or
foreign law, and with respect to any such case or
proceeding that is involuntary, such case or
proceeding is not dismissed with prejudice within
sixty (60) days of such filing.
E. Tenant makes a general assignment for the benefit of
creditors or applies for, consents to, or acquiesces
in the appointment of a trustee, receiver, or other
custodian for Tenant or the property of Tenant or any
part thereof, or in the absence of such application,
consent, or acquiescence, a trustee, receiver or
other custodian is appointed for Tenant or the
property of Tenant or any part thereof, and such
appointment is not discharged within sixty (60) days
F. Any action is commenced against Tenant to foreclose
any lien or mortgage or other rights of Tenant in or
to the Premises.
Tenant abandons, deserts or vacates the Premises for seven (7)
consecutive days or more.
11.2 REMEDIES OF AUTHORITY
If Tenant shall be in default hereunder as set forth above, the
Authority may exercise any of the following remedies.
A. TERMINATION
Authority may, at its election, give Tenant written notice of
its intention to terminate this Sublease on a date which shall
not be earlier than ten (10) days after such notice is given.
If all defaults have not been cured on or before the date
specified in the notice, Tenant's rights to possession of the
Premises shall cease, and with or without re-entry by
Authority, this Sublease and the term hereof shall terminate,
and Authority may then re-enter and take possession of the
Premises as provided below with respect to reentry without
termination. Any such
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<PAGE> 22
termination must be express, and neither notice to pay rent or
to deliver up possession of the Premises given pursuant to
law, nor any proceeding instituted by Authority, nor the
failure by Tenant for any period of time to pay any of the
rent herein reserved, shall of itself operate to terminate
this Sublease.
(i) Damages. Notwithstanding the termination of this Sublease
or any re-entry by Authority upon such termination, Tenant
shall continue to be liable for and Authority shall be
entitled to recover as damages:
(a) the sum of all rent that is due and owing as
of the date of termination and all other
sums then owing by Tenant hereunder;
(b) all rent that would otherwise continue to
accrue during the remaining term hereof or,
at the election of Authority, the discounted
present value of the sum of all rentals
remaining to be paid for the remaining term
of this Sublease, calculated by the
Authority in its reasonable discretion; and
(c) the reasonable costs incurred by Authority
in re-letting the Premises and the
reasonable costs to Authority necessary to
place the Premises in condition for
re-letting.
(ii) Credit. Any rent, income, receipts, profits or other
monies received or derived by Authority from any
re-letting or other use of the Premises after the
termination of this Sublease shall, so long as Tenant
shall continue to be liable for the payment of rent
hereunder, be credited against such rent as received and
collected.
B. REENTRY WITHOUT TERMINATION
As an alternative remedy, Authority may, without terminating
this Sublease, and after giving Tenant ten (10) days written
notice, re-enter the Premises and take possession thereof
pursuant to any legal proceedings or notice required by law,
in which event Tenant shall remain liable for the payment of
all rent and the performance of all conditions contained in
this Sublease.
(i) Reentry. Upon any such re-entry of the Premises by
Authority, Authority may expel Tenant and those
claiming through or under Tenant and remove their
property and effects (forcibly, if necessary) without
being guilty in any manner of trespass and without
any liability therefor and without prejudice to any
remedies of Authority in the event of default by
Tenant, and without liability for any interruption of
the conduct of the affairs of Tenant or those
claiming through or under Tenant which may result
from such entry. Tenant hereby irrevocably appoints
Authority as the agent and attorney-in-fact of Tenant
to remove all of Tenant's property whatsoever
situated upon the
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<PAGE> 23
Premises and to place such property in storage in any
warehouse or other suitable place in Tucson, Arizona,
for the account of and at the expense of Tenant and
Tenant hereby exempts and agrees to save harmless
Authority from any costs, loss or damage whatsoever
arising or occasioned by any such removal and storage
of such property by Authority or its duly authorized
agents in accordance with the provisions herein
contained. Nothing in this provision shall restrict
the right of the Tenant to utilize any and all
personal property as collateral for funding and make
such property subject to a Uniform Commercial Code
filing. Nothing in this Lease shall be construed to
give the Landlord a superior right to that of a
lender using such personal property of the Tenant as
collateral with rights superior to that of the
Landlord.
(ii) Reletting. After such re-entry, Authority shall use
reasonable diligence to re-let the Premises, or any
part or parts thereof, for such period or periods and
upon such term or terms and at such reasonable rental
or rentals and upon such other conditions as
Authority may deem advisable, with the right to make
alterations and repairs to the Premises. Tenant
hereby irrevocably appoints Authority as the agent
and attorney-in-fact of Tenant to enter upon and
re-let the Premises and to incur any necessary
expenses in doing so, all to be reimbursed by Tenant.
Tenant agrees that no acts of Authority in effecting
such re-letting shall constitute a termination of
this Sublease, irrespective of the period for which
such re-letting is made or the terms and conditions
of such re-letting or otherwise.
(iii) Credit. Tenant shall receive a credit against such
rental in the amount of the proceeds, if any, of such
re-letting. Tenant's obligations, in addition to
rent, for which it shall remain liable include, but
shall not be limited to, all repossession costs,
brokerage commissions, legal expenses, attorneys'
fees, expenses of employees, removal costs,
alteration costs and expenses of preparation for
re-letting, and any other amounts expended pursuant
to action taken under this paragraph.
11.3 REMEDIES CUMULATIVE
All rights, options and remedies of Authority contained in this
Sublease shall be construed and held to be cumulative, and no one of
them shall be exclusive of the other, and Authority shall have the
right to pursue any one or all of such remedies or any other remedy or
relief which may be provided by law, whether or not stated in this
Sublease (including but not limited to any right of "self help" or
similar remedy in order to minimize any damages, expenses, penalties
and related fees or costs).
11.4 NO WAIVER
No waiver of any Event of Default of Tenant hereunder shall be implied
from any acceptance by Authority of any rent or other payments due
hereunder or any omission by Authority to take any action on account of
such default if such default persists or is repeated, and no express
waiver shall affect an Event of Default in a manner other than as
specified in said waiver. The consent or approval by Authority to or of
any act by Tenant requiring Authority's consent or approval shall not
be deemed to waive or render unnecessary Authority's consent or
approval to or of any subsequent similar acts by Tenant.
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11.5 NOTICE
Any default notice tendered to Tenant hereunder shall be deemed to be
sufficient if it is sent as provided in Section 14.8 and is reasonably
calculated to put Tenant on inquiry as to the nature and extent of such
default.
11.6 INTEREST
All amounts due the Authority hereunder shall accumulate interest at a
rate of 12% per annum or the maximum amount allowed by law, whichever
is less.
ARTICLE XII - TERMINATION BY TENANT
12.1 TERMINATION EVENTS
Tenant may terminate this Sublease at any time upon thirty (30) days
written notice to Authority upon or after the happening or continuation
of any of the following events:
A. The inability of Tenant to use, for a period of
thirty (30) consecutive days, any portion of the
rights, licenses, services or privileges of Tenant
hereunder because of any law, rule, regulation or
other action or failure to act on the part of any
United States governmental authority having
jurisdiction thereof.
B. The default by Authority in the performance of any
covenant or agreement herein required to be performed
by Authority and the failure of Authority to remedy
such default for a period of thirty (30) days after
receipt of written request or demand from Tenant to
remedy the same.
C. The assumption by the United States government or any
authorized agency thereof of the operation or control
of the Airport or any part thereof, in such manner as
to substantially restrict Tenant for a period of at
least thirty (30) consecutive days from conducting
any of its operation on the Premises.
12.2 CURE
If any of the foregoing reasons for termination by Tenant cease to
exist prior to a termination, then the right to terminate for such
reason shall cease.
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12.3 NO WAIVER
No waiver by Tenant of Authority's default of any of its obligations
hereunder shall be construed to be or act as a waiver by Tenant of any
subsequent default by Authority.
ARTICLE XIII - SURRENDER OF POSSESSION, CONDITION OF PREMISES
13.1 SURRENDER
Upon the expiration or earlier termination of this Sublease or any
extensions thereof Tenant shall forthwith surrender the Premises to
Authority.
13.2 GOOD CONDITION
The Premises shall be returned to Authority in as good condition as at
the time of occupancy by Tenant, except as otherwise provided in this
Sublease, ordinary wear and tear excepted.
13.3 REMOVAL OF PROPERTY
Tenant, and Tenant's subtenants, may remove any and all personal
property, including portable buildings, signs, trade fixtures,
machinery and equipment from the Premises prior to expiration of this
Sublease; provided, however, that Tenant shall repair any damage caused
by such removal. Title to any property remaining in the Premises after
expiration or termination of this Sublease shall vest in Authority and
Authority shall have the right and option to remove the same, restore
the Premises and recover from Tenant the costs and expenses of doing
so.
ARTICLE XIV - MISCELLANEOUS
14.1 NOTIFICATION OF CHANGES
Tenant shall promptly notify Authority of any change in Tenant's name
or address or a change in ownership.
14.2 SUCCESSORS AND ASSIGNS BOUND
All the terms, covenants and conditions of this Sublease shall extend
to and bind the successors and assigns of the respective parties
hereto.
14.3 ARTICLE HEADINGS
The article headings contained herein are for convenience and reference
and are not intended to define or limit the scope of any provisions of
this Sublease.
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14.4 SEVERABILITY
If any term or condition of this Sublease shall be deemed to be invalid
or unenforceable, all other terms and conditions shall remain in full
force and effect.
14.5 APPLICABLE LAW
The terms and conditions of this sublease shall be interpreted in
accordance with the laws of the State of Arizona.
14.6 CONSTRUCTION OF SUBLEASE
Authority and Tenant agree that each party and its counsel have
reviewed and revised this Sublease and that any rule of construction to
the effect that ambiguities are to be resolved against the drafting
party shall not apply in the interpretation of this Sublease. No remedy
or election given by any provisions of this Sublease shall be deemed
exclusive unless so indicated, but each shall, whenever possible, be
cumulative with all other remedies in law or equity. Each provision
hereof shall be deemed both a covenant and a condition and shall run
with the land for the duration of the leasehold term or any extensions
thereof. Whenever the content of any provision shall require it, the
singular number shall be held to include the plural number and vice
versa. The form of this Sublease contemplates that Tenant will be an
entity and not one or more natural persons. If Tenant is one or more
natural persons, then all pronouns referring to Tenant shall be deemed
to be appropriately changed to fit those circumstances.
14.7 COSTS AND ATTORNEYS' FEES
A. AUTHORITY'S REVIEW
Tenant shall pay the expenses (including reasonable attorneys'
fees and the fees of other consultants) incurred by Authority
in reviewing any of the documents (including subleases, plans
and specifications of any improvements to be constructed by
Tenant, and documents created pursuant to Section ) for which
Authority's approval is required by the terms hereof.
B. ENFORCEMENT OF RIGHTS
The non-prevailing party shall promptly pay to the prevailing
party, upon demand, all costs and other expenses paid or
incurred by the prevailing party (including, without
limitation, reasonable attorney's fees) in enforcing or
exercising its rights or remedies created by, connected with
or provided for in this Sublease, whether or not any action or
proceeding is brought (including, without limitation, all such
costs, expenses and fees incurred in connection with any
bankruptcy, receivership, or other court proceedings [whether
at the trial or the appellate level]).
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14.8 NOTICES
A. TO AUTHORITY
Notices to Authority in connection with this Sublease shall be
sufficiently served if physically delivered or sent by
certified mail, postage prepaid, addressed to Authority at the
address shown for it on the cover page of this Lease, with a
coy to Property Manager.
B. TO TENANT
Notices to Tenant in connection with this Sublease shall be
sufficiently served if physically delivered or sent by regular
mail, postage prepaid, addressed to Tenant at the address
shown for it above, provided that notice of utility
interference shall be sufficiently served if Authority gives
said notice to the current supervisor of Tenant's operations
on the Premises.
C. TIMING
Service of any notice or demand by physical delivery shall be
deemed complete upon the date of delivery. Service of any
notice or demand by certified mail shall be deemed complete at
the expiration of three (3) days after the date of the
certified mailing if mailed within the continental United
States.
D. CHANGE IN ADDRESS
Each party may change its address to such other addresses as
such party may designate to the other in writing from time to
time.
14.9 AUTHORITY TO EXECUTE
Each party represents and warrants to the other that it has the right
and authority to enter into this Sublease.
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<PAGE> 28
IN WITNESS WHEREOF the parties have executed this Sublease as of the
day and year first above written.
TUCSON AIRPORT AUTHORITY, INC.,
an Arizona nonprofit corporation
By:
-------------------------------------
Its:
-------------------------------------
"AUTHORITY"
AAS-COMPLETE CONTROLS, INC.
an Arizona Corporation
By:
-------------------------------------
Micah Chapman
President
"TENANT"
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<PAGE> 29
EXHIBIT A
[DIAGRAM OF PREMISES]
<PAGE> 30
EXHIBIT B
USE OF PREMISES
TENANT: AMERICAN AIR CARRIERS SUPPORT - COMPLETE CONTROLS, INC.
USE OF PREMISES: MAINTENANCE, REPAIR AND OVERHAUL FACILITY
SPECIALIZING IN FLIGHT CONTROL SURFACES -STORAGE OF
AIRPLANE PARTS
<PAGE> 31
EXHIBIT C
RENT SCHEDULE
YEAR MONTHLY RENT
2000 $9,114.00
2001 $9,114.00
2002 $9,478.56
2003 $9,857.01
2004 $10,252.02
2005 $10,662.10
2006 $11,088.50
2007 $11,532.14
2008 $11,993.43
2009 $12,473.17
<PAGE> 1
EXHIBIT 10.5.13
LANDLORD: GRAN CENTRAL CORPORATION,
a Florida corporation
c/o Codina Real Estate Management, Inc.
9955 N.W. 116 Way, Suite 10
Medley, Florida 33178
TENANT: AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED, A DELAWARE CORPORATION
DATE OF EXECUTION: 8 APRIL 1999
- --------------------------------------------------------------------------------
LEASE-INDUSTRIAL COMMERCIAL
- --------------------------------------------------------------------------------
Revised form 2/5/1999
<PAGE> 2
LEASE SUMMARY
The following is a summary of basic lease provisions with respect to the
Lease. It is an integral part of the Lease, and terms defined or dollar amounts
specified in this Summary shall have the meanings or amounts as stated, unless
expanded upon in the text of the Lease and its Exhibits, which are attached to
and made a part of this Summary.
<TABLE>
<S> <C> <C>
1. Date of Lease Execution:
2. "Landlord": Gran Central Corporation
3. Landlord's Address: c/o Codina Real Estate Management, Inc.
9955 N.W. 116 Way, Suite 10
Medley, Florida 33178
Attention: Property Manager
4. "Tenant": AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED, A DELAWARE CORPORATION
5. Tenant's Address: AMERICAN AIRCARRIERS SUPPORT, INCORPORATED
P.O. BOX 7566
CHARLOTTE, NC 28241
587 GREENWAY INDUSTRIAL DRIVE
FORT MILLS, SC 29725
With a copy to: C/O GRAY, LAYTON, KERSH, SOLOMON,
SIGMON, FURR & SMITH, P.A.
516 SOUTH NEW HOPE ROAD
GASTONIA, NC 28053-2636
ATTN: EMILY D. HARRISON, ESQ.
IF TENANT IS NO LONGER AT THE
ABOVE ADDRESS, THEN NOTICE MAY BE
GIVEN TO TENANT OR AAS-AMJET,
INC., A FLORIDA CORPORATION, AT
THE PREMISES. SERVICE OF PROCESS
MAY BE MADE ON TENANT BY SERVICE
OF PROCESS UPON AAS-AMJET, INC.,
A FLORIDA CORPORATION, AT THE
PREMISES OR AS OTHERWISE
PERMITTED BY LAW.
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
6. "Guarantor": None, so long as AMERICAN AIRCARRIERS
SUPPORT, INCORPORATED remains the Tenant
7. Guarantor's Address: N/A
8. Premises (section 1.1): A PORTION OF BUILDING #23, BEACON
STATION AT GRAN PARK, NW 100TH ST.
AND 108TH AVE, MIAMI, FLORIDA, TO BE
CONSTRUCTED, COMPRISING THE WESTERLY
17 BAYS, APPROXIMATELY as shown on
Exhibit "A"
9. Building No.: #23, Beacon Station at Gran Park
10. Gross Rentable Area of Approximately 138,005 rentable square
Premises (section 1.1): feet
11. Gross Rentable Area of Approximately 179,832 rentable square
Building (section 1.1): feet
12. Tenant's Proportionate
Share (section 2.3): 77%
13. Permitted Use of
Premises (section 3.1): warehousing and distribution, and
related business offices, AND JET AIRCRAFT
ENGINE OVERHAUL (IN CONFORMITY WITH
ALL GOVERNMENTAL AND REGULATORY AND
INSURANCE REQUIREMENTS) OF AAS-
AMJET, INC., A FLORIDA CORPORATION
WHICH IS A WHOLLY OWNED SUBSIDIARY
OF TENANT.
14. Term of Lease (section 1.1): TEN (10) years AND THREE (3) MONTHS
"Commencement Date":THE EARLIER OF
(A) SEPTEMBER 1, 1999 OR (B) THE DATE
OF THE ISSUANCE OF A CERTIFICATE OF
COMPLETION FOR THE PREMISES
"EXPIRATION DATE": THAT DATE WHICH IS
TEN (10) YEARS AND THREE (3) MONTHS
AFTER THE FIRST DAY OF THE FIRST FULL
CALENDAR MONTH AFTER THE
COMMENCEMENT DATE
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C> <C>
15. Option to Renew (Rider 1, TWO (2) FIVE (5)-YEAR OPTIONS TO RENEW
if applicable): AS DESCRIBED IN RIDER 1 TO THIS LEASE.
16. "Minimum Rent" (section 2.2): the following rent, plus sales tax
</TABLE>
<TABLE>
<CAPTION>
LEASE YEAR (OR ANNUAL MINIMUM ANNUAL MONTHLY PAYMENT
PORTION THEREOF) RENT RATE PER MINIMUM RENT (PLUS SALES TAX)
SQUARE FOOT
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 $6.10 $841,830.50 $70,152.54
2 $6.31 $870,811.55 $72,567.63
3 $6.53 $901,172.65 $75,097.72
4 $6.76 $932,913.80 $77,742.82
5 $7.00 $966,035.00 $80,502.92
6 $7.25 $1,000,536.25 $83,378.02
7 $7.50 $1,035,037.50 $86,253.13
8 $7.76 $1,070,918.80 $89,243.23
9 $8.03 $1,108,180.15 $92,348.35
10 $8.31 $1,146,821.55 $95,568.46
11 (three months) $8.60 $1,186,843.00 $98,903.58]
- -----------------------------------------------------------------------------------------
</TABLE>
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS LEASE, PROVIDED THIS LEASE IS
THEN IN GOOD STANDING AND TENANT IS NOT IN DEFAULT, MINIMUM RENT FOR THE FIRST
FULL THREE (3) MONTHS OF THE LEASE TERM SHALL BE ABATED. THE FOREGOING SHALL NOT
ALTER TENANT'S OBLIGATION TO DELIVER ALL AGREED PREPAID RENT TO LANDLORD UPON
EXECUTION OF THIS LEASE, AND SUCH PREPAID RENT SHALL BE APPLIED TO THE FIRST
FULL MONTH OF THE LEASE TERM FOLLOWING THE THREE MONTHS FOR WHICH MINIMUM RENT
IS ABATED. IF TENANT SHALL BE IN MONETARY DEFAULT, OR MATERIAL NONMONETARY
DEFAULT, UNDER THIS LEASE, WHICH IS NOT CURED WITHIN APPLICABLE GRACE PERIODS,
IF ANY, THEN THIS MINIMUM RENT ABATEMENT SHALL BE CANCELED AND TENANT SHALL OWE
LANDLORD THE MINIMUM RENT WHICH THERETOFORE HAD BEEN ABATED AND NOT PAID BY
TENANT.
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<PAGE> 5
<TABLE>
<S> <C> <C>
17. Prepaid Rent: $79,712.46 (includes sales tax) (due
upon execution of Lease; to be applied
to first full month Minimum Rent is due)
18. Security Deposit (section 2.6): $148,451.63 (excludes sales tax)
(due upon execution of Lease)
19. Cost Pass-Throughs
(section 2.3): Operating Costs
20. Base Year (section 2.3): 2000
21. Comprehensive General
Liability Insurance
(section 6.1): $2,000,000.00
22. No. of Parking Spaces: 170 unassigned SPACES
23. Broker(s) (section 13.12): Codina Realty Services, Inc.o ONCOR
International, which represents
Landlord, AND LINCOLN PROPERTY
COMPANY, INC., WHICH REPRESENTS
TENANT
23. SPECIAL PROVISIONS: RIGHT OF FIRST REFUSAL: PROVIDED THAT
THIS LEASE IS THEN IN GOOD STANDING
AND IN FULL FORCE AND EFFECT AND THAT
TENANT IS NOT IN DEFAULT AND NO
CONDITION EXISTS WHICH WITH NOTICE OR
PASSAGE OF TIME WOULD CONSTITUTE A
DEFAULT, TENANT SHALL HAVE A RIGHT OF
FIRST REFUSAL FOR SPACE THAT BECOMES
AVAILABLE IN THE BUILDING, WHICH IS
THEN CONTIGUOUS TO THE PREMISES AS
THEN CONFIGURED, WHICH RIGHT OF FIRST
REFUSAL SHALL BE IN EFFECT UNTIL THREE
(3) YEARS BEFORE THE TERMINATION DATE
OF THIS LEASE, UPON THE FOLLOWING
TERMS AND CONDITIONS. LANDLORD SHALL
GIVE TENANT NOTICE OF SUCH SPACE,
AND THE MARKET RENT THEREFOR, AFTER
WHICH TENANT SHALL HAVE TEN (10) DAYS
</TABLE>
-iv-
<PAGE> 6
<TABLE>
<S> <C> <C>
IN WHICH TO REACH AGREEMENT AS TO
THE LEASE TERMS (WHICH SHALL
INCLUDE A TERMINATION DATE WHICH
IS COTERMINOUS WITH THE
TERMINATION DATE OF THIS LEASE,
AS TO THE PREMISES ORIGINALLY
LEASED); IF TENANT DOES NOT
ACCEPT SUCH PREMISES AND EXECUTE
A LEASE ON LANDLORD'S
THEN-CURRENT FORM, OR AS A
MODIFICATION OF THIS LEASE
(WHICHEVER LANDLORD MAY
DESIGNATE), WITHIN SUCH TIME
FRAME, LANDLORD MAY CONTRACT WITH
A THIRD PARTY FOR SUCH SPACE AND
TENANT SHALL HAVE NO FURTHER
RIGHTS IN REGARD TO THAT SPACE.
LANDLORD MAY, HOWEVER, SHOW THE
SPACE AND WORK WITH THIRD PARTIES
AT ANY TIME, AS TO ANY SUCH
SPACE, SO LONG AS LANDLORD GIVES
TENANT THE OPPORTUNITY TO
EXERCISE ITS RIGHT OF FIRST
REFUSAL AS DESCRIBED IN THIS
PARAGRAPH.]
</TABLE>
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<PAGE> 7
THIS LEASE (the "Lease"), dated the 8th day of April, 1999, is made
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED, A DELAWARE CORPORATION (the
"Tenant").
ARTICLE I. TERM.
1.1 Grant; Term. In consideration of the performance by the Tenant of its
obligations under this Lease, the Landlord leases to the Tenant, and the Tenant
leases from the Landlord, for the Term, the "Premises," which Premises are shown
outlined on the floor plan attached hereto and made a part hereof as Exhibit
"A." The Premises are located in that certain building in Gran Park at Beacon
Centre (the "Building"), located in Miami-Dade County, Florida, as more
particularly described in Exhibit "B," attached hereto and made a part hereof.
The gross rentable area of the Premises and Building are approximately as shown
on the Lease Summary.
The "Term" of the Lease is the period from the Commencement Date
as specified in the Lease Summary, through the Expiration Date, as specified in
the Lease Summary. If the Premises are ready for occupancy prior to the
Commencement Date, then Tenant shall take occupancy on such date and Tenant's
obligations to pay Minimum Rent and all other charges shall commence on such
date. If Landlord cannot deliver possession of the Premises to Tenant on the
Commencement Date, this Lease shall not be void or voidable, nor shall Landlord
be liable to Tenant for any loss or damage resulting therefrom, but in that
event, this Lease shall in all ways remain in full force and effect except that
Minimum Rent and other charges shall be waived for the period between the
Commencement Date and the time when Landlord can deliver possession; provided,
however, if delivery of possession is delayed more than ninety (90) days past
the scheduled Commencement Date, Tenant may terminate this Lease upon fifteen
(15) days' written notice to Landlord, whereupon both parties shall be relieved
of all further obligations hereunder. Notwithstanding the foregoing, if delivery
of possession is delayed due to any act or omission of Tenant, then the
Commencement Date shall be the date Landlord would have delivered possession,
but for Tenant's delay.
The Landlord shall have no construction or improvement obligations
with respect to the Premises unless expressly set forth in a work letter
agreement, which, if executed by Landlord and Tenant, shall be incorporated as
an exhibit to this Lease. Upon the expiration of five (5) business days
following the Commencement Date, the Premises shall be conclusively deemed to be
accepted by Tenant unless Tenant shall have given Landlord written notice of any
contended defects in the Premises.
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<PAGE> 8
ARTICLE II. RENT.
2.1 Covenant to Pay. The Tenant shall pay to Landlord all sums due
hereunder from time to time from the Commencement Date without prior demand,
together with all applicable Florida sales tax thereon; however, unless
otherwise provided in this Lease, payments other than Tenant's regular monthly
payments of Minimum Rent and Operating Costs shall be payable by Tenant to
Landlord within five (5) days following demand. All rent or other charges that
are required to be paid by Tenant to Landlord shall be payable at Landlord's
address indicated on the Lease Summary. Minimum Rent and Additional Rent for any
"Lease Year" consisting of less than twelve (12) months shall be prorated on a
per diem basis, based upon a period of 365 days. "Lease Year" means the twelve
(12) full calendar months commencing on the Commencement Date. However, the
final Lease Year may contain less than twelve (12) months due to expiration or
sooner termination of the Term. The Tenant agrees that its covenant to pay rent
and all other sums under this Lease is an independent covenant and that all such
amounts are payable without counterclaim, set-off, deduction, abatement, or
reduction whatsoever, except as expressly provided for in this Lease.
2.2 Minimum Rent. Subject to any escalation which may be provided for in
this Lease, the Tenant shall pay Minimum Rent for the Term in the initial amount
specified in the Lease Summary, which, except for the first installment, shall
be payable throughout the Term in equal monthly installments in advance on the
first day of each calendar month of each year of the Term, such monthly
installments to be in the amounts (subject to escalation) specified in the Lease
Summary. The first monthly installment of Minimum Rent shall be due on the date
of this Lease. The Minimum Rent described above shall be adjusted at the
beginning of the second and each succeeding Lease Year during the Term of this
Lease as provided in the Lease Summary.
2.3 Operating Costs. The Tenant shall pay to the Landlord the Tenant's
proportionate share of the amount by which the annual Operating Costs, as
hereinafter defined, for each calendar year exceed the Operating Costs incurred
during the Base Year specified in the Lease Summary. Such excess is referred to
for purposes of this Lease as the "Increased Operating Costs." Tenant's
obligation to pay its proportionate share of Increased Operating Costs shall
commence as of the beginning of the first full calendar year following the Base
Year. The amount of Increased Operating Costs payable to the Landlord may be
estimated by the Landlord for such period as the Landlord determines from time
to time (not to exceed twelve (12) months), and the Tenant agrees to pay to the
Landlord the amounts so estimated in equal installments, in advance, on the
first day of each month during such period. Notwithstanding the foregoing, when
bills for all or any portion of Increased Operating Costs so estimated are
actually received by Landlord, the Landlord may bill the Tenant for the Tenant's
-2-
<PAGE> 9
proportionate share thereof, less any amount previously paid by Tenant to
Landlord on account of such item(s) by way of estimated Increased Operating
Costs payments.
Within a reasonable period of time after the end of the Period for
which estimated payments have been made, the Landlord shall submit to the Tenant
a statement from the Landlord setting forth the actual amounts payable by the
Tenant based on actual costs. If the amount the Tenant has paid based on
estimates is less than the amount due based on actual costs, the Tenant shall
pay such deficiency within fifteen (15) days after submission of such statement.
If the amount paid by the Tenant is greater than the amount actually due, the
excess may be retained by the Landlord to be credited and applied by the
Landlord to the next due installments of the Tenant's proportionate share of
Increased Operating Costs, or as to the final Lease Year, provided Tenant is not
in default, Landlord will refund such excess to Tenant. The Tenant's
proportionate share of actual Increased Operating Costs for the final estimate
period of the Term of this Lease shall be due and payable even though it may not
be finally calculated until after the expiration of the Term. Accordingly,
Landlord shall have the right to continue to hold Tenant's security deposit
following expiration of the Term until Tenant's share of actual Increased
Operating Costs has been paid.
For purposes of this Lease, Tenant's proportionate share shall be
a fraction, the numerator of which is the gross rentable area of the Premises,
and the denominator of which is the gross rentable area of the Building (which
is as set forth in the Lease Summary). Tenant's proportionate share is as set
forth in the Lease Summary. The term "Operating Costs" shall mean any amounts
paid or payable whether by the Landlord or by others on behalf of the Landlord,
arising out of Landlord's maintenance, operation, repair, replacement (if such
replacement increases operating efficiency) and administration of the Building
and Common Areas, including, without limitation: (i) the cost of all real
estate, personal property and other ad valorem taxes, and any other levies,
charges, local improvement rates, and assessments whatsoever assessed or charged
against the Building and Common Areas, the equipment and improvements therein
contained, and including any amounts assessed or charged in substitution for or
in lieu of any such taxes, excluding only income or capital gains taxes imposed
upon Landlord, and including all costs associated with the appeal of any
assessment on taxes; (ii) the cost of insurance which the Landlord is obligated
or permitted to obtain under this Lease and any deductible amount applicable to,
any claim made by the Landlord under such insurance; (iii) the cost of security,
(iv) the cost of landscaping, and (v) a reasonable management fee.
2.4 Payment of Personal Property Taxes. Tenant shall pay, when due, all
taxes attributable to the personal property, trade fixtures, business,
occupancy, or sales of Tenant or any other occupant of the Premises and to the
use of the Building by Tenant or such other occupant.
-3-
<PAGE> 10
2.5 Rent Past Due. If any payment due from Tenant shall be overdue, a
late charge of five (5%) percent of the delinquent sum may be charged by
Landlord. If any payment due from Tenant shall remain overdue for more than
fifteen (15) days, an additional late charge in an amount equal to the lesser of
the highest rate permitted by law or one and one-half (1 1/2%) percent per month
(eighteen (18%) percent per annum) of the delinquent amount may be charged by
Landlord, such charge to be computed for the entire period for which the amount
is overdue and which shall be in addition to and not in lieu of the five (5%)
percent late charge or any other remedy available to Landlord.
2.6 Security Deposit. The Landlord acknowledges receipt of a security
deposit in the amount specified on the Lease Summary to be held by the Landlord,
without any liability for interest thereon, as security for the performance by
the Tenant of all its obligations under this Lease. Landlord shall be entitled
to commingle the security deposit with Landlord's other funds. If Tenant
defaults in any of its obligations under this Lease, the Landlord may at its
option, but without prejudice to any other rights which the Landlord may have,
apply all or part of the security deposit to compensate the Landlord for any
loss, damage, or expense sustained by the Landlord as a result of such default.
If all or any part of the security deposit is so applied, the Tenant shall
restore the security deposit to its original amount on demand of the Landlord.
Subject to the provisions of section 2.3, within thirty (30) days following
termination of this Lease, if the Tenant is not then in default, any remaining
security deposit will be returned by the Landlord to the Tenant.
2.7 [INTENTIONALLY DELETED]
ARTICLE III. USE OF PREMISES.
3.1 Permitted Use. The Premises shall be used and occupied only for the
use specified in the Lease Summary. Tenant shall carry on its business on the
Premises in a reputable manner and shall not do, omit, permit, or suffer to be
done or exist upon the Premises anything which shall result in a nuisance,
hazard, or bring about a breach of any provision of this Lease or any applicable
municipal or other governmental law or regulation. Tenant shall observe all
reasonable rules and regulations established by Landlord from time to time for
the Building. The rules and regulations in effect as of the date hereof are
attached to and made a part of this Lease as Exhibit "C." The names for the
Building and the business park of which the Building is a part, which the
Landlord may from time to time adopt, and every name or mark adopted by the
Landlord in connection with the Building shall be used by the Tenant only in
association with the business carried on in the Premises during the Term and the
Tenant's use thereof shall be subject to such regulation as the Landlord may
from time to time impose.
-4-
<PAGE> 11
3.2 Compliance with Laws. The Premises shall be used and occupied in a
safe, careful, and proper manner so as not to contravene any present or future
governmental or quasi governmental laws, regulations, or orders, or the
requirements of the Landlord's or Tenant's insurers. If due to the Tenant's use
of the Premises, repairs, improvements, or alterations are necessary to comply
with any of the foregoing, the Tenant shall pay the entire cost thereof.
3.3 Signs. Except with the prior written consent of the Landlord, the
Tenant shall not erect, install, display, inscribe, paint, or affix any signs,
lettering, or advertising medium upon or above any exterior portion of the
Premises. Any exterior signage shall be installed by Tenant at Tenant's expense,
and such signage shall comply with Landlord's sign criteria as adopted from time
to time. The design and specification of such signage (including camera-ready
artwork) shall be submitted for Landlord's prior written approval.
3.4 Environmental Provisions. Tenant warrants and represents that it will
not use or employ Landlord's or the Building property, facilities, equipment or
services to handle, transport, treat or dispose of any hazardous waste or
hazardous or regulated substance ("Hazardous Materials"), except cleaning
supplies used in the ordinary course of business and in accordance with all
Legal Requirements, whether or not it shall have been generated or produced on
the Premises. Tenant further warrants and represents that any activity on or
relating to the Premises shall be conducted in full compliance with all
applicable Legal Requirements. "Legal Requirement(s)"is defined as any law,
statute, code, rule, regulation, ordinance, order, judgment, decree, writ,
injunction, franchise, permit, certificate, license, authorization,
registration, or other direction or requirement of any Legal Authority, which is
now or in the future applicable to the Premises or the Building, including those
not within the present contemplation of the parties. "Legal Authority" is
defined as any domestic or foreign, federal, state, county, municipal, or other
government or governmental or quasi-governmental department, commission, board,
bureau, court, agency, or instrumentality having jurisdiction or authority over
Landlord, Tenant, or all or any part of the Building.
If Tenant's activities at the Premises or Tenant's use of the Premises (a)
results in a release of Hazardous Materials which is not in compliance with
Legal Requirements; (b) gives rise to liability or a claim or requires a
response under common law or any Legal Requirement; (c) causes a significant
public health effect; or (d) creates a nuisance, then Tenant, in any and all
such occurrences and at its sole cost and expense, shall: (i) immediately notify
Landlord verbally and in writing of any such release, which notice shall
identify the Hazardous Materials involved and the emergency procedures taken or
to be taken; and (ii) promptly take all appropriate action in response to such
situation, in compliance with all applicable Legal requirements, provided that
Tenant shall first obtain Landlord's approval of the remediation plan to be
undertaken.
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<PAGE> 12
Tenant shall give written notice to Landlord immediately of any production,
generation, handling, storage, treatment, transportation, disposal, release or
removal of any Hazardous Materials from or on the Premises whether or not
permitted by this Lease. Such requirement for notification of Landlord shall not
constitute Landlord's consent for such activities to be conducted on the
Premises.
Tenant agrees to defend, indemnify and hold harmless Landlord against any and
all claims, costs, expenses, damages, liability and the like, which Landlord may
hereafter be liable for, suffer, incur or pay under any applicable laws and
resulting from, related to, or arising out of any breach of the warranties and
representations contained in this Section 3.4, or out of any act, activity or
violation of any applicable laws or regulations on the part of Tenant, its
agents, employees or assigns. Tenant's liability under this Section 3.4 shall
survive the expiration or any termination of this Lease.
Tenant shall pay when due any judgments or claims for damages, penalties or
otherwise against Landlord, and shall assume the burden and expense of defending
all suits, and defending or otherwise participating in all administrative
proceedings and the resolutions of any description with all persons or Legal
Authorities resulting from, related to, or arising out of the matters
indemnified against. If Landlord retains counsel for advice or other
representation (i) with respect to this provision of the Lease, (ii) in any
litigation, contest, dispute, suit or proceeding (whether instituted by
Landlord, Tenant or any other party) in any way relating to this provision of
the Lease or the indemnities described herein, or (iii) to enforce Tenant's
obligations hereunder, then all of the reasonable attorneys' (including
paralegals') fees arising from such services and all related expenses and court
costs (including bankruptcy, appellate and collection matters) shall be payable
on demand by Tenant to Landlord.
The representations, warranties and indemnities of Tenant contained in this
section shall survive the termination of the Lease.
ARTICLE IV. ACCESS AND ENTRY.
4.1 Right of Examination. The Landlord shall be entitled at all
reasonable times and upon reasonable notice (but no notice is required in
emergencies) to enter the Premises to examine them; to make such repairs,
alterations, or improvements thereto as the Landlord considers necessary or
reasonably desirable; to have access to underfloor facilities and access panels
to mechanical shafts and to check, calibrate, adjust, and balance controls and
other parts of the heating, air conditioning, ventilating, and climate control
systems. The Landlord reserves to itself the right to install, maintain, use,
and repair pipes, ducts, conduits, vents, wires, and other installations leading
in, through, over, or under the Premises and for this purpose, the Landlord may
take all material into and upon the Premises which is required therefor. The
Tenant shall not unduly obstruct any pipes, conduits, or mechanical or other
electrical
-6-
<PAGE> 13
equipment so as to prevent reasonable access thereto. The Landlord reserves the
right to use all exterior walls and roof area. The Landlord shall exercise its
rights under this section, to the extent possible in the circumstances, in such
manner so as to minimize interference with the Tenant's use and enjoyment of the
Premises.
4.2 Right to Show Premises. The Landlord and its agents have the right to
enter the Premises at all reasonable times and upon reasonable notice to show
them to prospective purchasers, lenders, or anyone having a prospective interest
in the Building, and, during the last six months of the Term (or the last six
(6) months of any renewal term if this Lease is renewed), to show them to
prospective tenants.
ARTICLE V. MAINTENANCE, REPAIRS, AND ALTERATIONS.
5.1 Maintenance and Repairs by Landlord. The Landlord covenants to keep
the following in good repair as a prudent owner: (i) the structure of the
Building including exterior walls and roofs; and (ii) the entrances, sidewalks,
corridors, parking areas and other facilities from time to time comprising the
Common Areas. The cost of such maintenance and repairs shall be included in
Operating Costs. So long as the Landlord is acting in good faith, the Landlord
shall not be responsible for any damages caused to the Tenant by reason of
failure of any equipment or facilities serving the Building or delays in the
performance of any work for which the Landlord is responsible pursuant to this
Lease. Notwithstanding any other provisions of this Lease, if any part of the
Building is damaged or destroyed or requires repair, replacement, or alteration
as a result of the act or omission of the Tenant, its employees, agents,
invitees, licensees, or contractors, Landlord shall have the right to perform
same and the cost of such repairs, replacement, or alterations shall be paid by
the Tenant to the Landlord upon demand. In addition, if, in an emergency, it
shall become necessary to make promptly any repairs or replacements required to
be made by Tenant, Landlord may re-enter the Premises and proceed forthwith to
have the repairs or replacements made and pay the costs thereof. Upon demand,
Tenant shall reimburse Landlord for the cost of making the repairs.
5.2 Maintenance and Repairs by Tenant. The Tenant shall, at its sole
cost, repair and maintain the Premises including, but not limited to, base
building mechanical and electrical systems, all to a standard consistent with a
first class building, with the exception only of those repairs which are the
obligation of the Landlord pursuant to this Lease. Without limiting the
generality of the foregoing, Tenant is specifically required to maintain and
make repairs to (i) the portion of any pipes, lines, ducts, wires, or conduits
contained within the Premises; (ii) windows, plate glass, doors, and any
fixtures or appurtenances composed of glass; (iii) Tenant's sign; (iv) any
heating or air conditioning equipment serving the Premises ("HVAC") (which shall
include, without limitation, a preventive maintenance HVAC service contract,
which service contract shall be entered into between Tenant and one of
Landlord's approved HVAC
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<PAGE> 14
contractors[; such service contract shall include, without limitation,
preventive HVAC maintenance no less than quarterly); (v) the Premises or the
Building when repairs to the same are necessitated by any act or omission of
Tenant, or the failure of Tenant to perform its obligations under this Lease.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS LEASE, LANDLORD WILL BE
RESPONSIBLE FOR THE REPLACEMENT OF THE HVAC AIR HANDLER AND COMPRESSOR WHICH
SERVICE THE OFFICE SPACE (AND NOT THE WAREHOUSE SPACE) IN THE PREMISES, PROVIDED
TENANT SHALL HAVE MAINTAINED THE SERVICE CONTRACT, HAD ALL ROUTINE MAINTENANCE
CHECKS PROVIDED FOR UNDER THE CONTRACT, AND REPAIRED THE EQUIPMENT AS NEEDED,
AND PROVIDED THE REPLACEMENT IS NOT REQUIRED BECAUSE OF TENANT'S GROSS
NEGLIGENCE OR WILLFUL MALFEASANCE. All repair and maintenance performed by the
Tenant in the Premises shall be performed by contractors or workmen designated
or approved by the Landlord. At the expiration or earlier termination of the
Term, the Tenant shall surrender the Premises to the Landlord in as good
condition and repair as the Tenant is required to maintain the Premises
throughout the Term. Tenant shall also furnish, maintain, and replace all
electric light bulbs, tubes, and tube casings located within or serving the
Premises and Tenant's signage, all at Tenant's sole cost and expense. Landlord
will assign to Tenant the benefit of any manufacturer's warranties with respect
to the mechanical, electrical, and plumbing systems.
5.3 Approval of Tenant's Alterations. No alterations (including, without
limitation, repairs, replacements, additions, or modifications to the Premises
by Tenant), other than minor or cosmetic alterations which are interior and
nonstructural, shall be made to the Premises without the Landlord's written
approval, which, as to exterior or structural alterations may be withheld in
Landlord's sole discretion. Any alterations by Tenant shall be performed at the
sole cost of the Tenant, by contractors and workmen approved by the Landlord, in
a good and workmanlike manner, and in accordance with all applicable laws and
regulations.
5.4 Removal of Improvements and Fixtures. All leasehold improvements
(other than unattached, movable trade fixtures which can be removed without
damage to the Premises) shall at the expiration or earlier termination of this
Lease become the Landlord's property. The Tenant may, during the Term, in the
usual course of its business, remove its trade fixtures, provided that the
Tenant is not in default under this Lease; and the Tenant shall, at the
expiration or earlier termination of the Term, at its sole cost, remove such of
the leasehold improvements (except for improvements installed by Landlord prior
to the Commencement Date) and trade fixtures in the Premises as the Landlord
shall require to be removed and restore the Premises to the condition existing
prior to such removal. The Tenant shall at its own expense repair any damage
caused to the Building by such removal. If the Tenant does not remove its trade
fixtures at the expiration or earlier termination of the Term, the trade
fixtures shall, at the option of the Landlord, become the property of the
Landlord and may be removed
-8-
<PAGE> 15
from the Premises and sold or disposed of by the Landlord in such manner as it
deems advisable without any accounting to Tenant.
5.5 Liens. The Tenant shall promptly pay for all materials supplied and
work done in respect of the Premises so as to ensure that no lien is recorded
against any portion of the Building or against the Landlord's or Tenant's
interest therein. If a lien is so recorded, the Tenant shall discharge it
promptly by payment or bonding. If any such lien against the Building or
Landlord's interest therein is recorded and not discharged by Tenant as above
required within fifteen (15) days following recording, the Landlord shall have
the right to remove such lien by bonding or payment and the cost thereof shall
be paid immediately from Tenant to Landlord. Landlord and Tenant expressly agree
and acknowledge that no interest of Landlord in the Premises or the Building
shall be subject to any lien for improvements made by Tenant in or for the
Premises, and the Landlord shall not be liable for any lien for any improvements
made by Tenant, such liability being expressly prohibited by the terms of this
Lease. In accordance with applicable law's of the State of Florida, Landlord has
filed in the Public Records of Miami-Dade County, Florida, a public notice
containing a true and correct copy of this paragraph, and Tenant hereby agrees
to inform all contractors and materialmen performing work in or for or supplying
materials to the Premises of the existence of said notice.
5.6 Utilities. The Tenant shall pay to the Landlord, or as the Landlord
directs, all gas, electricity, water, and other utility charges applicable to
the Premises as separately metered or, if not so metered, as part of Tenant's
proportionate share of Increased Operating Costs. The Tenant shall pay the cost
of janitorial, garbage removal, and trash removal services for the Premises and
the cost of heating, ventilating, and air conditioning the Premises.
ARTICLE VI. INSURANCE AND INDEMNITY.
6.1 Tenant's Insurance. The Tenant shall, throughout the Term (and any
other period when Tenant is in possession of the Premises), maintain at its sole
cost the following insurance:
(A) All risks property insurance, naming the Tenant and the
Landlord as insured parties, containing a waiver of subrogation rights which the
Tenant's insurers may have against the Landlord and against those for whom the
Landlord is in law responsible including, without limitation, its directors,
officers, agents, and employees, and (except with respect to the Tenant's
chattels) incorporating a standard New York mortgagee endorsement (without
contribution). Such insurance shall insure property of every kind owned by the
Tenant in an amount not less than the full replacement cost thereof (new), with
such cost to be adjusted no less than annually.
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(B) Comprehensive general liability insurance. Such policy shall
contain inclusive limits per occurrence of not less than the amount specified in
the Lease Summary; provide for cross liability; and include the Landlord and any
mortgagee of Landlord as additional insureds.
(C) Worker's compensation and employer's liability insurance in
compliance with applicable legal requirements.
(D) Any other form of insurance which the Tenant or the Landlord,
acting reasonably, requires from time to time in form, in amounts, and for risks
against which a prudent tenant would insure.
All Policies referred to above shall: (i) be taken out with insurers
licensed to do business in Florida and reasonably acceptable to the Landlord;
(ii) be in a form reasonably satisfactory to the Landlord; (iii) be
non-contributing with, and shall apply only as primary and not as excess to any
other insurance available to the Landlord or any mortgagee of Landlord; (iv)
contain an undertaking by the insurers to notify the Landlord by certified mail
not less than thirty (30) days prior to any material change, cancellation, or
termination, and (v) with respect to subsection (A), contain replacement cost,
demolition cost, and increased cost of construction endorsements. Certificates
of insurance on the Landlord's standard form or, if required by a mortgagee,
copies of such insurance policies certified by an authorized officer of Tenant's
insurer as being complete and current, shall be delivered to the Landlord
promptly upon request. If a) the Tenant fails to take out or to keep in force
any insurance referred to in this section 6.1, or should any such insurance not
be approved by either the Landlord or any mortgagee, and b) the Tenant does not
commence and continue to diligently cure such default within forty-eight (48)
hours after written notice by the Landlord to the Tenant specifying the nature
of such default, then the Landlord has the right, without assuming any
obligation in connection therewith, to effect such insurance at the sole cost of
the Tenant and all outlays by the Landlord shall be paid by the Tenant to the
Landlord without prejudice to any other rights or remedies of the Landlord under
this Lease. The Tenant shall not keep or use in the Premises any article which
may be prohibited by any fire or casualty insurance policy in force from time to
time covering the Premises or the Building.
6.2 Loss or Damage. The Landlord shall not be liable for any death or
injury arising from or out of any occurrence in, upon, at, or relating to the
Building or damage to property of the Tenant or of others located on the
Premises or elsewhere in the Building, nor shall it be responsible for any loss
of or damage to any property of the Tenant or others from any cause, unless such
death, injury, loss, or damage results from the gross negligence or willful
misconduct of the Landlord. Without limiting the generality of the foregoing,
the Landlord shall , not be liable for any injury or damage to persons or
property resulting from fire, explosion, falling plaster, falling ceiling tile,
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falling fixtures, steam, gas, electricity, water, rain, flood, or leaks from any
part of the Premises or from the pipes, sprinklers, appliances, plumbing works,
roof, windows, or subsurface of any floor or ceiling of the Building or from the
street or any other place or by dampness, or by any other cause whatsoever. The
Tenant agrees to indemnify the Landlord and hold it harmless from and against
any and all loss (including loss of Minimum Rent and additional rent payable in
respect to the Premises), claims, actions, damages, liability, and expense of
any kind whatsoever (including attorneys' fees and costs at all tribunal
levels), unless caused by the gross negligence or willful misconduct of Landlord
or its agents, arising from any occurrence in, upon, or at the Premises, or the
occupancy, use, or improvement by the Tenant or its agents or invitees of the
Premises or any part thereof, or occasioned wholly or in part by any act or
omission of the Tenant its agents, employees, and invitees or by anyone
permitted to be on the Premises by the Tenant.
6.3 Landlord's Insurance. The Landlord shall throughout the Term carry:
(i) "all risk insurance on the Building and the machinery and equipment
contained therein or servicing the Building and owned by the Landlord (excluding
any property with respect to which the Tenant and other tenants are obliged to
insure pursuant to section 6.1 or similar sections of their respective leases);
(ii) public liability and property damage insurance with respect to the
Landlord's operations in the Building; and (iii) such other forms of insurance
as the Landlord or its mortgagee reasonably considers advisable. Such insurance
shall be in such reasonable amounts and with such reasonable deductibles as
would be carried by a prudent owner of a similar building, having regard to
size, age, and location.
ARTICLE VII. DAMAGE AND DESTRUCTION.
7.1 Damage to Premises. If the Premises are partially destroyed due to
fire or other casualty, the Landlord shall diligently repair the Premises, to
the extent of its obligations under section 5.1, and Minimum Rent shall abate
proportionately to the portion of the Premises, if any, rendered untenantable
from the date of destruction or damage until the Landlord's repairs have been
substantially completed. If the Premises are totally destroyed due to fire or
other casualty, the Landlord shall diligently repair the Premises to the extent
only of its obligations pursuant to section 5.1, and Minimum Rent shall abate
entirely from the date of destruction or damage to such date which is the
earlier of (i) the date tenantable, or (ii) thirty (30) days after Landlord's
repairs have been substantially completed. Upon being notified by the Landlord
that the Landlord's repairs have been substantially completed, the Tenant shall
diligently perform all other work required to fully restore the Premises for use
in the Tenant's business, in every case at the Tenant's cost and without any
contribution to such cost by the Landlord, whether or not the Landlord has at
any time made any contribution to the cost of supply, installation, or
construction of leasehold improvements in the Premises. Tenant agrees that
during any period of reconstruction or repair of the Premises, it will continue
the
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operation of its business within the Premises to the extent practicable. If all
or any part of the Premises shall be damaged by fire or other casualty and the
fire or other casualty is caused by the fault or neglect of Tenant or Tenant's
agents, guest, or invitees, rent and all other charges shall not abate.
7.2 Termination for Damage. Notwithstanding section 7.1, if damage or
destruction which has occurred to the Premises or the Building is such that in
the reasonable opinion of the Landlord such reconstruction or repair cannot be
completed within one hundred twenty (120) days of the happening of the damage or
destruction, the Landlord may, at its option, terminate this Lease on notice to
the Tenant given within thirty (30) days after such damage or destruction and
the Tenant shall immediately deliver vacant possession of the Premises in
accordance with the terms of this Lease.
ARTICLE VIII. ASSIGNMENT, SUBLEASES, AND TRANSFERS.
8.1 Transfer by Tenant. The Tenant shall not enter into, consent to, or
permit a "Transfer" as hereinafter defined, without the prior written consent of
the Landlord in each instance, which consent shall not be unreasonably withheld.
For purposes of this Lease, "Transfer" means an assignment of this Lease in
whole or in part; a sublease of all or any part of the Premises; any transaction
whereby the rights of the Tenant under this Lease or to the Premises are
transferred to another; any mortgage or encumbrance of this Lease or the
Premises or any part thereof or other arrangement under which either this Lease
or the Premises become security for any indebtedness or other obligations; and
if Tenant is a corporation or a partnership, the transfer of a controlling
interest in the stock of the corporation or partnership interests, as
applicable. If there is a permitted Transfer, the Landlord may collect rent or
other payments from the transferee and apply the net amount collected to the
rent or other payments required to be paid pursuant to this Lease but no
acceptance by the Landlord of any payments by a transferee shall be deemed a
waiver of any provisions hereof regarding Tenant. Notwithstanding any Transfer,
the Tenant shall not be released from any of its obligations under this Lease.
The Landlord's consent to any Transfer shall be subject to the further condition
that if the Minimum Rent and additional rent pursuant to such Transfer exceeds
the Minimum Rent and additional rent payable under this Lease, the amount of
such excess shall be paid to the Landlord. If, pursuant to a permitted Transfer,
the Tenant receives from the transferee, either directly or indirectly, any
consideration other than Minimum Rent and additional rent for such Transfer,
either in the form of cash, goods, or services, the Tenant shall, upon receipt
thereof, pay to the Landlord an amount equivalent to such consideration.
8.2 Assignment by Landlord. The Landlord shall have the unrestricted
right to sell, lease, convey, or otherwise dispose of the Building or any part
thereof and this Lease or any interest of the Landlord in this Lease. To the
extent that the purchaser
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or assignee from the Landlord assumes the obligations of the Landlord under this
Lease, the Landlord shall thereupon and without further agreement be released of
all further liability under this Lease. If the Landlord sells its interest in
the Premises, it shall deliver the security deposit to the purchaser and the
Landlord will thereupon be released from any further liability with respect to
the security deposit or its return to the Tenant and the purchaser shall become
directly responsible to Tenant.
ARTICLE IX. DEFAULT.
9.1 Defaults. A default by Tenant shall be deemed to have occurred
hereunder, if and whenever: (i) any Minimum Rent or Tenant's proportionate share
of Increased Operating Costs is not paid when due whether or not any notice or
demand for payment has been made by the Landlord; (ii) any other additional rent
is in arrears and is not paid within five (5) days after written demand by the
Landlord; (iii) the Tenant has breached any of its obligations in this Lease
(other than the payment of rent) and the Tenant fails to remedy such breach
within fifteen (15) days (or such shorter period as may be provided in this
Lease), or if such breach cannot reasonably be remedied within fifteen (15) days
(or such shorter period), then if the Tenant fails to immediately commence to
remedy and thereafter proceed diligently to remedy such breach, in each case
after notice in writing from the Landlord; (iv) the Tenant becomes bankrupt or
insolvent; (v) any of the Landlord's policies of insurance with respect to the
Building are canceled or adversely changed as a result of Tenant's use or
occupancy of the Premises; (vi) the business operated by Tenant in the Premises
shall be closed by governmental or court order for any reason; or (vii) there is
a violation of the Environmental Provisions of Section 3.4.
9.2 Remedies. In the event of any default hereunder by Tenant, then
without prejudice to any other rights which it has pursuant to this Lease or at
law or in equity, the Landlord shall have the following rights and remedies,
which are cumulative and not alternative:
(A) Landlord may cancel this Lease by notice to the Tenant and
retake possession of the Premises for Landlord's account. Tenant shall then quit
and surrender the Premises to Landlord. Tenant's liability under all of the
provisions of this Lease shall continue notwithstanding any expiration and
surrender, or any re-entry, repossession, or disposition hereunder.
(B) Landlord may enter the Premises as agent of the Tenant to take
possession of any property of the Tenant on the Premises, to store such property
at the expense and risk of the Tenant or to sell or otherwise dispose of such
property in such manner as the Landlord may see fit without notice to the
Tenant. Re-entry and removal may be effectuated by summary dispossess
proceedings, by any suitable action or
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proceeding, or otherwise. Landlord shall not be liable in any way in connection
with its actions pursuant to this section, to the extent that its actions are in
accordance with law.
(C) If this Lease is canceled under subsection (A) above, Tenant
shall remain liable (in addition to accrued liabilities) to the extent legally
permissible for all rent and all of the charges Tenant would have been required
to pay until the date this Lease would have expired had such cancellation not
occurred. Tenant's liability for rent shall continue notwithstanding re-entry or
repossession of the Premises by Landlord. In addition to the foregoing, Tenant
shall pay to Landlord such sums as the court which has jurisdiction thereover
may adjudge as reasonable attorneys' fees with respect to any successful lawsuit
or action instituted by Landlord to enforce the provisions of this Lease.
(D) Landlord may relet all or any part of the Premises for all or
any part of the unexpired portion of the Term of this Lease or for any longer
period, and may accept any rent then attainable; grant any concessions of Rent,
and agree to paint or make any special repairs, alterations, and decorations for
any new Tenant as it may deem advisable in its sole and absolute discretion.
Landlord shall be under no obligation to relet or to attempt to relet the
Premises.
(E) If this Lease is canceled in accordance with subsection (A)
above, and Landlord so elects, the rent hereunder shall be accelerated and
Tenant shall pay Landlord damages in the amount of any and all sums which would
have been due for the remainder of the Term.
(F) Landlord may remedy or attempt to remedy any default of the
Tenant under this Lease for the account of the Tenant and to enter upon the
Premises for such purposes. No notice of the Landlord's intention to perform
such covenants need be given the Tenant unless expressly required by this Lease.
The Landlord shall not be liable to the Tenant for any loss or damage caused by
acts of the Landlord In remedying or attempting to remedy such default and the
Tenant shall pay to the Landlord all expenses incurred by the Landlord in
connection with remedying or attempting to remedy such default. Any expenses
incurred by Landlord shall accrue interest from the date of payment by Landlord
until repaid by Tenant at the highest rate permitted by law.
9.3 Costs. The Tenant shall pay to the Landlord on demand all costs
incurred by the Landlord, including attorneys, fees and costs at all tribunal
levels, incurred by the Landlord in enforcing any of the obligations of the
Tenant under this Lease. In addition, upon any default by Tenant, Tenant shall
be also liable to Landlord for the expenses to which Landlord may be put in
re-entering the Premises; repossessing the Premises; painting, altering, or
dividing the Premises; combining the Premises with an adjacent space for any new
tenant; putting the Premises in proper repair; protecting and
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preserving the Premises by placing watchmen and caretakers therein; reletting
the Premises (including attorneys' fees and disbursements, marshall's fees, and
brokerage fees, in so doing); and any other expenses reasonably incurred by
Landlord.
9.4 Additional Remedies; Waiver. The rights and remedies of Landlord set
forth herein shall be in addition to any other right and remedy now and
hereinafter provided by law. All rights and remedies shall be cumulative and
non-exclusive of each other. No delay or omission by Landlord in exercising a
right or remedy shall exhaust or impair the same or constitute a waiver of, or
acquiescence to, a default.
9.5 Default by Landlord. In the event of any default by Landlord,
Tenant's exclusive remedy shall be an action for damages, but prior to any such
action Tenant will give Landlord written notice specifying such default with
particularity, and Landlord shall have a period of thirty (30) days following
the date of such notice in which to commence the appropriate cure of such
default. Unless and until Landlord fails to commence and diligently pursue the
appropriate cure of such default after such notice or complete same within a
reasonable period of time, Tenant shall not have any remedy or cause of action
by reason thereof. Notwithstanding any provision of this Lease, Landlord shall
not at any time have any personal liability under this Lease. In the event of
any breach or default by Landlord of any term or provision of this Lease, Tenant
agrees to look solely to the equity or interest then-owned by Landlord in the
Building, and in no event shall any deficiency judgment be sought or obtained
against Landlord.
ARTICLE X. ESTOPPEL CERTIFICATE; SUBORDINATION.
10.1 Estoppel Certificate. Within ten (10) days after written request by
the Landlord, the Tenant shall deliver in a form supplied by the Landlord, an
estoppel certificate to the Landlord as to the status of this Lease, including
whether this Lease is unmodified and in full force and effect (or, if there have
been modifications, that this Lease is in full force and effect as modified and
identifying the modification agreements); the amount of Minimum Rent and
additional rent then being paid and the dates to which same have been paid;
whether or not there is any existing or alleged default by either party with
respect to which a notice of default has been served, or any facts exist which,
with the passing of time or giving of notice, would constitute a default and, if
there is any such default or facts, specifying the nature and extent thereof;
and any other matters pertaining to this Lease as to which the Landlord shall
request such certificate. The Landlord, and any prospective purchaser, lender,
or ground lessor shall have the right to rely on such certificate.
10.2 Subordination; Attornment. This Lease and all rights of the Tenant
shall be subject and subordinate to any and all mortgages, security agreements,
or like instruments resulting from any financing, refinancing, or collateral
financing (including renewals or extensions thereof), and to any and all ground
leases, made or arranged
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by Landlord of its interests in all or any part of the Building), from time to
time in existence against the Building, whether now existing or hereafter
created; provided, however, that, so long as no default or event which, with the
passing of time or giving of notice would constitute a default, exists under
this Lease, any such lender or ground lessor shall not disturb Tenant's
possession of the Premises by joining Tenant as a defendant in a foreclosure or
eviction proceeding. Such subordination shall not require any further instrument
to evidence such subordination. However, on request, the Tenant shall further
evidence its agreement to subordinate this Lease and its rights under this Lease
to any and all documents and to all advances made under such documents. The form
of such subordination shall be made as required by the Landlord, its lender, or
ground lessor. Tenant shall, if requested by such mortgagee, owner, or
purchaser, or by any person succeeding to the interest of such mortgagee, owner,
or purchaser, as the result of the enforcement of the remedies provided by law
or the applicable security instrument held by such mortgagee, owner, or
purchaser, automatically become the tenant of any such mortgagee, owner,
purchaser, or successor-in-interest, without any change in the terms or other
provisions of this Lease; provided, however, that said mortgagee, owner,
purchaser, or successor shall not be bound by (a) any payment of rent or
additional rent for more than one month in advance, or (b) any security deposit
or the like not actually received by such mortgagee, owner, or purchaser, or
successor, or (c) any amendment or modification in this Lease made without the
consent of such mortgagee, owner, purchaser, or successor, or (d) any
construction obligation, free rent, or other concession or monetary allowance,
or (e) any set-off, counterclaim, or the like otherwise available against
Landlord, or (f) any act or omission of any prior landlord (including Landlord).
Upon request by said mortgagee, owner, or purchaser, or successor, Tenant shall
execute and deliver an instrument or instruments confirming its attornment.
ARTICLE XI. CONTROL OF BUILDING BY LANDLORD.
11.1 Use and Maintenance of Common Areas. The Tenant and those doing
business with Tenant for purposes associated with the Tenant's business on the
Premises, shall have a non-exclusive license to use the Common Areas for their
intended purposes during normal business hours in common with others entitled
thereto and subject to any rules and regulations imposed by the Landlord. The
Landlord shall keep the Common Areas in good repair and condition and shall
clean the Common Areas when necessary. Landlord shall not be liable for any
damage to automobiles of any nature whatsoever to, or any theft of, automobiles
or other vehicles or the contents thereof, while in or about the parking lots.
The Tenant acknowledges that its non-exclusive right to use any parking
facilities forming part of the Building may be subject to such rules and
regulations as reasonably imposed by the Landlord from time to time. The Tenant
acknowledges that all Common Areas shall at all times be under the exclusive
control and management of the Landlord. For purposes of this Lease, "Common
Areas" shall mean those areas, facilities, utilities, improvements, equipment,
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and installations of the Building which serve or are for the benefit of the
tenants of more than one component of the Building and which are not designated
or intended by the Landlord to be leased, from time to time, or which are
provided or designated from time to time by the Landlord for the benefit or use
of all tenants in the Building, their employees, customers, and invitees, in
common with others entitled to the use or benefit of same.
11.2 Alteration by Landlord. The Landlord may (i) alter, add to, subtract
from, construct improvements on, re-arrange, and construct additional facilities
in, adjoining, or proximate to the Building; (ii) relocate the facilities and
improvements in or comprising the Building or erected on the land; (iii) do such
things on or in the Building as required to comply with any laws, by-laws,
regulations, orders, or directives affecting the land or any part of the
Building; and (iv) do such other things on or in the Building as the Landlord,
in the use of good business judgment determines to be advisable, provided that
notwithstanding anything contained in this section 11.2, access to the Premises
shall be available at all times. The Landlord shall not be in breach of its
covenants for quiet enjoyment or liable for any loss, costs, or damages, whether
direct or indirect, incurred by the Tenant due to any of the foregoing.
11.3 Covenants, Conditions and Restrictions. Tenant hereby acknowledges
and agrees that the Building of which the Premises is a part, and Tenant's
occupancy thereof, is subject to certain declarations and agreements (the
"Declaration"), which Declaration has been recorded among the Public Records of
Miami-Dade County, Florida. Copies of the Declaration are located at Landlord's
management office and may be reviewed by Tenant during Landlord's normal
business hours. Tenant hereby acknowledges the existence of such Declaration and
agrees to be bound by the terms thereof (and any amendments or modifications
thereto). Tenant hereby agrees to reimburse Landlord, within five (5) days after
demand therefor, for the proportionate share of Common Expenses attributable to
the Premises, as described in the Declaration.
11.4 Tenant Relocation. Landlord shall have the right, at any time upon
sixty (60) days written notice to Tenant, to relocate Tenant into other space
within the Building comparable to the Premises. Upon such relocation, such new
space shall be deemed the Premises and the prior space originally demised shall
in all respects be released from the effect of this Lease. If the Landlord
elects to relocate Tenant as above described, (i) the new space shall contain
approximately the same as, or greater usable area than the original space, (ii)
the Landlord shall improve the new space, at Landlord's sole cost, to at least
the standards of the original space (iii) the Landlord shall pay the reasonable
costs of moving Tenant's trade fixtures and furnishings from the original space
to the new space, (iv) as total compensation for all other costs, expenses, and
damages which Tenant may suffer in connection with the relocation, including but
not limited to, lost profit or business interruption, no Minimum Rent or
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Operating Costs shall be due or payable for the first full calendar month of
Tenant's occupancy of the new space, and Landlord shall not be liable for any
further indirect or special expenses of Tenant resulting from the relocation,
(v) Minimum Rent, Tenant's proportionate share of Operating Costs, and all other
charges hereunder shall be the same for the new space as for the original space,
notwithstanding that the new space may be larger than the original space, and
(vi) all other terms of this Lease shall apply to the new space as the Premises,
except as otherwise provided in this paragraph.
ARTICLE XII. CONDEMNATION.
12.1 Total or Partial Taking. If the whole of the Premises, or such
portion thereof as will make the Premises unusable for the purposes leased
hereunder, shall be taken by any public authority under the power of eminent
domain or sold to public authority under threat or in lieu of such taking, the
Term shall cease as of the day possession or title shall be taken by such public
authority, whichever is earlier ("Taking Date"), whereupon the rent and all
other charges shall be paid up to the Taking Date with a proportionate refund by
Landlord of any rent and all other charges paid for a period subsequent to the
Taking Date. If less than the whole of the Premises, or less than such portion
thereof as will make the Premises unusable for the purposes leased hereunder,
the Term shall cease only as to the part so taken as of the Taking Date, and
Tenant shall pay rent and other charges up to the Taking Date, with appropriate
credit by Landlord (toward the next installment of rent due from Tenant) of any
rent or charges paid for a period subsequent to the Taking Date. Minimum Rent
and other charges payable to Landlord shall be reduced in proportion to the
amount of the Premises taken.
12.2 Taking For Temporary Use. If there is a taking of the Premises for
temporary use, this Lease shall continue in full force and effect, and Tenant
shall continue to comply with Tenant's obligations under this Lease, except to
the extent compliance shall be rendered impossible or impracticable by reason of
the taking. Minimum Rent and other charges payable to Landlord shall be reduced
in proportion to the amount of the Premises taken for the period of such
temporary use.
12.3 Award. All compensation awarded or paid upon a total or partial
taking of the Premises or Building including the value of the leasehold estate
created hereby shall belong to and be the property of Landlord without any
participation by Tenant; Tenant shall have no claim to any such award based on
Tenant's leasehold Interest. However, nothing contained herein shall be
construed to preclude Tenant, at its cost, from independently prosecuting any
claim directly against the condemning authority in such condemnation proceeding
for damage to, or cost of removal of, stock, trade fixtures, furniture, and
other personal property belonging to Tenant; provided, however, that no such
claim shall diminish or otherwise adversely affect Landlord's award or the award
of any mortgagee.
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ARTICLE XIII. GENERAL PROVISIONS.
13.1 Delay. Except as expressly provided in this Lease, whenever the
Landlord or Tenant is delayed in the fulfillment of any obligation under this
Lease, other than the payment of rent or other charges, by an unavoidable
occurrence which is not the fault of the party delayed in performing such
obligation, then the time for fulfillment of such obligation shall be extended
during the period in which such circumstances operate to delay the fulfillment
of such obligation.
13.2 Holding Over. If the Tenant remains in possession of the Premises
after the end of the Term without having executed and delivered a new lease or
an agreement extending the Term, there shall be no tacit renewal, of this Lease
or the Term, and the Tenant shall be deemed to be occupying the Premises as a
Tenant from month to month at a monthly Minimum Rent payable in advance on the
first day of each month equal to twice the monthly amount of Minimum Rent
payable during the last month of the Term, and otherwise upon the same terms as
are set forth in this Lease, so far as they are applicable to a monthly tenancy.
13.3 Waiver, Partial Invalidity. If either the Landlord or Tenant excuses
or condones any default by the other of any obligation under this Lease, this
shall not be a waiver of such obligation in respect of any continuing or
subsequent default and no such waiver shall be implied. All of the provisions of
this Lease are to be construed as covenants even though not expressed as such.
If any such provision is held or rendered illegal or unenforceable it shall be
considered separate and severable from this Lease and the remaining provisions
of this Lease shall remain in force and bind the parties as though the illegal
or unenforceable provision had never been included in this Lease.
13.4 Recording. Neither the Tenant nor anyone claiming under the Tenant
shall record this Lease or any memorandum hereof in any public records without
the prior written consent of the Landlord.
13.5 Notices. Any notice, consent, or other instrument required or
permitted to be given under this Lease shall be in writing and shall be
delivered in person, or sent by certified mail, return receipt requested, or
overnight express mail courier, postage prepaid, addressed (i) if to Landlord,
at the address set forth on the Lease Summary; and (ii) if to the Tenant, at the
Premises (AS REFLECTED IN THE LEASE SUMMARY) or, prior to Tenant's occupancy of
the Premises, at the address set forth on the Lease Summary. Any such notice or
other instruments shall be deemed to have been given and received on the day
upon which personal delivery is made or, if mailed, then forty-eight (48) hours
following the date of mailing. Either party may give notice to the other of any
change of address and after the giving of such notice, the address therein
specified is deemed to be the address of such party for the giving of notices.
If postal service is
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<PAGE> 26
interrupted or substantially delayed, all notices or other instruments shall be
delivered in person or by overnight express mail courier.
13.6 Successors; Joint and Several Liability. The rights and liabilities
created by this Lease extend to and bind the successors and assigns of the
Landlord and the heirs, executors, administrators, and permitted successors and
assigns of the Tenant. No rights, however, shall inure to the benefit of any
transferee unless such Transfer complies with the provisions of Article VIII. If
there is at any time more than one Tenant or more than one person constituting
the Tenant, their covenants shall be considered to be joint and several and
shall apply to each and every one of them.
13.7 Captions and Section Numbers. The captions, section numbers, article
numbers, and table of Contents appearing in this Lease are inserted only as a
matter of convenience and in no way affect the substance of this Lease.
13.8 Extended Meanings. The words "hereof," "hereto," "hereunder," and
similar expressions used in this Lease relate to the whole of this Lease and not
only to the provisions in which such expressions appear. This Lease shall be
read with all changes in number and gender as may be appropriate or required by
the context. Any reference to the Tenant includes, when the context allows, the
employees, agents, invitees, and licensees of the Tenant and all others over
whom the Tenant might reasonably be expected to exercise control. This Lease has
been fully reviewed and negotiated by each party and their counsel and shall not
be more strictly construed against either party.
13.9 Entire Agreement; Governing Law; Time. This Lease and the Exhibits
and Riders, if any, attached hereto are incorporated herein and set forth the
entire agreement between the Landlord and Tenant concerning the Premises and
there are no other agreements or understandings between them. This Lease and its
Exhibits and Riders may not be modified except by agreement in writing executed
by the Landlord and Tenant. This Lease shall be construed in accordance with and
governed by the laws of the State of Florida. Time is of the essence of this
Lease.
13.10 No Partnership. Nothing in this Lease creates any relationship
between the parties other than that of lessor and lessee and nothing in this
Lease constitutes the Landlord a partner of the Tenant or a joint venturer or
member of a common enterprise with the Tenant.
13.11 Quiet Enjoyment. If the Tenant pays rent and other charges and
fully observes and performs all of its obligations under this Lease, the Tenant
shall be entitled to peaceful and quiet enjoyment of the Premises for the Term
without interruption or interference by the Landlord or any person claiming
through the Landlord.
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<PAGE> 27
13.12 Brokerage. Landlord and Tenant each represent and warrant one to
the other that except as set forth in the Lease summary, neither of them has
employed any broker in connection with the negotiations of the terms of this
Lease or the execution thereof. Landlord and Tenant hereby agree to indemnify
and to hold each other harmless against any loss, expense, or liability with
respect to any claims for commissions or brokerage fees arising from or out of
any breach of the foregoing representation and warranty. Landlord recognizes the
broker(s) specified in the Lease Summary as the sole broker(s) with whom
Landlord has dealt in this transaction and agrees to pay any commissions
determined to be due said broker(s). Tenant acknowledges that Codina Realty
Services, Inc.o Oncor International represents solely the Landlord with respect
to this Lease.
13.13 Consent. Whenever Tenant requests the consent of Landlord, to an
assignment, a sublease, construction, or otherwise, Tenant shall pay all of
Landlord's fees and costs associated with such consent and the transaction for
which consent is requested, including but not limited to attorneys' fees and
costs, courier and overnight mail charges, credit review, architect's or
engineer's review, and similar fees and costs. Consent by Landlord to one
transaction shall not be deemed consent to future transactions of the same type.
13.14 TRIAL BY JURY. LANDLORD AND TENANT EACH HEREBY WAIVES ITS RIGHT TO
A JURY TRIAL OF ANY ISSUE OR CONTROVERSY ARISING UNDER THIS LEASE.
EXECUTED as of the day and year first above written.
WITNESSES: LANDLORD:
GRAN CENTRAL CORPORATION,
a Florida corporation
By: THE ST. JOE COMPANY, a
Florida corporation, its agent
/s/ Susan C. McMillan By:/s/ G. John Carey
- ------------------------------ -----------------------------
Print Name:Susan C. McMillan Print Name: G. John Carey
------------------- --------------------
Vice President
/s/ Kimberly D. Popvich [corporate seals]
- ------------------------------
Print Name:Kimberly D. Popvich
-------------------
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<PAGE> 28
TENANT:
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED, A DELAWARE
CORPORATION
By:/s/ Karl Brown
- ------------------------------ ------------------------------
Print Name: Print Name:Karl Brown
------------------- ----------------------
Title: CEO
---------------------------
[corporate seal]
- ------------------------------
Print Name:
-------------------
<PAGE> 29
EXHIBIT "A"
FLOOR PLAN OF PREMISES
<PAGE> 30
EXHIBIT "B"
LEGAL DESCRIPTION OF BUILDING AND LAND
LOT 2, BLOCK 10 OF "GRAN PARK THIRD ADDITION" ACCORDING TO THE PLAT THEREOF AS
RECORDED IN PLAT BOOK 149, PAGE 9 OF THE PUBLIC RECORDS OF MIAMI-DADE
COUNTY, FLORIDA.
<PAGE> 31
EXHIBIT "C"
RULES AND REGULATIONS
1. Security. The Landlord may from time to time adopt appropriate systems
and procedures for the security or safety of the Building, any persons
occupying, using, or entering the same, or any equipment, furnishings, or
contents thereof, and the Tenant shall comply with the Landlord's reasonable
requirements relative thereto.
2. Return of Keys. At the end of the Term, the Tenant shall promptly
return to the Landlord all keys for the Building and Premises which are in the
possession of the Tenant. In the event any Tenant fails to return keys, Landlord
may retain $50.00 of Tenant's security deposit for locksmith work and
administration.
3. Repair, Maintenance, Alterations, and Improvements. The Tenant shall
carry out Tenant's repair, maintenance, alterations, and improvements in the
Premises only during times agreed to in advance by the Landlord and in a manner
which will not interfere with the rights of other tenants in the Building.
4. Water Fixtures. The Tenant shall not use water fixtures for any
purpose for which they are not intended, nor shall water be wasted by tampering
with such fixtures. Any cost or damage resulting from such misuse by the Tenant
shall be paid for by the Tenant.
5. Personal Use of Premises. The Premises shall not be used or permitted
to be used for residential, lodging, or sleeping purposes or for the storage of
personal effects or property not required for business purposes.
6. Heavy Articles. The Tenant shall not place in or move about the
Premises with Landlord's prior written consent any safe or other heavy article
which in the Landlord's reasonable opinion may damage the Building, and the
Landlord may designate the location of any such heavy articles in the Premises.
7. Bicycles, Animals. The Tenant shall not bring any animals or birds
into the Building, and shall not permit bicycles or other vehicles inside or on
the sidewalks outside the Building except in areas designated from time to time
by the Landlord for such purposes.
8. Deliveries. The Tenant shall ensure that deliveries of supplies,
fixtures, equipment, furnishings, wares, and merchandise to the Premises are
made through such entrances, elevators, and corridors and at such times as may
from time to time be designated by the Landlord, and shall promptly pay or cause
to be paid to the Landlord the cost of repairing any damage in the Building
caused by any person making improper deliveries.
<PAGE> 32
9. Solicitations. The Landlord reserves the right to restrict or prohibit
canvassing, soliciting, or peddling in the Building.
10. Food and Beverages. Only persons approved from time to time by the
Landlord may prepare, solicit orders for, sell, serve, or distribute foods or
beverages in the Building, or use the Common Areas for any such purpose. Except
with the Landlord's prior written consent and in accordance with arrangements
approved by the Landlord, the Tenant shall not permit on the Premises the use of
equipment for dispensing food or beverages or for the preparation, solicitation
of orders for, sale, serving, or distribution of food or beverages.
11. Refuse. The Tenant shall place all refuse in proper receptacles
provided by the Tenant at its expense in the Premises or in receptacles (if any)
provided by the Landlord for the Building, and shall keep sidewalks and
driveways outside the Building, and lobbies, corridors, stairwells, ducts, and
shafts of the Building, free of all refuse.
12. Obstructions. The Tenant shall not obstruct or place anything in or
on the sidewalks or driveways outside the Building or in the lobbies, corridors,
stairwells, or other Common Areas, or use such locations for any purpose except
access to and exit from the Premises without the Landlord's prior written
consent. The Landlord may remove at the Tenant's expense any such obstruction or
thing caused or placed by the Tenant (and unauthorized by the Landlord) without
notice or obligation to the Tenant.
13. Proper Conduct. The Tenant shall not conduct itself in any manner
which is inconsistent with the character of the Building as a first quality
building or which will impair the comfort and convenience of other tenants in
the Building.
14. Employees, Agents, and Invitees. In these Rules and Regulations,
"Tenant" includes the employees, agents, invitees, and licensees of the Tenant
and others permitted by the Tenant to use or occupy the Premises.
15. Parking. If the Landlord designates tenant parking areas for the
Building, the Tenant shall park its vehicles and shall cause its employees and
agents to park their vehicles only in such designated parking areas. The Tenant
shall furnish the Landlord, upon request, with the current license numbers of
all vehicles owned or used by the Tenant or its employees or agents and the
Tenant thereafter shall notify the Landlord of any changes in such numbers
within five (5) days after the occurrence thereof. In the event of failure of
the Tenant or its employees or agents to park their vehicles in such designated
parking areas, the Tenant shall forthwith on demand pay to the Landlord the sum
of Twenty and No/100 ($20.00) Dollars per day per each car so parked. Landlord
may itself or through any agent designated for such purpose, make, administer,
and enforce additional rules and regulations regarding parking by tenants and by
their employees or agents, including, without limitation, rules and regulations
permitting the Landlord or such agent to move any vehicles improperly
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<PAGE> 33
parked to the designated tenant or employee parking areas. No disabled vehicle
shall be left in the parking areas of the Building for more than 24 hours.
-3-
<PAGE> 34
EXHIBIT "D"
WORK LETTER AGREEMENT
THIS WORK LETTER AGREEMENT (the "Work Letter"), dated as of 8 April,
1999, is attached to and made part of that certain Lease by and between Gran
Central Corporation, a Florida corporation (the "Landlord"), and AMERICAN
AIRCARRIERS SUPPORT, INCORPORATED, A DELAWARE CORPORATION (the "Tenant"). The
terms, definitions, and other provisions of the Lease are hereby incorporated
into this Work Letter by reference as if set forth in full.
IN CONSIDERATION OF the execution of the Lease and the mutual covenants
and conditions hereinafter set forth, Landlord and Tenant agree as follows:
(a) Landlord, at its expense (subject to the provisions of paragraph (e),
below), will cause Substantial Completion, as hereinafter defined, of the tenant
improvements (the "Tenant Improvements") to the Premises, in accordance with
plans and specifications for the Premises to be prepared by Tenant's architect,
at Tenant's expense (except as otherwise expressly provided below). Tenant's
architect and engineer for purposes of the plans and specifications for the
Tenant Improvements are subject to the prior written approval of Landlord, which
will not be unreasonably withheld or delayed. If Tenant elects to retain
Landlord's architect and/or engineer, such architect and/or engineer shall
nonetheless be considered to be Tenant's agent(s) for purposes of this Work
Letter. Tenant agrees to furnish to Landlord within five (5) business days after
the date of the Lease, a detailed set of plans and specifications for the Tenant
Improvements, time being of the essence with respect to the delivery of the
plans and specifications (and any revisions thereto). The plans and
specifications shall be in a form sufficient to obtain a building permit from
Metropolitan Miami-Dade County, Florida. The plans and specifications shall be
subject to Landlord's review and approval. Landlord shall accept or notify
Tenant of its objections to the plans and specifications within five (5) days
after receipt thereof. If Landlord requires more than five (5) days to approve
the plans and specifications, Landlord shall not be deemed to be in default
hereunder or otherwise liable in damages to Tenant. Should Tenant fail to submit
the plans and specifications within the time period set forth above, or if
Tenant fails to make any modifications Landlord may require within five (5) days
of notice thereof, then each such event shall be deemed to be a Tenant's delay
as described below. Notwithstanding Landlord's review and approval of the plans
and specifications, Landlord assumes no responsibility whatsoever, and shall not
be liable, for the manufacturer's, architect's, or engineer's design or
performance of any structural, mechanical, electrical, or plumbing systems or
equipment of Tenant. Once Landlord approves the plans and specifications, Tenant
shall, at Tenant's expense, provide Landlord with three (3) sets of the plans
and specifications which shall be signed and dated by both parties, with two
sets retained by Landlord and one set retained by Tenant. Changes to the plans
and specifications shall be made only by written addendum signed by both
parties. Tenant, at Tenant's expense, shall provide additional sets of the plans
and specifications upon request by Landlord. "Substantial
<PAGE> 35
Completion" shall mean that a certificate of occupancy has been obtained for the
Premises and that the Tenant Improvements are sufficiently complete so as to
allow Tenant to occupy the Premises for the use and purposes intended without
unreasonable disturbance or interruption; provided that Landlord, its employees,
agents, and contractors, shall be allowed to enter upon the Premises at any
reasonable time(s) following Substantial Completion as necessary to complete any
unfinished details pursuant to a punchlist to be prepared by Tenant and
delivered to Landlord within thirty (30) days following the date of Substantial
Completion.
(b) Within five (5) days following receipt of the final approved plans
and specifications for the Premises, Landlord shall have its contractor(s)
prepare an estimated budget (the "Construction Budget") of the cost of the
Tenant Improvements, and shall submit same to Tenant. The Construction Budget
shall be in reasonable detail and shall reflect a unit cost for all improvements
which is reasonable in amount, given the then current market conditions
pertinent to labor and material costs for such construction. The cost of the
Tenant Improvements, as set forth in the Construction Budget, shall also include
the cost of all utilities, air conditioning, and other services provided during
construction, plus a construction coordination fee equal to ten (10%) percent of
the cost of all non-Building-standard items reflected in the plans and
specifications, in order to reimburse Landlord for its time and expense involved
in the management and supervision of such non-standard items. The Construction
Budget shall be used as a basis for calculating Tenant's Costs, as hereinafter
defined, if any. Within five (5) days after receipt of the Construction Budget,
Tenant shall either approve the Construction Bid as submitted or provide
Landlord with modifications to the plans and specifications. If Tenant fails to
approve the Construction Budget or submit modifications to the plans and
specifications, for any reason whatsoever, within five (5) days, then either of
such events shall be deemed to be a delay caused by Tenant. If Tenant timely
submits modifications to the plans and specifications, Landlord shall, within
five (5) business days, review and approve the modified plans and specifications
(and provide a revised Construction Budget), or disapprove the modified plans
and specifications (and give Tenant its reasons for disapproval). If Tenant so
submits modified plans and specifications, then the time from such submission
until a Construction Budget is finally acknowledged and approved shall be deemed
to be a delay in Substantial Completion caused by Tenant. Following final
completion of the Tenant Improvements, Landlord shall provide Tenant with a
statement of actual costs thereof, including the cost of any approved change
orders. Landlord's general contractor shall be licensed and insured in the State
of Florida and Miami-Dade County.
(c) Upon Substantial Completion of the Premises, Tenant, at its expense,
shall install its furniture, trade fixtures, and equipment so that Tenant can
occupy the Premises for the use and purposes intended, Tenant may begin to
install such items prior to Substantial Completion; provided, however, that no
such pre-Substantial Completion installation shall in any way delay or interfere
with Landlord's work pursuant to this Work Letter and Tenant shall arrange a
meeting to coordinate with Landlord prior to any such pre-Substantial Completion
installation. Any such pre-Substantial
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<PAGE> 36
Completion installation of furniture, fixtures, and equipment shall be at
Tenant's sole risk, and if at any time such entry shall cause disharmony,
impediment, or interference with Landlord's work, then Tenant's right to enter
the Premises prior to Substantial Completion may be withdrawn by Landlord upon
48 hours' notice to Tenant. Such access shall at all times be subject to the
Landlord's rules and regulations regarding such access, If the parties agree
that Tenant will undertake to construct or install -some portion of the Tenant
Improvements or retain its own subcontractors to perform any other work, Tenant
shall only use contractor(s), subcontractor(s), or material supplier(s) first
approved by Landlord ("Tenant's Contractors"). Tenant shall be responsible for
obtaining all necessary permits and approvals at Tenant's sole expense in
connection with the work performed by Tenant's Contractors. Tenant shall advise
Tenant's Contractors that no interest of Landlord in the Premises or Building
shall be subject to liens to secure payment of any amount due for work performed
or materials installed in the Premises and that Landlord has recorded a notice
to that effect in the Public Records of Miami-Dade County, Florida. Landlord
shall permit Tenant and Tenant's Contractors to enter the Premises to accomplish
any work as agreed, however, Tenant agrees to insure that Tenant's Contractors
do not impede Landlord's contractor(s) in performance of their respective tasks.
Landlord shall not be liable in any way for any injury, loss, damage, or delay
which may be caused by or arise from such entry by Tenant, its employees, or
Tenant's Contractors, and Tenant agrees to indemnify and hold harmless Landlord,
its agents, and employees from and against any and all costs, expenses, damage,
loss, or liability, including, but not limited to, reasonable attorneys' fees
and costs, which arise out of, is occasioned by, or is in any way attributable
to the work being performed by Tenant's Contractors. Prior to any work being
performed by any Tenant's Contractor, Tenant shall provide to Landlord
certificates of insurance evidencing that Tenant has the required comprehensive
general liability insurance required of Tenant under the Lease, as well as
certificates of insurance in forms and in amounts satisfactory to Landlord
evidencing that each Tenant's Contractor has in effect (and shall maintain at
all times during the course of the work hereunder) workers' compensation
insurance to cover full liability under workers' compensation laws of the State
of Florida with employers' liability coverage and comprehensive general
liability and builders risk insurance for the hazards of operations, independent
contractors, products and completed operations.
(d) Tenant shall be responsible for any delay (including associated
costs) in Substantial Completion resulting from any of the following causes:
(i) Tenant's failure to timely submit (or submit to Landlord any
proposed modifications or additions to) the plans and specifications, unless
such failure is due to causes beyond Tenant's control (except that delays by
Tenant's architect and/or engineer shall be deemed to be a delay caused by
Tenant); or
(ii) Tenant's failure to pay any portion of Tenant's Costs, as
hereinafter defined, when due; or
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<PAGE> 37
(iii) Tenant's specification of special materials or finishes, or
special installations, which special items cannot be delivered or completed
within Landlord's construction schedule (subject to Landlord's obligation to
give Tenant prior notice of same at the time of such specification); or
(iv) any change in the plans and specifications caused by Tenant
once finally approved and accepted by Landlord, even though Landlord may approve
such change (Landlord agrees to estimate the delay to be caused by a change
order, provided Tenant expressly requests such estimate at the time it requests
a change order); or
(v) any other delay in Substantial Completion directly
attributable to the negligent or willful acts or omissions of Tenant, its
employees, or agents.
If any delay caused by Tenant results in or contributes to a delay in
Substantial Completion, then Substantial Completion shall be deemed to have
occurred as of the date Landlord would have otherwise achieved Substantial
Completion, but for Tenant's delay. Landlord will specify in writing to Tenant
the Tenant delay(s) which resulted in or contributed to a delay in Substantial
Completion.
(e) Landlord's Building-standard specifications for the warehouse portion
and the office portion of the Premises are attached hereto and made a part
hereof as Exhibit "D-l." To the extent that the plans and specifications reflect
that the Tenant Improvements are comprised entirely of Landlord's
Building-standard methods and materials, then Landlord will be responsible to
reimburse Tenant for the fees and costs incurred with respect to preparation of
the plans and specifications. In addition, to the extent that the Tenant
Improvements to the Premises are comprised entirely of Landlord's
Building-standard methods and materials, then Landlord's contractors shall
construct the Tenant Improvements, at Landlord's expense. Any and all
non-Building- standard improvements to the Premises (including, without
limitation, the fees and costs incurred with respect to preparation of the plans
and specifications for the non-Building- standard improvements) will be at
Tenant's expense ("Tenant's Costs"). IN ADDITION, "TENANT'S COSTS' SHALL INCLUDE
ANY CONSTRUCTION COST FOR THE TENANT'S IMPROVEMENTS TO THE PREMISES WHICH
EXCEEDS $540,000.00. Tenant's Costs shall be paid to Landlord as follows:
(i) Prior to commencement of construction of the Tenant
Improvements, Tenant shall pay Landlord an amount equal to fifty (50%) percent
of the Tenant's Costs, as such amount is then determined by reference to the
Construction Budget.
(ii) When fifty (50%) of the Tenant Improvements are complete in
accordance with the plans and specifications (as verified in writing by
Landlord's architect), Tenant shall pay Landlord an amount equal to the
remaining unpaid balance
-4-
<PAGE> 38
of Tenant's Costs, as such amount can then be reasonably determined by Landlord
based on available information.
(iii) Within ten (10) days following Landlord's submittal to
Tenant of a final accounting of Tenant's Costs, Tenant shall pay Landlord the
then remaining balance of Tenant's Costs, or Landlord shall reimburse Tenant as
to any excess amounts previously paid, as the case may be.
Tenant's Costs represent a reimbursement of monies expended by Landlord
on Tenant's behalf. Payment when due shall be a condition to Landlord's
continued performance under this Work Letter. Any delay in construction of the
Tenant Improvements or in Tenant taking occupancy of the Premises resulting from
Tenant's failure to make any Tenant's Costs payments when due shall be Tenant's
responsibility. Tenant's failure to pay any portion of Tenant's Costs when due
shall constitute a default under the Lease (subject to any applicable notice
requirements or grace periods), entitling Landlord to all of its remedies
thereunder.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Work Letter as
of the day and first year above written.
WITNESSES: LANDLORD:
GRAN CENTRAL CORPORATION,
a Florida corporation
By: THE ST. JOE COMPANY, a
Florida corporation, its agent
/s/ Susan C. McMillan By:/s/G. John Carey
- ------------------------ -----------------------------
Print Name:G. John Carey
---------------------
/s/ Kimberly D. Popovich Vice President
- ------------------------ [corporate seals]
TENANT:
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED, A DELAWARE
CORPORATION]
By: /s./ Karl Brown
- ------------------------ -----------------------------
Print Name: Karl Brown
-------------------------
Title: CEO
- ------------------------ -------------------------------
[corporate seal]
-5-
<PAGE> 39
EXHIBIT "D-1"
BUILDING-STANDARD IMPROVEMENTS
GENERAL NOTES:
1. Specifications are intended to denote quality only; the manufacturer
or provider of the items are at the sole discretion of Landlord.
2. Any changes, additions, deletions, or substitutions shall be at the
sole expense of Tenant. No exchanges or credits are given for quantities
requested that are less than those provided by Landlord.
3. Where ratios are given, the standard practice will be to round "up"
from 1/2 or greater, and round "down" for less than 1/2.
4. All above Building-standard items purchased by the Tenant shall meet
minimum state and local codes.
5. All finish selections (whether Building-standard or above) shall be
completed by Tenant prior to the commencement of construction.
WAREHOUSE AREA IMPROVEMENTS:
1. DEMISING PARTITIONS: Those walls that separate the rentable space from
one tenant to another. These one (1) hour fire rated walls shall be installed
from floor to underside of roof deck and shall include 6"-18" gauge metal studs
12" o/c with 5/8" type "X" wall board, taped, spackled, and painted white. 1/2"
plywood will be applied at a height of 4' and painted white.
2. CEILINGS: Exposed joists with shop coat of primer and roofdeck in
unpainted and unfinished condition.
3. FLOOR: Existing finished and sealed concrete floor.
4. WAREHOUSE LIGHTING FIXTURES: HID or equal light fixtures as required
by code, one (1) fixture per 1,350 warehouse square feet. Fixtures shall be hung
at roof joist height.
5. ELECTRICAL OUTLETS: One (1) wall mounted duplex electrical outlet
shall be provided per single bay of warehouse area. The outlet shall be located
on the wall near the dock height doors, in each bay.
<PAGE> 40
6. LIGHT SWITCHES: One (1) light switch, or minimum to comply with code,
shall be provided, located near the office area.
7. TELEPHONE OUTLETS: One (1) telephone outlet shall be provided in
warehouse area, located near dock doors.
8. EXIT LIGHTS: Lighted, wall mounted exit light signs per minimum code
requirements for standard exits. Exit lights for additional above-standard exits
shall be at Tenant's expense.
9. VENTILATION: Building-standard exhaust fans with no less capacity than
two (2) changes per hour.
10. PRIMARY ENTRANCE: A single primary entrance shall be provided per the
Building-standard for Premises location. The entrance shall consist of one (1)
storefront entrance, approximately 10' wide by 8' high, and shall include one
(1) 3' x 8' glass door and adjoining glazed side panels. One (1) overhead canopy
shall be provided. Signage shall be subject to Landlord's signage criteria.
11. SECONDARY ENTRANCE/EXIT: One (1) painted metal rated door and frame
assembly will be installed in the warehouse area to comply with minimum code
requirements. Door shall have heavy duty satin finish stainless steel lockset
with single-sided deadbolt, standard "Exit" sign, and concrete stairs and
handrail to comply with code. Entrance will not be the primary handicap entrance
to the Premises, and will not require sidewalk or handicap ramp.
OFFICE SPACE IMPROVEMENTS:
1. PARTITIONS:
(a) Warehouse/Office Partitions: Those walls that separate the office
portion of the Premises from the warehouse. It is assumed that the office will
be located adjacent to one demising wall. Therefore, only two (2)
warehouse/office partitions shall be considered Building-standard. These walls
shall be 3 5/8" - 25 gauge metal studs 24" on center with 5/8" wall board on
each side, taped, spackled, and painted with two (2) coats (minimum) as required
to cover. The height of this wall shall be minimum as required by code.
(b) Standard Partitions: Those walls located inside the office portion of
the Premises. It is assumed that 35% of the office is "open" space, or 12 lineal
feet of wall per 100 square feet of the office portion of the Premises. These
walls shall be 2 1/2" -24 gauge metal studs 24" on center with 5/8" wall board
on each side, taped, spackled,
-2-
<PAGE> 41
and painted with two (2) coats (minimum) as required to cover. The height of the
walls shall extend to the ceiling grid.
(c) Toilet walls: Those walls in the restroom areas and shall be 5/8"
water resistant wall board on standard partition studs, taped, spackled, and
painted.
2. WALL FINISHES:
(a) All walls shall be painted with two (2) coats flat finish latex paint
as required to cover. All walls shall be painted one (1) color, which color
shall be selected by Tenant from Building-standard color chart.
(b) Toilet walls shall be painted with epoxy high gloss paint to comply
with building code. Color shall be standard white.
(c) Vinyl base shall be standard 4" cove vinyl wall base. The base shall
be one (1) color, to be selected by Tenant from Building-standard.
3. FLOOR COVERING:
(a) General office areas shall be 12" x 12" vinyl composition tile (VCT)
or 26 oz. textured nylon loop carpet glued down to existing concrete floor slab
as selected by Tenant from Building-standard.
(b) Storage, telephone, and lounge areas shall be VCT selected by Tenant
from Building-standard.
(c) Toilet rooms shall be 12" x 12" VCT as selected by Tenant from
Building-standard. Should a janitorial room be added by Tenant, the floor
covering shall be the same as the toilet rooms.
4. DOORS, FRAMES, AND HARDWARE:
(a) Single swing 6'- 8" x 3'- 0", paint grade, pre-hung solid core wood
doors and wood frames shall be provided assuming 35% open office space, or
approximately 1 door per 300 square feet of office space. Finish will be two (2)
coats of stain, as selected by Tenant from Building-standard, one (1) coat
throughout.
(b) One (1) 6' - 8" x 3' - 0", paint grade wood, pre-hung solid core door
with wood frame shall be provided from office to warehouse.
(c) Hardware included shall be a satin finish stainless steel lever
passage set (not lockable), one pair of standard steel butt hinges, and a floor
mounted standard
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<PAGE> 42
steel door stop for every standard interior door. Locksets are not provided as a
standard.
5. WINDOW COVERING:
(a) White 2" PVC solid vertical blinds. Blinds shall be mounted in
exposed aluminum track and will be retractable.
6. CEILINGS:
(a) Entire office portion of the Premises shall be 2' x 4' x 5/8"
fissured flush lay-in acoustical ceiling tile such as Armstrong Minaboard
Designer Fissured #755B (or equal), to be installed in 1" white suspended
ceiling grid, 9'- 0" above finish floor.
7. PLUMBING:
(a) Sprinkler heads to be semi-concealed with a chrome finish. Sprinkler
design to comply with minimum code requirements for standard office buildout.
(b) A minimum number of restroom(s) shall be provided per current South
Florida Building Code. Each restroom shall have one (1) wall hung lavatory
china, one (1) mirror, one (1) water closet, and accessories. All toilet
fixtures and accessories to be Building-standard, and installed per Americans
with Disabilities guidelines as of the date of the Lease. If more than one
restroom is required by code, they shall be located adjacent to one another. Hot
water is not provided as a standard.
(c) One (1) metal utility sink shall be provided in the warehouse. The
location of the sink shall be on the warehouse/office partition, within ten (10)
feet of the plumbing stack in the toilet rooms. Any location beyond the 10' is
not considered a standard. The sink shall not be enclosed in a closet or a room.
8. CABINETS, CABINETRY:
(a) One (1) 2' x 4' lower "kitchen" cabinet with a fixed single shelf and
laminated counter top shall be provided. The counter top shall include a 4" back
splash, with mica selection from Building-standard. A single 12" x 18" stainless
steel sink with cold water only shall be provided integral with the cabinet. The
cabinet shall be located so that the plumbing wall shall be shared with the
restroom(s). Hot water is not provided as a standard.
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<PAGE> 43
9. LIGHTING:
(a) Fluorescent light fixtures shall be 2' x 4' Lithonia 2SP-332-A
12/120V - GLR/ES with 3 lamps at 32 watts (3-F32) or equal, color white, with
acrylic lens. One (1) fixture shall be provided for every 85 square feet of
office space.
(b) One light switch shall be provided for every 300 square feet of
office space. Switches shall be Leviton Single Pole or equal commercial grade,
20 amps, color white.
(c) Emergency/Exit shall be minimum per code for minimum required
entrances only. Exit signs provided for entrances not required by code shall be
at Tenant's expense.
10. ELECTRICAL & COMMUNICATIONS:
(a) One duplex electrical outlet shall be provided for every 125 square
feet of office space. Outlets shall be Leviton Single Pole or equal commercial
grade, 20 amps, color white.
(b) One telephone wall outlet shall be provided for every 200 square feet
of office space. Telephone outlet shall consist of a utility box with "pull
string" only. Conduit shall extend 6" above acoustical ceiling. Telephone wiring
and outlet wall plates shall be provided by Tenant at its expense.
(c) A 4' x 4' telephone equipment "mounting board" painted the same color
as the wall shall be provided with a single duplex outlet. If a dedicated
circuit is required, it shall be at Tenant's expense.
11. HVAC:
(a) Only the office portion of the Premises shall be air conditioned,
through Building-standard packaged roof top A/C units, approximately one (1) ton
per 300 square feet of office space. Supply and return air grills shall be 2' x
2' lay in type Building-standard.
12. EXTERIOR WINDOWS:
(a) Exterior windows as shown on building plans are considered Building-
standard. Any additional windows or doors added to Building are considered an
expense to the Tenant, including but not limited to all window coverings,
hardware, concrete, and landscaping.
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<PAGE> 44
RIDER NUMBER 1 TO LEASE
dated 8 April, 1999
between Gran Central Corporation, as Landlord,
and AMERICAN AIRCARRIERS, INCORPORATED, as Tenant
OPTION TO RENEW
A. Landlord hereby grants Tenant the option to renew (the "Renewal
Option") the initial Term (not to include, for purposes of this Rider only, any
Renewal Term(s), as hereinafter defined) for TWO (2) additional term(s) of FIVE
(5) YEARS EACH (the "Renewal Term(s)"), commencing as of the date immediately
following the expiration of the Term (or a Renewal Term, if applicable), such
option to be subject to the covenants and conditions hereinafter set forth in
this Rider. If Tenant duly exercises its right to a Renewal Term, Landlord may
elect that Tenant shall execute a lease on Landlord's then-current lease form,
to be applicable to the Renewal Term.
B. Tenant shall give Landlord written notice (the "Renewal Notice") of
Tenant's election to exercise its Renewal Option not later than one hundred
eighty (180) days prior to the expiration of the then-current term of the Lease;
provided that Tenant's failure to give the Renewal Notice by said date, whether
due to Tenant's oversight or failure to cure any existing defaults or otherwise,
shall render the Renewal Option null and void.
C. Tenant shall not be permitted to exercise any Renewal Option at any
time during which Tenant is in default under the Lease, subject to applicable
notice and grace periods (if any). If Tenant fails to cure any default under the
Lease prior to the commencement of the Renewal Term(s), subject to applicable
notice and grace periods, the Renewal Term(s) shall be immediately canceled,
unless Landlord elects to waive such default, and Tenant shall forthwith deliver
possession of the Premises to Landlord as of the expiration or earlier
termination of the then-current term of the Lease.
D. Tenant shall be deemed to have accepted the Premises in "as-is"
condition as of the commencement of the Renewal Term(s), subject to any other
repair and maintenance obligations of Landlord under the Lease, it being
understood and agreed that Landlord shall have no additional obligation to
renovate or remodel the Premises or any portion of the Building as a result of
Tenant's renewal of the Lease.
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<PAGE> 45
E. The covenants and conditions of the Lease in force during the original
Term, as the same may be modified from time to time, shall continue to be in
effect during the Renewal Term(s), except as follows:
(1) The "Commencement Date" for the purpose of the Lease shall be
the first day of the Renewal Term(s).
(2) The Minimum Rent for the Renewal Term(s) shall be an amount
equal to the then Fair Market Rental Value of the Premises. "Fair Market Rental
Value" of the Premises shall be an amount determined by Landlord on the basis of
the then-prevailing market rental rate for industrial space comparable to the
Premises as reflected in one or more leases executed by Landlord with new
tenants of the Building within the twelve-month period immediately preceding
comment cement of the Renewal Terms. If Landlord has not executed any lease with
new tenants within said twelve-month period, the new prevailing market rental
rate determination shall be based on new leases for premises comparable to the
Premises herein, as executed within said twelve-month period by owners of other
industrial building properties located in west Miami-Dade County, Florida.
However, in no event shall Minimum Rent for any year of the Renewal Term be less
than the amount of Minimum Rent for the immediately prior year.
(3) Following expiration of the Renewal Term(s) as provided
herein, Tenant shall have no further right to renew or extend the Lease.
F. Tenant's option to renew the Lease shall not be transferable by
Tenant, except in conjunction with a permissible Transfer in accordance with the
applicable provisions of the Lease.
<PAGE> 46
NOTICE REQUIRED BY CHAPTER 88-285, LAWS
OF FLORIDA
Chapter 88-285, Laws of Florida, requires the following notice to be
provided with respect to the contract for sale and purchase of any building, or
a rental agreement for any building:
"RADON GAS: Radon is a naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health risks
to persons who are exposed to it over time. Levels of radon that exceed federal
and state guidelines have been found in buildings in Florida. Additional
information regarding radon and radon testing may be obtained from your county
public health unit."
WITNESSES: TENANT:
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED, a Delaware
corporation
By:/s/ Karl Brown
- ----------------------------- ------------------------------
Print Name: Print Name:Karl Brown
------------------ ----------------------
Title: CEO
- ----------------------------- ---------------------------
Print Name: [corporate seal]
------------------
<PAGE> 47
RECEIPT OF SIGNAGE CRITERIA
Pursuant to that certain Lease entered into between the undersigned
Tenant and Gran Central Corporation ("Landlord"), the undersigned, by its
execution below, hereby acknowledges receipt of Landlord's signage criteria as
such criteria exists on the date hereof.
WITNESSES: TENANT:
AMERICAN AIRCARRIERS SUPPORT,
INCORPORATED, a Delaware
corporation
By:/s/ Karl Brown
- ----------------------------- ------------------------------
Print Name: Print Name:Karl Brown
------------------ ----------------------
Title: CEO
- ----------------------------- ---------------------------
Print Name: [corporate seal]
------------------
<PAGE> 1
Exhibit 10.5.14
850 E. TETON
INDUSTRIAL SUBLEASE
EFFECTIVE DATE: AUGUST 1, 1999
PARTIES AND ADDRESSES:
"AUTHORITY": TUCSON AIRPORT AUTHORITY, INC.,
an Arizona nonprofit corporation
7005 S. Plumer Avenue
Tucson, Arizona 85706
"TENANT": AAS-COMPLETE CONTROLS INC.
AN ARIZONA CORPORATION
MICAH CHAPMAN, PRESIDENT AND
JOE CIVILETTO, CHIEF OPERATING OFFICER
850 E. TETON RD. SUITE 8
TUCSON, ARIZONA 85706
EXHIBITS: Exhibits lettered A, B and C are annexed to
this Sublease and incorporated herein by
this reference.
<PAGE> 2
TABLE OF CONTENTS
RECITALS 5
COVENANTS AND CONDITIONS 5
ARTICLE I - PREMISES 5
1.1 PREMISES 5
1.2 ACCESS 5
1.3 SECURITY 5
1.4 PARKING 5
ARTICLE II - TERM 6
2.1 INITIAL TERM 6
2.2 EXTENSIONS 6
ARTICLE III - RENT AND DEPOSITS 6
3.1 BASE RENT 6
3.2 COMMENCEMENT OF RENTAL OBLIGATION 7
3.3 LATE FEES 7
3.4 SECURITY DEPOSIT 7
ARTICLE IV - USE OF PREMISES 8
4.1 PURPOSES 8
4.2 INDEMNITY 8
4.3 DANGEROUS CONDITIONS 8
4.4 ALTERATIONS 8
4.5 UTILITIES 8
4.6 MAINTENANCE AND REPAIR 9
ARTICLE V - INSURANCE AND CASUALTY 9
5.1 INSURANCE REQUIRED 9
5.2 DEDUCTIBLE 10
5.3 MODIFICATION OF REQUIREMENTS 10
5.4 CERTIFICATES 10
5.5 ADDITIONAL INSURANCE 11
5.6 ADDITIONAL INSUREDS 11
5.7 WAIVER OF SUBROGATION 11
5.8 INSURANCE BY AUTHORITY 11
5.9 CASUALTY TO PREMISES 11
ARTICLE VI - TAXES 12
6.1 TENANT'S RESPONSIBILITY 12
6.2 PROTEST 12
ARTICLE VII - RULES, REGULATIONS AND LAWS 12
7.1 COMPLIANCE WITH ALL APPLICABLE LAWS 12
7.2 NON-DISCRIMINATION 12
<PAGE> 3
A. NON-DISCRIMINATION COVENANTS 12
B. NON-COMPLIANCE 14
C. SUBLEASES 14
7.3 COMPLIANCE WITH FAR PART 77 14
7.4 FAR PART 107; AIRPORT ACCESS 14
7.5 STATE AND FEDERAL AVIATION REGULATIONS 14
7.6 EXCLUSIVE RIGHTS PROHIBITED 14
7.7 ENVIRONMENTAL LAWS 15
A. DEFINITIONS 15
B. COMPLIANCE 15
C. INDEMNITY 17
D. SUBTENANTS 17
ARTICLE VIII - SUPERIOR RIGHTS 18
8.1 AGREEMENTS WITH UNITED STATES 18
8.2 RIGHTS OF GOVERNMENT DURING WAR OR NATIONAL EMERGENCY 18
8.3 RIGHTS OF AUTHORITY 18
8.4 AGREEMENTS WITH CITY OF TUCSON 18
8.5 ABATEMENT OF OBLIGATION TO CONSTRUCT OR REBUILD 19
ARTICLE IX - RESERVATION OF NAVIGATION EASEMENT 19
9.1 EASEMENT 19
9.2 STRUCTURES; ELEVATION LIMIT 19
9.3 PURPOSES 19
ARTICLE X - ASSIGNMENT AND SUBLEASE 19
10.1 CONSENT OF AUTHORITY 19
10.2 CONTINUING RESPONSIBILITY OF TENANT 20
10.3 SUBJECT TO THIS SUBLEASE 20
ARTICLE XI - DEFAULTS AND REMEDIES 20
11.1 DEFAULT BY TENANT 20
11.2 REMEDIES OF AUTHORITY 21
A. TERMINATION 21
B. REENTRY WITHOUT TERMINATION 22
11.3 REMEDIES CUMULATIVE 23
11.4 NO WAIVER 23
11.5 NOTICE 23
11.6 INTEREST 24
ARTICLE XII - TERMINATION BY TENANT 24
12.1 TERMINATION EVENTS 24
12.2 CURE 24
12.3 NO WAIVER 24
ARTICLE XIII - SURRENDER OF POSSESSION, CONDITION OF PREMISES 24
13.1 SURRENDER 25
13.2 GOOD CONDITION 25
13.3 REMOVAL OF PROPERTY 25
iii
<PAGE> 4
ARTICLE XIV - MISCELLANEOUS 25
14.1 NOTIFICATION OF CHANGES 25
14.2 SUCCESSORS AND ASSIGNS BOUND 25
14.3 ARTICLE HEADINGS 25
14.4 SEVERABILITY 26
14.5 APPLICABLE LAW 26
14.6 CONSTRUCTION OF SUBLEASE 26
14.7 COSTS AND ATTORNEYS' FEES 26
A. AUTHORITY'S REVIEW 26
B. ENFORCEMENT OF RIGHTS 26
14.8 NOTICES 27
A. TO AUTHORITY 27
B. TO TENANT 27
C. TIMING 27
D CHANGE IN ADDRESS 27
14.9 AUTHORITY TO EXECUTE 27
EXHIBIT A 29
EXHIBIT B 30
EXHIBIT C 31
iv
<PAGE> 5
RECITALS
A. Authority has leased from the City of Tucson, a municipal corporation,
the airport known as Tucson International Airport located in Pima
County, State of Arizona (the "Airport").
B. Tenant desires to sublease from Authority a portion of the Airport and
to have certain rights, licenses, services and privileges in connection
with the Airport.
COVENANTS AND CONDITIONS
ARTICLE I - PREMISES
1.1 PREMISES
Authority does hereby demise and let unto Tenant, for its exclusive use
and occupancy, and Tenant does hereby lease from Authority, the
building located on the Airport at 7001 S. PARK AVE (the "Premises"),
APPROXIMATELY SEVENTY FIVE THOUSAND SIX HUNDRED (75,600) SQUARE FEET,
AS SHOWN ON EXHIBIT A, subject to all utility easements and rights of
way that encumber the Premises and subject to the terms hereof..
1.2 ACCESS
Tenant is granted the right of reasonable access to the Premises over
such other portions of the Airport as is necessary to provide
reasonable access to and from the Premises. Authority reserves the
right to designate the location of such access and to change its
location from time to time, as Authority deems reasonably necessary and
appropriate.
1.3 SECURITY
Tenant is responsible for securing Tenant's Premises, and neither the
Authority nor its agents or employees will be responsible for any loss
of or damage to Tenant's possessions while stored on the Premises.
1.4 PARKING
Tenant shall be entitled to utilize the parking areas associated with
the Premises in common with other tenants of adjacent facilities. The
Authority reserves the right, but shall not be obligated, to assign
specific parking spaces to tenants.
1.5 ENTRY UPON PREMISES
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<PAGE> 6
Authority may enter upon the Premises subleased exclusively to Tenant
hereunder at any reasonable time, for any purpose necessary, incidental
to or connected with the exercise of its governmental functions, or to
inspect the Premises for compliance with all applicable laws and rules
and regulations or to prevent waste, loss or destruction. Authority
shall, in addition, have the right to enter upon the Premises and
perform any actions necessary or appropriate in connection with any
environmental investigation or remediation, including but not limited
to the trenching, drilling and installation, monitoring, repair,
replacement and operation of pipes, wells, and related equipment. The
rent due hereunder shall equitably abate with respect any portion of
the Premises rendered unusable as a result of the Authority's exercise
of its rights under this Section.
ARTICLE II - TERM
2.1 INITIAL TERM
The initial term of the Sublease shall be for a period of five (5)
years beginning on the Effective Date hereof (the "Initial Term")
2.2 EXTENSIONS
The term hereof shall be deemed to be automatically extended on each of
the first five anniversaries of the Effective Date hereof, for an
additional one-year period, unless the Authority, at lease ninety (90)
days prior to such date, notifies Tenant that the Authority does not
elect to so extend the term. The intent of this provision is to
automatically extend the term of this Sublease each year (unless
otherwise elected by Authority) so that a remaining term of
approximately 5 years is maintained, for a possible maximum total term
of (10) years.
ARTICLE III - RENT AND DEPOSITS
3.1 BASE RENT
Tenant covenants and agrees to pay Authority rent from the Effective
Date of this Sublease in an amount equal to SEVENTEEN THOUSAND THREE
HUNDRED EIGHTY EIGHT DOLLARS AND NO CENTS ($17,388.00) per month with
FOUR PERCENT INCREASES ANNUALLY BEGINNING WITH THE START OF YEAR THREE
as set forth on the rent schedule attached as Exhibit C. Monthly rent
is due and payable to Authority in advance. Rent payments shall be
delivered to Authority's Property Manager who is currently Tucson
Industrial Centers, Inc., located at 850 E. Teton, Suite1, Tucson, AZ
85706, or such other person as directed by Authority in writing.
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<PAGE> 7
3.2 COMMENCEMENT OF RENTAL OBLIGATION
The first monthly payment, prorated to reflect the partial month for
which it is paid, shall be due on the Effective Date hereof and
subsequent installments shall be due on the first day of each
succeeding calendar month thereafter during the term of this Sublease.
3.3 LATE FEES
If any rent or any other sum due from the Tenant shall not be received
within FIVE (5) DAYS after such amount shall be due, Tenant shall pay a
late fee equal to TEN PERCENT (10%) of such overdue amount. Acceptance
of such late fees shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount nor prevent Authority from
exercising any of the other right and remedies granted hereunder.
3.4 SECURITY DEPOSIT
Simultaneously with the entry into this Sublease by the parties hereto,
the Tenant shall deposit with Authority, $17,388.00 which shall be
retained by Authority as security for the Tenant's payment of the Rent
and performance of all of its other obligations under the provisions of
this Lease, and shall not be deemed to represent payment of any rent.
On the occurrence of an Event of Default (as defined in Section 11.1
hereinbelow), Authority shall be entitled, at its sole discretion, (a)
to apply any or all of such sum in payment of (i) any Rent due and
unpaid, (ii) any expense incurred by Authority in curing any such
default, and/or (iii) any damages incurred by Authority by reason of
such default (including, by way of example rather than by limitation,
reasonable attorney's fees), in which event the Tenant shall,
immediately on its receipt of a written demand there for from
Authority, pay to Authority a sum equaling the amount so applied, so as
to restore the security deposit to its original amount; and /or (b) at
Authority's election, to retain any or all of such sum not otherwise
applied pursuant to the provisions of clause (a) of this sentence in
liquidation of any or all damages suffered by Authority by reason of
such default. On the termination of this Sublease, any of such sum
which is not so applied or retained shall be returned to Tenant. Such
sum shall not bear interest while being held by Authority.
ARTICLE IV - USE OF PREMISES
4.1 PURPOSES
The Premises shall not, without prior written consent of Authority, be
used for any
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<PAGE> 8
purpose other than or in addition to that set forth on Exhibit B
attached hereto.
4.2 INDEMNITY
Tenant agrees to fully indemnify and save and hold harmless Authority
and the City of Tucson from and against all claims, fines, damages,
penalties, actions and all expenses, including reasonable attorneys'
fees incidental to the investigation and defense thereof, related to or
arising out of the fault or negligence of or violation of law by
Tenant, its agents, employees or subtenants in the use, occupancy, or
maintenance of the Premises by any of them.
4.3 DANGEROUS CONDITIONS
Tenant agrees to exercise reasonable care when using the Premises and
all improvements thereon to discover and promptly remedy any conditions
that may pose an unreasonable risk of harm to members of the general
public or that may constitute a violation of law. If an unsafe,
defective or dangerous condition, or violation of the law is
discovered, Tenant warrants that no one other than Tenant and Authority
employees, agents and representatives will be admitted to the Premises
and no property belonging to any party other than Tenant and Authority
will be transported to, collected at or stored upon the Premises until
the unsafe, defective or dangerous condition, or violation of law is
corrected.
4.4 ALTERATIONS
The Authority will complete the electrical service entrance upgrade at
the southwest corner of the building (cost to be determined but not to
exceed $17,388). Tenant shall not construct or substantially alter or
modify any buildings, structures, or other improvements on the Premises
without the Authority's prior written approval of its plans and
specifications, which approval may not be unreasonably withheld.
4.5 UTILITIES
A. Tenant's Responsibilities:
Tenant shall pay for all utility services supplied to it or
its subtenants on the Airport.
B. Authority's Rights and Responsibilities:
Notwithstanding the execution of this Sublease, Authority
retains the right to the continued use of such utility lines
and services as are presently on the Premises and the right to
repair the same when necessary. Authority shall conduct such
repairs in such manner and at such times as to not
unreasonably interfere with Tenant's operations.
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<PAGE> 9
4.6 MAINTENANCE AND REPAIR
A. Tenant:
(1) Tenant shall, at no expense to Authority, maintain
the Premises in a neat, clean, safe condition and in
a manner that is compatible with the adjacent
facilities, and in compliance with all applicable
laws, rules, regulations and orders. Tenant shall be
responsible for all minor repairs and maintenance.
(2) General combustible storage shall not exceed 12 feet
in height.
(3) Aisle separation shall be between 4 feet to 8 feet
wide. (Width to be determined by Fire Department and
classification of commodities being stored).
(4) Must have stable storage piles (No leaning stacks).
B. Authority:
Subject to Section 5.9 the Authority shall be responsible for
all structural repairs in the Premises unless necessitated by
any negligence or willful misconduct of Tenant or Tenant's
subtenants, employees, agents, invitees or guests.
ARTICLE V - INSURANCE AND CASUALTY
5.1 INSURANCE REQUIRED
Tenant shall obtain and maintain in full force, with a company or
companies authorized to transact the business of insurance in the State
of Arizona and of sound and adequate financial responsibility, selected
by Tenant and acceptable to Authority, comprehensive insurance policy
(either as part of any other policy or policies carried by Tenant, or
separately) providing for the protection of the Authority and the City
of Tucson and officers, directors, agents and employees of either of
them, against:
(1) general liability, including all direct or contingent
loss or liability for damages for bodily injury,
personal injury, death or damage to property,
including loss of use thereof, occurring on or in any
way related to the Premises or occasioned by reason
of occupancy by and the operations of Tenant upon, in
and around the Premises, with limits of $1,000,000
per
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<PAGE> 10
occurrence for personal injury or death or damage to
property, with coverage at least as broad as that
provided by INSURANCE SERVICES OFFICE COMMERCIAL
GENERAL LIABILITY COVERAGE form CG0001 (Occurrence
Form), and such policy or policies shall cover all of
Tenant's operations on the entire Premises, including
but not limited to any elevators and escalators
therein and any sidewalks, streets or other public
ways adjoining the Premises; and
(2) automobile liability covering owned, non-owned,
leased and hired vehicles with combined single limits
of no less than $250,000 per occurrence.
5.2 DEDUCTIBLE
The deductible for any policy required hereunder shall not exceed
$1,000.
5.3 MODIFICATION OF REQUIREMENTS
Authority may adjust or increase liability insurance amounts and
requirements as Authority deems reasonably necessary, or as may be
required because of changes in the insurance requirements imposed by
Authority's insurer or by applicable law. Tenant shall comply with such
adjustments or increases within such reasonable time period as is
requested by Authority.
5.4 CERTIFICATES
Upon or prior to the commencement of the term of this Sublease and at
least annually thereafter Tenant shall furnish to Authority
certificates of insurance showing the amount and type of the insurance
then in effect that is required to be procured and maintained by it
hereunder and stating the date and term of the policies evidencing such
insurance. Tenant shall, upon request, supply Authority with certified
copies of all applicable insurance policies, riders, endorsements and
declaration pages. Certificates evidencing any renewal, replacement or
extension of any or all of the insurance required hereunder, or of
renewals, replacements or extensions of such renewals, replacements or
extensions, shall be delivered by Tenant to Authority not less than
thirty (30) days prior to the expiration of any policy of insurance
renewed, replaced or extended by the insurance represented by any such
certificate. Each policy of insurance required hereunder shall provide
for not less than thirty (30) days notice to Authority and Tenant
before such policy may be canceled.
5.5 ADDITIONAL INSURANCE
The provisions of this Sublease as to insurance required to be procured
and maintained shall not limit or prohibit, or be construed as limiting
or prohibiting, Authority or Tenant from obtaining any other or greater
insurance with respect to the Premises or improvements thereon or the
use and occupancy thereof that either or both of them may
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wish to carry, but in the event Authority or Tenant, as the case may
be, shall procure or maintain any such insurance not required by this
Sublease, the cost thereof shall be at the expense of the party
procuring or maintaining the same.
5.6 ADDITIONAL INSUREDS
All insurance required by this Article shall be procured and maintained
in the name of Tenant and shall add Authority and the City of Tucson as
additional insureds as their interests appear.
5.7 WAIVER OF SUBROGATION
Each party hereto waives all claims for recovery from the other party
for any loss or damage to any of its property on the Premises insured
under valid and collectible insurance policies to the extent of any
recovery collected from such policies. The parties agree that all
material insurance policies shall be endorsed with a clause which
waives subrogation against the other party.
5.8 INSURANCE BY AUTHORITY
Authority may, upon written notice to Tenant, in the event that Tenant
fails to timely provide proof of insurance as required by Section 5.4
above, procure and maintain any or all of the insurance required of
Tenant under this Article. In such event, all costs of such insurance
procured and maintained by Authority on behalf of Tenant shall be the
responsibility of Tenant and shall be fully reimbursed to Authority
within ten (10) business days after Authority advises Tenant of the
cost thereof.
5.9 CASUALTY TO PREMISES
Authority may, but shall not be required to, maintain insurance against
loss or damage to the Premises, but shall have no obligation to repair
the Premises in the event of casualty or damage thereto. In the event
that any such casualty renders the Premises unsafe or untenantable,
this Sublease shall terminate unless Authority notifies Tenant, within
45 days of the date of the casualty, that Authority intends to repair
the Premises, in which event this Sublease shall remain in full force
and effect, although rent shall abate while the Premises are unusable.
ARTICLE VI - TAXES
6.1 TENANT'S RESPONSIBILITY
Tenant shall pay before delinquency any and all taxes levied or
assessed against the Premises, any levied or assessed against or by
reason of personal property located in, on or about the Premises, any
levied or assessed because of Tenant's right to possession of the
Premises and improvements thereon, all applicable taxes levied or
assessed by any
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government body as the result of Tenant's operations and all taxes
which may be levied or assessed as the result of rentals payable under
this Sublease. All such taxes and assessments for partial years shall
be apportioned and adjusted on a time basis.
6.2 PROTEST
Tenant shall have the right at its own cost and expense to contest the
amount or validity of any such tax or assessment and to bring or defend
any actions involving the amount or validity of any such tax or
assessment in its own name or in the name of Authority; provided that,
if unsuccessful, Tenant shall pay and discharge any such tax or
assessment so contested, together with any penalties, fines, interest,
costs and expenses, including reasonable attorneys' fees, that may
result from any such action by Tenant.
ARTICLE VII - RULES, REGULATIONS AND LAWS
7.1 COMPLIANCE WITH ALL APPLICABLE LAWS
Tenant and all persons operating under the rights granted hereby shall
observe and obey all reasonable and lawful rules and regulations with
respect to the use of the Airport which have been or may in the future
be adopted by Authority and shall further abide by all applicable laws,
statutes, ordinances, rules, orders, and regulations of all governing
bodies which are now in effect or which may hereafter be put into
effect.
7.2 NON-DISCRIMINATION
A. NON-DISCRIMINATION COVENANTS
(1) The Tenant for himself, his heirs, personal
representatives, subtenants, successors in interest,
and assigns, as a part of the consideration hereof,
does hereby covenant and agree, as a covenant running
with the land, that in the event improvements are
constructed, maintained, or otherwise operated on the
Premises for a purpose for which a Department of
Transportation ("DOT") program or activity is
extended or for another purpose involving the
provision of similar services or benefits, Tenant
shall maintain and operate such improvements and
services in compliance with all other requirements
imposed pursuant to Title 49, Code of Federal
Regulations, DOT, Subtitle A, Office of the
Secretary, Part 21, Nondiscrimination in
Federally-Assisted Programs of the Department of
Transportation-Effectuation of Title VI of the Civil
Rights Act of 1964, and as said Regulations may be
amended.
(2) The Tenant for himself, his personal representatives,
successors in interest, and assigns, as a part of the
consideration hereof, does hereby covenant and agree,
as a covenant running with the land that: (1) no
person on the grounds of race, color, or national
origin shall be excluded from participation in,
denied the benefits of, or be otherwise subjected to
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discrimination in the use of said improvements, (2)
that in the construction of any improvements on,
over, or under such land and the furnishing of
services thereon, no person on the grounds of race,
color, or national origin shall be excluded from
participation in, denied the benefits of, or
otherwise be subject to discrimination, (3) that
Tenant shall use the Premises in compliance with all
other requirements imposed by or pursuant to Title
49, Code of Federal Regulations, Department of
Transportation, Subtitle A, Office of the Secretary,
Part 21, Non-discrimination in Federally-Assisted
Programs of the Department of
Transportation-Effectuation of Title VI of the Civil
Rights Act of 1964, and as said Regulations may be
amended.
(3) Tenant shall furnish its accommodations and/or
services on a fair, equal and not unjustly
discriminatory basis to all users thereof and it
shall charge fair, reasonable and not unjustly
discriminatory prices for each unit or service,
PROVIDED THAT Tenant may be allowed to make
reasonable and nondiscriminatory discounts, rebates
or other similar type of price reductions to volume
purchasers.
(4) Tenant assures that it will undertake an affirmative
action program as required by 14 CFR Part 152,
Subpart E, to insure that no person shall on the
grounds of race, creed, color, national origin, or
sex be excluded from participating in any employment
activities covered in 14 CFR Part 152, Subpart E.
Tenant assures that it will require that its covered
sub organizations provide assurances from their sub
organizations, as required by 14 CFR Part 152,
Subpart E, to the same effort.
B. NON-COMPLIANCE
Non-compliance with an provision of this Section shall
constitute a material breach hereof and in the event of such
non-compliance Authority shall have the right to terminate
this Sublease and the estate hereby created without liability
therefore or at the election of Authority or the United
States, either or both shall have the right to judicially
enforce these provisions.
C. SUBLEASES
Tenant agrees that it shall insert the provisions of this
Section in any sublease by which Authority grants a right or
privilege to any person, firm or corporation to render
accommodations and/or services to the public on the Premises
herein subleased.
7.3 COMPLIANCE WITH FAR PART 77
Tenant shall comply with the notification and review requirements
covered in Part 77 of
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the Federal Aviation Regulations in connection with any improvements or
modification or alteration of improvements on the Premises.
7.4 FAR PART 107; AIRPORT ACCESS
Tenant and all persons operating under the rights granted hereunder
shall comply with Part 107 of the Federal Aviation Regulations with
respect to aircraft operations and airport security at the Airport.
Tenant shall at all times take all reasonable steps to control, police
and regulate the use of the Premises and of the Airport premises to
prevent unauthorized persons and the general public from obtaining
access to the Airport. Such steps by Tenant shall include, but not be
limited to, steps requested by Authority and those required under
Federal Regulations. Tenant must secure the Premises so that there is
no inadvertent or purposeful unauthorized entry in or upon the Airport
by people, vehicles, or animals.
7.5 STATE AND FEDERAL AVIATION REGULATIONS
Tenant will conduct its operations and activities on the Airport so as
to conform to all applicable regulations of the Federal Aviation
Administration and the Aeronautics Division of the Arizona Department
of Transportation.
7.6 EXCLUSIVE RIGHTS PROHIBITED
It is understood and agreed that nothing herein contained shall be
construed to grant or authorize the granting of an exclusive right
within the meaning of Section 49 U.S.C. 40103(e).
7.7 ENVIRONMENTAL LAWS
Tenant, at its own expense, shall ensure that Tenant and Tenant's
agents, employees, invitees, and sublessee comply with all present and
hereafter enacted Environmental Laws, and any amendments thereto,
affecting Tenant's operation on the Premises.
A. DEFINITIONS
(1) "Environmental Laws" means any laws, regulations and
ordinances (whether enacted by the local, state,
federal government, or by the Authority) now in
effect or hereafter enacted that deal with the
regulation or protection of the environment
(including the ambient air, ground water, surface
water, and land use, including sub-strata land), or
with the generation, storage, disposal or use of
chemicals or substances that could be detrimental to
human health or the environment.
(2) "Extremely Hazardous Substances" means any substance
or material
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designated by the United States Environmental
Protection Agency as an "extremely hazardous
substance" under Section 302(a)(2) of the Superfund
Amendment and Reauthorization Act ("SARA") (42 U.S.C.
ss. 11002(a)(2)).
(3) "Hazardous Material" means all substances, materials
and wastes that are, or that become, regulated under,
or that are classified as hazardous or toxic under
any environmental law (including, but not limited to,
Extremely Hazardous Substances and Toxic Chemicals).
(4) "Release" means any releasing, spilling, leaking,
pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing, or dumping.
B. COMPLIANCE
(1) Compliance with Environmental Laws Generally. Tenant
shall not cause or permit any Hazardous Material to
be used, generated, manufactured, produced, stored,
brought upon, or released, on, under or about the
Premises, or transported to and from the Premises, by
Tenant, its agents, employees, contractors, invitees,
sublessees or any third party in violation of any
Environmental Law, provided that, in no circumstances
shall Tenant cause or permit any Extremely Hazardous
Substance or Toxic Chemical to be used, generated,
manufactured, produced, stored, brought upon, or
Released, on, under or about the Premises, or
transported to and from the Premises.
(2) Cleanup. Without limiting the foregoing, if the
presence of any Hazardous Material on, under or about
the Premises caused or permitted by Tenant results in
any contamination of the Premises, Tenant shall
promptly take all actions at its sole cost and
expense as are necessary to return the Premises to
the condition existing prior to the introduction of
any such Hazardous Material to the Premises; provided
that Authority's approval of such actions shall first
be obtained, which approval shall not be unreasonably
withheld so long as such actions would not
potentially have any material adverse effect on the
Premises. In the event Tenant shall fail timely to
commence or cause to be commenced or fail diligently
to prosecute to completion such actions as are
necessary to return the Premises to the conditions
existing prior to the introduction of any Hazardous
Material to the Premises, Authority may, but shall
not be obligated to, cause such action to be
performed, and all costs and expenses (including,
without limitation, attorneys' fees) thereof or
incurred by Authority in connection therewith shall
be paid by Tenant.
(3) Governmental Submittals. Tenant shall, at Tenant's
own cost and expense, make all submissions to,
provide all information to, and comply with all
requirements of any governmental authority having
jurisdiction (the "Government") under the
Environmental Laws. Should the
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Government determine that a site characterization,
site assessment and/or a cleanup plan be prepared or
that a cleanup should be undertaken because of any
release of hazardous materials at the Premises which
occur during the term of this Sublease, then Tenant
shall, at Tenant's own cost and expense, prepare and
submit the required plans and financial assurances,
and carry out the approved plans in accordance with
all requirements of the Government.
(4) Information Sharing. Tenant shall provide to Tucson
Airport Authority a copy of any and all information,
reports, and applications submitted to the Government
as described in Paragraph X.6B.(4), whether such
submittal is routine or in response to a release or
threatened release of any Hazardous Material, and
whether the impetus for such submittal is generated
by Tenant, or by an inquiry or action by the
Government or another third party. At no cost or
expense to Authority, Tenant shall promptly provide
all information requested by Authority to determine
the applicability of the Environmental Laws to the
Premises, or to respond to any governmental
investigation or to respond to any claim of liability
by third parties which is related to environmental
contamination. Tenant shall immediately notify
Authority of any correspondence or communication from
any governmental entity regarding the application of
Environmental Laws to the Premises or Tenant's
operation of the Premises.
(5) Change in Use of Premises. Tenant shall immediately
notify Authority of any changes in Tenant's operation
on the Premises that will change or has the potential
to change Tenant's or Authority's obligations or
liabilities under the Environmental Laws.
C. INDEMNITY
Tenant shall indemnity, defend and hold harmless Authority,
its successors and assigns, its employees, agents and
attorneys from and against any and all liability, loss,
damage, expense, penalties and costs (including legal and
investigation fees or costs) arising from or related to any
claim or action for injury, liability, breach or warranty or
representation, or damage to persons or property and any and
all claims or actions brought by any party or governmental
body, alleging or arising in connection with (i) contamination
of, or adverse effects on, the environment (whether known,
alleged, potential, or threatened), or (ii) alleged or
potential violation of any Environmental Law or other statute,
ordinance, rule, regulation, judgment or order of any
government or judicial entity which are brought as a result
(whether in part or in whole) of any activity or operation on
or Release from the Premises (caused by any person or entity
other than Authority) during the term of this Sublease or any
previous sublease of the Premises by Tenant or its owners or
related entities. This obligation includes but is not limited
to all costs and expenses related to investigation and/or
cleaning up the Premises and all land, soil, and underground
or surface water as required under the law.
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Tenant's obligations and liabilities under this paragraph
shall continue so long as Authority bears any liability or
responsibility under the Environmental Laws for any action
that occurred on the Premises during the term of the Sublease.
This indemnification of Authority by Tenant includes, without
limitation, costs incurred in connection with any
investigation of site conditions or any cleanup, remedial,
removal or restoration work required by any federal, state, or
local governmental agency or political subdivision because of
Hazardous Material located on the Premises or present in the
soil or ground water on, under or about the Premises. The
parties agree that Authority's right to enforce Tenant's
Promise to indemnify is not an adequate remedy at law for
Tenant's violation of any provision of this paragraph;
Authority shall have all the rights and remedies set forth in
this Sublease as well as all other rights and remedies
provided by law.
D. SUBTENANTS
Tenant shall insert the provisions of this section in any
lease agreement or contract by which it grants a right or
privilege to any person, firm or corporation under this
Sublease.
ARTICLE VIII - SUPERIOR RIGHTS
8.1 AGREEMENTS WITH UNITED STATES
This Sublease shall be subordinate to the provisions and requirements
of any existing or future agreement between Authority and the United
States, relative to the development, operation or maintenance of the
Airport.
8.2 RIGHTS OF GOVERNMENT DURING WAR OR NATIONAL EMERGENCY
This Sublease and all the provisions hereof shall be subject to
whatever right the United States Government now has or in the future
may have or acquire, affecting the control, operation, regulation and
taking over of the Airport or the exclusive or non-exclusive use of the
Airport by the United States during the time of war or national
emergency.
Tenant and Authority recognize that during the time of war or national
emergency the City of Tucson, owner of the Airport, has the right to
enter into agreements with the United States government for military or
naval use of part or all of the Airport. If any such agreement is
executed by the City of Tucson, the provisions of this Sublease,
insofar as they are inconsistent with the provisions of any agreement
so made by the City of Tucson with the United States government, shall
be subject to the terms of such agreement and Tenant shall have no
claim against Authority or the City of Tucson for any loss or damage
sustained by Tenant because of the making of such agreement by the
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City of Tucson. In such event, however, the amounts, if any, payable
from the City of Tucson or the United States for improvements placed on
the Premises by Tenant shall be paid to Tenant if this Sublease is in
effect at the time of such taking.
8.3 RIGHTS OF AUTHORITY
Authority reserves the right to further develop or improve the landing
area of the Airport as it sees fit, regardless of the desires or view
of Tenant and without interference or hindrance. Authority reserves the
right, but shall not be obligated to Tenant, to maintain and keep in
repair the landing area of the Airport and all publicly-owned
facilities of the Airport, together with the right to direct and
control all activities of Tenant in this regard.
8.4 AGREEMENTS WITH CITY OF TUCSON
This Sublease is subject to the existing lease between Authority and
the City of Tucson and to the provisions of any existing or future
agreement between the City of Tucson and Authority.
8.5 ABATEMENT OF OBLIGATION TO CONSTRUCT OR REBUILD
Inasmuch as this Sublease contains certain provisions concerning
repairs, replacement and rebuilding of damaged or destroyed buildings,
construction of buildings, quiet enjoyment and other related causes
applicable to the parties to this Sublease, and inasmuch as the
Premises constitute a portion of a public Airport, it is agreed that
the parties hereto shall not be required to repair, replace, rebuild or
construct any building or portion of any building so long as the
obligated party is prevented from so doing by action of the United
States government or any agency or department thereof.
ARTICLE IX - RESERVATION OF NAVIGATION EASEMENT
9.1 EASEMENT
There is hereby reserved to Authority for the use and benefit of
aircraft using the Airport a right of flight for the passage of
aircraft in the airspace above the uppermost surface of the Premises,
together with the right to cause such noise as may be inherent in the
operation of any aircraft now known or hereafter used for navigation of
or flight in said airspace, or landing at, or taking off from, or
operating on the Airport.
9.2 STRUCTURES; ELEVATION LIMIT
Tenant, by accepting this Sublease, expressly agrees for itself, its
successors and assigns that it will not erect nor permit the erection
of any structure or object, nor permit the growth of any tree on the
Premises above the mean sea level elevation of 2460 feet. In the event
the aforesaid covenants are breached, Authority reserves the right to
enter upon
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the Premises and to remove the offending structure or object and cut
the offending tree, all of which shall be at the expense of Tenant.
9.3 PURPOSES
Tenant, by accepting this Sublease agrees for itself, its successors
and assigns that it will not make use of the Premises in any manner
which might interfere with the landing and taking off of aircraft from
the Airport or otherwise constitute a hazard. In the event the
aforesaid covenant is breached, Authority reserves the right to enter
upon the Premises and cause the abatement of such interference at the
expense of Tenant.
ARTICLE X - ASSIGNMENT AND SUBLEASE
10.1 CONSENT OF AUTHORITY
Tenant shall not sublease, assign or sell this Sublease or any interest
therein, or any portion of the Premises, without first obtaining
written consent from Authority. For this purpose, any change in
ownership or control of Tenant shall be considered an assignment of
rights hereunder. Tenant shall furnish the Authority with a copy of any
sublease or assignment entered into with respect to this Sublease or
the Premises or any portion thereof.
10.2 CONTINUING RESPONSIBILITY OF TENANT
If it is a complete assignment or sublease of the entire Premises it
shall be in writing and provide that the subtenant or assignee assumes
and agrees to perform all of the terms, covenants and agreements which
Tenant has agreed to perform under this Sublease, and that Tenant's
subtenant or assignee shall become jointly and severally liable with
Tenant, or any successor in interest of Tenant, for the performance of
the terms and covenants of this Sublease. A sublease for less than the
entire Premises shall be in writing and shall recite that it is subject
and subordinate to all the terms and provisions of this Sublease.
Neither the execution of such sublease or assignment, the Authority's
consent to the same, nor the acceptance of rent by Authority from
Tenant's subtenant or assignee shall release or in any manner affect
Tenant's liability to Authority hereunder.
10.3 SUBJECT TO THIS SUBLEASE
Any sublease between Tenant and a subtenant shall be in writing and
shall provide that said sublease is subject to all the provisions of
this Sublease.
ARTICLE XI - DEFAULTS AND REMEDIES
11.1 DEFAULT BY TENANT
Tenant shall be in default under this Sublease upon the occurrence of
any of the
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following "Events of Default":
A. Tenant shall fail to pay when due any installment of
rent payable pursuant to this Sublease and such
failure shall continue unremedied for a period of ten
(10) days; provided that Tenant shall not be entitled
to the benefit of more than one (1) grace period of
ten (10) days under this paragraph A(1) within any
calendar year.
B Tenant or any of Tenant's agents, employees, guests,
invitees, or subtenants, shall use Premises for any
unlawful or illegal purpose or for any purpose other
than those set forth on Exhibit B.
C. Tenant shall fail to observe or perform any other
covenant, agreement or obligation hereunder and such
failure shall not be remedied within thirty (30) days
(or such additional time as is reasonably required in
the opinion of Authority to correct any such failure,
if Tenant has instituted corrective action and is
diligently pursuing the same) after Authority shall
have given Tenant written notice specifying which
covenant, agreement or obligation Tenant has failed
to observe or perform; provided that Tenant shall not
be entitled to the benefit of more than two (2) grace
periods of thirty (30) days (or more if permitted)
under this paragraph within any calendar year.
D. There is commenced by or against Tenant any case
under the Bankruptcy Code (Title XI of the United
States Code) or any other bankruptcy, arrangement,
reorganization, receivership, custodianship or
similar proceeding under any federal, state or
foreign law, and with respect to any such case or
proceeding that is involuntary, such case or
proceeding is not dismissed with prejudice within
sixty (60) days of such filing.
E. Tenant makes a general assignment for the benefit of
creditors or applies for, consents to, or acquiesces
in the appointment of a trustee, receiver, or other
custodian for Tenant or the property of Tenant or any
part thereof, or in the absence of such application,
consent, or acquiescence, a trustee, receiver or
other custodian is appointed for Tenant or the
property of Tenant or any part thereof, and such
appointment is not discharged within sixty (60) days
F. Any action is commenced against Tenant to foreclose
any lien or mortgage or other rights of Tenant in or
to the Premises.
G. Tenant abandons, deserts or vacates the Premises for
seven (7) consecutive days or more.
11.2 REMEDIES OF AUTHORITY
If Tenant shall be in default hereunder as set forth above, the
Authority may exercise any of the following remedies.
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A. TERMINATION
Authority may, at its election, give Tenant written notice of
its intention to terminate this Sublease on a date which shall
not be earlier than ten (10) days after such notice is given.
If all defaults have not been cured on or before the date
specified in the notice, Tenant's rights to possession of the
Premises shall cease, and with or without re-entry by
Authority, this Sublease and the term hereof shall terminate,
and Authority may then re-enter and take possession of the
Premises as provided below with respect to reentry without
termination. Any such termination must be express, and neither
notice to pay rent or to deliver up possession of the Premises
given pursuant to law, nor any proceeding instituted by
Authority, nor the failure by Tenant for any period of time to
pay any of the rent herein reserved, shall of itself operate
to terminate this Sublease.
(1) Damages. Notwithstanding the termination of this
Sublease or any re-entry by Authority upon such
termination, Tenant shall continue to be liable for
and Authority shall be entitled to recover as
damages:
(a) the sum of all rent that is due and owing as
of the date of termination and all other
sums then owing by Tenant hereunder;
(b) all rent that would otherwise continue to
accrue during the remaining term hereof or,
at the election of Authority, the discounted
present value of the sum of all rentals
remaining to be paid for the remaining term
of this Sublease, calculated by the
Authority in its reasonable discretion; and
(c) the reasonable costs incurred by Authority
in re-letting the Premises and the
reasonable costs to Authority necessary to
place the Premises in condition for
re-letting.
(2) Credit. Any rent, income, receipts, profits or other
monies received or derived by Authority from any
re-letting or other use of the Premises after the
termination of this Sublease shall, so long as Tenant
shall continue to be liable for the payment of rent
hereunder, be credited against such rent as received
and collected.
B. REENTRY WITHOUT TERMINATION
As an alternative remedy, Authority may, without terminating
this Sublease, and after giving Tenant ten (10) days written
notice, re-enter the Premises and take possession thereof
pursuant to any legal proceedings or notice required by law,
in which event Tenant shall remain liable for the payment of
all rent and the performance of all conditions contained in
this Sublease.
(1) Reentry. Upon any such re-entry of the Premises by
Authority, Authority may expel Tenant and those
claiming through or under Tenant and remove their
property and effects (forcibly, if necessary) without
being guilty in any manner of trespass and without
any liability therefor and without prejudice to any
remedies of Authority in the event of default by
Tenant, and without liability for any interruption of
the conduct of the affairs of
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Tenant or those claiming through or under Tenant
which may result from such entry. Tenant hereby
irrevocably appoints Authority as the agent and
attorney-in-fact of Tenant to remove all of Tenant's
property whatsoever situated upon the Premises and to
place such property in storage in any warehouse or
other suitable place in Tucson, Arizona, for the
account of and at the expense of Tenant and Tenant
hereby exempts and agrees to save harmless Authority
from any costs, loss or damage whatsoever arising or
occasioned by any such removal and storage of such
property by Authority or its duly authorized agents
in accordance with the provisions herein contained.
(2) Reletting. After such re-entry, Authority shall use
reasonable diligence to re-let the Premises, or any
part or parts thereof, for such period or periods and
upon such term or terms and at such reasonable rental
or rentals and upon such other conditions as
Authority may deem advisable, with the right to make
alterations and repairs to the Premises. Tenant
hereby irrevocably appoints Authority as the agent
and attorney-in-fact of Tenant to enter upon and
re-let the Premises and to incur any necessary
expenses in doing so, all to be reimbursed by Tenant.
Tenant agrees that no acts of Authority in effecting
such re-letting shall constitute a termination of
this Sublease, irrespective of the period for which
such re-letting is made or the terms and conditions
of such re-letting or otherwise.
(3) Credit. Tenant shall receive a credit against such
rental in the amount of the proceeds, if any, of such
re-letting. Tenant's obligations, in addition to
rent, for which it shall remain liable include, but
shall not be limited to, all repossession costs,
brokerage commissions, legal expenses, attorneys'
fees, expenses of employees, removal costs,
alteration costs and expenses of preparation for
re-letting, and any other amounts expended pursuant
to action taken under this paragraph.
11.3 REMEDIES CUMULATIVE
All rights, options and remedies of Authority contained in this
Sublease shall be construed and held to be cumulative, and no one of
them shall be exclusive of the other, and Authority shall have the
right to pursue any one or all of such remedies or any other remedy or
relief which may be provided by law, whether or not stated in this
Sublease (including but not limited to any right of "self help" or
similar remedy in order to minimize any damages, expenses, penalties
and related fees or costs).
11.4 NO WAIVER
No waiver of any Event of Default of Tenant hereunder shall be implied
from any acceptance by Authority of any rent or other payments due
hereunder or any omission by Authority to take any action on account of
such default if such default persists or is repeated, and no express
waiver shall affect an Event of Default in a manner other than as
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specified in said waiver. The consent or approval by Authority to or of
any act by Tenant requiring Authority's consent or approval shall not
be deemed to waive or render unnecessary Authority's consent or
approval to or of any subsequent similar acts by Tenant.
11.5 NOTICE
Any default notice tendered to Tenant hereunder shall be deemed to be
sufficient if it is reasonably calculated to put Tenant on inquiry as
to the nature and extent of such default.
11.6 INTEREST
All amounts due the Authority hereunder shall accumulate interest at a
rate of 12% per annum or the maximum amount allowed by law, whichever
is less.
ARTICLE XII - TERMINATION BY TENANT
12.1 TERMINATION EVENTS
Tenant may terminate this Sublease at any time upon thirty (30) days
written notice to Authority upon or after the happening or continuation
of any of the following events:
A. The inability of Tenant to use, for a period of
thirty (30) consecutive days, any portion of the
rights, licenses, services or privileges of Tenant
hereunder because of any law, rule, regulation or
other action or failure to act on the part of any
United States governmental authority having
jurisdiction thereof.
B. The default by Authority in the performance of any
covenant or agreement herein required to be performed
by Authority and the failure of Authority to remedy
such default for a period of thirty (30) days after
receipt of written request or demand from Tenant to
remedy the same.
C. The assumption by the United States government or any
authorized agency thereof of the operation or control
of the Airport or any part thereof, in such manner as
to substantially restrict Tenant for a period of at
least thirty (30) consecutive days from conducting
any of its operation on the Premises.
12.2 CURE
If any of the foregoing reasons for termination by Tenant cease to
exist prior to a
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termination, then the right to terminate for such reason shall cease.
12.3 NO WAIVER
No waiver by Tenant of Authority's default of any of its obligations
hereunder shall be construed to be or act as a waiver by Tenant of any
subsequent default by Authority.
ARTICLE XIII - SURRENDER OF POSSESSION, CONDITION OF PREMISES
13.1 SURRENDER
Upon the expiration or earlier termination of this Sublease or any
extensions thereof, all rights herein granted to Tenant shall cease and
terminate and Tenant shall forthwith surrender the Premises to
Authority.
13.2 GOOD CONDITION
The Premises shall be returned to Authority in as good condition as at
the time of occupancy by Tenant, except as otherwise provided in this
Sublease, ordinary wear and tear excepted.
13.3 REMOVAL OF PROPERTY
Tenant, and Tenant's subtenants, may remove any and all personal
property, including portable buildings, signs, trade fixtures,
machinery and equipment from the Premises prior to expiration of this
Sublease; provided, however, that Tenant shall repair any damage caused
by such removal. Title to any property remaining in the Premises after
expiration or termination of this Sublease shall vest in Authority and
Authority shall have the right and option to remove the same, restore
the Premises and recover from Tenant the costs and expenses of doing
so.
ARTICLE XIV - MISCELLANEOUS
14.1 NOTIFICATION OF CHANGES
Tenant shall promptly notify Authority of any change in Tenant's name
or address or a change in ownership.
14.2 SUCCESSORS AND ASSIGNS BOUND
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All the terms, covenants and conditions of this Sublease shall extend
to and bind the successors and assigns of the respective parties
hereto.
14.3 ARTICLE HEADINGS
The article headings contained herein are for convenience and reference
and are not intended to define or limit the scope of any provisions of
this Sublease.
14.4 SEVERABILITY
If any term or condition of this Sublease shall be deemed to be invalid
or unenforceable, all other terms and conditions shall remain in full
force and effect.
14.5 APPLICABLE LAW
The terms and conditions of this sublease shall be interpreted in
accordance with the laws of the State of Arizona.
14.6 CONSTRUCTION OF SUBLEASE
Authority and Tenant agree that each party and its counsel have
reviewed and revised this Sublease and that any rule of construction to
the effect that ambiguities are to be resolved against the drafting
party shall not apply in the interpretation of this Sublease. No remedy
or election given by any provisions of this Sublease shall be deemed
exclusive unless so indicated, but each shall, whenever possible, be
cumulative with all other remedies in law or equity. Each provision
hereof shall be deemed both a covenant and a condition and shall run
with the land for the duration of the leasehold term or any extensions
thereof. Whenever the content of any provision shall require it, the
singular number shall be held to include the plural number and vice
versa. The form of this Sublease contemplates that Tenant will be an
entity and not one or more natural persons. If Tenant is one or more
natural persons, then all pronouns referring to Tenant shall be deemed
to be appropriately changed to fit those circumstances.
14.7 COSTS AND ATTORNEYS' FEES
A. AUTHORITY'S REVIEW
Tenant shall pay the expenses (including reasonable attorneys'
fees and the fees of other consultants) incurred by Authority
in reviewing any of the documents (including subleases, plans
and specifications of any improvements to be constructed by
Tenant, and documents created pursuant to Section ) for which
Authority's approval is required by the terms hereof.
B. ENFORCEMENT OF RIGHTS
The non-prevailing party shall promptly pay to the prevailing
party, upon
Page 25
<PAGE> 26
demand, all costs and other expenses paid or incurred by the
prevailing party (including, without limitation, reasonable
attorney's fees) in enforcing or exercising its rights or
remedies created by, connected with or provided for in this
Sublease, whether or not any action or proceeding is brought
(including, without limitation, all such costs, expenses and
fees incurred in connection with any bankruptcy, receivership,
or other court proceedings [whether at the trial or the
appellate level]).
14.8 NOTICES
A. TO AUTHORITY
Notices to Authority in connection with this Sublease shall be
sufficiently served if physically delivered or sent by
certified mail, postage prepaid, addressed to Authority at the
address shown for it above.
B. TO TENANT
Notices to Tenant in connection with this Sublease shall be
sufficiently served if physically delivered or sent by regular
mail, postage prepaid, addressed to Tenant at the address
shown for it above, provided that notice of utility
interference shall be sufficiently served if Authority gives
said notice to the current supervisor of Tenant's operations
on the Premises.
C. TIMING
Service of any notice or demand by physical delivery shall be
deemed complete upon the date of delivery. Service of any
notice or demand by certified mail shall be deemed complete at
the expiration of three (3) days after the date of the
certified mailing if mailed within the continental United
States.
D CHANGE IN ADDRESS
Each party may change its address to such other addresses as
such party may designate to the other in writing from time to
time.
14.9 AUTHORITY TO EXECUTE
Each party represents and warrants to the other that it has the right
and authority to enter into this Sublease.
IN WITNESS WHEREOF the parties have executed this Sublease as of the
day and year first above written.
TUCSON AIRPORT AUTHORITY, INC.,
an Arizona nonprofit corporation
Page 26
<PAGE> 27
By:
--------------------------------
Its:
--------------------------------
"AUTHORITY"
AAS-COMPLETE CONTROLS, INC.
an Arizona Corporation
By:
--------------------------------
Micah Chapman
Its:
--------------------------------
"TENANT"
By:
--------------------------------
Joe Civiletto
Its:
--------------------------------
"TENANT"
Page 27
<PAGE> 28
EXHIBIT A
Page 28
<PAGE> 29
EXHIBIT B
USE OF PREMISES
TENANT: AMERICAN AIRCARRIERS SUPPORT - COMPLETE CONTROLS, INC.
USE OF PREMISES: MAINTENANCE, REPAIR AND OVERHAUL FACILITY SPECIALIZING IN
FLIGHT CONTROL SURFACES -STORAGE OF AIRPLANE PARTS
Page 29
<PAGE> 30
EXHIBIT C
RENT SCHEDULE
YEAR MONTHLY RENT
---- ------------
YEAR 1 $17,388.00
YEAR 2 $17,388.00
YEAR 3 $18,083.52
YEAR 4 $18,806.86
YEAR 5 $19,559.14
YEAR 6 $20,341.51
YEAR 7 $21,155.17
YEAR 8 $22,001.39
YEAR 9 $22,881.44
YEAR 10 $23,796.70
Page 30
<PAGE> 1
EXHIBIT 10.5.15
FIRST AMENDMENT TO INDUSTRIAL SUBLEASE
TUCSON AIRPORT AUTHORITY AND AAS COMPLETE CONTROLS INC.
This First Amendment to Industrial Sublease is entered into
this first day of January, 2000, by and between Tucson Airport Authority, Inc.,
an Arizona nonprofit corporation ("Authority"), and AAS Compete Controls, Inc.,
an Arizona corporation ("Tenant").
A. Authority and Tenant previously entered into that certain
Industrial Sublease dated August 1, 1999 (the "Lease") with respect to certain
premises located at 7001 South Park Avenue on the Tucson International Airport.
B. The Lease was for an initial term of five (5) years, with
five (5) one-year extension options, at the discretion of the Authority.
C. Tenant and Authority are also parties to that certain
Industrial Sublease dated January 1, 2000, concerning premises within the hangar
complex known as Tucson Industrial Center, located at 850 East Teton Road, on
the Airport. Tenant would like to align the terms of these two leases.
NOW THEREFORE the parties hereby agree as follows:
1. The term of the Lease, which is set forth in Article II of the Lease, is
modified to be as follows: The "Initial Term" of the Lease shall extend from the
Effective Date as set forth in the Lease, through December 31, 2004. The term
shall be deemed to be automatically extended on each of the first five
anniversaries of January 1, 2000, for an additional one-year period, unless the
Authority, at least 90 days prior to such date, notifies Tenant that the
Authority does not elect to so extend the term. The intent is to automatically
extend the term of the Lease each year (unless otherwise elected by Authority)
so that a remaining term of approximately five (5) years is maintained for the
first five years of the Lease, with a possible maximum total term of ten years.
2. The first rent adjustment under Section 3.1 of the Lease will be as of
January 1, 2002 (rather than August 1, 2001), and rent adjustments thereafter,
as set forth in Section 3.1 and Exhibit C of the Lease, will take place on
January 1 of each year.
3. In the event that Tenant makes any improvements or modifications to the
Premises, Tenant shall promptly pay all suppliers and contractors and will not
cause or permit any lien to be filed against either the Premises or the Tenant's
interest in the Premises or this Lease. In the event that any such lien is
filed, Tenant will promptly cause such lien to be removed.
-1-
<PAGE> 2
AUTHORITY: TENANT:
TUCSON AIRPORT AUTHORITY, INC., AAS COMPLETE CONTROLS INC., an
an Arizona nonprofit corporation Arizona corporation
By: By:
----------------------- ----------------------
Walter A. Burg Micah Chapman
Its: President/CEO Its: President
-2-
<PAGE> 1
EXHIBIT 21
AMERICAN AIRCARRIERS SUPPORT, INCORPORATED AND SUBSIDIARIES
LIST OF SUBSIDIARIES OF REGISTRANT
AVIATION SERVICES, INC.
AAS LANDING GEAR SERVICES, INC.
AAS AMJET, INC.
AAS COMPLETE CONTROLS, INC.
AAS AIRCRAFT SERVICES, INC.
AAS TECHNOLOGIES, INC.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference into the Registration
Statement No. 333-87365 on Form S-8 of American Aircarriers Support,
Incorporated and Subsidiaries (the "Company") of our report dated January 29,
1999, except for Note 9, as to which the date is March 4, 1999, with respect to
the Company's consolidated balance sheet as of December 31, 1998 and the related
statements of operations, stockholders' equity and cash flows for the year then
ended, which report appears in the Company's annual report on Form 10-KSB for
the year ended December 31, 1999.
/s/ Cherry Bekaert and Holland, L.L.P.
Charlotte, North Carolina
March 29, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 91
<SECURITIES> 0
<RECEIVABLES> 20,821
<ALLOWANCES> (366)
<INVENTORY> 60,068
<CURRENT-ASSETS> 81,439
<PP&E> 12,533
<DEPRECIATION> (746)
<TOTAL-ASSETS> 113,864
<CURRENT-LIABILITIES> 74,227
<BONDS> 0
0
0
<COMMON> 7
<OTHER-SE> 29,741
<TOTAL-LIABILITY-AND-EQUITY> 113,864
<SALES> 59,946
<TOTAL-REVENUES> 59,946
<CGS> 35,903
<TOTAL-COSTS> 10,338
<OTHER-EXPENSES> (99)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,360)
<INCOME-PRETAX> 10,246
<INCOME-TAX> (3,981)
<INCOME-CONTINUING> 6,265
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,265
<EPS-BASIC> 0.87
<EPS-DILUTED> 0.86
</TABLE>
